No hangover: Doc buying binge rolls on as systems learn from past deals
Skip to main content
MDHC_Logotype_white
Subscribe
  • My Account
  • Login
  • Subscribe
  • News
    • This Week's News
    • COVID-19
    • Providers
    • Insurance
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • People
    • Regional News
    • Digital Edition
    • Barbers, artists help defy vaccine myths for people of color
      US opens more distance in worldwide race against coronavirus
      Private equity's estimated healthcare spending halved in first quarter
      UnitedHealthcare sees Q1 profits rise and other key earnings takeaways
    • Barbers, artists help defy vaccine myths for people of color
      US opens more distance in worldwide race against coronavirus
      FCC to open next round of COVID-19 telehealth program applications
      Virus is 'runaway train' at Michigan hospital system
    • Some healthcare associations moving full steam ahead with conferences starting in summer
      COVID hospitalizations in Michigan top fall surge; Beaumont seeing nurse 'burnout'
      Calls mount for Biden to track U.S. healthcare worker deaths from COVID
      Front-line workers want more assistance after a year of COVID-19
    • UnitedHealthcare sees Q1 profits rise and other key earnings takeaways
      California re-opens enrollment for health insurance coverage
      Insurers are partnering to offload the costs of kidney failure patients
      Cigna and Oscar expand their small business partnership
    • J&J vaccine pause a minor blip, but efforts must press on, experts say
      Effort to keep Arkansas Medicaid plan falls short in state Legislature
      A year into pandemic, federal officials design new mask guidelines to better protect more workers
      Long-term care providers concerned by effects of J&J COVID-19 vaccine pause
    • Private equity's estimated healthcare spending halved in first quarter
      UH reports $54.7M operating income for 2020 despite significant COVID-related costs
      CMS issues new guidance to enforce price transparency rule
      Massachusetts to crack down on highest-cost hospitals, insurers
    • FCC to open next round of COVID-19 telehealth program applications
      CHIME, HLTH to host joint spring conference next year
      Anthem, Blackstone launch new joint venture
      Healthcare data breaches
    • Michigan expands antibody treatment to cut hospitalizations
      J&J vaccine pause a minor blip, but efforts must press on, experts say
      A year into pandemic, federal officials design new mask guidelines to better protect more workers
      FDA pauses enforcement of in-person dispensing requirement for abortion pill
    • Oscar names new virtual-first care division president
      Redfield joins Big Ass Fans, which promotes controversial COVID-killing technology
      Next Up Podcast: Modern Healthcare's editor Aurora Aguilar talks new content direction
      Novant Health adds chief payor performance officer
    • Midwest
    • Northeast
    • South
    • West
  • Insights
    • ACA 10 Years After
    • Best Practices
    • Special Reports
    • Innovations
    • The Affordable Care Act after 10 years
    • A close-up of a woman receiving a COVID-19 vaccine.
      Providers in underserved communities work toward equitable vaccine distribution
      Josh Bradshaw
      How one rural Illinois county vaccinated 84% of its senior citizens by early March
      Dr. John Fischer
      Patient-reported outcomes tool for hernia surgery helps physicians improve care
      New care model helps primary-care practices treat obesity
    • A family photo of the the Hangens.
      Stressing the already burdened pediatric behavioral health system
      Jennifer Pannone and her daughter Victoria.
      Mental health access for children needs attention
      What's next for on-demand telehealth companies?
      A CalOptima PACE vaccination clinic.
      Will COVID-19 be the catalyst for creating a more sustainable healthcare system?
    • Ryan McGinnis
      Finding efficiencies in the OR using tech
      Dr. Daniel Hall
      UPMC pilots machine learning, telehealth to inform patient transfers
      A woman being recorded using her inhaler on a smartphone.
