Look before leaping into a large health system
By Terri D’Arrigo
Billing, staffing, electronic health records, economic uncertainty in the era of health care reform and perennially threatened Medicare compensation: It can be enough to make some physicians in private practice wonder where the “medicine” in “Doctor of Medicine” has gone.
Faced with ever-increasing logistical and regulatory burdens, many physicians are leaving private practice and turning to large health systems to give them breathing room to care for their patients and restore work-life balance.
According to a survey released by the consulting firm Accenture in 2012, the number of independent physicians in the U.S. has plummeted from 57% in 2000 to 39%. The firm predicts a further decrease, down to 36%, by the end of this year. An overwhelming number of survey respondents—87%—cited the cost and expense of running a business as a major concern, and more than half said that electronic health record (EHR) requirements were a main reason for leaving private practice.
Small practices in particular are feeling the strain, said Susan Turney, MD, MS, FACP, president and CEO of MGMA-ACMPE.
“Think of technology implementation and the reporting requirements on both the business and clinical sides of medicine. Then add to that the need for coordination of care and shared decision-making with patients and families, all as the population ages,” she said. “These are huge demands that can be difficult for small practices to manage.”
The nature of providing care is shifting, as well. As the practice models of the patient-centered medical home and accountable care organizations evolve, physicians are choosing to work in teams with other allied health professionals.
“Many practices are looking to supplement the care with licensed nurse practitioners, registered nurses, and pharmacists who can work at the peak of their licensure, particularly when there aren’t enough people to go around. Larger systems can offer help in that area,” Dr. Turney said.
Changes in the physician population itself also have an impact. A 2012 report by The Physicians Foundation noted that the recession affected the retirement plans of more than 230,000 physicians age 55 and older and predicts that as many as 100,000 of them will retire over the next five years as the economy recovers. Given the current shortage of primary care physicians, such an exodus may make joining a large health system more appealing for mid- and late-career physicians who grapple with increased patient volume. They simply may not have the time for all of the tasks associated with practice management.
Recruiting newly minted physicians is also an issue, said Bruce Johnson, JD, MPA, a partner at the law firm Polsinelli Shughart in Denver. “Young physicians are graduating with large debt, and many of them are looking for high salaries and student loan repayment. Private practices cannot accommodate that, but a large health system might,” he said.
Regardless of the reasons for selling a private practice to a large health system or hospital, it is crucial for physicians to enter such arrangements with their eyes wide open, knowing the expectations on both sides and what compromises might be required, said Dr. Turney. “Physicians should keep in mind that once the transaction takes place and the transition occurs, it may no longer be a level playing field. The system gains leverage, so it’s important to ask questions before the deal is consumated,” she said.
There are five key areas to work through before, during and after the transition, experts said: culture, finance, technology, staffing and patient relations.
A health system’s culture encompasses everything from practice models to work hours and appointment procedures, but the most important thing is that it’s conducive to good practice, said Michael Wagner, MD, FACP, chief medical officer at Tufts Medical Center and president and chief executive officer of Tufts Medical Center Physicians Organization in Boston. “Is the organization physician-friendly? Are administrators and other providers there sensitive to physicians’ needs?”
One way to suss that out is to observe how the acquiring organization approaches the practice, Dr. Wagner added. “If the physicians have a high-value practice and provide great care, the acquiring organization won’t want to mess that up. They’ll want to maintain the good parts and value of the practice.”
Likewise, the health system should be willing to evaluate the practice’s current systems and offer tech support through the transition, especially if the practice will be moving from paper to electronic health records, Dr. Wagner said. “A good acquiring organization will have a team come out to the practice, do a systems assessment, explain what the practice would be using, and provide training.”
Physicians should be prepared for give-and-take, said Gregory Hood, MD, FACP, Governor of ACP’s Kentucky chapter in Lexington, Ky., and medical director of his local Independent Physician Association.
“You may be exchanging a certain amount of freedom for the security and support provided by a larger system,” Dr. Hood said. “It’s basically a trade-off. You’re relieved of certain [tasks] that you don’t want to deal with, but you may end up surrendering your ability to individualize the way you do business and provide care.”
