About four years ago, Dr. Lawrence Pareles saw the writing on the wall.
After three decades as a cardiologist, the healthcare industry was rapidly changing, creating difficulties for his small Greater Hartford physician group to do business.
Facing uncertainty over insurance reimbursement rates, greater demands for more expansive use of electronic medical records, and the need to offer higher level, more coordinated patient care, Pareles’ group Cardiac Care Associates decided to seek a partner to meet the demands of modern day medicine.
In July, the six cardiologists agreed to merge with Hartford’s Connecticut Multispecialty Group, one of the largest physician practices in the region.
“We weren’t comfortable being on our own in the changing environment,” said Pareles, 62. “This is going to let us do more on a larger scale.”
Cardiac Care’s decision to go “bigger” isn’t unique. Consolidation of small physician practices, which have long dominated the Connecticut landscape, has been the norm in recent years. But the pace of mergers, industry observers say, is quickening as federal healthcare reform fully kicks in and doctors face increasing financial pressures.
Government programs like Medicare and Medicaid continue to threaten reduced reimbursements, and now private insurers are playing hardball too. Health plans competing on Connecticut’s insurance exchange, for example, are offering physicians reimbursements below traditional commercial rates.
Meanwhile, the Affordable Care Act is requiring doctors to modernize their practice with new care delivery systems and payment models, all of which can be difficult for small physician groups to adopt on their own, said Matthew Katz, CEO of the Connecticut State Medical Society.
“There have been so many mergers and acquisitions within the market that the dominance of solo and small practices is shrinking,” Katz said.
Pareles said he and his fellow Cardiac Care docs thought long and hard — for nearly 8 months — before merging with Connecticut Multispecialty Group, to leverage CMG’s back office capabilities and scale.
With 105 doctors, CMG offers more extensive business support services than Cardiac Care could afford: revenue cycle management, compliance, coding, finance, and human resources. CMG even owns a regional health IT support company.
CMG’s size will also gain Cardiac Care leverage in contract negotiations with insurers and suppliers, Pareles said.
While Cardiac Care had its own electronic medical record system its use was limited: information couldn’t be shared beyond its small group of doctors. Now the six cardiologists can trade patient data with more than 100 physicians in various specialties across Greater Hartford, allowing for better tracking of patient health histories.
That’s important because starting as early as 2015, doctors will be forced to expand the use of their health IT systems or face possible Medicare reimbursement penalties.
“It gives us access to a lot more information on current medications and previous patient evaluations,” Pareles said.
The consolidation trend is changing the state’s competitive landscape and has set off an arms race among larger medical groups and hospitals, which have built strong business development teams to woo new doctors.
Major players competing for talent include CMG, Hartford Healthcare Medical Group, Northeast Medical Group, ProHealth Physicians, and Women’s Health USA.
“It’s the wild west out there,” said Douglas Arnold, CEO of Middletown-based Medical Professional Services Inc., which has more than 450 medical providers in its statewide network. “I have to look at a scorecard every day to see who is still in my group.”
Arnold said it’s not just solo practitioners or small groups being targeted. Hospitals are recruiting doctors in large networks too. Just recently, five MPS internists received acquisition offers from eight different hospitals and medical groups.
MPS, too, has been aggressive: it added more than 60 doctors to its network in 2013. Primary care physicians in particular are a hot commodity, Arnold said, as the state faces a potential shortage of those doctors in the coming years.
Meanwhile, hospitals are hungry to add physicians so they can create a strong referral network to their facilities, Arnold said.
Jarrod Post, CMG’s CEO, said his group has expanded gradually over the years, going from 35 doctors in 1998 to just over 100 today. The independent practice is mutually-owned by its doctors.
CMG’s strategy, Post said, is to grow “smartly” based on the clinical needs of the community. The company added Pareles’ group, for example, because it wanted to beef up its cardiology services.
In 2014, CMG would like to add five to 10 more doctors, Post said.
“We don’t grow for the sake of growing,” Post said.
Hospitals and medical groups are also expanding their physician ranks to meet the changing demands of the industry. One goal of healthcare reform is to move doctors and hospitals away from the traditional fee-for-service model, which is seen as costly and inefficient. It’s leading to new payment models that offer medical providers a fixed sum to care for a group of patients, particularly individuals with chronic illnesses — diabetes, heart disease, asthma — who get sick more often and drive up healthcare costs.
To manage those patients effectively, hospitals, doctors, and other care providers must work more collaboratively. CMG, for example, has close ties with Hartford Hospital, where more than 20 of its doctors practice.
Post said CMG has always used an integrated approach to medicine within its own practice. Now it’s looking for ways to better align itself with outside care givers.
The group, for example, is developing a transitional care clinic program to help patients have smoother transitions after leaving the hospital. The program could include placing its doctors in outpatient centers to ensure patients are taking proper medications and receiving education about their follow-up care after a hospital visit.
“Allowing care to flow from one venue to another is significant,” Post said. “We are going to need to embrace tighter relationships with various entities.”
A key question that remains is how consolidation will impact healthcare costs. As physician groups and hospitals get larger, their bargaining power over insurance companies is increasing, putting providers in a better position to negotiate higher reimbursements rates.
At the same time, physician groups are gaining scale by combining and sharing resources, which should reduce administrative and overhead costs.
It’s too early to tell what the exact cost impact will be, but the No. 1 focus must be to improve quality and access to care, Katz said.
DOWNLOAD PDFs
Read more