      Digital check-ins, connected inhalers help control asthma
      A phone screen showing the question, "Mary we hope this information was helpful and we'd like to keep guiding you. Are you interested in knowing when it's your turn to receive the vaccine?"
      Chatbots, texting campaigns help manage influx of COVID vax questions
  • Transformation
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • Mayo Clinic launches two tech companies
      Diabetes patients at high risk for COVID-19 are managing conditions more effectively
      Nearly 1 in 5 Americans skipped care due to cost last year
      COVID-19 long-haulers need holistic treatment, providers say
    • Amazon gives out $12M under next phase of AWS diagnostics development initiative
      Malpractice premiums peak in 2020, AMA survey shows
      A rendering of a cancer research institute at the University of Southern California that will include 5G.
      Healthcare providers determine how to best use ultrafast 5G
      Two-thirds of largest hospitals aren't complying with price transparency rule
    • Addressing long-standing barriers needed for mental and physical health integration
      A close-up of a woman receiving a COVID-19 vaccine.
      Providers in underserved communities work toward equitable vaccine distribution
      The waiting room of a Kaiser Permanente clinic at a Target location.
      Health systems revamp their approach to retail clinics
      Josh Bradshaw
      How one rural Illinois county vaccinated 84% of its senior citizens by early March
    • When money talks. Why cash pay is becoming more popular
      CMS wants to bump pay for hospices, SNFs next year
      CMMI pauses new Direct Contracting model applications
      CMS wants to boost payments over 2% for inpatient rehab, psych facilities
  • Data/Lists
    • Rankings/Lists
    • Interactive Databases
    • Data Points
    • Health Systems Financials
      Executive Compensation
      Physician Compensation
  • Op-Ed
    • Bold Moves
    • Breaking Bias
    • Commentaries
    • Letters
    • Vital Signs Blog
    • From the Editor
    • Dr. Alan Kaplan
      The risks, rewards of taking organizations 'where they haven’t gone before'
      Wellstar CEO calls adapting for the pandemic her bold move
      Howard P. Kern
      Recognizing the value of telehealth in its infancy
      Dr. Stephen Markovich
      A bold move helped take him from family doctor to OhioHealth CEO
    • Drs. Hal Paz and Joshua J. Joseph
      Mobilized to fight the COVID crisis: a blueprint for community and academic partnerships
      Dr. Stephen Markovich
      Making sure we're aligned along the path to achieving inclusion
      Barry Ostrowsky
      Ending racism is a journey taken together; the starting point must be now
      Laura Lee Hall and Gary Puckrein
      Increased flu vaccination has never been more important for communities of color
    • Five lessons for securing our children's future
      We're losing engaged providers, and healthcare will pay the price
      Dr. Chris DeRienzo
      How COVID-19 broke health systems and made them stronger
      Bonnie Castillo and John Welton
      Dueling opinions: The role of mandated nurse staffing ratios
    • Letters: Eliminating bias in healthcare needs to be ‘deliberate and organic’
      Letters: Maybe dropping out of ACOs is a good thing for patients
      Letters: White House and Congress share blame for lack of national COVID strategy
      Letters: VA making strides to improve state veterans home inspections
    • Sponsored Content Provided By Optum
      How blockchain could ease frustration with the payment process
      Sponsored Content Provided By Optum
      Three steps to better data-sharing for payer and provider CIOs
      Sponsored Content Provided By Optum
      Reduce total cost of care: 6 reasons why providers and payers should tackle the challenge together
      Sponsored Content Provided By Optum
      Why CIOs went from back-office operators to mission-critical innovators
  • Awards
    • Award Programs
    • Nominate
    • Previous Award Programs
    • Other Award Programs
    • Nominations Closed - 50 Most Influential Clinical Executives
