BMN Blog

FEB 06

Each year, the landscape for physician practices has experienced seismic shifts in the areas of reimbursement, regulatory requirements, technology, and competition. Meeting the challenges of such a shifting landscape is a formidable task for even the most sophisticated of physician practices. Doing so requires a keen eye on what’s ahead and careful planning. So, let’s look at a couple of trends that should be considered in the planning process for 2020.

A trend that has gained steam recently is the increase in what I will call “retail medicine.” Retail medicine consists of care delivery models that are intended to better accommodate patients’ desires for timely and convenient access to medical care and their health information. These models may include urgent care centers, freestanding emergency departments, clinics in retail pharmacies, telemedicine, and others that are designed to facilitate access by placing care closer, either physically or electronically, to the patient.

Retail medicine also seeks to expand the delivery of medical care beyond normal business hours in order to accommodate patient schedules. Delivery systems for retail medicine are often undertaken by large entities that have the ability to bring the resources to bear to provide real-time access to health records, convenient appointment times, locations, and scheduling, and - perhaps most importantly - timely responses to patients’ questions.

In response to the retail medicine trend, many traditional physician practices are offering similar online access services, extending office hours on week days, and offering Saturday appointments. We expect this trend to continue as patients’ expand their expectations for convenient care.

Concurrent with the emergence of retail medicine has been the growth of private equity investment in medical delivery systems. Along with investing in the types of retail medicine delivery systems mentioned above, we have seen private equity investment in traditional physician practices, particularly in orthopedics, ophthalmology, dermatology, urology, gastroenterology, and radiology. According to Bloomberg Law, there were 181 physician practice private equity transactions in 2018, and results to date suggest that 2019 yielded as many or more.

In states that prohibit the corporate practice of medicine, private equity funds do not take an ownership interest directly in the medical practice but, instead, acquire an ownership interest in a management services organization that handles the business functions of the practice, with the physicians retaining ownership of the practice and responsibility for all clinical decisions.

Private equity investment can provide a physician practice with the resources to employ new technologies to enhance patient engagement and convenience, prepare for value-based purchasing, and to potentially gain enough size to attain a stronger bargaining position with payors. However, these l benefits come with a loss of autonomy over business decisions. Some studies have also raised concerns about potential conflicts between the quality of patient care and the pressure for profits inherent in private equity investments.

For physician practices that want to consider raising capital through private equity investment, the American Medical Association has published a very informative guide entitled, Venture Capital and Private Equity Investment: How to Evaluate Contractual Agreements, which can be found at https://www.ama-assn.org/system/files/2019-07/evaluate-contractual-arrangements.pdf. The guide provides an overview of private equity investment, key documents involved in private equity transactions, and key provisions that should be addressed in the documents. It is recommended reading for any physician considering a private equity investment in the physician’s practice.

Regardless of whether a physician practice chooses to remain independent, merge with another practice, or raise capital through private investment, the practice should consider how it will address the increased level of competition that is being generated by retail medicine initiatives and private investment. Keeping a keen eye on these trends, along with careful planning, can help physicians have a prosperous 2020.

James Henry is a partner with the law firm of Cabaniss, Johnston, Gardner, Dumas & O’Neal LLP. He represents providers in all aspects of healthcare law, including regulatory, entity formation, purchase and sale of entities, professional discipline, Certificate of Need, reimbursement, physician contracts, and others. He may be reached at 205-716-5257 or jfh@cabaniss.com.

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