Physician Practices Are Merging at a Record Pace, Driven by Health Reforms

Physician practices are consolidating at a record pace, driven by payments cuts embedded in the federal health reforms, a new survey finds. Small cardiology practices, which have seen the deepest cuts in Medicare payments, are among the most likely to be acquired by larger providers.

Physician practices are consolidating at a record pace, driven by payments cuts embedded in the federal healthcare reforms, a new survey finds. Small cardiology practices, which have seen the deepest cuts in Medicare payments, are among the most likely to be acquired by larger providers.

The number of physicians involved in mergers or acquisitions jumped to 2,910 in 2009, nearly twice the number seen a year earlier, according to the latest cost-trend report from PriceWaterhouseCoopers. This year’s on track to be another record-breaker, the report says. Behind the wave of consolidation are Medicare and other physician payment changes introduced by the federal health reform law, the survey concluded.

The overwhelming majority of physicians still continue to practice in solo or small practices. But by consolidation their practices with other physicians groups or hospitals, doctors are increasing their negotiating clout with suppliers, payers, and labor, the survey found. Relatively small provider organizations or networks are joining the ranks of national conglomerates and demanding premium rates for their services.

Physician and hospital consolidation are expected to continue to increase at a rapid pace this year and next, according to the survey.

One specialty particularly affected by this consolidation trend is cardiology, which has experienced

the deepest cuts in Medicare payments, according to PriceWaterhouseCoopers. Because most private insurers base their payment rates on Medicare, the changes affect physicians’ total earnings. An 8% cut in Medicare payment rates has been projected for cardiovascular services in 2010, with a 13% decrease over the next four years, PriceWaterhouseCoopers says. As a result, nearly 40% of cardiology practices were considering selling to a hospital system, a recent survey by the American College of Cardiology found.