      Nominations Open - Top 25 Innovators
      Nominations Open May 24 - Top 25 Emerging Leaders
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • Best Places to Work in Healthcare
    • Health Care Hall of Fame
    • Healthcare Marketing Impact Awards
    • Top 25 Emerging Leaders
    • Top 25 Innovators
    • Minorities in Healthcare
      • - Luminaries
      • - Top 25 Minority Leaders
      • - Minorities to Watch
    • Women in Healthcare
      • - Luminaries
      • - Top 25 Women Leaders
      • - Women to Watch
    • Excellence in Nursing Awards
    • Design Awards
    • Top 25 COOs in Healthcare
    • 100 Top Hospitals
    • ACHE Awards
  • Events
    • Conferences
    • Galas
    • Webinars
    • COVID-19 Event Tracker
    • emburse certify modern healthcare custom media webinar logo lockup
      Sponsored Content Provided By Emburse
      Webinar: Making it easy to manage costs
      virtualmed staff modern healthcare custom media logo lockup
      Sponsored Content Provided By VirtualMed Staff
      Webinar: Best practices for creating a successful telepsychiatry program
      telehealth visit man touching neck while speaking to doctor on computer
      Sponsored Content Provided By Accumen
      Webinar: How telehealth has evolved into a standard of care
      modern healthcare custom media and trimedx custom webinar logo lockup
      Sponsored Content Provided By TRIMEDX
      Webinar: Bridging the gap between clinicians and administration to improve capital equipment planning
    • Women Leaders in Healthcare Conference
    • Social Determinants of Health Symposium
    • Healthcare Transformation Summit
    • Leadership Symposium
    • Virtual Briefings
      • - Hospital of the Future
      • - Mental Health
      • - Patient Safety & Quality
      • - Strategic Marketing
      • - Virtual Health
      • - Workplace of the Future
    • Best Places to Work Awards Gala
    • Health Care Hall of Fame Gala
    • Top 25 Minority Leaders Gala
    • Top 25 Women Leaders Gala
  • Listen
    • Podcast - Next Up
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Video Series - The Check Up
    • Sponsored Video Series - One on One
    • Next Up Podcast: Modern Healthcare's editor Aurora Aguilar talks new content direction
      Dr. Chris DeRienzo
      Next Up Podcast: Building team spirit in the wake of COVID-19
      Mikelle Moore
      Next Up Podcast: Mikelle Moore on recognizing all hospital workers during the pandemic
      Empty boardroom
      Next Up Podcast: What's going to happen tomorrow? Succession planning during emergencies
    • Beyond the Byline: Kids' unchecked mental health needs pose long-term consequences
      Beyond the Byline: How COVID-19 has impacted hospital finances
      An older man sitting on a hospital bed with his back toward the camera.
      Beyond the Byline: Upcoding could explain why hospitals are increasingly billing for the most complex treatment
      Beyond the Byline: Insurers are betting on virtual-first plans as COVID-19 shifts care pathways
    • James garvert neustar healthcare insider podcast image
      Building on basics
      Healthcare Insider Podcast Episode Art - Premier
      Why Roger Weems and other consultants are leaving the big firms to join Premier
      James garvert neustar healthcare insider podcast image
      Outreach during COVID-19
      ann barnes healthcare insider podcast image
      Leading with intention to promote diversity and inclusion
    • The Check Up: Dr. James E.K. Hildreth
      The Check Up: Dr. James E.K. Hildreth of Meharry Medical College
      The Check Up: Matt Eyles
      The Check Up: Matt Eyles of AHIP
      The Check Up: Dr. Tom Shanley
      The Check Up: Dr. Tom Shanley of Lurie Children’s Hospital of Chicago
      The Check Up: Dr. Harold Paz
      The Check Up: Dr. Harold Paz of Wexner Medical Center at Ohio State University
    • ivana naeymi-rad one on one intelligent medical objects
      Video: Ivana Naeymi Rad of Intelligent Medical Objects
  • MORE +
    • Advertise
    • Media Kit
    • Newsletters
    • Jobs
    • People on the Move
    • Reprints & Licensing
MENU
Breadcrumb
  1. Home
  2. Providers
June 20, 2015 01:00 AM

