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Hospital buying out private practices

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  • Hospital buying out private practices

    My local health system has been on a binge of acquiring surgical subspecialty practices.

    For the health system, it makes sense.  Tighter control of contract/schedules/call, prevent docs from working for the competition, skim profits.

    For the docs, I can see the economy of scale for solo groups or for lower cashflow practices, but some of these groups are pretty large and I would assume 8 digit billing.  What is the appeal of becoming a hospital employee?  I mean, is it a similar carrot as PE to the partners--wring out the last bit of equity from the practice before exiting?  The cost of losing autonomy alone couldn't possibly be worth it.

    What am I missing?

  • #2
    If you are a senior partner it's a nice golden parachute and to the cost of screwing over your Junior partners.


    • #3

      The cost of losing autonomy alone couldn’t possibly be worth it.
      Click to expand...

      Face it, surgical subspecialty practices are a competitive environment. You definately lose the upsided of having a most if not all partners at or near the top of capacity.

      When the referral network gets absorbed, the landscape changes. Lots of pressure for referring within the "new hospital group". There are capital requirement for new facilities and locations. Most likely, its accept the buyout or fight the new competition. You mentioned the economies of scale that can be a huge competitive advantage. The "business development" pressures get jettisoned but replaced by a different set of pressures. Some may actually welcome it, but not from a financial standpoint. The insurance and overhead problems disappear, but so do the toppings of owning a piece of the practice. Not all smooth running practices will remain so. Depends on how the .group practice would adjust to new challenges