Long Island Business News
Before Joining Hospitals, Docs Prep Paperwork
by Michael Fairlie
August 28th, 2013
Featuring:Dr. Ira Nash, Senior Vice President and Executive Director, North Shore-LIJ Medical Group
The privately practicing doctor is under enormous financial, regulatory and competitive pressure that will eventually lead to small general practices becoming extinct, said Stuart Kertzner, partner-in-charge of the health care group at the Woodbury-based accounting firm Gettry Marcus.
The industry trend toward physician practices forming large mega-groups or merging into hospital systems is accelerating.
“People are losing the ability to choose what doctor they want to go to. Unfortunately the personal connection is being lost and medicine is becoming more and more of a business,” Kertzner said.
“The changes in the industry are making it more difficult for doctors to maintain their practice, making it increasingly difficult for these physicians to focus on practicing medicine.”
Kertzner says that the choice between joining a mega-group or a hospital is dependent on what the doctor is looking for and how much autonomy he wants to retain.
“When joining a larger group, the doctor still feels like he is controlling his own office and environment, allowing him to maintain more of an entrepreneurial feeling,” he said.
He added that doctors could have better pension and profit-sharing options in a larger group than in a hospital setting, allowing for an easier retirement.
“They also have the ability to be more involved in the governance of the group, giving them a better feeling that they are part of the process as opposed to being an employee,” Kertzner said.
On the other hand, “working for a hospital is less strenuous than working for yourself because you have less to handle on your own,” he said, adding that this is usually a more attractive option for physicians closer to retirement.
In preparing for a merger or acquisition, it’s critical that there is good information available on which to base an offer.
“It is important that physicians have their financial records and productivity information in order,” Kertzner said. “It would also be helpful if they streamlined their overhead as best as possible.”
Kertzner added the main factors a hospital looks for in bringing in doctors is productivity and a loyal patient base.
The trend toward hospitals and health systems employing more physicians previously in private practice is national in scope, said Dr. Ira Nash, executive director of the North Shore-Long Island Jewish Medical Group and senior vice president of the North Shore-LIJ Health System.
“Medicare and commercial reimbursement rates seem to be on the decline, which puts these doctors in a weak negotiating position to get enough money from insurance companies to cover their procedures,” Nash said
With the costs of operations going up every year and the pay going down, independently practicing doctors are feeling squeezed. Also receiving the mandate to fully switch to electronic medical records by 2015 or face severe penalties, doctors are forced to seek alternatives. Nash says that joining an established hospital allows them to continue to practice medicine with a strong support network behind them.
“North Shore-LIJ has an extensive process to evaluate and find potential recruits,” said Nash. Among other factors, the health system assesses the quality of care that the physicians provide, as well as how their services fit into what the group already provides, and whether they practice in an area in which North Shore-LIJ is looking to expand.
Over the past couple of years, several community-based physicians’ practices have been acquired by South Nassau Communities Hospital in Oceanside, and Joshua Yedvab, vice president of network development, is pleased with the outcome.
According to Yedvab, success has been achieved through a collaborative effort and a thorough evaluation of the physicians’ and the hospital’s needs.
“Senior leadership is always looking for win-win relationships with its medical staff,” Yedvab said.
South Nassau handles the majority of the business side of the integrated practice’s operations in order to allow doctors to focus on being doctors and caring for their patients.
“Quality is a key attribute we look for when affiliating with a physician or physician group practice,” he said.
When independent physicians and small group practices are interested in joining a mega-group, “they look for a group that is large enough to enable them to expand into ancillary service lines and/or capitalize on enhanced reimbursement rates,” said Greg Bloom, a partner/director of the Great Neck-based law firm Garfunkel Wild.
Bloom added that most practitioners feel a group must be fairly significant in size to receive higher reimbursement rates from insurance companies.
Noting that the choice to join a mega-group is far from an easy decision, Bloom advises his clients to work with both their attorney – to evaluate their existing agreements, obligations and liabilities and how those may be affected by the deal – and their accountant, to prepare projections so that the physicians understand their financial picture and how it may change when merging with other practices.
Also adding that a certain amount of autonomy is lost in joining forces with other practices or affiliating with a hospital, Bloom said, “individual owners need to look at how a transaction will affect their income, obligations and retirement, as well as their daily life at work.”