Hospital-Centric Healthcare | Impending Death of Hospitals

Why You Must Know About A University’s Captive Medical Group Filing Bankruptcy

Last week, on November 7, 2018, the medical group affiliated with Michigan’s Wayne State University Medical School, University Physician Group, which does business as Wayne State University Physician Group (“WSUPG”), filed Chapter 11 bankruptcy.

How is that even possible, you ask? After all, you were told that there’s safety in what is essentially hospital employment.

Well, it’s not only possible, it’s likely the tip of the iceberg, not only for “stand alone” captive physician groups like WSUPG with its 873 employees, but for entire hospital hospital systems made more fragile, not stronger, by their size.

Hospital systems across the country suffer from bloated fixed costs, huge payrolls, layers and layers of bureaucracy, and management by managers, not by entrepreneurial thinkers.

Instead of bringing what the proponents of hospital-centricity promised would be stability, the actual result is becoming much different: The larger the hospital-centric system is, the more sensitive it is to declining payments from private payors, and the movement of procedures out of their facilities to freestanding, and often independent facilities, from clinical laboratories, to imaging facilities, to ASCs. And now, the federal government is getting increasingly into the act: It has cut reimbursement to hospital outpatient clinics, and has signaled its decreasing support for outpatient surgery performed in hospital outpatient departments (“HOPDs”)as opposed to in freestanding ambulatory surgery centers.

Hospital employment was hardly ever a good deal for any physician. The difficulty in holding a hospital together is tough enough. The difficulty in holding a hospital system together is even greater.

But both pale in comparison to the challenges of holding a hospital system plus its directly or indirectly employed physicians together. A shock that could have been absorbed by the pure hospital-side of the business can be fatal to the enormously expense-ridden hospital-plus-physician structure.

Why You Need to Know

1. Employment, directly or indirectly, with hospitals is far from “safe.” In fact, it may be far riskier for physicians.

2. In the event that a tightly aligned physician group fails, the employed physicians have no offices, no patient records, no staff, no “nothing” readily available to them to re-start independent medical practice.

3. For outside groups, the failure of a hospital-controlled medical group presents the ability to cherry pick physicians who may be desperate for quick reemployment. That is, unless those physicians are barred from accepting employment in the area due to ill negotiated covenants not to compete, assuming that they are enforceable.

4. The failure of a hospital-affiliated medical group will disrupt referral patterns, presenting opportunities on both the services-side and the facility-side for independent physician practices and their affiliated facilities.

Comment or contact me if you’d like to discuss this post.

Mark F. Weiss

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Un-Merry Christmas for Another Hospital

Naughty or Nice?

This year, Santa brought a lump of coal to Tenet’s Abrazo Maryvale hospital campus.

Rumored to be accompanied by the Grinch for extra muscle, he padlocked the 232-bed Phoenix area facility.

All kidding aside, the hospital fell victim to, in the words of its spokesman, “dwindling patient volumes.”

As a reader of my blog and of my book, The Impending Death of Hospitals (download here or purchase in hard copy), you know it’s more than that: it fell victim to a dwindling business model.

Tenet clearly understands it. They recently said goodbye to their former CEO, who probably had a better holiday than most with his $22.9 million severance package. But despite their foray into ASCs via their acquisition of United Surgical Partners International, their major line of business, hospitals, is an anchor around their neck.

Having lost $367 million in the 3rd quarter of 2017, compared with a $9 million loss for the 3rd quarter of 2016, the company reports that it’s looking for “strategic options.” That’s quite a euphemism.

Tenet’s slow demise isn’t unique. A significant part of the hospital industry is broken.

But you’re not Tenet.

For entrepreneurial physicians, Tenet’s troubles are your opportunity. Physician owned ASCs, non-Medicare hospitals, medical malls, and more.

The time has never been better for you. Payouts are pushing procedures out of hospitals. Why not be there to profit from them?

Comment or contact me if you’d like to discuss this post.

Mark F. Weiss

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