Margo Williams, senior associate of ACP’s Center for Practice Improvement and Innovation, suggests a fact-finding mission. “Talk to the other practitioners in the system. They can tell you not only how their practices changed, but how they managed the transition themselves.”
Dr. Turney encouraged physicians to remember that although change is inevitable, physicians still have the power of self-direction in the examination room. “They may have less autonomy on the business side and in how the practice operates, but they still have freedom when it comes to talking with the patient at the point of care.”
The nature of selling a practice has changed in the past five to 10 years, said Dr. Hood. “The patient panel used to be the value of the practice. Physicians would bank that into what they were selling. But now, with the way that patients change insurance and locations so often, it’s difficult to do that. Now when physicians sell, they are selling their own skills.”
That can turn a practice into prey, especially if the sale comes about because of a crisis such as the sudden departure of a physician or impending bankruptcy. “Unfortunately, there are business entities who will not let any crisis go to waste. I’ve known colleagues who have sold themselves for no money down, and no cash equity other than the depreciating assets of the office,” said Dr. Hood.
Mr. Johnson stressed the importance of hashing out the financial details, including each party’s responsibilities, regardless of the situation prompting the sale.
“Clarity of expectations is essential, but that’s easier said than done. There is a tendency to look only at the bottom line, and not a lot of desire to dig down into how to get there,” he said.
Although it’s tempting to revel in the possibility of letting someone else handle the hassle of claims, malpractice premiums, or supply payments, Mr. Johnson cautioned physicians against assuming that they are home-free once they join a large system. “Understand that someone will be looking at the overhead. A well-structured compensation arrangement will consider both the revenue and the expenses,” he said.
Physicians should take pains to understand how the acquiring organization handles billing, Mr. Johnson added. “Is it decentralized? Will your existing staff handle it or will the bills be generated somewhere else? It behooves physicians to pay attention to this because they will be held accountable for how [accurately] services are billed [via coding].”
A primary reason physicians join forces with large health systems is technology, namely EHRs. Medicare incentives for meaningful use are a powerful lure to convert to or upgrade an EHR system, but the initial investment can be staggering.
According to a 2012 MGMA-ACMPE report compiled with data amassed from 348 physician groups, the median approximate cost to purchase and implement an EHR system is $30,000 per physician full-time equivalent (FTE). The approximate monthly cost to maintain the system is $550 per physician FTE. Depending on the size of the practice, moving to a cutting-edge EHR system may be the deciding factor in becoming part of a health system.
Although EHRs and other electronic systems can be a boon to a practice, there are still challenges to address regarding technical and operational compatibility, said Michael D. Shapiro, MD, MBA, FACP, CPE, president and chief executive officer of Denver Nephrology in Colorado and managing partner of National Nephrology Alliance, a practice management services organization. “The easy thing is to install it. The hard thing is to make it work.”
Flexibility is key, he added. “In some ways you’ll have to adapt to what the systems allow you to do, but conversely, the systems can be adjusted to what your operational processes already are.”
Having been through tech transitions several times, Dr. Shapiro suggests a walk-through. Denver Nephrology conducts mock patient visits.
“We watch how ‘patients’ flow through the office, from check-in to exam room and check-out. Then we look at how the physicians interact with patients and staff, and when and how they document the encounter,” Dr. Shapiro said. “An important component of the documentation process for physicians is matching the CPT code to the reason for the encounter, as well as the history, physical exam and medical decision-making elements.”
Dr. Turney encourages testing the system before going live. “Make sure there is an opportunity to pilot the system to make sure it’s doing what you think it’s doing,” she said. “Everyone should understand that there has to be an exchange of information, not only at the point of care, but for data mining and analysis later on so that you can track trends and make any necessary changes to care delivery or payment.”
The experts agree that if the practice already has electronic systems in place, physicians should discuss how the acquiring organization’s system will harvest existing data. Transferring data will spare both physicians and office staff the headache of reobtaining and entering patient information.
Migrating data can also serve as a protective measure, said Dr. Hood. “If you start over from scratch or there is no way to cross-reference data, you can end up with patients who were previously dismissed returning for care,” he said. “The patient calls up the new organization and the next thing you know, Mrs. Jones is back on the schedule.”
