Faced with a precarious economic environment, independent physician
practices are snatching up employment offers from health systems.
But the I. T. risks are considerable—for both buyer and seller.
By Gary Baldwin
During his residency in emergency medicine for the Medical College of Pennsylvania back in the early 1980s, Richard MacKenzie, M.D., got a piece of memorable advice from his mentor on the topic of physician independence. “He told me to just give it
up. He said, ‘you’ll always work for the man; it’s just a question of who
the man is.’ Physicians are never totally independent. Even in private
practice, you have to follow the rules of the federal government or
you won’t be in practice long. For most traditional group practices,
independence is more of a mindset than a financial benefit.”
MacKenzie is now ensconced in his role as a physician employed
by the Lehigh Valley Physicians Group. He serves as senior vice
chair of operations for the emergency department, which handles
some 150,000 annual visits. The Allentown, Pa.-based group prac-
tice consists of some 500 physicians and, in theory at least, main-
tains an arm’s length distance from Lehigh Valley Health Network,
its three-hospital, 900-bed corporate partner. But in reality, “the
group supports the mission of the health network. We have shared
governance. On paper, it is a separate ownership. In reality, it’s their
group.” Physicians are not contractually obligated to admit solely to
Lehigh Valley, but the opportunities to work with competing hospi-
tals are few, MacKenzie says. “As physicians get bought up, and alle-
giances form, there is no longer an opportunity to work at a compet-
ing hospital. If a doctor is bought up by Lehigh Valley, they declare
themselves as a Lehigh Valley physician.”
MacKenzie’s got plenty of company industry-wide. During the last
few years, physicians have been abandoning their once-cherished
role as independent practice owners and opting for employment with
medical groups owned by hospital-based health systems. At the dawn
of the century, nearly 60 percent of the nation’s physicians were in-
dependent, according to research by Accenture. Entering 2013, that
figure had dwindled to just over 36 percent and the trend continued to
accelerate even as the number of physicians increases overall.
Several factors are converging to entice physicians to trade their independence for W-2s. They have plenty of buyers, as health systems
are seeking to expand their employed physician base—once the domain of a small group of hospitalists. Health systems are seeking to
expand their market, if not shore up their referral base. And faced
with the demise of fee-for-service reimbursement, they want tighter
alignment with physicians than afforded by the conventional medical staff model.
Common information systems also are part of the new mix. Physicians are seeking to sell for similar reasons. In addition to reimbursement cuts, they face mounting practice management overhead—not
the least of which is I. T. infrastructure which the government has for
all intents mandated with its meaningful use program.
But the risks to both buyer and seller are considerable. I. T. figures
prominently in the industry makeover, but it is also a potential land-mine waiting to be stepped on. For that reason some observers have
declared the death of the private practice—but others are not so sure.
The skeptics recall how the industry’s first big wave of group practice dissolution did not end favorably. Back in the mid-90s, a spate