Merged Gastro One remaining independent
Healthcare systems across the United States have been express-purchasing physician practices in great quantity during the last two or three years. Now, with the Medical Group Management Association estimating the median loss for employing a physician at $176,463 each in 2013, national experts predict a purchase slowdown across the country as forces stabilize.
In Memphis, Methodist Le Bonheur Health Systems is taking time from its acquisitions (250-plus providers representing 26 specialties) to work on some basics.
“We started acquiring practices at the request of physicians wanting us to come up with a new business model,” said Bill Breen, senior vice president of physician alignment, Methodist. “The market kind of out-requested our ability to perform on this, and the result strained our infrastructure. We wanted to get that right-sided quickly.”
Breen explained that Methodist is financially prepared to carry the burden of the purchases. It’s the billing and collecting, electronic medical records, quality initiatives, and risk management that they want to optimize for all the groups of PCG (Primary Care Group), SPG (Specialty Care Group) and UTMP (University of Tennessee Methodist Physicians) within their umbrellas.
Daniel Gentry, PhD, MHA, professor and director of health systems management and policy at the University of Memphis, said this situation is not like the 1990s where hospitals grossly overpaid for physician practices and the system unraveled in response to managed care, health maintenance organizations and preferred provider organizations.
“This time around, hospitals have tried to look at the data and put a more realistic value on physician practices. There is also a consensus among policy makers, researchers and administration practitioners and leaders—this is more of a long term investment,” he said.
St. Francis currently employs about 60 physicians and just acquired Memphis Surgery Associates. They have no plans to slow down or stop acquiring groups, according to Marilynn Robinson, senior vice president.
Jim Boswell, president and CEO of Baptist Medical Group and vice president of physician services for Baptist Memorial Health Care, said Baptist is being more strategic about its purchases and is slowing down from its “hyper-growth” period of the last two to three years. BMG now employs 550 providers representing 44 specialties.
“We will continue to recruit to our existing practices, strategically acquire practices as necessary, make strategic investments in operations in order to maintain the highest performing physician group practice with the best physicians in our market in our three-state region,” he said.
Boswell also echoed Methodist’s initiative to focus on infrastructure, referencing the implementation of Baptist OneCare medical records systems and development of a new primary care model in midtown.
“Managing practices are not what physicians are trained to do – dealing with insurance companies and electronic health records and other infrastructure,” Gentry said. “The amount of money and time private practices have to invest to keep up is incredibly challenging. And, the younger generation of doctors wants better work/life balance anyway.”
The challenges for hospitals involved in practice purchases are not just managerial, but cultural as well.
“All of these practices are entrepreneurial businesses that don’t find combining with a health system to be easy or natural,” said Breen. “Doctors were entrepreneurs in a day when being a doctor didn’t mean being three extra FTEs to get the administrative work done. We’ve been about a cultural effort to make the physicians feel they are part of the health system. We recognize how hard it is to make that journey.”
As everyone adapts, has the Memphis market achieved “purchase saturation?” Dr. Gentry said that some markets across the country are reaching a threshold, as all the doctors who want their practices purchased have been bought. In Memphis, we may be headed that direction eventually, but recent purchases belie that we are there now.
For those who want to maintain independence, there are other avenues.
Consolidated Medical Practices of Memphis (CPMC), PLLC, was created in 2008 to maintain independence from competing markets in the industry while addressing financial issues faced by private practice doctors. Fifteen physicians/physician groups are a part of CPMC.
Then, there are mergers of large practices. The recent joining of Gastro One and Memphis Gastroenterology Group is not an attempt to remain independent of hospital systems, said Michael Dragutsky, MD, but to retain flexibility for patients—citing their doctors having privileges at Baptist, Methodist and St. Francis. The practice is retaining the name Gastro One.
“We each feel that the Memphis area will benefit from a regional independent practice of our size as is the trend in most major metro areas. Independence means the highest level of flexibility for our patients in terms of facilities, insurance and choice,” he said. “It follows a national GI services trend of creating regional ambulatory service centers with deep resources for treatment, research and subspecialties.”
Dr. Gentry agreed that there are significant mergers within specialties in other markets, particularly trending in gastroenterology groups and orthopedic groups. He explained the power in numbers required to negotiate with large insurance companies and health systems is a plus for mergers, as well as the efficiencies to be gained in management and infrastructure.
Richard Aycock, MD, of Memphis Gastroenterology Group, said there had been talk about a merger at this level for a few years, and the combination with Gastro One presented a great fit for both practices. Both Gastro One and Memphis Gastroenterology Group had been approached by hospitals before and had passed on the opportunities.
