Keeping the Physician Practice Independent: Challenges and solutions under the Affordable Care Act

Posted by | February 28, 2014 | No Comments

Remaining independent and complying with the Affordable Care Act (signed into law in March of 2012), is difficult while possible for independent and small group practices.  However, given the difficulties, a large percentage of currently practicing physicians and medical practices have moved to an employee arrangement.  Further, approximately 75% of new graduates intend to be employees of a large system over the next five years.  The current independent practices and small group practices have good reason to feel pressured into the sale of their practice as a result of the following frustrations:  investments, both monetary and time required to collect the onerous amounts of required data, pay for performance, billing and collections difficulties, underpayment by insurers, and declining Medicare and Medicaid reimbursements.  As for the new physicians entering practice for the first time, it appears that the next generation of practitioners will choose to be employees simply because they feel more comfortable aligned with an organization.

In addition to the aforementioned, The Doctor’s Company recently conducted a study which found 56% of the respondents intended to stay independent of employment.  Originally, hospitals intended to acquire primary care and internal medicine practices to more efficiently comply with the Accountable Care Organization requirements.  However, the reduction of independent primary care practices correlated into a reduction in referrals to specialty practices, which led to the acquisition of specialty practices by hospitals.  It should be noted that many of the acquisitions of specialty practices by hospitals, were instigated by the independent practices due to reduction in referrals from primary care physicians.  It is also important for the private practice physician considering employment by a hospital to understand joint defense issues which may arise in the event of a malpractice claim while contractually bound by an employment agreement.

Reasons for Practice Acquisition:

Physicians approach hospital/seek to sell their practices 70%
Build a competitive advantage 58%
Part of a physician recruitment strategy 57%
Maintain a competitive advantage 55%
Accountable Care Organization formation 30%
Improve patient safety 28%

*Source:  Jackson Healthcare

With most of the doomsday information presented, the focus should now be on the solution to remaining independent.  Independent practices and small groups can survive with the implementation of strategic alliances.  The solution cannot, however, be based on previous cycles of hospital employment trends.  This cycle possesses it own unique set of characteristics due to current market conditions, the Affordable Care Act, and the necessity of clinical integration.

Alliance is not acquisition; it is collaboration.  Most collaboration is conducted through Independent Practice Associations (IPA) or a Physician-Hospital Organization (PHO).  An IPA is a group of independent physicians united to enhance negotiation for contracts with insurers and government reimbursement, as well as to improve the quality of healthcare and to better comply with the Affordable Care Act.  PHOs are formed based on the same principles of IPAs but will usually include a hospital or hospital system.  Most importantly, the ACA allows IPAs and PHOs to be eligible as Accountable Care Organizations, a requirement for certain reimbursements moving forward.

We are all familiar with the phrase “knowledge is power.”  In the arena of health care today, this phrase can be translated into “resources are power.”  It has been found that the IPAs and PHOs can double the amount of resources, such as expensive information technologies, available to the practitioners’ patients through shared care management services. With the addition of shared resources, practitioners can expect the following:

  • Provider alignment for more efficient patient coordination and management;
  • More cost-effective treatment to the patient;
  • Enhanced ability to recruit new physicians to your practice;
  • More efficient practice models through combined management, insurance consolidation, shared medical equipment and technology for electronic health records, billing, etc.
  • Group purchasing benefits;
  • Increased access to shared allied professionals such as CRNAs, NPs, PAs, etc.

It is also important to understand the importance of independent malpractice insurance.  This is especially true when moving from an independent physician status to an employee or alignment with an IPA or PHO.  Depending on the type of malpractice insurance policy, such as claims-made coverage, there are many potential risks which may lead to a lapse in coverage or bare period upon the transference of coverage.  Regardless, either of these scenarios increases the probability for an uncovered claim to be presented.   In short, each insurance company has different policy language.  Many times, the policies are not able to provide a perfect marriage of previous and future professional liability coverage.  For this reason, it is important to maintain a relationship with an independent medical professional liability insurance specialist.  Their purpose is to help guide you and to negotiate the most cost-effective and comprehensive terms available.

In summary, independent practices and small groups must adapt to their environment in order to survive.  As presented above, it is possible to adapt without being “employed.”  In fact, the perfect environment for independent and small physician practices very well may be to align with an IPA to share resources rather than be employed.


D. Twiddy, MD.  Physicians assemble: Integrating small groups to preserve independent practice.  American Academy of Family Physicians.  Volume 20, Number 6:  November/December 2013.

Clinical and Financial Integration of Physician Practices:  Panel Discussion.  Massachusetts Medical Society.  July 16, 2013.

Trend Watch:  Physician Practice Acquisitions 2012-2013:  A special report.  Jackson Healthcare.

Casalino LP, Wu FM, Ryan AM, Copeland K, Rittenhouse DR, Ramsey PP, and Shortell SM.  Independent practice associations and physician-hospital organizations can improve care management for smaller practices.  Health Affairs.  August 2013.

L. Casalino, MD.  Small Medical Practices Benefit from independent practice associations and physician hospital organizations, study shows.  Deans Bulletin; Weill Medical College.  August 2013.

C. Kane and D. Emmons, PhD.   New data on physician practice arrangements:  Private practice remains strong despite shifts toward hospital employment.  Policy Research Perspectives;  American Medical Association. 2013.

Trend Watch:  Physician Practice Acquisitions.  Tracking which physician practice hospitals are acquiring. Jackson Healthcare Special Report.  2012

To contact the author, call 800-457-7790 and ask for Matt Thompson.

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