private practice mergers | The Health Law Firm Blog

Industry Trend: Hospital Systems Merging and Acquiring Private Practices All Over the Country

By George F. Indest III, J.D., M.P.A., LL.M., Board Certified by The Florida Bar in Health Law

There’s a structural shift that is sweeping the health care system – hospitals are acquiring private physician practices. It is happening all over the U.S., including right here in Central Florida. On December 31, 2012, Orlando Health – a nonprofit, multi-hospital system that owns Orlando Regional Medical Center and eight other hospitals – will allegedly merge with Physician Associates – Central Florida’s largest medical practice, according to the Orlando Sentinel. The alleged price tag on this sale is $50 million, with each of the group’s 95 physicians receiving about $500,000 a piece.

Critics Believe the Merger will Hurt Patients.

Orlando Health maintains the goal of the merger is to move toward a new payment model and reduce health care costs, but critics interviewed in the Orlando Sentinel article disagree.

The trend around the country is that after a merger patients will see a facility fee tacked onto a doctor’s fee, even if patients go to the same doctor’s office. Critics also believe providers will feel obligated, or will be required, to only refer patients to the hospital that employs them. Another fear is job loss, as hospitals take over office management.

To read the article from the Orlando Sentinel, click here.

An Investigation into Acquisitions.

In August 2012, the Wall Street Journal took a closer look at what happens after an acquisition of a private practice by a hospital system.

The article stated as physicians are absorbed into hospital systems, they can get paid for services at the hospital systems’ rates, which are typically higher than what insurers pay to independent doctors. Some services that physicians previously performed at their facilities may start to be billed as hospital outpatient procedures, this can double or triple the cost.

Medicare pays more for certain services if they are performed at hospital facilities. According to the Wall Street Journal, if a hospital system transforms a private clinic to become an outpatient facility or moves services onto a hospital site, the hospital’s Medicare reimbursement rates will increase.

To read the entire Wall Street Journal article, click here.

Physician Associates Writes Letter to Patients.

On November 15, 2012, the Physician Associates Chairman of the Board of Directors posted a letter to patients on the practice’s website. The letter assures patients nothing about the service they receive will change. The letter says the sale is about patients receiving the best possible care in a new, fast-paced health care environment. In response to the sale price, the chairman said a large component of the purchase price reflects the sale of all of the Physician Associates’ assets to Orlando Health, along with an agreement to provide future employment.

Click here to read the entire letter.

Contact Health Law Attorneys Experienced in Business Transactions and Contracts.
At the Health Law Firm we provide legal services for all health care providers and professionals. This includes physicians, nurses, dentists, psychologists, psychiatrists, mental health counselors, Durable Medical Equipment suppliers, medical students and interns, hospitals, ambulatory surgical centers, pain management clinics, nursing homes, and any other health care provider. We represent facilities, individuals, groups and institutions in contracts, sales, mergers and acquisitions.

The services we provide include reviewing and negotiating contracts, business transactions, professional license defense, representation in investigations, credential defense, representation in peer review and clinical privileges hearings, Medicare and Medicaid audits, commercial litigation, and administrative hearings.

To contact The Health Law Firm, please call (407) 331-6620 or (850) 439-1001 and visit our website at www.TheHealthLawFirm.com.

Comments?

What do you think of the merger between Physician Associates and Orlando Health? Who do you think it will benefit more, the patients or the doctors? Please leave any thoughtful comments below.

Sources:

Jameson, Marni. “$50M sale of Physician Associates Signals Major Shift in Orlando Health Care.” Orlando Sentinel. (November 13, 2012). From: http://articles.orlandosentinel.com/2012-11-13/news/os-physician-associates-orlando-health-20121109_1_orlando-health-health-care-physicians

Wilde Matthews, Anna. “Same Doctor Visit, Double the Cost.” Wall Street Journal. (August 27, 2012). From: http://online.wsj.com/article/SB10000872396390443713704577601113671007448.html

Walker, M.D., Erik. “Letter to Our Patients Regarding Potential Orlando Health Merger.” Physician Associates. (November 15, 2012). From: http://www.paof.com/news/2012/11/letter-our-patients-regarding-potential-orlando-health-merger

About the Author: George F. Indest III, J.D., M.P.A., LL.M., is Board Certified by The Florida Bar in Health Law. He is the President and Managing Partner of The Health Law Firm, which has a national practice. Its main office is in the Orlando, Florida, area. www.TheHealthLawFirm.com The Health Law Firm, 1101 Douglas Ave., Altamonte Springs, FL 32714, Phone: (407) 331-6620.

“The Health Law Firm” is a registered fictitious business name of George F. Indest III, P.A. – The Health Law Firm, a Florida professional service corporation, since 1999.
Copyright © 1996-2012 The Health Law Firm. All rights reserved.

Hospitals Allegedly Enforcing Questionable Practices to Increase Bottom Line

By George F. Indest III, J.D., M.P.A., LL.M., Board Certified by The Florida Bar in Health Law

Doctors and hospitals around the country seem to be butting heads. In the past month, an article in The New York Times and a segment on the television “magazine” show 60 Minutes shed light on some questionable practices being enforced by hospitals on physicians working for them.

