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12 Hartford Business Journal • June 17, 2019 • www.HartfordBusiness.com FOCUS Source: Each group via survey. (a) An additional 869 advanced practice providers (APP). (b) MD, including mid-levels. (c) 412 including advanced practice clinicians. (d) Data from 2017 survey. —Compiled by Stephanie R. Meagher. THE LIST Physician groups in Greater Hartford Ranked by number of physicians as of June 2019 EXPERTS CORNER Physician practice consolidation reshaping healthcare landscape By Steve Shaw and Brad Mondschein T here's a revolution going on in health care these days. No, we're not talking about the mega mergers like CVS and Aetna, or the recently announced "Haven," the joint venture between Amazon, J.P. Morgan and Berkshire Hathaway. This headline probably won't make it above the fold, but it's a trend that is likely to rewrite the delivery of health care for- ever more. The days of the independent doctor are rapidly coming to an end. Nearly half of all physicians recently surveyed say they're now affiliated with a hospi- tal or large medical group. Record consolidation of physician practices (about 7.5 percent per year since 2016) is expected to continue as health systems, payors, private equity investors and large medical groups gobble up small practitioners. Thirty-one percent of all physician practices are now owned by a hospital. Physician-to-physician practice mergers by volume are much higher than hospital-to-hospital deals. Hos- pital-to-hospital mergers are larger in scope but there are fewer of them. Practice mergers are larger in volume and you're also starting to see private equity groups enter the prac- tice acquisition market. Why is this happening? Physician practices are seeing a need for significant capital investment due to govern- ment mandates around medical record keeping. As a result, they're not seeing the traditional financial returns they'd seen in the past. That leaves an opening for private equity that can acquire say, a hundred practices and, in theory, achieve the economies of scale inher- ent in a larger organization. Things like bulk purchasing, insur- ance, centralized billing and IT services all make physician practices ideal tar- gets for the right private-equity firm. Sellers must focus on efficiency If a physician practice is think- ing about selling they should look at becoming as efficient as possible. One of the first places buyers look is in a group's medical coding. Are they maximizing revenue by cod- ing properly for each procedure they perform in their office? Are they over- paying their staff? Are they effectively using information technology to make them more efficient, or do they look at IT as a necessary evil that only needs attention when something breaks? Most physicians don't look at what a traditional business would call "cost of goods." They see themselves as providing a service and look mostly at revenue, rather than expenses. Cost of goods is the cost of a physician group's staff, supplies, rent, insurance, etc. There is also the issue of HIPAA and data security. There have been numer- ous fines levied against purchasers of practices and hospitals because of violations that occurred pre-closing. We're talking fines that have been lev- ied in the tens of millions of dollars. Looking at the way a practice protects patient information is every bit as important as looking at their balance sheet. The Harvard Business Review estimates that nine out of 10 hospital- to-hospital mergers fail because the acquiring hospitals are not achieving the benefits of scale they predicted before the acquisition. On the physician side, you're seeing it from both sides. The buyer isn't seeing the realized efficiencies they anticipated because they failed to per- form full due diligence. On the seller side, deals are falling short because the seller may be forced to spend more post-closing on things like necessary IT upgrades to meet the buyer's infra- structure requirements. So what's the advice for buyer and seller in today's competitive M&A marketplace? Maximize. Buyers, particularly private equity firms, look for practices that pay attention to both sides of the ledger, maximizing profit and maxi- mizing efficiency. Valuation is dependent on decreas- ing costs to maximize cash flow. Maximize cleanliness. An attractive practice is one that understands and embraces the reporting regulations that govern it, that makes sure they're not over-coding or under-coding. And finally, physicians who want to sell their practice need to understand that in many cases, they're in the driv- er's seat. It's a very competitive mar- ketplace, especially among specialties with a high level of ancillary revenue like cardiology, radiology, orthopedics, gastroenterology and primary care. They should market their practice and not necessarily take the first offer that comes along. Steve Shaw is executive vice president for VertitechIT, a national healthcare IT consulting firm based in the Greater Hartford/Western Massachusetts area. Brad Mondschein is VertitechIT's chief legal counsel. Physician groups in Greater Hartford (Ranked by number of physicians as of June 2019) Rank Group No. of physicians Description Chief executive Year founded 1 Hartford HealthCare Integrated Care Partners 1290 Silas Deane Highway Wethersfield, CT 06109 860-972-9051; integratedcarepartners.org 1,409 (a) Clinically integrated, multi-specialty, physician-run organization delivering value-based population health James Cardon, CEO 2013 2 St. Francis HealthCare Partners 95 Woodland St., 4th Floor Hartford, CT 06105 860-714-5606; saintfrancishealthcarepartners.org 723 Multi-specialty, shareholder-owned physician/hospital joint venture serving independent and employed providers in the Greater Hartford area John Sunde, Interim president 1993 3 UConn Medical Group 263 Farmington Ave., Suite 130 Farmington, CT 06030 844-388-2666; health.uconn.edu 457 (b) Multi-specialty practice; outpatient services in primary care, OB/ GYN, dermatology, oncology, orthopedics, ophthalmology and more; offices in Avon, Canton, East Hartford, Farmington, Simsbury, Southington, Storrs and West Hartford Anne Horbatuck, Vice president, Ambulatory Services 1970 4 ProHealth Physicians 3 Farm Glen Blvd. Farmington, CT 06032 855-286-3411; ProHealthMD.com 240 (c) Internal medicine, pediatric, family practice, walk-in-care and specialty-care professionals Benito Alvarez, CEO 1997 5 Conneticut Children's Specialty Group (d) 282 Washington St. Hartford, CT 06106 860-545-9000; www.connecticutchildrens.org 184 Multi-specialty, pediatric group practice in over 20 pediatric specialty areas; physicians also serve as faculty members of the University of Connecticut School of Medicine Christine Finck Juan Salazar, Physician chiefs 1996 6 Starling Physicians 2110 Silas Deane Highway Rocky Hill, CT 06067 860-258-3470; starlingphysicians.com 180 (e) Physician-owned, multi-specialty group including 27 specialties and 32 locations Tracy King, Interim CEO 2016 (f) 7 Bristol Hospital Multi-Specialty Group 25 Newell Road, Suite D28 Bristol, CT 06010 860-585-1560; bristolhospital.org 52 Comprehensive care to the community through a variety of local practices in Bristol, Burlington, Farmington, New Britain, Southington, Terryville and Wolcott Edward Henry, Executive director 2011 8 Middlesex Health Family Medicine (g) 90 South Main St. Middletown, CT 06457 860-358-6300; mhfamilymedicine.org 45 (h) Primary care treatment in office, hospital, nursing home or home care to children, pregnant women, adults and seniors in Middletown, Portland and East Hampton Alan Douglass, Director 1973 9 Middlesex Medical Group 28 Crescent St. Middletown, CT 06457 860-632-5570; mhprimarycare.org/ 44 (i) Primary care, dermatology and general and specialty surgical practice with eight offices in the greater Middletown area Susan Serkey, Executive director 1997 Steve Shaw Brad Mondschein