As healthcare reform and Medicare reimbursement cuts continue to loom, physician practices and larger hospital systems continue courting each other not only in the Memphis area, but nationally as well. The trend has picked up in Memphis during the past 24 months. (See related story below.)

“It’s a very quickly evolving lay of the land in the Memphis market, and I suspect that’s the way it is in other places too,” said Gene Spiotta Jr., MD, of Memphis Medical Specialists.

Saint Francis Medical Partners, an arm of the larger Saint Francis Hospital system in Memphis and Bartlett, acquired the internal medicine practice in January. “We felt like it was the best decision to proceed for the future.”

Under the undisclosed acquisition, Spiotta and the other five doctors at Memphis Medical Specialists became Saint Francis employees. Until then, Spiotta had served as president of the group. Now he functions more as a partner.

In many cases, doctors are choosing to abandon private practice because hospital system acquisitions allow them to spend more time with patients and less time dealing with administrative headaches. These transactions afford physicians comfortable, predictable salaries instead of soaring compliance costs or worries over how much fee collections might diminish in coming years. Larger hospital systems also offer practices the resources to expand.

“It’s getting harder and harder now for the physicians who have their own practices, to manage,” said Vicki Lambert, an office supervisor at Midtown Internal Medicine.

Methodist Le Bonheur Healthcare acquired that practice on Aug. 31. The acquisition enabled its two doctors and various support staff to move into a newly renovated space on Union Avenue. It also positioned the practice to convert to electronic medical records and a centralized billing system, not to mention providing much better IT support. The records and billing systems are expected to be in place by April.

“I feel a big burden off my shoulders,” said Shawn Hayden, MD.

He declined to disclose the practice’s acquisition price, but called it an almost-even swap. Hayden emphasized that the group hadn’t been in trouble; the doctors were just tired of being zapped by administrative issues. 

“I’ve been the captain of the ship several times in the past 22 years and it’s not all it’s cracked up to be,” added J.O. Patterson, MD, Hayden’s partner.

Better Healthcare Benefits

Another advantage the two have experienced since joining Methodist is being able to offer better healthcare benefits to employees. The doctors’ anxiety over the national trend toward bundling instead of fees for service has diminished as well.

“We traded our practice for the stability of being inside the healthcare system of Methodist,” Hayden said. 

However, hospital systems like Methodist, Saint Francis and Baptist Memorial Health Care Corp. benefit as well. By bringing doctors under their umbrellas, they cultivate physician loyalty and ensure patient referrals all in one maneuver. This also makes it easier to recruit young talent, since doctors coming out of residency programs today prefer more regular hours and set salaries.

“I think there are strategic opportunities to being associated (with a larger organization),” said Jim Boswell, vice president of physician operations and CEO of Baptist Memorial Medical Group, the arm of Baptist in charge of physician group acquisitions and partnerships. 

Baptist has acquired more than 300 physicians’ groups and 31 specialty offices in Tennessee, Arkansas and Mississippi.

A big tenet of healthcare reform involves lowering patient costs and encouraging healthcare providers to coordinate their efforts in a much more concentrated way. That means primary care physicians and specialists share information while working toward total wellness for their patients.

“Baptist is transitioning from a hospital-centric company to a hospital and physician group (model),” Boswell said. “I think it’s the type of organization that physicians obviously want to be associated with.”

The way Baptist Memorial Medical Group is structured, it maintains a high level of autonomy for doctors transitioning out of private practice.

“It provides a strong voice for physicians – a governance structure,” he said. “We go to great lengths to ensure the physicians continue to have a voice. We believe that’s an absolute key to success.”

One Big Reason: Reimbursements

Bill Breen, senior vice president for physician alignment at Methodist, said the most likely acquisition candidates are primary care practices. Much of it has to do with the threat of a 27 percent cut in Medicare reimbursements by Jan. 1.

“That’s Armageddon, if you will,” he said.

The push now is toward a higher quality of patient care, lower costs and greater access. At the same time, Medicare pays hospitals a fixed rate for services, whereas doctors are paid piecemeal. Right now, they have little incentive to work toward a common goal.

“Smaller entities are going to have to band together with larger entities to create an enterprise that’s going to thrive in that environment, where we’re going to be paid a bundled rate for care and as the federal government cuts back on what it’s going to pay for things,” Breen said.

Today, business depends on patient volume. Soon, it will depend much more on quality and outcomes.

“Hospitals feel like we cannot accomplish (those) cost savings and efficiencies without physicians being on the same page as we are,” said Mike Lachina, chief medical officer for Saint Francis. “A lot of what you see is just people preparing for what’s to come.”

He added, “If fee-for-service declines as predicted, then physicians in medical practice will find that they won’t be rewarded as well if they’re not able to deliver healthcare in a high-quality, efficient manner.”

Related Story

A Growing List…Local Hospital Acquisitions

Physician practice acquisitions are on the rise locally and nationally. Below are the three major hospital corporations in Memphis and the practices they have acquired during the past two years.

One prominent practice, West Clinic, is not included on the list below because it differs from an acquisition. On January 1, 2012, West Clinic will become a partner of Methodist Healthcare. See related story at the bottom of  page 23.

Baptist Memorial Medical Group/Baptist Memorial Health Care 

Pediatrics, Atoka

General Surgery, Collierville

Internal Medicine, Collierville

General Surgery, Covington

Orthopedic Surgery, Covington

Tipton Hospitalist, Covington

Obstetrics & Gynecology, Covington

Physical Medicine and Rehabilitation, Germantown

Psychiatry, Germantown

Germantown Wound Center, Germantown

Lakeland Primary Care, Lakeland

Boston Baskin Cancer Foundation, Memphis

Cardiovascular Surgery, Memphis

Family Cancer Center Foundation, Memphis

Finn Medical Associates, Memphis

Forest Hill Family Practice, Memphis

Humphreys Family Practice, Memphis

Integrity Oncology Foundation, Memphis

Memphis Hospitalist, Memphis

 Memphis Internal Medicine, Memphis

 Memphis Lung Physicians Foundation, Memphis

Radiation Oncology, Memphis

Stern Cardiovascular Foundation, Memphis

The Light Clinic, Memphis

Women’s General Surgery, Memphis

Methodist Le Bonheur Healthcare

Foundation Medical Group, Germantown

The Cardiovascular Center, Germantown

Sutherland Cardiology Clinic, Germantown

Lakeland Family Medicine, Lakeland

Eastmoreland Internal Medicine, Memphis

The Internal Medicine Clinic, Memphis

Jordan Internal Medicine, Memphis

Kraus Internal Medicine, Memphis

Methodist Specialty Physician V, Memphis 

Midtown Internal Medicine, Memphis

Pediatric Cardiology, Memphis

PennMarc Internal Medicine, Memphis

Southwind Medical Specialists, Memphis

McClatchy Medical Center, Olive Branch

Memphis Shoulder and Orthopedic Surgery, Somerville

Saint Francis Medical Partners

(Primary Care Providers)

Stage Road location, Bartlett

Macon Road location, Cordova

PerkinsExtended Clinic, Memphis 

Memphis Medical Specialists, Memphis 

Park Avenue location, Memphis

Summer Avenue location, Memphis 

SFH Inpatient Physicians, Memphis

Millington location, Millington

(Specialty Doctors)

Memphis Medical Specialists, Memphis 

SFH Center for Surgical Weight Loss, Memphis 

Summer Avenue (Cardiology), Memphis

SFH Cardiovascular Surgery, Memphis 

List provided by named hospital organizations

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