Anticipating integrated healthcare systems.

The lexicon of American healthcare services continues to expand to reflect the changes taking place in the healthcare environment. "Clinics without walls," "management services only," "physician-hospital organizations," are, for example, but a few of the phrases that describe some of these changes--specifically those

Clearly, as Congress begins its work on the various healthcare reform proposals before it, the hard work of restructuring the American healthcare system has already begun. Almost every day, an announcement appears in the media about the merger of two or more healthcare-related organizations. For example, the Cleveland Clinic has announced that it has joined forces with Health Cleveland to form an integrated network to contract for managed care. And there are hundreds of other examples of physicians, hospitals, and payers coming together to form the healthcare networks that will characterize our restructured delivery system.

The cover story of this issue of HFM relates to one aspect of this restructuring, namely physician practice acquisition by hospitals. Author Steven Manacke presents a pro forma analysis model that addresses the "build or buy" decision. The financial issues related to physician practice acquisition are important for hospital financial managers to understand.

It is important to realize, though, that financial managers who work for clinics and physician practices also will examine these issues--but from the practices' points of view.

As Candra Breisch and Julie Johnsson recently noted in an article entitled "Hospitals are Gobbling Up Practices, Should You Sell?" (American Medical News), there are many reasons why a physician might be willing to sell his or her practice. These reasons include: a deal that meets the physician's personal and professional goals, frees the physician from the daily hassles of running a business, provides the potential for strong managed care contracting, or presents an attractive purchase price.

According to Breisch and Johnsson, reasons for not selling a practice include: a deal that means loss of autonomy for the physician, weak potential for managed care contracting, a poor purchase price, or the existence of a viable alternative partner or partners for the physician. The authors argue that physicians should be careful and examine all aspects of the deal, including the nature of the continuing relationship they will have with the hospital after the sale is completed.

More and more, the professionals who will consider the financial ramifications of both sides of these types of transactions will be members of HFMA. Increasingly, HFMA members are being hired as consultants to physician groups, or employed as practice executives. Their knowledge of healthcare payment and financing issues increases the level of expertise that the physician group brings to the negotiation of the financial terms of the deal.

HFMA members who are employed by hospitals bring this same level of expertise to the table. Hopefully, the deal that is struck will be fair and reasonable for all concerned.

HFMA's role is to provide its members with the tools they need to successfully complete such transactions. There are many legal and financial pitfalls related to the acquisition of a physician practice by a hospital, or the acquisition of a hospital by a large group practice, or the merger of providers of care with managed care organizations. Appropriate and timely information and education about these issues is a vital service that HFMA can provide.

Some might argue that HFMA should not provide professional support to financial managers who work in settings such as managed care organizations or physician practices. They would argue that HFMA should primarily serve hospital-based individuals.

I believe, however, that market forces will continue to push physicians, hospitals, and payers together into integrated healthcare systems. The governing boards and chief executives of these integrated healthcare systems will require their financial managers to have a broad-based knowledge of physician, hospital, and payer financial issues. And the healthcare system will be better served when individuals charged with responsibility for structuring these new relationships are equipped with the appropriate tools to complete their charge.

HFMA must remain at the forefront of the healthcare financial management profession by providing the tools necessary for dealing with the emerging healthcare delivery system.