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Medical Practice Sales, Appraisal and Financing

Medical Practice Sales, Appraisal and Financing

Consultant's Corner - Q&A with the Industry Experts

Question: Would you advise doctors to sell their practices to hospitals or health systems?

"I advise my clients of all available options given their specific situation...Sometimes that includes selling to a hospital but generally it doesn't make sense to do so. The management dynamics of these arrangements don't work in many cases and the financial outcomes for doctors are often less than desirable. You are going to see a lot of these deals unravel like they did in the 1990's.

I also believe that hospital acquisitions will slow down because MedPac and CMS are zeroing-in on payment disparity. Medicare payment rates often vary for the same ambulatory services provided to similar patients in different settings (MD Offices, ASCs, HOPDs). Payment variations across settings may encourage arrangements that result in care being provided in higher paid settings. Hospitals often acquire private practices and absorb them into hospital outpatient departments (HOPDs). These practices are providing the exact same services as before but are now billing at much higher HOPD rates. Here is an excerpt of a letter from MedPac to CMS:

Payment variations across settings urgently need to be addressed. Many services have migrated from physicians' offices to the HOPD setting as physicians have increasingly become employed in the higher-paid ambulatory setting.

CMS and MedPac are constantly searching for areas of overutilization and payment disparity. This is one of them, and the financial motivation for hospital to gobble-up private practice just won't be there anymore. There is a growing realization that increased consolidation and acquisition are driving costs higher, not lower. As a result of reimbursement scrutiny you will see a slowdown of hospital acquisitions of physician practices and ASC's and unwinding of previous acquisitions. It think that the reduced consolidation pressures may improve the market for private practices and the private practice model of health delivery in general. - Christopher Majdi, Medical Practice Appraiser & Broker"

Written by Transition Consultants

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