Health Law Pointers
Volume XVII, No. 2
November 6, 2015
Brought to you by Hurwitz & Fine, P.C.
Editor: Lawrence M. Ross
As a public service, we are pleased to present this issue of our health law newsletter addressing the legal concerns of health practitioners. The primary purpose of this newsletter is to provide timely educational information and commentary for our clients and subscribers. In some jurisdictions, newsletters such as this may be considered: Attorney Advertising.
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Trends in the Consolidation of Professional Practices
Professional practices in Western New York facing financial challenges from rising costs of operations and flat or declining reimbursement rates are increasingly attracted to offers from local hospital systems and their affiliated or “captive” professional entities to consolidate or merge their practices. These hospital systems actively solicit interested practices as a means to broaden their provider network and leverage their bargaining power.
The advantages appear obvious: employment security, shed unwanted management and administrative duties, avoid costly electronic record-keeping mandates, gain economies of scale with vendors, eliminate redundancies and benefit from cost containment, generate new revenues and bolster the provider and referral network. However, medical professionals are urged to proceed with caution and not act hastily. Not all grass is greener on the other side! There may be significant cultural and operational shocks.
- Loss of Independence - Medical professionals accustomed to exercising autonomy in decision-making may find it difficult to accept management oversight on a variety of issues, such as staffing, spending and office administration.
- Loss of Job Security - Rarely are medical professionals offered a guaranteed term of employment following a practice consolidation. More often than not, continued employment is dependent upon meeting productivity standards and the contract term will be subject to a “termination without cause” provision on some advanced written notice.
- Uncompensated Practice Goodwill - Medical professionals who have dedicated their entire career to establishing their community practice will be surprised to learn that the hospital system has no intent to pay for the “value” of their professional practice. At best, you can expect to be offered payment for the “hard” assets of the practice, based on a local appraisal or valuation.
- A Shifting Employee Benefits Landscape - Expectations that the loyal practice workforce will follow the medical professionals to their new home will be influenced by the “comparability” of the employee benefits offered by the new employer, and continued staff employment often hinges on a stable office management team. Neither is assured from past experience.
- New Compensation Models - The trend in post-consolidation compensation is to base payment on a value-based model, not a volume-driven methodology. New quality of care measures may dictate earnings to a degree not previously anticipated.
- Continuity in Office Policies and Patient Treatment - Unless contractually assured, selling medical professionals should anticipate shifts in office policy and procedure, and changes in the influences on treatment decisions.
While there are legitimate reasons for the trend towards practice consolidation, not every medical professional will find a new “home” in the new environment and it will be essential to get independent advice from competent counsel and advisors as you proceed.