ACO's, Practice Buy-outs and Déjà vu All over Again

July 2012
Management Home Page 

By Mick Raich, President, Vachette Pathology

Sometimes you get it right. In May of this year, I gave a speech to the Virginia Society of Pathologists. One of my topics was the possible increase in scrutiny of medical practices purchased by hospitals and health systems. My thinking was that it was highly likely that these purchases would cause increased oversight by both state and federal agencies, because this is what happened in the 90's when the first wave of these practice acquisitions took place. At that time, there was an increase in oversight by the Office of Inspector General, which lead to a carryover in the area of non-payment of Part A services. Although nothing happened to actually change this practice, it made many administrators think twice about denying payment for these services. Last week’s Modern Healthcare, June 2011, noted that there is again an increased scrutiny into these purchases, with a focus on antitrust issues. See, sometimes you get it right.

Look at it this way; if your health system owns all of the practices and healthcare facilities in a given area, they can then be in a stronger negotiating position. In fact, they may have a monopoly. The only one allowed to have a monopoly is the federal or state government. These guys do not like competition.

Let’s play this out once again. Your health system buys your practice and then builds their own self-insured or ACO healthcare delivery model. This likely means your practice goes from fee-for-service to salary. This also means that your income will likely significantly decrease.

What happened the last time this took place? Remember in the mid to late 90’s when the first wave of practice acquisitions took place? Many health systems tried to build these models and failed. Over the years, the health systems that failed with their self-insured models sold these off to local HMO’s or watched them dissolve. Most practices that were purchased at that time were then sold over the next five years. Some hospitals tried to build their own capitated delivery models also; few succeeded. Several survived but they are the exception, not the norm.

Now we are trying to do the same thing all over again. It is the second round of this thinking. Basically it is a copy. What will the future bring? Most likely there will be some self-insured models that survive this second coming. Also some ACO / Capitation models will survive but the most likely scenario will be that the majority of these new entities will fail and many practices that are bought by health systems will be sold or allowed to go back into the fee-for-service non-employment pool.

Mick Raich is the President / CEO of Vachette Pathology, the nation's leading pathology consulting and management firm. He can be reached at 866-407-0763, 517-403-0763 or at