Mergers and Acquisitions Benefitting the Healthcare System

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Large healthcare systems buying smaller offices and providers merging with each other have become extremely popular among many in the healthcare system. The healthcare market, it seems, is becoming more competitive, and the benefits of a large group practice model can be quite attractive in the eyes of the insurance companies as well as the patients.

In the second quarter of 2012, even though the number of transactions decreased, the “dollar volume of merger and acquisition activity in the health care industry more than doubled,” according to a press release by Irving Levin Associates.

medical_billing_advocate-86The trend has only gained momentum, and more people are leaning toward the larger group practice model rather than hanging on to or starting the smaller practices. So many factors go into this transition making sense for all involved – the insurance companies, the patients and the doctors.

Also, results or quality-based reimbursement is a growing trend, which is much easier to implement and monitor in larger corporations. Systems are typically set up to ensure the level of quality remains high and standards are met in all areas of the practice, maximizing care, thus maximizing reimbursements.

Since insurance companies have been much more selective with reimbursements, yet costs have continued to rise, the larger the system, the more likely a deal can be worked out with the insurers. Bigger companies have more negotiating power with insurance companies.

After all, the bigger the company gets, the smaller the rest of the market gets, and at some point they may not have much of a choice. Many doctors with experience in both small practices and large groups report that it is true; the smaller businesses feel silenced in a sense because of their inability to be taken seriously and weigh in on the critical issues within the market.

When organizations come together, the service improves. More minds are at work together, thinking of how to improve and streamline services, making the process much more efficient. Employees and group members also notice this, and many times are much happier as part of a larger group than they are with a small practice.

These are all strategies that have transformed many other industries. There’s strength in numbers. Just like stores that offer a variety of brand names and services typically do better than the smaller, independent stores, the healthcare industry is no different.

 

Interdependence

medical_billing_advocate-74Many practitioners do not like the business side of running a medical practice, including administrative and billing tasks. Larger groups already have those systems in place, relieving the practice of such tasks, and in some cases, completely diminishing the need for in-house or outsourced billing.

Being connected, doctors and patients will see a more streamlined experience. Referrals become less necessary as they can simply be keyed into the system and a specialist in the same building with the same records can see the patient. Duplicate treatments are less likely, because the communication is much more simplified, resulting in more effective treatment plans.

State-of-the-art equipment is easier attained as well, because not only do bigger systems have more money to be able to afford the equipment, they often get discounts based on their size, the number of machines purchased, and sometimes their name alone will speak volumes when negotiating prices.

 

Pay Structure

As part of a group, pay is regulated and is typically salary rather than percentages of procedures. This is great for the battle of the cost of healthcare. Raises depend on performance, not the doctor’s whim, which helps keep the costs from going even higher. Moreover, the doctor’s paycheck is pretty much guaranteed – as much as a paycheck can be guaranteed in this economy, that is.

It isn’t dependent on patient retention or how much the insurers actually reimburse. They will know what their pay will be at all times. If that isn’t enough relief, the doctor also won’t need to worry about making or even handling payroll. The bigger system already has that taken care of as well.

Collaboration

Organizations that are physician-run are great for doctors, as they are still able to give valuable input. They aren’t simply puppets on a string; they are key factors in decision-making. High-level administrators and directors with a high level of business acumen that are not necessarily from the medical industry, come together to contemplate, create and deliver the best experience for all involved. The doctor can put more focus on patient care, and the administrative side will be taken up and regulated according to a system that is usually already up and running.

 

Treatment

medical_billing_advocate-46As with any change, mergers are typically met with some resistance – especially by the patients – even more so by patients with chronic conditions. But mergers don’t necessarily mean dropped patients. Since the doctor will be part of a large group, there’s a good chance the insurance will still allow the patient to see their doctor.

Also, since the patient will have an entire team working to treat them, the diagnosis and treatment is often more efficient. In instances where a doctor may be perplexed, he or she will have the team to turn to. Researchers, specialists, interns and high-level physicians are all there to assist in the process. Physicians from all walks of the industry in many different disciplines can come together and avoid the pitfalls of limitations that are sometimes seen in smaller practices.

 

Independence

Even though there are tons of benefits, some still choose to stay out on their own, preferring their own level of autonomy over being regulated by a corporation. They want to run their own office in the way they see fit and prefer not to have someone looking over their shoulder ensuring they are following all of the corporate strategies. In addition, many physicians do not like the fact that non-compete agreements must be signed, which may limit their power to practice outside of the hospital or group.

 

Ownership

Another factor that may cause hesitation is that if the equipment or office space is leased, the hospital may assume the lease. While that may sound like a relief since they are taking a large chunk of the burden, if the merger were to fall apart, it may be difficult for the original practitioner to reassume the lease. Larger, more financially secure companies may be preferred, and the landlord may choose to stick with the corporation over the individual.

medical_billing_advocate-38Also, once the merger is set in stone, the doctor no longer “owns” the staffing or the practice. It all belongs to the bigger group. If the doctor wanted to branch out on his or her own again, they would have to start from scratch.

Still, the number of doctors in large practices remains relatively small. This means that not only is it not necessary to sell off practices, however beneficial merging may be, but that quality care can still come from smaller practices.

Moreover, instead of selling their practice and becoming an employee, many doctors simply partner with bigger medical groups, which still delivers many of the benefits such as money-saving, record sharing and insurance contracts. It’s just not quite as easy to go it alone.

For some, staying on their own may be worth it due to the freedom to run the practice as they please. For those who choose to do so, simply being an employee can be a vast relief. It’s just simply easier in many ways and can be quite profitable when joining with other professionals who share the same vision.

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