If Marcus Welby, MD, were in business today, he might have sold his medical practice to the local hospital.
Practicing solo, or even in very small groups, is becoming an increasingly difficult—although possible—proposition for many family and internal medicine physicians.
Growing regulatory pressures, privacy rules, the burdens of billing and collections, steep investments to incorporate electronic health record (EHR) systems, and onerous requirements of data collection are all difficult to manage on one’s own. These forces, coupled with declining revenues, are causing more doctors in small practices to consider employment over independence.
“What you’re seeing largely is that, as insurers continue to underpay providers, providers have no choice but to go into the arms of someone with more money,” says Joseph Valenti, MD, board member of the nonprofit Physicians Foundation. “Physicians are being placed into an economic situation which is untenable.”
Given that reality, it’s little surprise that a recent survey conducted by the healthcare staffing firm Jackson Healthcare found that not only are hospital acquisitions of physician practices up (52% of hospitals plan to acquire practices in 2013 as compared with 44% in 2012), the majority of those deals—70%, in fact—are initiated by doctors looking to sell.
“We expected hospitals to be acquiring internal medicine and primary care practices, most probably, to develop [accountable care organization (ACOs)]. That’s what we assumed. However, we’re finding that it’s more opportunistic than strategic at this point,” says Sheri Sorrell, market research manager with Jackson Healthcare. “Physicians are knocking on the door, and hospitals seem to be jumping at the opportunity.”
That doesn’t surprise American College of Physicians President David Bronson, MD, who says it makes perfect sense for doctors to approach their local hospitals or to listen when hospitals approach them. These days, doctors in private practices “are under more and more financial strain and don’t have the capital to invest in things that would help them,” he says.
Although recent acquisitions predominantly are about opportunity, hospitals also cite other reasons for the trend, the Jackson Healthcare survey finds:
58% of hospitals are scooping up physician practices to build a competitive advantage;
57% say practice acquisition is a doctor recruitment strategy;
55% say they want to maintain a competitive advantage; and
30% are acquiring practices as part of an ACO formation strategy.