No hangover: Doc buying binge rolls on as systems learn from past deals

Beth Kutscher
  • Tweet
  • Share
  • Share
  • Email
  • More
    Print
    Getty Images

    Hospitals continue to add physicians at a brisk pace, defying predictions that the practice acquisition binge would end in a fiscal fiasco.

    Unlike the 1990s, when system purchases of physician practices led to losses and an unwinding of many deals, hospital systems this time around appear to have found a way to absorb the costs associated with employing physicians, which usually include a steep overhead tab and the higher salaries and benefits paid for office-based specialties. Experts point to the welcome influx of paying patients from healthcare reform, efficiencies associated with hospital consolidation and the continued improvement in the overall economy as factors offsetting those higher costs and cushioning hospitals' bottom lines, at least for the moment.

    But just as significantly, hospitals have taken a number of steps to hold down costs related to their physician-practice acquisitions. They include leveraging their heavy investment in health information technology, focusing their acquisition strategy on primary-care practices and moving quickly to standardize physician activities at the newly acquired practices.

    “Obviously, there's an investment to be made in bringing them on,” said Paul Marmora, executive director of the medical group at Atlantic Health System in Morristown, N.J., which grew to 383 employed physicians in 2014, up from 316 the previous year. But “the costs will come down as we share some of the best practices,” he said.

    Health systems across the country are continuing to expand the number of physicians they employ despite the increased costs that come with having physicians on staff. Physician employment increased 3.8% between 2013 and 2014, according to Modern Healthcare's annual Systems Survey, which this year included responses from about 80 health systems across the country.

    But few are writing big checks simply to inflate their totals. System officials say they are becoming more selective about which specialists they hire. They are also looking more closely at compensation models and how they integrate the new physicians once they are on board.

    Spectrum Health in Grand Rapids, Mich., had a 40-member primary-care group just six years ago. Now the number of employed physicians has swelled to 668, including a 10% bump since 2013.

    Much of the growth has come as the system has expanded farther into western Michigan through the acquisition of several rural hospitals. But it is also part of its strategy to expand service lines and build up its tertiary and quaternary care offerings.

    “We don't see this slowing down,” said Dr. David Ottenbaker, associate chief medical officer at Spectrum Health Medical Group. The number of employed clinicians could conceivably reach 1,500 by 2020, he added. “We call it growing with purpose. We want to grow where it makes sense.”

    Demand is particularly high for primary-care physicians, the backbone of both referral networks as well as value-based care models that emphasize keeping people healthy. “The supply and demand equation for them has turned upside down,” said Bob Collins, managing partner at The Medicus Firm, a physician recruitment agency. “There's an arms race for primary-care providers. By far, that's where there's the greatest angst and need.”

    Spectrum and its insurance arm, Priority Health, are not participating in accountable care organizations. But physician employment will allow them to consider adding risk-based contracts, where they will be paid based in part on outcomes, Ottenbaker said.

    “At the end of the day, we're committed to driving down costs,” he said. “Our goal is always to get into the bottom quartile for cost and the top quartile for quality.”

    MH Takeaways

    Hospital systems that are snatching up physician practices in their communities are absorbing the high cost by being more selective and taking steps to hold down post-acquisition expenses.

    Adding high-cost specialists is a tougher lift, but is still being avidly pursued by some. The fields in demand include cardiology, obstetrics and certain surgical subspecialties such as cardiothoracic and neurosurgery. “It's all about fulfilling a broader service line in the community,” said Mark Folk, a healthcare attorney at Waller Lansden Dortch & Davis.

    Investment in physician employment continues despite predictions it would slow because of the strain on hospital balance sheets. But the improving economy and the reduced uninsured population has enabled systems to offset those higher costs with higher revenue, at least for now.

    The average revenue increase reported in the survey was 10.2%. The average operating margin in 2014 rose to 3.3% among systems in Modern Healthcare's financial database, an increase from 2.5% the previous year.

