The ACC Corner: Private Practices Trending Towards Hospital Integration

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Dr. Erb is founder of Cardiology Consultants of Bozeman in Montana and chair of the ACC’s PINNACLE Network Work Group.

The financial pressures associated with declining reimbursements and rising operational costs on private cardiology practices has resulted in increased migration of practices to hospital affiliation.

Now, due to the dramatic cuts to cardiology included in the 2010 Medicare Physician Fee Schedule (MPFS), private cardiology practices are increasingly interested in developing closer working relationships with hospitals. Other drivers toward hospital affiliation include rising regulatory constraints and changes in practice culture.

Physician reimbursement is arguably the primary force behind current hospital/physician integration efforts. Continued cuts in Medicare reimbursement, combined with increasing overhead costs related to personnel and professional liability coverage, are making it more difficult for practices to remain viable. Investment in information technology and the cost of compliance also have added to the cost pressures on physicians who face limited reimbursement from all payor categories.

A recent American College of Cardiology (ACC) member survey found that 28 percent of those in private practice have plans to merge within the next two years, with an additional 12 percent considering integration in three or more years. As a result of the 2010 MPFS, an additional 14 percent of members in private practice, who had originally indicated no integration plans, would now consider merging with a hospital or integrated delivery network.

As a result of the current economy, financial pressures also exist for U.S. hospitals, which are looking for expense-control opportunities. In my own practice, the 2010 Medicare cuts have driven my Medicare reimbursement so far below my hard costs for procedures and services that we will be virtually insolvent within three years. Hospital integration will likely be our only choice.

Additionally, some regulatory changes from Congress and CMS are making the day-to-day practice of cardiology more difficult. For example, continued Medicare payment reductions for imaging services are making it increasingly hard for cardiovascular professionals to provide these necessary patient services in-office. Also, the healthcare reform law does not allow new physician-owned specialty hospitals to be built.

Recovery audit contractors also highlight the regulatory environment that will continue to require significantly higher cooperation among cardiology providers and hospitals. Finally, the current fee-for-service model of payment is coming under fire and a variety of new reimbursement models are being contemplated. Medicare, commercial payors and even large employers are exploring new payment models based on bundling, episodes of care, capitation or single-point contracting. Private cardiology practices, particularly smaller ones, often lack the resources needed to negotiate and implement these contracts.

Changes in practice also are impacting integration decisions. The next generation of cardiologists and cardiovascular professionals are trending towards a greater work/life balance. They tend to be more interested in the clinical practice of cardiology versus the business side of running a practice, demonstrating an affinity toward working in shifts. An integration model provides both practice stability and income security for these younger practitioners. In addition, hospitals have their own management structure that allows cardiologists to focus on clinical care and leaves the business administration to others.

The college is working to develop tools and resources to help practices evaluate the many factors that must be considered in order to make the best decisions for a particular practice that preserves the focus on patient care.

The ACC held a two-day symposium in Las Vegas this month that addressed the evolving models of cardiovascular practice. For more information on integration tools, visit www.acc.org/practicemanagement.

Dr. Erb is founder of Cardiology Consultants of Bozeman in Montana and chair of the ACC’s PINNACLE Network Work Group.