Major reasons why doctors are selling practices to hospitals
Major Reasons Why Doctors are
Selling Practices to Hospitals
A recent CNN report says that the trend of doctors selling their private practices to
hospitals has picked up pace. The number of physicians who sell their practices to
hospitals has increased to 40% from 30% over the last five years, according to
experts. Hospitals are now rushing to increase their market share as soon as possible
in the expectation that millions of more Americans can gain access to healthcare with
Obamacare. So these big players are very keen to buy private practices and hire
doctors. Doctors who sell their practice typically become the employees of the
hospitals and enjoy fixed salaries without worrying about administrative work.
Let us explore the exact reasons which have led to this disturbing trend in the light
of the above report.
In its effort to reduce the federal deficit, the federal government decided to cut down
the health care costs. The Centers for Medicare and Medicaid Services (CMS) reduced
the reimbursement for physicians and are now planning to lower the rate of payment
further in future. Reduced payments imposed higher costs on private practices and
made their situation worse.
Dr. Patrick Cobb, an oncologist in Montana sold his thirty year old group practice
Frontier Cancer Center to a hospital in December 2012 after struggling a lot for
years. The main reason for this decline was chemotherapy drug reimbursement
Oncologists used to buy the drugs for patients and bill the insurers for
reimbursements in the case of cancer treatment. In 2003, Medicare reduced
reimbursements for chemotherapy drugs significantly. Cobb’s Cancer Center spent
millions to buy these drugs from distributors. When the reimbursement was reduced,
the costs went up phenomenally. Even though Cobb and other oncologists took pay
cuts, it was not enough to offset declining revenues and the practice closed one of its
locations in 2008. They started looking for a buyer in 2012 and finally sold the
practice to Mont.-based St. Vincent Healthcare which hired all of them.
While reduced reimbursement rates did increase the investment on the part of the
private practices, doctors are forced to spend more money out of their pockets to
implement electronic medical records. Federal law insists that physicians implement
digital records technology by 2015. Otherwise, their Medicare payments will be cut
by 1%. Electronic Health Record (EHR) implementation will be very expensive for
private practices and it will definitely increase their outlay.
Dr. Dwayne Smith, a bariatric surgeon says that digital records implementation
would have been a very difficult proposition for his practice. He sold his group
practice to Cincinnati-based St. Elizabeth Healthcare in 2011. Even though his
practice was profitable, increasing costs were the reason to sell it to a hospital.
Doctors Even Facing Bankruptcy
Doctors often take pay cuts to leverage reduced reimbursement and increased costs
as in the case of Dr. Patrick Cobb. However, if the situation remains the same for a
long time, it will be difficult for them to manage their expenses, and they will
eventually land in debt.
Reduced reimbursement for chemotherapy drugs and medical supplies providers put
the profitable solo practice of Dr. Dennis Morgan, an oncologist at stake and he
began to make cutbacks to manage the falling revenues. This affected his expenses
slowly and his business debt grew. In 2011, his practice was filed for bankruptcy.
How Outsourcing Can Help Increase Revenue
Even though the practice of medicine, either group or solo is a service, it needs
revenue for sustenance. In the current scenario, even qualified, trained and
experienced physicians find it difficult to reap the expected financial returns from
their practices. It has become very expensive to operate a practice today and at the
same time very difficult to gain maximum reimbursement for services provided, due
to Medicare regulations.
The best option to tackle this situation is to seek help from an external service
provider instead of having it done in-house. By outsourcing the administrative work
to a professional medical billing and coding company, private practices can increase
their revenue and make their services profitable. Such companies can provide the
following services to the doctors.
Assist in revenue cycle management
Monitor overall financial performance
Identify the factors which affect cash collection
Implement an organized and efficient workflow to reduce errors and gain
billing and reporting
In addition to that, they can take care of EHR implementation and maintenance of
digital records without HIPAA compliance risks. Doctors can easily retrieve medical
records from them in the hour of need. They can even provide medical record review
services for doctors.
A reliable medical billing and coding company offers timely and affordable medical
billing, coding and audit services for physicians ensuring due reimbursement.
Professional billing staff keeps themselves updated about each and every code
change and changes in regulations. They know the services that are covered, and
will help physicians avoid providing services that have no coverage. A dedicated
medical billing firm is a physician’s best partner, helping to maintain a steady
revenue inflow through accurate and timely reimbursement.