Part of the reason for health systems buying physician practices was the Medicare payment differential between HOPDs ( hospital out-patient departments) and HOPPS ( hospital out-patient prospective payment system). Previously and until December 31st 2016, hospital bought physician practices (off-campus) were paid under OPPS but after January 1st 2017, they will be paid under the ambulatory surgical center prospective payment system or medicare physician fee schedule.
Whats the big deal? Hospitals were paid a higher amount (differential) under OPPS. So, for the same service physician offices were paid less. This is millions of $ less for hospitals owning physician practices. Health system excel spreadsheets showing revenues were partly based on this differential. Imagine, if this reduces Medicare costs Congress could eliminate ALL differentials based upon site of service. Private insurers will follow. UHC has already announced they will not pay for HOPD services if there is a cheaper alternative nearby (physician office).
So, what does this mean for hospital employed physicians? First, some specialties have shown decreased production (wrvus). Second, their compensation may have continued to increase partly based on the site differential in collections. If this is now gone, what happens?Fortunately, a lot of physician practices are on campus and should see no impact. If your practice is 'off-campus' and it is being considered for acquisition see if there is a possibi,llity of being within 250 yards of the main hospital or facility. If the practice cannot move close to the main campus, it can be still be provider based if it is within 250 yards of another remote in-patient location such as an affiliated hospital (but with the same name and control of the health system). Another option is to just move your ancillaries to campus for the higher reimbursement and leave the office practice as is.
I suppose the bigger point is that I see the world changing over the next 5 years when budgets become really tight. I have said from the beginning of the spree of acquisitions of physician practices that you must leave the back door open.