When private physician groups get acquired: Who loses?

In the recent years, there is a growing trend in the health care industry whereby private practitioners and independent groups are being acquired by larger companies. This trend is a result of growing complexities of running a private practice and increased expectations of hospital administrators from hospital-based specialists such as anesthesiologists, radiologists and pathologists.

I will concentrate on anesthesia as it is my area of specialization, and I have some relevant administrative experience. Historically, the anesthesiologists were paid a “unit value.” This unit value varies widely from one insurance company to another. Typically, the relatively low-unit values paid by Medicaid and Medicare were compensated somewhat by the higher amounts paid by private insurers. Understandably, the insurance companies realizing the power they held over the “hospital-based”, non-revenue-generating physicians, gradually started to pay significantly lesser and lesser amounts. The anesthesiologists had few options but to enter into fixed-rate contracts with the insurers. With the power to determine the value of a physician’s work now in the hands of the payer, and requirements from Center for Medicare and Medicaid Services (CMS) on several reportable measures simultaneously increasing, physicians found themselves having to devote a lot of time to administrative efforts. Clearly, the stage had been set for larger enterprises to take on the back office work and employ physicians.

Some anesthesia groups sold their practices by choice, others saw their practices taken over by these companies for trivial or no particular reasons.

Recently, my own group entertained the idea of selling and becoming employed at a significantly lower salary than currently being generated by the group. Understandably there was to be a large upfront payment to the group. Simultaneously juggling the need to hire physicians we found it increasingly difficult to attract talent as the rumors of the practice being sold circulated.

We were able to attract excellent candidates as soon as we decided to stay private. The influx of extremely well-qualified candidates came from groups that had recently sold their practice or had been acquired by the Walmarts of the medical industry. These conglomerations take a page from the playbook of the original Walmart — lower pay with increasing working hours, additional responsibilities without additional compensation creating a stressful work environment, possibly compromising patient care and undoubtedly worsening the working conditions for physicians. After all, the bottom line for these companies has to improve somehow.

What about the insurer? The insurer now has to enter into contracts with the Walmarts at higher rates, rates they vehemently denied the smaller groups as the Walmarts have a better negotiating power.

Not surprisingly — this increases the subscriber’s premium. This trend accomplished a lot on the corporate front. Increased revenues, improved profits, higher CEO salaries and bonuses. This is completely in line with capitalism.

The impact on patient care remains to be determined. The impact on the physician providers has been established. Lower salaries, longer working hours, workplace dissatisfaction are rampant.

The customer is still paying, in fact, paying more every year. The profits are now shared by the insurers and the conglomerates. Often the customer has no say in the matter.

“Be the change you want to see in the world!” incorrectly attributed to Mahatma Gandhi but an inspirational quote nonetheless.

The consumers of these services are the hospitals and the patients. Perhaps the hospitals can resist the temptation to allow these companies to manage these crucial services. Perhaps there is no stopping this juggernaut. In the interim, let us hope the shift changes and the multiple areas supervised by tired physicians in these models have no adverse effect on patient care.

For those of you interested in the origins of words, have a little fun with juggernaut.

Bimal Massand is an anesthesiologist.

Image credit: Shutterstock.com

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