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    Hospital ownership of physician practices on the rise

    The number of physician practices owned by hospitals has increased 86% over the past 4 years, which also resulted in a 50% rise in the number of physicians employed by hospitals, according to a recent study.

    The report, conducted by Avalere and released by the Physicians Advocacy Institute (PAI), showed that nearly four of 10 physicians are employed by a hospital and one out of four practices is owned by a hospital.


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    Kelly Kenney, JD, PAI’s executive vice president, notes government and private payment policies create incentives for this type of integration. However, Medicare’s “site of service” payment differential—as documented in another study released by Avalere earlier this year—demonstrates how Medicare pays more for the same services delivered in the hospital outpatient setting versus the physician office setting. 

    “As drivers of this trend, the acquiring hospitals or health systems in today’s environment are responding to incentives from public and private healthcare payers to integrate vertically with healthcare providers,” Kenney says. “In integrated arrangements, the hospital/system can exert much greater control over the healthcare services patients receive as they move through their system.”

    Kevin Fine, MHA, a director for the healthcare advisory services group at Miami, Florida-based Kaufman Rossin, notes hospitals and health systems have been aggressively acquiring medical practices in order to expand their networks.

    “Everyone is fighting for market share and control of the patient,” he says. “By developing integrated delivery systems, the organization has the ability to provide the entire continuum of care. However, employing physicians becomes a significant expense in a business where the margins are slim.”


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    Hospital acquisition of physician practices also builds and protects the hospital’s patient base, and strengthens referrals within the system, which drives revenue, he added.

    A physician’s choice

    There are myriad factors driving physicians from private practices and into employment arrangements with hospitals or health systems. According to Kenney, a big one is physicians’ concerns about the financial viability of private practice, especially with the widespread belief that payment for healthcare will move increasingly to value-based systems that reward more highly integrated care models. 

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    Keith Loria
    Keith Loria is a contributing writer to Medical Economics.


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