Healthcare’s Consolidation Landscape

Christopher Cheney, June 1, 2017

In the same HealthLeaders Media MAP survey, physician practices were among the top targets for recent MAP deals, with survey respondents citing that 27% of the entities involved in a recent transaction were physician practices.

''Our whole organization’s evolution has been through successful partnerships and consolidations with regional players.''

The respondents reported that health systems also accounted for 27% of recent MAP transactions. Hospitals were next in line as the top target for MAP transactions, accounting for 20% of recent MAP activity.

In the survey, physician practices were the most sought-after entities for MAP activity within the next year, with 59% of the respondents reporting that their organization was interested in pursuing MAP deals with physician practices. The next-highest category of sought-after entities for MAP deals were physician organizations such as independent practice associations at 30%.

In September 2016, Physicians Advocacy Institute (PAI), a nonprofit advocacy organization dedicated to examining the challenges that physicians face and educating policymakers about those challenges, published a national report that shows the impact of consolidation activity on doctors: Physician Practice Acquisition Study: National and Regional Employment Changes.

Data for the PAI report was drawn from seven points in time from July 2012 to July 2015. During the study period, the percentage of hospital-employed physicians increased 49%, with increases posted over each six-month period examined in the report. The percentage of hospital-employed physicians nationwide jumped from 26% in July 2012 to 38% in July 2015.

The report shows a 31,000-practice increase in the number of physician practices employed by hospitals over the three-year period, which amounted to an 86% hike.

"This change in employment status has occurred across the country," says Kelly Kenney, JD, executive vice president of PAI. "The thought was that urban areas would outpace the rural side because it would not make as much sense for a rural hospital to employ physicians, but we found that the rural employment rates have gone up considerably and are converging into the urban rates."

Unfavorable financial factors are driving many physicians out of independent practices, says Robert Seligson, MBA, MA, president of PAI, and executive vice president and CEO of the North Carolina Medical Society. "In a rural area, you have less paying patients in most cases, so that creates a process of trying to find a formula and a strategy that will make your practice viable based on your payer mix."

Christopher Cheney

Christopher Cheney is the senior finance editor at HealthLeaders Media.

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