    As systems get larger, they're better able to spread their fixed costs, such as health information technology. The systems in Modern Healthcare's survey had an average of 21 hospitals in 2014, up from 19 in 2013.

    Having its physicians on a single electronic health-record system has been beneficial, said Marmora of the Atlantic Health. Like other systems, it initially focused on expanding its employment of primary-care physicians and cardiologists. It has since expanded to other specialties, preferring to bring on large doctors' groups rather than two-physician practices. “Now we're working and practicing as one aligned group,” he said.

    In Columbus, Ohio, 12-hospital OhioHealth also has focused on better collaboration with its physicians as a way to improve clinical outcomes and ultimately reduce costs. Dr. Gary Ansel, an interventional cardiologist, spent 17 years in private practice at MidOhio Cardiology and Vascular Consultants before the group became part of OhioHealth in 2009.

    At first, the cardiology practice tried to operate almost as an independent franchise of OhioHealth, Ansell recalled. “You really didn't notice much change in the practice at first,” he said. But over the past couple of years, OhioHealth has focused on standardizing practices across the system.

    Physicians now serve in leadership roles and have regular meetings with their colleagues. “We created a vascular institute without walls,” Ansel said. “We are driven to come up with common treatment protocols for the entire system; we are a resource for the entire system.”

    The goal is to allow patients to receive care close to home but still get the same outcomes as if they were treated at an OhioHealth tertiary-care hospital. The changes have reduced the system's complication rate for vascular procedures to 0.3%, well below the typical 1% to 3%.

    Yet while many systems tout the benefits of having more physicians, they're also looking for ways to make the costs more manageable. “What you're seeing here is probably a more disciplined approach,” said Paul Generale, who oversees the physician group at 25-hospital Christus Health. The Irving, Texas-based system operates with a slim operating margin below 2%, and Generale acknowledged that its physician-employment strategy has contributed to the strain.

    The number of employed physicians at Christus actually declined slightly in 2014 to 265 from the previous year's 273. But the system reports that in 2015, that number has jumped to 303.

    What's changing, however, is the mix of physicians, Generale said. Specialists once accounted for 57% of its employed physicians. Now that number has flipped, with 60% of its employed physicians practicing primary care.

    The system can employ primary-care providers more economically than higher-paid specialists. Moreover, Christus is moving away from office-based services by embracing urgent and walk-in care in retail locations. Primary care is central to that shift, Generale said.

    But expanding physician employment isn't for everyone. SCL Health in Denver is shrinking its paid physician workforce by taking a hard look at which specialties would be better to have in-house and which should remain community-based, making its decision on a market-by-market basis.

    The three-state system employed 293 physicians in 2014, down from 368 the previous year, after shedding two Kansas City hospitals.

    But SCL isn't adding physicians at its existing hospitals either, at least not across the board.

    Competition in metro Denver, for instance, has forced its hand toward an employment model, particularly in specialties such as primary care and cardiology. But in Montana, SCL prefers to contract with cardiologists under a professional services agreement.

    “Over the past 24 months, we have been much more purposeful about the specialty mix that we're bringing into our medical group,” said Dr. Richard Lopes, chief population health officer at SCL. “Our specialty recruitment has been very selective.”

    With labor costs accounting for more than half of revenue, compensation is another avenue where systems are attempting to manage expenses. Compensation still largely follows productivity-based formulas, despite moves toward value-based care delivery models, said Travis Singleton, senior vice president at Merritt Hawkins.

    The physician recruitment firm actually has seen a move away from value-based payment incentives. Only 24% of its assignments feature bonuses linked to quality or value metrics, down from 39% the previous year. “As much as we want to believe our system is moving to outcomes, by and large, our system is based on volume,” Singleton said.

    Still, OhioHealth is one provider rethinking the productivity-based compensation formula. “In certain areas, we've actually moved away from production,” said Hugh Thornhill, president of the OhioHealth Physician Group. About 20% of OhioHealth's physicians are now on a salary-plus model, where they get incentives for meeting certain targets. “Productivity was actually a barrier for us,” he said.

