On Demand Webinar | Basic | Physician Relationships
Large retailers and employers are entering the healthcare market, reimbursements are declining, clinician resources are diminishing, and consumers are demanding access on their terms. Group practice leaders and physician network executives ...
Save
Blog | Physician Relationships

Pace of physician practice acquisition by health plans may accelerate post-pandemic

Blog | Physician Relationships

Pace of physician practice acquisition by health plans may accelerate post-pandemic

  • Blue Shield of California subsidiary Altais on April 10 said in a press release it is acquiring Brown & Toland Physicians, a medical group serving 350,000 patients in the San Francisco Bay Area.
  • The acquisition is meant to help Brown & Toland’s network of 2,700 physicians stay largely independent by supporting them with the technology needed to succeed in value-based care and alleviating the administrative burden, according to the release.
  • HFMA’s Chad Mulvany says the acquisition isn’t all that surprising as Blue Shield of California and Brown and Toland have long been partners in an ACO.

Modern Healthcare reported: “Blue Shield of California venture Altais on [April 10] said it is acquiring Brown & Toland Physicians, a 2,700 provider medical group, serving 350,000 patients in the San Francisco Bay Area. Altais will provide Brown & Toland with capital and a technology platform that includes practice management tools, predictive analytics, and telehealth, and will help the medical group roll out an electronic health record."

The acquisition isn’t all that surprising. Blue Shield of California and Brown and Toland have long been partners in an ACO.

Takeaway

Over the past five years, we’ve seen a trend of health plans purchasing, or partnering to create, large physician practices. In general, demand for practices on the health plan side is driven by:

  • The opportunity to better manage patient care for complex patients, reducing the total cost of care
  • The ability to encourage referrals to lower-cost sites of service, reducing the per unit cost for non-emergent services

The supply has been driven by the decreasing profitability of owning a practice as a result of practice expenses — such as technology, pointed out in the Modern Healthcare article — increasing faster than the rate of payment (particularly for practices with a heavy Medicare payer mix).

Post-pandemic, I expect the pace of practice acquisition will accelerate, for the following reasons.

First, the supply of practices for sale (or physicians looking for employment) will increase. As a result of COVID-19, practice revenues have decreased 55%, according to the Medical Group Management Association. This makes the economics for many independent practices unsustainable.

The CARES Act Relief fund staves off immediate jeopardy. But it may not be enough for practices to repay the Medicare Accelerated Payments  that many have accessed to provide needed liquidity. Unless CMS  modifies its recoupment instructions, the Medicare Administrative  Contractor (MAC) will hold all of a practice’s Medicare payments beginning 120 days from when the advance was provided. If the loan is  not repaid within 210 days, the MAC will issue a demand letter and apply an interest rate of 10.125% to the remaining balance.

Second, while health plans’ finances will be negatively impacted, most will exit the pandemic in a stronger financial position relative to hospitals. In this environment, plans will have both motive and the wherewithal to acquire practices or employ physicians whose practices didn’t have the balance sheet to survive the revenue shock. 

About the Author

Chad Mulvany, FHFMA,

is director, healthcare finance policy, strategy and development, HFMA’s Washington, D.C., office.

Advertisements

Related Articles | Physician Relationships

Blog | Coronavirus

More independent physician practices likely to seek partners in the coming months due to financial issues caused by COVID-19

HFMA's Chad Mulvany says given the limited days cash on hand independent physician practices report having, it is likely practices will start seeking partners in the coming months, if they haven’t already.

News | Analytics

How healthcare organizations can use behavioral economics to get desired results from patients and staff

Karen Horgan, CEO of VAL Health, reviewed how healthcare finance professionals can use behavioral economics to get the outcomes they want from both patients and staff during an Aug. 14 session at HFMA's Digital Annual Conference.

How To | Supply Chain Management

A 5-step process to achieve and sustain physician preference item cost reduction

To identify and reduce the costs of physician preference items, hospitals and health systems should use a five-step process that begins with cleaning and organizing PPI cost and utilization data.

Q&A | Consumerism

Digital Annual Conference featured session will provide insight on applying behavioral economics to drive patient engagement

The field of behavioral economics offers key insights for healthcare stakeholders, including how to promote positive patient behaviors.