Operational challenges in COVID-19 pandemic may increase transactions among practices
Throughout the COVID-19 pandemic, operational challenges have led to an increased trend in transactions among medical practices, according to a presenter at the Physician Transactions Conference.
In his presentation, Gary W. Herschman, JD, noted medical practices are seeing an increase in market consolidation during the COVID-19 pandemic, “resulting in larger organizations that are well capitalized or competing with medical groups.” While lack of liquidity and working capital has impacted smaller practices, Herschman said this has not been an issue for larger organizations, such as larger physician groups, hospitals, private equity platforms and big, national health care companies.
“Capital and infrastructure, it all interrelates with liquidity,” Herschman, a member of the firm and board of directors of Epstein Becker Green, said. “It is the other end of it. It is looking at capital to weather pandemics, capital to improve and compete in the market.”
He added specialist practices are being impacted by the acquisition of independent, primary care referral sources by local hospitals, regional multispecialty groups and national companies.
“If a local hospital buys a 10-person primary care group that is, as a specialist, one of your main referral sources ... you are going to start to lose that type of referral base because of the other acquisitions going on with referral sources,” Herschman said. “Being part of a larger organization is one of the ways to try to counter that and otherwise pivot and do other things to help your bottom line.”
He noted the COVID-19 pandemic may lead to an increased shift to value-based payment models in the future, with practices in a value-based payment model having significant capitation and doing better during the pandemic compared with practices with fee-for-service models. The COVID-19 pandemic has also led to an increase in direct contracting by self-insured employers, growth of virtual care and telehealth, and increase in the use of outpatient care and ancillary services, according to Herschman.
With these changes taking place, many medical practices are uncertain about what the “new normal” will be after the pandemic, according to Herschman.
“There is uncertainty regarding what the new normal is going to be after the pandemic, at the end of this year, maybe into the next 2 years,” Herschman said. “What is the new normal going to be like and also what is going to happen with reimbursement? How are things going to be different reimbursement wise [and] regulatory wise?”
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Herschman GW. 10 key operational challenges – facing independent physician groups. Presented at: Physician Transactions Conference: Strategic Positioning in the Post-COVID Era; April 6, 13, 20 and 27, 2021 (virtual meeting).
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