After 40 years in business, Buffalo Cardiology & Pulmonary Associates, a 16-physician group, is closing its doors. According to The Buffalo News, the group’s closing is part of an industry trend in which doctors are moving into large, multispecialty groups or becoming hospital employees.
Gina Gray, the group’s practice administrator, said in a statement the large private practice model for physician specialists no longer makes sense as it did when the practice opened in the ‘70s. "We are in the midst of a new era of healthcare that forces specialists to link in practice with primary-care physicians, either employed by a hospital system, or at extremely large conglomerations of integrated care," she said.
Regulatory issues are a contributing factor
Dr. Robert P. Gatewood Jr., president of the practice, told Buffalo Business First the administrative part of running a practice has become so complex with all the new regulations imposed by the ACA that it’s too cumbersome. “We just want to take care of patients and let others take care of the administrative part of it,” he said. “That’s much easier to do in a large, integrated system where everyone’s sharing HR, billing, hiring and all of that stuff."
According to Aaron Money, a senior managing director of San Francisco private equity firm FFL, which invests in healthcare services, there are a number of ongoing changes in the healthcare field that make it difficult for small, independent group practices and solo practitioners to thrive. “Probably the biggest factors are ever-increasing coding and documentation requirements, greater complexity in how reimbursement works and the importance of demonstrating quality outcomes,” he says. “Heightened competition for new patients – both from sophisticated multi-channel marketing and the emergence of different models to better capture referrals from other providers – is another continuing trend.”
Decreasing revenues are also to blame
Under the ACA, Medicare reimbursement for private practices has continued to drop. According to CNN, reduced incentive payments and Medicare reimbursements, bundled payments and reimbursements based on metrics are making private practices unprofitable for those who do not adapt.
Strategies for success
In an article in Medical Economics, Nancy Groves said that collaboration is the key to small practice success. For example, Ripley R. Hollister, MD, a family physician in Colorado Springs, said he joined an independent practice association (IPA) that includes nine small practices. Hollister said the IPA gives him a larger population of patients to manage and more money to help with patient education and healthcare management team members, case managers and social workers.
Hollister also said the IPA has more leverage when entering into financial arrangements with insurance companies.
Money offers a couple of additional strategies that may help small practices to survive in today’s healthcare climate:
- Consider hiring a private equity investor: “Fortunately for providers, there are private equity investors out there that offer clinical autonomy while supporting doctors with real business expertise, operational infrastructure and capital to invest in their practices,” says Money. “The right investor can enable doctors to re-focus their efforts on providing quality care to patients and still effectively compete in today’s changing landscape, offering an alternative to a large corporate roll-up or health system.”
- Develop a good strategy for IT. Money says it’s not only important to have a thoughtful IT strategy, but to also have the means to invest behind that strategy.