Hospital-owned physician practices continue to struggle financially, but time and experience may soon bring them into the black.
According to the Medical Group Management Association's most recent cost-survey data, some hospital-owned practices are losing as much as $53,917 per full-time physician every year. Inexperience and growing pains are the cause of the losses, says MGMA consultant Hobart Collins.
"A lot of hospital systems got involved in the group practice business, and not only didn't understand (the business), but initially didn't bring people into manage them," Collins says. "Some organizations have found they didn't set things up correctly and that has led to operation deficits, but they have figured that out and they are (now) working to fix it."
Englewood, Colo.-based MGMA analyzed the 1996 costs, incomes and losses of primary-care multispecialty, family medicine and multispecialty practices. On average, hospital-owned primary-care multispecialty practices are experiencing the greatest losses, $53,917 per full-time (or its equivalent) physician.
Primary-care multispecialty clinics that are not hospital owned, however, lose only $259 per physician. Hospital-owned multispecialty practices lose an average of $46,577, compared to a $2,404 gain for those not owned by hospitals.
Minneapolis-based Allina Health System has acquired more than 20 practices in recent years, according to Jeffrey Chell, M.D. Chell, who is president of the system's 423-physician group practice, says he doesn't expect newly acquired practices to be profitable for several years because of the integration expenses involved.
"When these practices are acquired, there is some investment that is required -- bringing common systems in, maybe building a new building or rehabbing an old building, implementing information systems," he says. Those investments, however, are slowly starting to payoff. For example, Chell says, physicians recruited to the new hospital-owned networks are doing more business, and the major investments (such as information systems) have been completed.