Mega Practices – How Big is Too Big?

mega practicesBy: Jeff Cohen

A January 24, 2014 court ruling in Idaho that will require the unwind of a hospital system’s purchase of a large primary care medical practice will cause mega practices to think twice about their size.  The Idaho court ruled that St. Luke’s Health System’s purchase of the 40 physician Saltzer Medical Practice violated pertinent state and federal antitrust laws because the group had 80% of the primary care physicians in Nampa, Idaho, a city of roughly 85,000.  The suit was brought by two competing hospitals and succeeded, despite St. Luke’s claims that integrating the practice would improve the quality of care

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Eye on the Regulations: The Argument Against ACO Exclusivity

photo 3By: Jackie Bain

In an ACO, participating physicians, hospitals and other healthcare providers use a coordinated approach to provide improved care to beneficiaries. As an incentive to participate in ACOs, Medicare shares its savings when participating providers coordinate to provide quality care while spending Medicare dollars more wisely.

The Centers for Medicare & Medicaid Services (“CMS”) have determined that a certain amount of exclusivity is necessary for an ACO beneficiary to be accurately assigned to an ACO.  Exactly how much exclusivity is necessary has been the topic of much debate.  Initially, lawmakers envisioned that only primary care physicians were required to be exclusive to their ACOs.  After the public had the opportunity comment on the proposed law, the rule was changed.  Now, it is generally accepted that if CMS assigns an ACO beneficiary to an ACO because of primary care services previously supplied by the physician, then the physician must be exclusive to the ACO.  This is true whether the physician is a primary care physician or a specialist who provides primary care services to a patient with no primary care physician. Continue reading

Hospital Physician Alignments are Tenuous

integration1Hospitals, particularly those heading ACO development efforts, are quick to say things like “One day, all physicians will be employed by hospitals.”  Though there is clearly some wisdom under that statement, it’s also a remarkable leap of faith.

Three things are clear in this era of healthcare reform:  (1) healthcare will be provided to more, but with less; (2) there will be a growing move over time to pass financial risk to providers; and (3) those businesses in a position to control both costs and quality (and some say patient satisfaction) are in a position to both survive and even do better than ever.

This leaves the door wide open as to the form of the business that can succeed.  Is it a single specialty mega practice?  Is it a multi specialty medical practice?  How about a hospital? Continue reading

Doctors: Beware Signing ACO Documents

There continues to be terrific interest in accountable care organizations (ACOs), which are of course a financially risk-based model of providing healthcare to patients who choose to enroll in the Medicare Shared Risk Program.  ACO organizations are often led by hospitals and hospital systems, though occasionally by physician organizations.  One of the key common threads among these provider led ACOs is the fear of being left out of “the game,” the fear of losing out financially.  This fear, however, can lead physicians to run headlong into danger if and when they sign ACO documents.


One of the key ways ACOs get formed involves a stack of contracts being created, then shoved under physicians’ noses.  Doctors afraid to lose out tend to just sign.  The organizations are really to blame here, when the documents fail to contain material terms to deal with things like:  credentialing criteria, disciplinary procedures, financial provisions, how the financial up side or down side can affect physician compensation.  The documents are simply slid under their noses and, in fear of being left out, they get signed!  Or, as my buddy Rodger says “Ready, shoot, aim.”


Regardless of a doctor’s view of ACOs, no document ought to be signed unless all the questions raised by them are addressed, very clearly and in writing.  Be at the table with ACO organizers and do your best to design a good system, but don’t be naïve to think that the unaddressed portions will magically get filled in somehow in a way that benefits you or that even makes sense.  At the very least, wait until the document is complete, then consider if you want to sign it.

The Secret About Large Practices

Change in health care delivery and business is driving tremendous integration activity in all sectors. Hospitals are merging. Medical practices are merging with competitors (typically in single specialties). Size and growth is becoming the magic pill in this era of change and fear. But it is not “necessary” and it is certainly not enough.

“The day of the onsies and twosies is coming to an end.” How many lawyers and other consultants have said this? For how many years? For a very long time. And yet, one and two person practices persist and even flourish! That said, there are clear opportunities available to those practices that embrace the concept of size:

1. Economies of scale. Stuff costs less when you buy more of it, and large practices buy more stuff;

2. Pricing power. To some extent, the larger group gets to muscle back against commercial payers. Though this depends on complex things like the scope of services and geographic availability, the clear truth seems to be that size is a factor in pricing;

3. New income opportunities. Sure. Larger groups have a greater opportunity to develop new income sources. Ancillary services, for instance, are volume driven, so the larger the group, the greater the opportunity.

So, what’s the secret about large practices? Size alone does not fix much. People selling size are selling their expertise and consulting services. They are not in the business of making businesses operational, so their fix is structure (size) alone. Put another way, as someone one said “To a carpenter, everything is a nail.”

There are three medical practices—One, Two and Three. They each have their own challenges, successes and cultures. Put them into one large practice, what do you have for certain? A large practice with a collection of challenges, successes and cultures. Where is it going? How will it get there? Who will run it? Will they fund development, growth, operations, evolution? If questions like this aren’t asked and answered, the only thing certain is that the new large group will simply mirror the challenges, successes and cultures of their component parts.

Size alone is no panacea! And the truth is always the same in business, even medical practice: without business leadership (expertise) and commitment (money) and hard work over time, no business can grow, thrive or evolve. But, as Jerry Seinfeld once said “Not that there’s anything wrong with that.”

Odd Little Facts about ACOs

  • The Medicare patients will be invisible to the providers for one year so as to discourage lowering costs improperly. How will this affect the providers’ ability to design cost-lowering programs?
  • ACOs are not closed networks;
  • When ACO beneficiaries go outside the ACO, and healthcare cost savings or excess is passed onto the ACO, even though the ACO had no control over such things. Imagine how seasonal residence plays into this;
  • Demonstration projects show a lot of patient “churn,” further challenging the ability of an ACO to control costs;
  • It looks like the two sided model will put 25% of reimbursement at risk;
  • Even Mayo, Geisinger and Cleveland are saying they won’t participate in ACOs.