Physician Owners: An Endangered Breed?


 

The healthcare environment has long been one of constant change. In recent years, change has taken hold more rapidly. From trends in reimbursement, to new technologies, to compliance concerns, and various other regulatory, financial, and social shifts, the landscape is far from fixed. Many health care providers have struggled to navigate these shifting seas.

One type of provider that has been particularly affected has been physician-owners of small to mid-sized practices. 2016 was the first year in which a majority of American physicians had no ownership stake in their practice. In 1983, over 75 percent of physicians owned their practices. Now there are more employees and independent contractors among physicians than physician-owners. Between July 2015 and July 2016, approximately 5,000 independent physician practices were acquired by hospitals, and the number of physicians employed by hospitals increased by 14,000. While certain specialties and demographics reflect greater percentages of ownership by physicians, hospital acquisition of physician practices is a trend that shows no signs of stopping.

The reasons for acquisitions are varied. The Affordable Care Act resulted in changes to the healthcare regulatory framework that served to accelerate a trend that was already underway. It can be prohibitively expensive and time consuming for small practices to manage healthcare IT developments, coding revisions, administrative burdens, and compliance issues - all while maintaining clinical quality. Shortcomings in any of these areas can prove costly.

Nevertheless, the forces influencing this trend away from physician ownership may not all be negative. While challenges drive some physicians to join a large entity, there are also opportunities compelling physicians to make the same decision. Furthermore, the trend may be in part due to cultural changes in the medical profession itself: a larger percentage of new physicians may simply have little interest in being owners. In light of the industry's current direction, now may be a prime time for physicians to consider selling their practices, either to hospitals or large, multi-specialty groups.

Unintended consequences for both physicians and patients can result from hospital acquisition of physician practices, including, in some areas, an increase in barriers to health care access. This is due in part to hospital locations being fewer and further between than doctor's offices, and compounded by the fact that physician-owned practices are not the only casualties of the move towards consolidation. Small and independent hospitals are also being acquired by larger entities or, as in our state, simply closing their doors.

The presence of geographic challenges to access is certainly the case in Alabama. The Alabama Department of Public Health recognizes wide swaths of the state which are Health Professional Shortage Areas, particularly but not exclusively in rural areas. Greater consolidation of physicians into large healthcare institutions, which are typically anchored in populated metropolitan centers, is unlikely to provide much improvement to these shortages. However, some hospitals - including hospitals in rural areas and 340B Program hospitals - are seeking to address the need for greater access by strategically acquiring or developing practices in various specialties as well as primary and urgent care in locations that facilitate patient access.

What is to be done with this information - the reality that physicians are increasingly less likely to own their practices, and that consolidation may adversely affect patients' access to care? The American Medical Association identifies physician burnout as a significant problem contributing to this trend, and it is working to address this through several initiatives. These include advocating the federal government to shift the regulatory scheme's focus away from paperwork and toward patient care, seeking improved EHR systems and interoperability, and addressing ways to streamline prior authorizations.

It remains to be seen whether or not these initiatives will be able to help make the practice of medicine more manageable for physicians. The factors influencing the acquisition trend are in many cases deeply ingrained. It appears doubtful that physicians will return in mass to private ownership, although more who are current owners may choose to stay in such positions. For the individual physician, studying these trends may signal an opportunity to sell to or partner with hospitals, although there are no one-size-fits-all approach. Each practitioner must evaluate the costs and benefits for himself.

Recognition of these trends is vital, and both hospitals and physicians have a role to play in recognizing the sometimes-forgotten parties in this landscape: patients themselves. Initiatives by hospitals to improve access for underserved populations, and attempts by physician advocates to ease their regulatory burden, may prove to be two sides of the same coin in our industry's struggle to purchase a more tolerable environment.


Christopher Thompson is an associate in the health law practice of Waller.

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