Faced with few ACO options, physicians are increasingly considering merging their practices, which would enable them to reduce expenses and wield more clout in negotiations.
This article originally appeared in Managed Care Contracting & Reimbursement Advisor, July 2013.
Physician practices are beginning to feel the changes in managed care forced by the Affordable Care Act (PPACA), and are looking for ways to stay profitable as the payer landscape shifts. In the coming 12 months, as more components of the PPACA kick in, there will be increasing consolidation of practices, says John D. Fanburg, JD, managing member and head of the healthcare practice at the law firm of Brach Eichler, based in Roseland, N.J.
The development of accountable care organizations is moving at an extremely slow pace in most of the country, Fanburg says. That is leaving many physicians with no ACO to align themselves with, or few choices when it comes to selecting one, he says. As a result, a substantial number of practices are considering merging their practices to grow larger, which would allow them to reduce expenses and perhaps increase clout in negotiations.
The mergers can involve physicians from similar specialties, or disparate specialties coming together to form a multispecialty practice, Fanburg explains. Some practices also are considering selling to hospitals to avoid having to worry about managed care at all.
"What I see coming in the next year is further consolidation of physician groups," Fanburg says. "I don't necessarily think we will have significant consolidation in the hospital area, but we're going to see more physician practices banding together into single specialty or multispecialty groups."
Smaller practices may face the toughest choices because they already operate on a thin margin that leaves little room for absorbing losses during a transition, says Marc Halley, president and CEO of Halley Consulting Group in Westerville, Ohio. But larger practices are still facing challenges.
"It used to be the small groups trying to come in out of the cold, but today we are seeing some very good-sized medical practices—60 or 70 providers—having to come in and have formal talks with one or more hospitals, and others trying to sort out what they're going to be in the future," Halley says. "They're struggling to remain viable."