From the November 2016 issue of HealthCare Business News magazine
Some hospitals have also been buying freestanding diagnostic imaging centers. Population health management has been a primary driver to maintain consistent subspecialized professional coverage across all inpatient and outpatient radiology. This is not only beneficial from a quality standpoint, but also may allow the hospital to strategically expand opportunities for the radiologists with whom it maintains exclusive arrangements.
As diagnostics centers have suffered dramatic reimbursement cuts, increasing regulatory restrictions on the operation of referral sources, administrative difficulties and pending capital expenditures, these centers have lost significant strength, and hospitals have been able to capitalize via acquisitions. The Deficit Reduction Act of 2005, which began in January 2007, cut reimbursements for Medicare private office outpatient imaging centers, which is similar to the reimbursement challenges cardiology has incurred. Leading hospitals have taken advantage of these opportunities. Now, with the advancement of alternative reimbursement structures, hospitals can mitigate risk by controlling patient utilization.
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Of course, there are also challenges to consider. The cost of acquisition can be high, and employing physicians can become a significant expense in a business where the margins are slim. Return on investment (ROI) does not happen overnight. It may take a year or more for a hospital to see a return on a medical practice acquisition. Hospital leadership should be strategic in deciding how and when they will measure and quantify that ROI.
Perhaps the biggest challenge — and one that is often underestimated — is post-deal integration. Integrating disparate systems and technologies, corporate cultures, operations, staff, etc. is a major undertaking that requires proper planning upfront. It’s not uncommon for growing hospitals to acquire several medical practices, in which case the integration challenges are multiplied.
About the author: Kevin N. Fine, MHA, is a director of health care advisory services in the Miami office of Kaufman Rossin, one of the top 50 CPA and advisory firms in the U.S. He can be reached at kfine@kaufmanrossin.com.Back to HCB News
