If you can’t go it alone, who should you go with?

Strategic plans mean choosing your mates with care

It’s not just a rumor: Medical practices are merging or affiliating with other practices, and partners are selling out to practice management companies as never before. Those are the conclusions of a study by accounting firm Deloitte & Touche in Atlanta, Redesigning Health Care for the Millennium.

Adapt or die?

"Older physicians are not renewing their medical licenses because they don’t want to give up control," says Marci Thomas, CPA, a partner and director of health care enterprise risk services for the firm. "But younger physicians are selling out to managed care organizations and practice management companies. Others are merging; small practices are just a thing of the past."

Thomas says that the expense of starting a practice and the limited ability to negotiate favorable contracts are behind the decline of small practices. Instead, practices are taking steps to increase their negotiating power and decrease their costs. They are choosing several paths to get to this point, ranging from merging with other practices, partnering with a hospital, or selling the practice altogether. (See charts, at right.)

PHOs on the decline

Thomas says the study predicts even more will make similar moves this year, as shown in the chart at right. Only the number joining a physician-hospital organization (PHO) will decline, with just 16% of practices saying they will make such a move.

"That option just isn’t ‘it’ anymore," Thomas explains. "They don’t work. The doctors and hospitals just fight over control."

The most prevalent forms of affiliation in the future will be mergers and practices joining independent practice associations, says Thomas. "Unless you are the best specialist in town, you just can’t stay on your own any more."

Thomas’ opinion is also borne out by the study, which shows that although 69% of physician groups have no more than six physicians, nearly half (46%) of all doctors who are in group practices are in practices with 26 or more physicians.

(Take our survey, and tell us what steps you are taking to meet market demands and pressures, inserted in this issue.)

If you are typical, your practice has made one of the changes described in the study in the recent past or is considering it for the future.