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Selling a Physician Practice Isn't Easy

 |  By jfellows@healthleadersmedia.com  
   October 29, 2015

Despite the burdens of running a family practice, when hospitals and health systems offer a buyout, the decision to sell or stay solo is a tough one, says one New Jersey doctor who see himself at a crossroads.

Fifty-eight-year old Gerard Faugno, MD, is a board-certified family physician facing a decision that many other solo practitioners are also asking themselves: stay independent or sell?

"I've called my own shots all these years," Lyndhurst, NJ-based Faugno says. "I like the autonomy, but I sit here in my office year after year looking at my bills and looking at my income trying to make it work. I'm at a crossroads."

What's perplexing Faugno is whether he should wait for insurers to develop more alternative payment models or let someone else worry about the future.


Faugno recently finished up his first year in an insurer's alternative payment program. "I have 1,100 patients in a PCMH model with Blue Cross Blue Shield," he says. "I was in the top 10% of quality measures, so I got a pretty sizeable bonus, which was nice."


BCBS Rolls Out 'Total Care' National Network


The quality and utilization targets BCBS set were easy to meet Faugno says. They included mammogram screenings, diabetes management, and colonoscopy rates. The insurer even helped fund a nurse to help Faugno manage collecting and reporting the data.

As long as the benchmarks and manpower to meet them continue, Faugno says remaining a solo practitioner is a possibility. But it's the uncertain future of whether alternative payment models can fully replace the traditional fee-for-service system that has him thinking about partnering or selling.

"For small group practices, these models are happening slowly," says Dave Harris, partner for PwC's health sector. PwC issued a recent report on the slow pace of alternative payment adoption. "The chief proponents of APMs (alternative payment models) are large employers and the federal government—the true purchasers of healthcare."

Consumers Rule
Harris says hospitals are hesitant of abandoning the fee-for-service payment model because that ultimately means they'll get fewer admissions. Instead of viewing healthcare transformation through the lens of what hospitals and health systems want, Harris believes it is the consumer who will play the biggest role in healthcare over the next 10 years.

"Consumers didn't have resources at their fingertips to make healthcare decisions. They had to rely heavily on physicians," says Harris. "But that is completely changed today with social media."


Consumer-Centric Tools Improve the Revenue Cycle


Faugno says he responded to what patients wanted by expanding his office hours. "I used to work 60 hours a week," Faugno says. "I increased it to 70 hours a week in the spring, working from 7AM to 8PM during the week and opening on Saturday until noon."

The extra hours also helped Faugno bridge the widening gap between cost and income. It's at a tipping point now, which is another reason he's considering selling the practice.

"The overhead is going to outstrip the incremental increases," he says. "Up until now I have always been able to do something about it. My kids are going to college and I'm worried. I'm selling my house. It's hard to whine because we make more than most people, but I am making the same amount I did 15 years ago. That's hard to see."

Faugno estimates he has 7,000 patients in his system—an attractive number to two hospitals currently courting him. One offer, Faugno says, is a complete buyout. He would be an employee and receive annual bonuses. The other offer is from a health system and is similar. Faugno says he also attended a presentation about concierge medicine, but that turned him off.


Physicians Recast Primary Care, Payers Follow


"I spent all these years trying to be accessible," he says. "The doctor who was presenting this [model] talked about how he told his patients about the transition. He said he told them, 'I didn't leave you, you left me.' Wow. I can't imagine doing that happily."

Concierge medicine does get criticism, but there are hybrids of the model that don't cost patients thousands of dollars a year. New models of payment, whether driven by employers, the federal government or patients, will continue to emerge as long as alternative payment models leave physicians in limbo.

Not Pessimistic
"This is a sea change in how the healthcare industry thinks," says Harris. "The driver right now is cost. When you look at other consumerism movements, like cars, cost was also the initial factor. Then came quality, safety, and reliability. I think the same thing will happen with healthcare."

How long can physicians hold on? Faugno says he would gladly sign up for another insurer's payment program that rewarded him for meeting quality benchmarks.

"I'm in a better place than I was a year ago," Faugno says. "I don't feel pessimistic. I think every year I get better and I get more satisfaction. I've never sat looking at every nickel and dime. That changed a couple of years ago, but that's not because of me. That's the industry."

Jacqueline Fellows is a contributing writer at HealthLeaders Media.


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