January 2012

Well, another interesting article this week regarding the exodus of physicians from private practice.  This time, it’s the Philadelphia Inquirer reporting on "Why Heart Doctors are Leaving Private Practice"  Only time will tell if this a merely a fad or a real change in the way healthcare will be delivered going forward.  We have seen this "trend" before, however, and it didn’t really work out that well for many physicians or hospitals. 

In my experience, those transactions that are based upon each party’s short-term gains/protection are unlikely to take hold for the long-term.  Striking a deal that works adequately for an initial three-year employment term is not that difficult.  The real trick is in building a model that will last well beyond the first three or six years.  If the employment model (think "goverance and compensation") doesn’t foster and reward collaborative success, employed physicians end-up feeling disenfranchised, and unfortunately disenfranchised employees usually don’t care that much about the success of their employer.   There is certainly an opportunity for forward-thinking physicians and hospitals to use the current climate as a catalyst to build a truly integrated delivery model but it will require both parties to check some heavy baggage at the door.  

Most medical practices in Pennsylvania are aware that Pennsylvania imposes a sales and use tax on various items and services purchased by medical practices.  However, physicians are not always clear on exactly the items and services to which the tax applies.  For example, the tax applies to secretarial/administrative services purchased from a third party vendor.  This includes transcription services.  If your vendor is not charging a sales tax or you are not reporting a use tax in connection with your outside transcription services, you may have an issue.  The Pennsylvania Medical Society has published a helpful guide entitled How to Comply with State Sales and Use Taxes.  If you’re not sure whether or how Pennsylvania’s sales and use tax applies, I recommend that you give your accountant or attorney a call since the Pennsylvania Department of Treasury is currently conducting sales and use tax audits of physician practices.

There’s an interesting piece in the Miami Herald today regarding hospitals once again acquiring physician practices. The article raises some good questions regarding the motivations underlying this growing (recurring) trend and suggests that it might be more about control than preparing for a "reformed" health care system. The article also questions whether hospitals will be any more successful this go-round in managing the acquired practices than they were in previous attempts.

I frequently represent both hospitals and physicians in practice acquisition transactions. In my experience, only a handful of hospitals and health systems have a true plan for how they will integrate the practices they are acquiring in a manner that will improve the delivery of healthcare. To be sure, how best to integrate providers to improve care is not an easy question to answer. I find, however, that the "smart" hospitals and health systems are willing to acknowledge that physicians should be involved in the development process and that they (the hospitals) do not necessarily have all the answers for how best to accomplish that goal.

If you are considering selling your practice to a hospital, or you are a hospital looking to integrate the physicians in a thoughtful way, consider whether it makes sense to begin the process with a dialogue about where each party envisions the relationship to be several years in the future. If you can reach consensus on where you want to end up, you can then structure a transaction which is specifically designed to get you there.

A recent article on CNNMoney discusses the not-so-new news story about the financial struggles of private medical practices. However, buried within the article is an important financial issue that many physicians overlook: collection of patient balances. According to one of the experts cited in the article, private practices lose 10% to 15% of their profits in uncollected patient balance revenue.

I’ve worked with many medical practices over the years on dealing with this issue and understand why physicians are reluctant to pursue aggressive patient balance collection efforts. Perhaps chief among their concerns is that physicians are afraid unhappy patients will sue or file a complaint with the Board of Medicine. Given the ease with which patients can file complaints with medical boards or, even more easily, post negative feedback on the Internet, this line of thinking is not without merit. However, having strong collection policies and making your patients aware of them upfront can go a long way to improving your bottom line and improving your patient relationships. Here are a couple of tips for developing collections policies within your practice:

  • It should be a standing policy that, with only an occasional exception, patients should pay their balances at the time of service. When staff send follow-up appointment reminders, they should also remind patients to bring payment at the time of service or they will need to be rescheduled. Obviously, exceptions may need to be made to this policy where a patient’s health may be jeopardized by a delay in being seen.
  • Office staff who deal with patients at scheduling and check out should be trained on the collections policies so that they know what to tell patients and what procedures they must follow to ensure payment.
  • Patients should be made aware of the practice’s collection policies. It’s a good idea to post notices your office regarding collections policies. That way patients know what is expected of them and can’t claim ignorance.
  • If you use a collections agency, be sure you have a clear understanding with the agency regarding the procedures they will use to collect patient balances. Among other things, you should review and approve the language in collection letters to be sure that the language is professional and not overly harsh.
  • Be sure to check applicable law and your third-party payors contracts to be sure your collection policies are compliant.