The Key to Profiting from Physician Acquisitions

Physician group acquisitions are still on the rise in healthcare.  Hospitals and health systems have been losing money annually on physician contracts and enterprises. The biggest problem is the lack of a clear and consistent physician acquisition strategy. One health care system changed their strategy 5 times in 8 years, resulting in a $100 million loss per year. Hospitals tend to buy up physician practices by region, by specialty, etc., and tend to change strategy as a reaction to the revenue loss and the changing economic climate.

We have seen recently a more proactive approach to this problem starting at the initial contracting and acquisition phase, rather than solving the revenue loss through reevaluating existing physician contracts. Physician practices have been engaging in timeshares and other nontraditional partnerships as they are added to a health system’s clinically integrated network. These partnerships consider the goals of all parties involved, encourages dialogue and collaboration between parties, and benefit in ways that align with some of the suggested strategies and solutions.

Health systems first need to define and enact a consistent, strategic rationale for partnering with physicians. They need to account for the expected return on operational losses and hospital revenue generated from physician recommendations. Does it make sense financially to fully acquire the practice, or should the hospital consider a leasing option? After determining a strategy,  set corresponding goals, either value or performance based, across the system. Lastly, incorporate these goals into physician compensation and incentives, insurer contracts, support systems and operations, and motivation strategies for their employed and independent physicians as ways to manage and increase revenue.


Harvard Business Review has a good article on the physician acquisition strategies, to read more, go to: