The Importance of Physician Clinics


Recent news about hospitals’ ongoing shopping sprees for physician clinics, continues to reinforce the perception that hospitals are aiming to consolidate power in the face of healthcare reform.

Hospitals, the argument goes, are the best-positioned and have the resources to invest in the needed technology and services models to adapt to a fast-changing world.  And physician clinics – anxious to avoid the ever-increasing regulation hassles and resulting financial resources to stay compliant – are essentially selling their practices and trading ownership for fewer headaches and some financial security.  And as for how this all fit in with ACOs (the most-talked-about piece of health reform), many believed that hospitals were positioned to be the clear beneficiaries of ACO regulations at the expense of everyone else in the healthcare system.

Two news items in the past few weeks has seriously undermined that line of thinking:

  • First, in April CMS named the next round of 27 ACOs to the Shared Savings program.  From this group of 27, 21 are physician-led organizations (rather than hospital-led).  In fact, only 10 hospitals (out of a possible 5,800 in the U.S.) are involved in any fashion with this recent group.
  • Second, the dialysis chain Davita announced its intent to acquire Healthcare Partners, an operator of 150 clinics and physician groups, for $4.4b.  Healthcare Partners was named as one of the 32 CMS Pioneer ACOs in late 2011 (and note that it does not count a hospital among its assets).

So what is behind the seeming shift from hospitals at the center of the healthcare landscape?  Probably for the simple reason that hospitals are still largely compensated to keep beds full, and we won’t see true savings in our healthcare system until we start reducing those expensive hospital stays.  In other words, the real name of the game is going to be true “care coordination” that keeps people healthy enough to avoid an inpatient stay – and market participants are realizing that hospitals may not have a major role in that workflow.

We are closely watching healthcare technology companies that are taking lessons like these to heart and planning for the next generation of services where patient care can truly be coordinated, perhaps in a world where physician clinics exist as the true foundation of our healthcare delivery system.

Let us know what you think.

Conor Green
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