Healthcare’s Consolidation Landscape

Christopher Cheney, June 1, 2017

In North Carolina, young physicians are seeking hospital employment rather than coping with the financial pressure and other challenges associated with independent practices in rural markets, he says.

"We have a community practitioner program here in North Carolina that places doctors in underserved areas of the state, and in return, we pay up to 50% of their tuition loans. They have to stay in that area for at least five years. Twenty years ago, it was an easier sell to get doctors to do that. Now, with the changing dynamics of the marketplace—whether it is the rural or the urban areas—it is harder for a practice to maintain its viability when its payer base is weak and it is trying to be competitive and meet all the requirements that are coming down the pike."

With a high level of uncertainty about the future direction of healthcare regulation and the ongoing evolution of value-based care models, consolidation poses daunting risks for physicians, Kenney says.

"There is a rush to consolidate as we all know and as our study confirmed. We are very concerned that if the economics do not play out in a fairly quick time frame—because we know that health systems often lose money on the first few years of purchasing physician practices—that health systems will shed those purchasing agreements. Then what happens to those physicians? They have sold their practice. They have no practice to return to."

OhioHealth’s strategy for MAP success

OhioHealth, which reported total operating revenue at $3.5 billion in fiscal year 2016, has enjoyed a significant measure of consolidation success acquiring community hospitals, Louge says.

"This is where we have been active and successful for a long time. The problem for those hospitals is usually an inability to recruit and retain physicians and physician specialties in their market. So, it is increasingly difficult for them to keep patients local because you need physicians and specialists to do that."

The demanding regulatory environment for hospitals in recent years has been another impetus for community hospitals to seek membership in OhioHealth, he says. "When you look at the requirements that are being placed on all healthcare providers, the community setting has a lack of depth and breadth of resources. When they see readmissions and other regulations coming—and the penalties that come with them—community hospitals need a depth and breadth of resources to comply."

Christopher Cheney

Christopher Cheney is the senior finance editor at HealthLeaders Media.

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