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Doctor-Hospital Integration Catches on Again with Lessons Learned
SEPTEMBER 2010
As published in The Journal of South Mississippi Business
An old trend is gaining steam again in the health care industry, and it could have important consequences inside and outside the industry.
"Health care systems are seeing the opportunity to partner up with physicians," said Rud Blumentritt, a senior manager in the Hattiesburg office of HORNE LLP where his primary focus is the valuation of health care entities. "This allows them to take advantage of the physicians knowledge so they can design specialty departments, electronic health records initiatives, centers of excellence and things of that nature."
If such an arrangement sounds familiar, it is. A similar trend swept the medical industry in the 1990s, with hospitals buying up private medical practices, Blumentritt said. There were bidding wars with the hospitals overpaying for the practices and then losing money on them. On top of paying too much, hospitals quickly found that they did not understand the outpatient business.
"Managing a physician's practice is a whole lot different than managing the hospital," said Greg Shoemaker, the executive vice president for business development at Singing River Health Systems. Singing River bought up a number of doctor's practices in the 1990s and then in 2000 and 2001 completely divested itself of these practices.
This time around is a good deal different than when this was first tried 10 to 15 years ago, he said. Now, the doctors are driving it.
"What is different now," Shoemaker said, "is that there is a lot of different dynamics causing hospitals to get paired up with doctors. Many new physicians are comfortable with an employee arrangement. That, in itself, is a very big driver for this.
"There is a lot of it is the complexity of running the business," he added. "Especially in primary care. It is extremely difficult to run a private primary care practice in such a way that you meet all of the regulations and all of the red tape that goes along with primary care health care and make a reasonable profit or a reasonable salary.
"Years ago, physicians who built successful practices had to be willing to put in the hours to do it. They often worked 70, 80 or 90 hours a week, seven days a week. Many younger doctors today are just not willing to do that. They have families and they want balance in their lives. Joining a bigger group or health care group allows them to have security and gives them the infrastructure to run a business that is very difficult without committing to 80 or 90 hours a week to make ends meet."
Another big driver in this trend is the health care reform legislation that was passed by Congress earlier this year. The massive new law, with nearly 3,000 pages of sweeping changes, includes a number of provisions that will make it even harder for the independent practitioner to stay in business. These include converting to an electronic medical records system next year and a global payment system by insurers with continuing downward pressure on reimbursements, making it much more difficult for new doctors to get started.
An integrated health care system will improve service for patients, Shoemaker said.
"A lot of this will be transparent to patients," Shoemaker said. "We have acquired existing practices and the doctors keep seeing their patients. One example is Pascagoula Family Practice. They have been in that one location for more than 20 years. The next morning after we acquired them (in 2009), they opened their doors and the doctors were seeing patients just like before."
One of those doctors was Teresa Williamson, who worked for the state Health Department and John Hopkins Hospital in Baltimore, Md., before returning to the Gulf Coast in 1996.
"When we moved back, the clinic had just been bought by the hospital," Williamson said. "There were not the safety measures in there for running a clinic. The people in the hospital had no idea about how to run an outpatient clinic." Williamson and her partners took their practice back from the hospital in 2000. They have since sold it back to the hospital in June 2009.
"It is night and day different this time," she said. "The people who they have in place over the outpatient clinics are much more educated on what it takes to run an outpatient clinic. They have had a lot more thought go into this.
"I think there have been a lot of good things that have happened for our patients," Williamson said. "It goes a lot to what you can afford to do. Now, we have a call center. All of our calls go to people who can make appointments. People can make appointments and get in quicker and easier. Our three or four phone lines are not always tied up, which was a big issue before. Our accessibility is better. Our hours of operation have changed. We are open a little earlier and stay a little later.
"The most important thing is the patients and the care that the patients get," Williamson said that the business end of running a practice is really not the forte' of most doctors. "That is why I am here and why I practice medicine. It might sound a little hokey, but that is what God called me to do. In a year's time, I feel that this allows me to be a better doctor."
