Physician practice management companies have re-emerged as big players in physician practice acquisition. In 2011, more than half of the purchasers of physician practices were hospitals and health systems. In 2013, that percentage dropped to just 14% according to PwC US. Overall, the total value of US health services merger and acquisition (M&A) activity reached $12.3 billion during the first quarter of 2014, which is 152% higher than the same period in 2013. According to Brett Hickman, partner with PwC’s Health Industries Group, “Several indicators that we track point to robust M&A activity for the rest of the year… Combined with positive signs we’re seeing in the other health services sectors, we’re optimistic that there will be heightened deal activity in 2014.”
The slow-down in acquisitions by hospitals and health systems and the ramp up in activity by physician practice management companies is expected to continue as specialty groups try to cope with reimbursement changes and high regulatory costs that increase the challenge of running a profitable practice.
David Glaser, JD, alerts us to proposed changes in the healthcare reimbursement model that would make employing physicians less appealing for hospitals. MedPAC, the Medicare Payment Advisory Commission, issued a report that details a discrepancy between higher reimbursements for services rendered in hospitals relative to those for the same services provided in clinics. Simply put, more Medicare money is available to compensate physicians when they are in a hospital outpatient setting. This MedPAC report proposes an end to the added “facility fee” that drives the discrepancy by leveling reimbursements across the board in all settings. MedPAC recommendations are not binding, and Congress has the final say about Medicare reimbursements. But in Glaser’s opinion, “the days of additional facility fee payments are numbered.”