Why Income May Drop if You Sell to Hospital


Recent reports from the MGMA (Medical Group Management Association) show that hospital- owned practices are 25% less productive than those that are privately owned. Our experience as medical practice consultants confirms these findings. In some cases, previously-profitable practices start to see a decline in their income. In other cases, the practices may have been less profitable to begin with. Here are the major roots of the problems and some suggested solutions.

1. Centralization of Billing and Collections: A New England hospital brought in varied practices, eventually totaling 82 physicians. The hospital decided to centralize the billing operations and put these activities under the control of the hospital's financial VP. Fifteen months later, when we were called in, the net collections for these physicians, had dropped by an average of 18 percent.

2. Loss of Physician Control and Involvement: When a practice lacks billing and collections staff, then physicians recognize that they have no control over the financial performance of their group. This loss of control results in the physicians being less involved in the oversight of their individual practices.

3. Lower-Performing Practices May Be More Likely to Sell to Hospitals: Higher-performing practices often do not see a need to become part of a hospital system. Therefore, it has been the lower performers, lacking the know-how to be very profitable, that have turned to the hospitals for support



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