I previously wrote a blog on this structural shift in the practice of medicine. Click here to read that blog.

The effects of this trend are examined in these two news stories. Doctors and former employees from a number of hospitals around the country were interviewed and all seem to be dealing with the same issues. The biggest concerns addressed were: pressure to order unnecessary tests, admitting patients to fill hospital quotas and drive hospital profits, and the feeling of being controlled by hospital executives and administrators instead of practicing effective medicine.

Doctors Allegedly Pressured to Fill Emergency Room Beds to Increase Profits.

On December 2, 2012, 60 Minutes aired an investigative segment on one of the largest for-profit hospital chains in the country. Former employees and physicians alleged this hospital system thrived by buying urban-area hospitals and turning them into profit centers by filing empty beds from emergency rooms. A former emergency medicine doctor stated that the hospital in which he worked required an admission rate of twenty percent (20%) for patients seen in the ER and fifty percent (50%) for patients who were 65 years old and older (most of whom are Medicare patients) seen in the ER.

A former hospital system employee interviewed by 60 Minutes claimed he was in charge of auditing the hospital chain in question. He stated that he was convinced that doctors were under an extraordinary amount of pressure to fill hospital beds. He stated that he personally audited hospitals in Texas, Florida and Oklahoma, and concluded there were hundreds of thousands of dollars submitted to Medicare and Medicaid for hospital stays that did not meet standards for reimbursement, including medical necessity.

Doctors interviewed for The New York Times article had similar stories. They stated in interviews that hospital administrators created quotas for how many patients should be admitted, because more admissions allegedly meant more money. Doctors who met or exceeded quotas were rewarded with increased compensation, while doctors who did not felt in danger of losing their jobs.

Click here to read the entire New York times article.

Consequences of Ordering Unnecessary Tests.

The New York Times article looked at a number of lawsuits filed by former employees who allege the hospitals they worked for compensated doctors for ordering more tests than necessary.

The Department of Justice (DOJ) recently settled with a hospital group in Joplin, Missouri. According to the DOJ press release, the hospital system had to pay more than $9.3 million for rewarding doctors partly based on how many tests they ordered. This is in direct violation of the Stark Law and the False Claims Act.

Click here to read the entire press release from the DOJ.

I recently wrote an article for Medical Economics on the legal ramifications of ordering unnecessary tests. To read that article, click here.

If you want to know more on the Stark Law, click here.

Doctors Feel Controlled By Hospital Executives.

Doctors also stated they felt controlled by hospital executives. This was due, in part, to a corporate wide computer software system that was customized to automatically order an extensive battery of tests, some unnecessary, as soon as a patient walked into the hospital. It’s also stated that the software would prompt a physician to reconsider when he or she decided to send an emergency room patient home.

Most doctors interviewed were upset that the program also generated reports that evaluated each doctor’s performance and productivity.

To watch the segment from 60 Minutes, click here.

Hospitals Say They are Embracing the New Model of Health Care.

The hospital system in question by 60 Minutes maintains that these allegations are not correct. The executive vice president said that as a whole admission rates haven’t changed in four years and are near or below industry averages. The hospital systems believe that by consolidating they are embracing the new model of health care and state patient care comes first.

Contact Health Law Attorneys Experienced in Representing Health Care Professionals and Providers.

At the Health Law Firm we provide legal services for all health care providers and professionals. This includes physicians, nurses, dentists, psychologists, psychiatrists, mental health counselors, Durable Medical Equipment suppliers, medical students and interns, hospitals, ambulatory surgical centers, pain management clinics, nursing homes, and any other health care provider. We represent facilities, individuals, groups and institutions in contracts, sales, mergers and acquisitions.

To contact The Health Law Firm, please call (407) 331-6620 or (850) 439-1001 and visit our website at www.TheHealthLawFirm.com.

Comments?

Do you think there are constant battles between doctors and hospitals? As a health professional, have you experienced the pressure to admit patients, order unnecessary tests or refer a patient inside your network? Please leave any thoughtful comments below.

Sources:

Creswell, Julie and Abelson, Reed. “A Hospital War Reflects a Bind of Doctors in the U.S.” The New York Times. (November 30, 2012). From: http://www.nytimes.com/2012/12/01/business/a-hospital-war-reflects-a-tightening-bind-for-doctors-nationwide.html?pagewanted=all

Kroft, Steve. “Hospitals: The Cost of Admission.” 60 Minutes. (December 2, 2012). From: http://www.cbsnews.com/video/watch/?id=50136261n

Department of Justice. “Missouri Hospital System Agrees to Pay $9.3 Million to Resolve False Claims Act and Stark Law Violations.” DOJ. (November 5, 2012). From: http://www.justice.gov/printf/PrintOut3.jsp

“The Health Law Firm” is a registered fictitious business name of George F. Indest III, P.A. – The Health Law Firm, a Florida professional service corporation, since 1999.