    OhioHealth is among the systems that has been expanding its medical group, both through affiliations with new hospitals, as well as through a focused strategy to develop key specialties. It has increased physician employment at a rate of 20% each year, and is concentrating in particular on services such as cardiology, vascular medicine and neurology—the latter as it prepares to open a $300 million neuroscience center at Riverside Methodist Hospital in Columbus.

    The number of doctors on staff in 2014 numbered 722, up from 588 the previous year. “We've gone from an administrative to a physician-led organization,” Thornhill said.

    The system sees no reason to change course. It expects to keep growing at the same rapid rate in primary care, and will add specialists only slightly more slowly at a 12% to 15% per year clip. “If we build a good enough business,” said intervention cardiologist Ansel, “we're going to drive patients to OhioHealth.”

    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    Some healthcare associations moving full steam ahead with conferences starting in summer
    Some healthcare associations moving full steam ahead with conferences starting in summer
    COVID hospitalizations in Michigan top fall surge; Beaumont seeing nurse 'burnout'
    COVID hospitalizations in Michigan top fall surge; Beaumont seeing nurse 'burnout'
    Sponsored Content
    Get Newsletters

    Sign up for enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today
    MH Magazine Cover

    MH magazine offers content that sheds light on healthcare leaders’ complex choices and touch points—from strategy, governance, leadership development and finance to operations, clinical care, and marketing.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS
    • Instagram

    Our Mission

    Modern Healthcare empowers industry leaders to succeed by providing unbiased reporting of the news, insights, analysis and data.

    MDHC_Logotype_white
    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • News
      • This Week's News
      • COVID-19
      • Providers
      • Insurance
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition
    • Insights
      • ACA 10 Years After
      • Best Practices
      • Special Reports
      • Innovations
    • Transformation
      • Patients
      • Operations
      • Care Delivery
      • Payment
    • Data/Lists
      • Rankings/Lists
      • Interactive Databases
      • Data Points
    • Op-Ed
      • Bold Moves
      • Breaking Bias
      • Commentaries
      • Letters
      • Vital Signs Blog
      • From the Editor
    • Awards
      • Award Programs
        • 100 Most Influential People
        • 50 Most Influential Clinical Executives
        • Best Places to Work in Healthcare
        • Health Care Hall of Fame
        • Healthcare Marketing Impact Awards
        • Top 25 Emerging Leaders
        • Top 25 Innovators
        • Minorities in Healthcare
          • - Luminaries
          • - Top 25 Minority Leaders
          • - Minorities to Watch
        • Women in Healthcare
          • - Luminaries
          • - Top 25 Women Leaders
          • - Women to Watch
      • Nominate
      • Previous Award Programs
        • Excellence in Nursing Awards
        • Design Awards
        • Top 25 COOs in Healthcare
      • Other Award Programs
        • 100 Top Hospitals
        • ACHE Awards
    • Events
      • Conferences
        • Women Leaders in Healthcare Conference
        • Social Determinants of Health Symposium
        • Healthcare Transformation Summit
        • Leadership Symposium
        • Virtual Briefings
          • - Hospital of the Future
          • - Mental Health
          • - Patient Safety & Quality
          • - Strategic Marketing
          • - Virtual Health
          • - Workplace of the Future
      • Galas
        • Best Places to Work Awards Gala
        • Health Care Hall of Fame Gala
        • Top 25 Minority Leaders Gala
        • Top 25 Women Leaders Gala
      • Webinars
      • COVID-19 Event Tracker
    • Listen
      • Podcast - Next Up
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Video Series - The Check Up
      • Sponsored Video Series - One on One
    • MORE +
      • Advertise
      • Media Kit
      • Newsletters
      • Jobs
      • People on the Move
      • Reprints & Licensing