Physicians who plan to sell their practices to health systems will have to address what happens to their staff. Some systems may request to interview the staff and determine who will be employed by the new organization, while others may consider the staff part of the package, to come along with the physicians.
Dr. Hood encourages physicians to press for the latter option, especially with smaller practices where there is a long history or close working relationship. “There may be employees who were with the practice for 15 or 20 years, and if they lose their jobs, all of their institutional memory goes with them,” he said.
Physicians should feel free to go to bat for their staff, said Mr. Johnson. “They may be able to negotiate staff salaries and things like credits for years of service when calculating time off,” he said. “There are bound to be some changes, but if physicians handle this step right, staff will be offered comparable wages and benefits.”
In smaller, more close-knit practices, physicians may feel inclined to share information about the coming changes, but they should exercise caution and be mindful of any nondisclosure or confidentiality agreements they signed when they began discussions with the acquiring party, said Mr. Johnson.
“Depending on the size of the practice, you may be able to negotiate some transparency, but remember that this process takes months,” he said. “If you announce up front that you are looking to change, some of your staff may start looking for new jobs. Generally you’ll get within 60 to 90 days of the closing date and then be able to make an announcement.”
Once word is out, it’s wise to have open communication wherever possible, said Dr. Hood.
“Staff will talk, and they will draw their own conclusions, but their thoughts won’t be as wildly divergent as they would if there was a vacuum of information,” he said. “Just a simple message at regular intervals, in person so they can see your facial expressions and body language and hear your tone of voice, will do a lot to help calm nerves and keep the rumor mill at bay.”
Dr. Wagner urges physicians to be ready for questions and suggests they ask the health system for help with answers. “Staff will ask what’s going to happen to them,” he said. “The acquiring organization should be savvy and approach it from the staff’s point of view. They could say something like, ‘Here are some questions I would anticipate if I were in your shoes.’”
Ideally, staff will have time to learn the new systems and procedures once the sale is complete and the practice is officially part of the health system. Although there may be a temporary loss of revenue, reducing the schedule for a week or two and then slowly ramping back up will allow time for adjustment, said Dr. Shapiro. “Schedule some space between appointments so everyone can catch their breath and work through it all. As with anything, it will take practice.”
The last to know, but certainly not the least important, are the patients. Physicians would do well to communicate clearly with them and leave no stone unturned when viewing the process from their perspective, said Dr. Turney.
“This is where the process is heavily front-loaded,” she said. “Even something as simple as a glitch in phone access can create a huge problem. A lot of patients don’t know where to go if they can’t reach their physicians. Think of the impact it would have on them.”
Ms. Williams suggests sending patients a letter. “Tell the patients what is happening and what it means for them,” she said. “The letter should cover any changes in office location, phone numbers, scheduling and billing addresses.”
Dr. Wagner encourages physicians to be positive when informing patients of the changes. “Say that you’re pleased to announce that you’ve joined forces with the system, and explain any new services or labs patients will be able to access. They’ll need this information because it pertains to their health benefits.”
From every angle, being proactive can only help physicians manage the transition, said Dr. Shapiro. “[Physicians] need to ensure they have a seat at the table in the system where they will be working,” he said. “To borrow from [the late business philosopher] Peter Drucker, ‘Know the future that has already happened.’”
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American Medical Association. Physician Characteristics and Distribution in the U.S., 2012 edition. Chicago: American Medical Association; 2012.
Dill MJ, Salsberg ES. The complexities of physician supply and demand: projections through 2025. Washington, DC: Center for Workforce Studies, Association of American Medical Colleges; November 2008.
Goldsmith J. The Future of Medical Practice: Creating Options for Practicing Physicians to Control Their Professional Destiny. The Physicians Foundation. Available online.
Johnson BA. Understanding Your Options: Combinations, Mergers & Acquisitions. MGMA Connexion. November/December 2012:32-36.
MGMA 2012 Cost Survey. Englewood, CO: MGMA; 2012.
Performance and Practices of Successful Medical Groups: 2012 Report Based on 2011 Data. Englewood, CO: MGMA-ACMPE; 2012.
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