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Can Today's Physician Practice Remain Independent? 3 Trends to Watch
posted on Feb. 21, 2019


As the pace of change in health care accelerates, with new entrants to the industry, new technologies disrupting legacy models, and new payment models that emphasize population health management, some independent physician practices struggle to remain so in an environment that prefers integrated systems across multiple points of care.


Fewer than half of physician practices today are owned by physicians, according to an American Medical Association study. In 2018, private equity investment in physician practices such as anesthesia, dermatology, ophthalmology, GI, dentistry, and more was a key catalyst for consolidation in some specialties, with dermatology and ophthalmology practices drawing the highest level of interest. (See H2C merger-and-acquisition data for 2018.)


Rural practices are particularly amenable to consolidation. One study shows hospital employment and acquisitions of rural practices far outpaced moves to bring urban practices on board.


What is the outlook for today’s independent physician practices? There are three trends to consider.


Trend No. 1: Elevated capabilities around population health management and predictive analytics will be essential to success. Strengthening capabilities around population health management and predictive analytics will be critical to providing more effective care for Medicare patients and other patients with complex needs. In fact, among healthcare providers entering into mergers and acquisitions in 2018, H2C data shows these two capabilities are among the top four that providers sought to enhance through partnership. The other two capabilities are precision medicine and meeting consumers’ expectations for care (e.g., access, experience).


One option to consider: dedicating a funding pool for digital innovation, a strategy the American Hospital Association found can accelerate digital innovation among healthcare providers.


Trend No. 2: Medicare reimbursement won’t cover costs for many physician practices in 2019. A January 2019 MGMA poll found only 16 percent of physician practices anticipate Medicare reimbursement will cover the cost of providing care for Medicare beneficiaries. More than two-thirds of practices expect a shortfall, the poll found, and many will have to rely on increased commercial contract rates or more commercial patient volume to cover the loss from caring for Medicare patients, whose conditions often are more complex and require greater resources to manage.


Trend No. 3: Few independent practices have the sophistication to participate in pay-for-performance models. Although research shows small, physician-owned practices have lower costs per patient, fewer preventable readmissions, and lower readmission rates—factors that could position these practices for strong performance under value-based payment models—these practices are least likely to adopt these payment models. Independent physician practices typically do not have the tools, quality reporting systems, or staff to participate or the funds to invest in these resources. Participation in pay-for-performance models also requires complete retooling of the way in which physicians bill for care—a monumental challenge for independent practices.


As a result, physician practices remain skeptical about the transition to value-based care. A recent survey shows 61 percent of physicians believe value-based care and reimbursement would have a negative impact on their practice; 63 percent believe the move away from fee-for-service also would have a negative impact on earnings. The move toward adoption of value-based payment models remains slow among physician practices: For two-thirds of practices, value-based contracts comprise just 20 percent or less of their overall contracts, an MGMA poll found.


In 2018, the Centers for Medicare & Medicaid Services took steps to encourage small practices to participate in the federal Quality Payment Program, MACRA, by offering increased flexibility for participation and providing state-level resources to facilitate participation among small and rural practices. Some practices also have formed partnerships with other practices to share resources that support participation, such as quality-reporting systems and population health management technologies. In 2019, exploring ways to relieve the financial and administrative burden of participation in value-based payment models could be key to independent practices’ success.


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Hammond Hanlon Camp LLC (“H2C”) is an independent strategic advisory and investment banking firm committed to providing superior advice as a trusted advisor to healthcare organizations and related companies throughout the United States. H2C’s professionals have a long track record of success in healthcare mergers and acquisitions, capital markets, real estate, and restructuring transactions, acting as lead advisors on hundreds of transactions representing billions of dollars in value. Hammond Hanlon Camp LLC offers securities through its wholly-owned subsidiary H2C Securities Inc., member FINRA/SIPC.  For more information, visit



Kelly T. Duong
Hammond Hanlon Camp LLC

Wayne P. Weitz

Managing Director

Hammond Hanlon Camp LLC

212 257 4531

Michael R. Lane

Managing Director

Hammond Hanlon Camp LLC

312 508 4205


In today's economy, more healthcare organizations are becoming forced to deal with changing financial circumstances. Some organizations are looking to affiliate with or acquire competitors to stay strong; others are in need of restructuring or are potentially facing insolvency. H2C works with organizations facing financial or other liquidity challenges and those looking to strengthen their position by joining forces with others. For more information, contact one of H2C Restructuring's senior advisors.


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