Rising Administrative Costs Have Small Physician Practices Seeking Safety in Numbers

June 28, 2016 - Executives at physician organizations are seeing an unprecedented number of small groups nearing decisions whether to go it alone, join a larger group or seek hospital employment.

The Affordable Care Act and related changes over the past six years have increased administrative costs for physician practices, leading many to consider joining larger groups, experts such as Bill Fera, a consultant with Ernst & Young LLP in Pittsburgh, said.

"We are seeing diminishing numbers of onesy and twosy practices," Fera said. "They are being acquired by hospitals or larger physician groups."

At Henry Ford Medical Group, CEO William Conway, M.D., said physician recruiting has never been stronger.

But Conway said he doesn't just blame Obamacare or mandates for electronic health records. "Commercial insurers are coming up with narrow networks" and other performance-based contracts that require doctors to submit much quality data to receive bonus payments, he said.

Mike Williams, M.D., CEO of Bingham Farms-based United Physicians Inc., said physicians have to consider joining larger organizations.

"Most physicians want to see patients," Williams said. "Unfortunately, many physicians try to run their practice on the side. None of us in one- to three-member practices can survive doing that. It is why some of us have moved to larger groups."

Williams' own practice merged with three other primary care practices to form Prism Medical Group in 2010. Recently, Prismmerged with Internal Medicine Associates to form 41-physician Arcturus Healthcare PLC. He said Arcturus' growth plan calls for at least 200 physicians.

"We have been able to share a lot of expenses (including information technology, billing and human resources) and still maintain some autonomy," Williams said.

Iltefat Hamzavi, M.D., vice president with Hamzavi Dermatology/Dermatology Specialists, said his 16-physician medical group with seven offices has grown under Obamacare because smaller practices need infrastructure support to survive.

But the decision in 2012 to purchase an electronic health record system for the practice changed it more than the legislation did, Hamzavi said.

"We grew because some older physicians and groups had problems with the technology and were forced to consolidate," Hamzavi said. "We really developed our system. It was an added expense, but the documentation has improved, and overall it is a good process."

The group conducts its own billing, credentialing, human resources and accounting.

"We are trying to find a good balance between autonomy and scale, but we want to be physician-directed," Hamzavi said. "We have been approached by larger groups, but we are not interested right now."

Lisa Keane, president of Wayne State University Physician Group, said UPG has been recruiting physicians for clinical practice the past several years. Most of UPG's 550 employed doctors also conduct research and teach medical students and residents.

"We need to find the right fit" when hiring clinical staff, said Keane, noting that UPG has been reorganizing to improve productivity with its faculty physicians and contract partners.

Keane said physicians join larger organizations also because "doctors are fearful they are not skipped over and worried about being lost in the shuffle."

But Keane said none of the physicians interested in joining UPG have said it is to alleviate Obamacare or EHR regulations. "Many doctors like the allure of being part of an academic group," she said.

Ewa Matuszewski, CEO of Rochester-based MedNetOne Health Solutions, said there is a strong core of physicians who want to maintain their independence. Many of those doctors join physician organizations to access back-office support services, EHRs and clinically integrated networks.

Other physicians are staying independent through direct primary care (DPC) arrangements. A new DPC group has formed in Troy called Salta Direct Primary Care and is headed up by CEO John Blanchard, M.D. Under DPC, physicians charge patients a monthly fee, offer enhanced office services and agree not to bill health insurers for the specified services.

By Jay Green
Posted on Crainsdetroit.com

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