For hospital systems, acquiring physician practices makes sense for a lot of reasons. It’s a way to capture a primary care access point, and to ensure the “loyalty” of physicians to the IDN. It makes sense for physicians too, particularly for those who want to hand off the financial responsibilities of running a practice. The key question for hospital systems is, Does it make sense financially?


VHA Inc., the national health care network, has added a new, web-based offering to help member hospitals analyze and improve the revenue and profitability of acquired physician practices. It’s called Physician Downstream Analyzer, and is part of VHA’s Physician Strategies and Services consulting service. Read the full article in the December issue of Repertoire.


Data indicates that hospital systems can lose as much as $150,000 to $250,000 per year over the first three years of employing a new physician. But that doesn’t necessarily mean the acquisition was a bad deal, says Don Hicks, vice president, VHA Physician Strategies and Services. That’s true for a number of reasons, with these three being the primary ones:


  • Ancillary services. One of the first things hospital systems do after acquiring a physician practice is strip out ancillary services (e.g., imaging, lab, infusion therapy, etc.) and incorporate them into the hospital’s ambulatory operations. The dollars may still be flowing, but the revenues are no longer attributed to the physician practice.


  • Employee benefits. Hospital systems are typically more generous than physician practices in terms of the benefits packages they offer their employees. So, in one fell swoop, the benefits packages for the staff of acquired practices go up, making the practice’s profitability go down.


  • Electronic medical records. IDNs often switch newly acquired physician practices to the electronic medical records system being used by their existing practices. “Any major change like that creates an immediate hiccup in terms of productivity,” notes Hicks.

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