Mr. Unland sees at least a five- to six-year break in the boom of physician-owned services that went from the 1980s to 2008. In that bygone era, “physicians were able to get financing just based on a business plan,” he says. Then capital markets shrunk, and more so for physicians than hospitals. “In general, hospitals now have a much easier time getting financing,” he says. While access to capital is improving, “it’s a slow cooker; it’s going to take awhile.”
Mr. Unland sees hospitals overtaking physician ownership in three ways.
1. Selling practices to hospitals. Practices are being sold to hospitals because the costs of maintaining an independent practice tend to be higher per unit than at the hospital, he says. Also, practices are under pressure to buy expensive electronic medical records systems, which a hospital can provide to them.
In addition, Mr. Unland says increasing government intervention is prompting many physicians approaching retirement to throw in the towel and sell their practices to hospitals. “Some of them may want to become hospital employees in their last few years of practice,” he says. In a parallel trend, young physicians now prefer employed status. The two trends suggest independent practices can only shrink, he says.
2. Hospital acquisition of physician practices. More hospitals are acquiring physician practices. “When hospital tried this in the 1990s, their implementation was, in general, pitiful,” Mr. Unland says. “Amateurs were assigned to run the divisions that managed medical practices. We still have to see if hospitals can be successful this time.”
This time around, Mr. Unland says hospitals have been trying to learn from their mistakes. For example, some hospitals are outsourcing management of employed physicians to outside vendors who have experience with this.
3. Joint ventures with hospitals. Practices have been starting up ASC joint ventures with hospitals. Now even some very large independent practices are making joint ventures with hospitals for certain types of businesses such as imaging centers, Mr. Unland says.
“There is no question in my mind that in terms of raw technology, physicians will beat hospitals every time, but right now the capital just isn’t there,” Mr. Unland says. “If physicians could get the capital, they would never joint-venture with a hospital. But they are finding they have to, to survive.”
Reach James Unland at jjunland@hotmail.com.
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