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Physicians Shut Out of ACOs Seek to Merge Practices

Greg Freeman, June 12, 2013

But if the primaries are aligning with a hospital or selling practices to a hospital, a specialist physician practice can have more of a challenge, he says. The hospital will want the primaries to refer patients to the hospital's specialists, which can interrupt referral patterns that you depend on for patient flow and revenue.

"From a managed care standpoint, we're seeing the evolution of larger single-specialty or multispecialty practices, with the thinking of getting enhanced rates and enhanced leverage with third-party payers," Fanburg says. "Sometimes that does happen that your larger size gives more bargaining power, and sometimes that does not happen. A lot of it depends on where you are geographically, the demographics of your patient base, and how active the third-party payers are in that area. If one payer is dominant in that area, you may not see as much improved leverage from being with a bigger multispecialty practice."

Even in that situation, merging to form a larger practice can be the right move, Fanburg says. The larger practice will save money through economies of scale.

"You can share the cost of an electronic health record, which can be significant. Your administration should be more efficient with the elimination of duplication of efforts," he explains. "You can consolidate office locations also. The savings can be significant."

Be proactive with contract negotiations
Some practices also are finding that this is a good time to get creative with contract negotiations. Fanburg recently discussed options with a large orthopedic group and he suggested the group approach payers with a plan for shared savings. All payers are focused on reducing the cost of care without sacrificing quality, so they should be willing to hear your proposal, he says.

"I told them now is the time. You're not under a lot of pressure yet," Fanburg says. "They should reach out to the larger payers and negotiate some shared savings. The point of discussion will be that as an orthopedist you have a lot of decision points that will impact the cost of care. To the extent the payer wants to incentivize you to reduce costs, then it is incumbent on the payer to share those savings with the doctor."

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