Report: Hospital-owned practices lose up to $100K per doc each year

Despite the industry drive toward hospital acquisition of physician practices, early research shows that these deals are no panacea to medical practice financial struggles.

Hospital-owned practices of all sizes in Kentucky, for example, are losing as much as $100,000 per doctor each year, according to a report by the accounting and consulting firm Dean Dorton Allen Ford.

According to the Lexington Hearald-Leader, the data on 26 healthcare executives representing 79 hospitals across a mix of rural and urban settings revealed:

  • The longer a hospital owns physician groups, the higher the likelihood it is losing money on them.
  • The more physicians a hospital employs, the more likely operating losses become.
  • Physician groups operating as separate legal entities from hospitals have the highest losses, potentially because hospitals in these situations can lose control over operations.

In order to succeed in such mergers, hospitals may have to take a closer look at how they do business in a post-Affordable Care Act environment, which includes considering flexible options for the way physicians are paid, concluded Gary Ermers and David Bundy, principal authors of the report.

"In the current environment, more tests and procedures mean more profit for the hospital, but in the future, as hospitals are compensated on measures of population health, they will actually experience more financial losses from the cost of these procedures," they wrote.

This study is consistent with previous national research from the Medical Group Management Association, which found that hospital-owned practices are 25 percent less productive than those that are privately owned. According to that report, revenues may fail to reach their potential due to pitfalls of centralized billing, lack of physician incentives and lack of physician control.

To learn more:
- read the Hearald-Leader article
- see the story from Business First