In states such as Indiana, Ohio, New York and Pennsylvania, where large systems are aggressively pursuing physician and hospital acquisitions, independent hospitals and small health systems must have a strategy in place that defines:
- when and under what conditions affiliation/acquisition will be pursued; and
- the best way to position themselves for negotiation.
Hospitals operating in this type of environment are constantly at risk of a shift in primary care physician loyalties that could empty their beds overnight. The best way to protect your interests while simultaneously strengthening your negotiating position should you choose to pursue affiliation: align yourself with the primary physicians who drive your volume. We recommend approaching this strategy in two steps.
Step One: Identify the independent primary care physicians in your market and categorize them as fully supportive, splitter or unsupportive based on the downstream revenue they generate for your hospital.
The median gross downstream revenue for U.S. primary care physicians is $1.6 million. Use this to help you determine who’s fully supportive and who’s a splitter.
Step Two: Prioritize the physicians important to your bottom line and align them with your organization.
Generally, “fully supportive” physicians are top priorities. However, if there’s no immediate threat of acquisition by a competitor, you may decide to align with “splitters” first as a new revenue source. For unsupportive physicians, a call from a physician liaison or executive team member can determine if there’s any opportunity to shift volume to your organization. Your alignment strategy will probably have to include employment, although you can also utilize professional services agreements, co-management agreements, a Physician-Hospital Organization or a clinically integrated network, as well.
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