Skip to main content

Don't Let Physician Practice Acquisition Derail Your Back Office

 |  By kminich-pourshadi@healthleadersmedia.com  
   February 21, 2011

For several years now, hospitals and health systems nationwide have been acquiring physician practices. It's a potential growth opportunity for hospitals and health systems, and a stabilizing move for small group practices which may be financially unable to absorb all the possible reimbursement losses due to the changes in Medicare and Medicaid.

In fact, in the coming year 32% of financial leaders say they expect to acquire another organization, and the service lines they'd most like to grow are geriatrics, cancer and oncology, and primary care, according to the HealthLeaders Media Industry Survey 2011. While growth is great, that doesn't mean it doesn't come without causing a few hiccups—especially in your back office.

In the fervor to grow, many have a tendency to look all the benefits (translation, money) that a new acquisition will bring. However, in the haste to reach for success, many also fail to look at the challenges that may result from these purchases—not only in terms of physician alignment with organizational goals, but in this case, in terms of back office processes.

The first step financial leaders should take is a full examination of whether or not the back office has the capacity to handle what's about to come its way. After all, once you've completed the acquisition process, the last thing you need is to discover that you aren't able to handle the new influx of new patient claims that come with your newly acquired physicians and your cash flow suddenly decreases up instead of increases.

It's a predicament to which Baptist Healthcare System in Louisville, KY, can relate. Baptist Health is comprised of Baptist Hospital East, Baptist Hospital Northeast, Baptist Medical Associates, three Baptist Urgent Care centers, four BaptistWorx® occupational medicine clinics and two outpatient centers in the Metro Louisville area. Baptist Health is a large, multispecialty, employed physician group and its goal the past thee years has been growth.

Elizabeth North, director of reimbursement for Baptist Health, says in order to focus on fostering relationships with its physicians, continuing to acquire additional practices and secure market share, their attention had shifted away from daily revenue cycle operations. With more than 24,000 claims to file monthly, however, —funds needed to continue the pursuit of growth—they couldn't afford the distraction.

Having gone through a reduction in force in this department in 2007, the team was already operating at capacity. Then, when their growth strategy took hold—adding numerous physicians—a backup on the back-end emerged. The acquisitions had rapidly outpaced the team's capacity and accounts receivable days hit an all-time high of 50.

"We are in a highly competitive market, so any delay on our part with our ability to onboard these new physicians might damage us from a competitive standpoint," North explains. "We had decided already that our main goal was to grow and to do that we had to have a stable income."

Given the challenge, some healthcare providers might have decided to slow down growth efforts, shuffle people around, or hire additional back office personnel. North, however, says the cost of hiring, training, and ramp-up dictated that it would not be financially prudent to keep this in house. North says Baptist Health lacked the internal infrastructure, the correct number of employees, and the expertise needed to stabilize and improve its core revenue cycle, including claims management, A/R follow-up and collections, for the practices they had already acquired and the ones they wanted to add as part of the strategic growth plan. 

Though Baptist retained the responsibility for all its basic finances, such as charge capture and charge entry, it brought in McKesson to address the problem through outsourcing. As Baptist concentrated on growth, its vendor concentrated on stabilizing the revenue cycle and cash flow; in the process the average monthly charges increased 56.5%, and A/R days began dropping. North says Baptist Health actually just hit an all-time low in A/R days—29.2. 

More important than its reinvigorated revenue cycle, however, are Baptist's growth results. Over the last three years the hospital has grown its employed physicians from 77 to 110 and it continues to pursue other group practices. The lesson that Baptist has learned is a good one for many healthcare leaders to keep in mind: If growth is in your future, understand how it will impact all facets of your operation before making the first acquisition.

Karen Minich-Pourshadi is a Senior Editor with HealthLeaders Media.
Twitter

Tagged Under:


Get the latest on healthcare leadership in your inbox.