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'Rapid' Rise in Physicians Seeking to Sell Practices

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   March 21, 2013

The upholders of the Hippocratic oath are acting a lot like self-styled brokers lately, actively looking for buyers of their practices. Indeed, physicians are taking the initiative in hospital-based acquisitions of their practices, in a big way.

The latest evidence comes from a recent survey by Jackson Healthcare, the Atlanta-based healthcare staffing recruiter. When asked about physician practice acquisitions, 70% of healthcare leaders said doctors are approaching their hospitals, seeking to sell their practices. It's definitely not the hospitals taking the first steps in the courtship with physicians, as much as it is docs knocking on the door.

Physicians seeking hospital employment are setting the stage for this evolution in how healthcare is delivered, says Sheri Sorrell, market research manager for Jackson Healthcare.

"Physicians are approaching the hospitals and are seeking to sell," Sorrell said in an interview. "That's the number 1 reason why hospitals are acquiring physician practices."

The trend is expected to continue "at a rapid rate," Sorrell says. When asked about the disposition of acquisitions in 2012, 44% of hospitals closed the deal, while 56% said they didn't. Those hospitals hesitant about acquiring are more likely to be rural hospitals, Sorrell says. About 70% of hospitals that say they are not planning to acquire physician practices have 150 beds or less.

This year, 8% more hospitals – for a total of 52% - plan to acquire physical practices, and 48% said they will not. Jackson Health did not do a comparable survey in 2011, so year-over-year comparisons are not possible. A total of 118 participants completed the surveys, from November 1 through December 15, 2012.

"A lot of solo practices and solo physicians are looking to sell," Sorrell says. "They can't afford to put in the resources necessary to comply with the ACA, (Affordable Care Act) and they're just looking to get out. Employment seems to be a better option for them at this time," Sorrell says.

While physicians appear to be the primary initiators, hospitals aren't merely passive bystanders. The survey showed that 58% of hospitals are bringing physicians on board to build "competitive" advantage, 55% to maintain a competitive advantage, and 57% say it's part of a "physician recruitment strategy."

Another 28% said improving patient safety was a key motivator in their physician acquisition strategy. (Editor's note: A HealthLeaders Media Webcast, Recruiting and Retaining the Right Physicians for the Post-Reform Era is slated for Friday, March 22, with Jim Stone, president of The Medicus Firm, and Floyd Wilson, Jr., executive VP of marketing, physician relations, and community outreach at Metro Health System in Wyoming, MI.)

Over the last several years, recruiting and retaining doctors have been challenging, against the backdrop of uncertain economic conditions, physician shortages, and regulatory challenges. Hospitals and physician groups are working to overcome the obstacles.

Sorrell says the hospital plans for physician acquisitions seem "more opportunistic than strategic." The physicians are taking the first step, and hospitals are jumping at it, she adds.

And what of those "competitive advantages" in buying physician practices? Sorrell sees it this way: "Building a competitive advantage would be acquiring physician practices in specialties in which you do not currently have an advantage—trying to go up against a competitor that already has an advantage over local competition—strengthening that advantage."

Of the hospitals surveyed, family practice and internal medicine are the primary targets in the acquisition of physician practices, Sorrell says, which is not surprising. While 54% of leaders reported interest in family practice for 2012, only 31% planned an acquisition of family practice in 2013.

In other specialties, only 2% to 6% of leaders reported acquisitions in areas such as radiology, cardiothoracic surgery, and gastroenterology in 2012. The leaders report even lower interest anticipated in 2013 for podiatry, sleep medicine, and sports medicine, at 1%.

It will be interesting to see the focus shift of specialties, Sorrell says. "Right now, it's what we all expected. They are acquiring family practices, primary care, internal medicine. It will be very interesting if they shift more toward specialties, focusing on their catchment areas," she said.

Of those hospitals acquiring physician practices, at least 30% say they plan on being involved in the formation of accountable care organizations, a figure that is "a little higher than I thought," Sorrell says.

She noted that 250 ACOs have been created, to date, with reports showing that there may be as many as 500 more organizations applying to be ACOs. That would account for 14% of the nation's 5,500 hospitals, Sorrell says. The 30% figure mentioned in the survey shows "a trend toward ACO development or laying the groundwork for it," she explained.

As 2013 continues, Sorrell doesn't anticipate a drop off in doctors' interest in obtaining hospital employment. "Physicians are approaching the hospitals asking, 'Do you want to buy the practice? Hospitals are saying, 'Here's a primary care doc or practice looking to sell. Let's take advantage and buy it.'"

Joe Cantlupe is a senior editor with HealthLeaders Media Online.

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