🔒CT looks to beef up scrutiny over physician practice mergers

As hospitals and other entities continue to acquire physician groups in Connecticut, state regulators, policymakers and others are increasingly concerned the trend could lead to less competition and higher costs for consumers, including businesses that often foot the bill for employee healthcare costs.

In response, state lawmakers earlier this year passed a law that requires the Office of Health Strategy (OHS), which oversees the healthcare industry, to create a working group to study and recommend new regulations for physician practice mergers and acquisitions.

The law requires the 15 to 20 member working group to study all aspects of M&A activity and make preliminary recommendations by early 2023.

Democratic Sen. Pro Tempore Martin Looney, who co-sponsored the legislation, said he’s been tracking the consolidation issue for years and is optimistic recommendations may be made as early as prior to the 2022 legislative session.

The group’s work could have wide-ranging implications on the future of industry consolidation and the ability of hospitals and others to add to their physician ranks.

“This working group is important as a way of building more accountability in our system, including quality oversight and a review of the process and costs,” Looney said. “Health care is critical in people’s lives and affects their health and financial situation; there is nothing more important.”

Gap in law

Healthcare industry consolidation has been going on for years and hospitals have been the most aggressive in acquiring physician practices, although larger doctor groups and even insurers have gotten into the action.

According to the Physicians Advocacy Institute (PAI), only 30% of U.S. physicians practiced independently in 2020, with 70% employed by hospitals. PAI also reported that in 2019 and 2020, 48,400 additional physicians nationwide left independent practices and became employees of hospitals and or other corporate entities.

Office of Health Strategy Executive Director Victoria Veltri said the statistic that worries her most, however, is that over a three-year period in Connecticut, only three of 55 group practice acquisitions were reviewed by her office.

The reason: There’s a major gap in the laws.

“Fifty-two of them had no oversight whatsoever,” Veltri said. “Some were physician practices acquired by hospitals with fewer than eight physicians. Any group practice that has fewer than eight physicians is not subject to review by our office. There may have also been a physician group acquiring another physician group, which is also not subject to review. There are current gaps in the system.”

Veltri said she hopes the working group will recommend ways to fill those gaps, including expanding the regulatory purview of her office.

“We are looking for input and to figure out how to do this to ensure oversight, to reduce market concentration and the possibility of increased prices, but to also balance that against the ability of smaller providers to be able to join [larger groups],” Veltri said.

The working group, which had not been named as of Oct. 13, will include consumer advocates, independent physician and hospital providers, insurance representatives and a variety of other organizations and government entities, Veltri said.

“We are looking at having independent providers, a hospital or two, some specialty practices, state agencies including the Attorney General’s Office, and we hope to have at least one insurance company,” she said.

Paying close attention to the working group and what it might propose is the Connecticut State Medical Society (CSMS), which represents physicians in the state.

CSMS has urged Connecticut policymakers and the working group to “examine the underlying reasons why Connecticut’s small, independent practices are being challenged,” according to Dr. David Emmel, chair of the organization’s legislative committee.

Of chief concern, Emmel said, is independent physicians’ ability to negotiate fair payment rates with the handful of insurers in the market. Small practices, he said, are at a major disadvantage with their bargaining power.

“Physicians must be given some leverage and capacity to negotiate fair insurance contracts without the threat of being removed from the insurance networks,” he said.

Other issues contributing to consolidation include the need for significant capital investment due to government mandates around medical record keeping.

Costs or potential savings related to bulk purchasing, insurance, centralized billing and IT services also make small independent physician practices open to selling to larger entities.

In Connecticut many doctors are also reaching retirement age while younger doctors increasingly prefer a work-life balance that is easier to achieve as part of a larger group.

Halloran & Sage attorney Arnold Menchel has been a healthcare specialist and expert since 1979, including 33 years working in the Connecticut attorney general’s office.

The goal for everyone, Menchel said, should be quality health care at an affordable price. To that end, Menchel said working group members must be willing to compromise and offer solutions that are fair and well thought out.

“I’d want to see the working group be well balanced of all stakeholders,” Menchel said. “That includes patients, providers and payers being well represented. This is such a huge multifaceted problem that they can devote the next 40 years to it.”