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AHLA's Speaking of Health Law
New Players, Higher Stakes: Upping the Ante on Physician Transactions
There has been a boom in physicians and physician groups entering into partnership or employment with hospitals or other entities, especially during the pandemic. Jessica Stack, Principal, Veralon, speaks with Kristen McDermott Woodrum, Partner, McGuireWoods LLP, and Tara Ravi, Of Counsel, Parker Hudson Rainer & Dobbs LLP, about the trends and regulatory challenges impacting the different players involved in physician transactions. They discuss recent shifts in the types of specialties being targeted by health systems, how deal structures are changing, and the role of disruptors such as telehealth and at-home health. Kristen and Tara spoke about this topic at AHLA’s 2022 Health Care Transactions Program in Nashville, TN. Sponsored by Veralon.
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Speaker 2:Hi, my name is Jessica stack and I'm here with Kristen Woodrow and Tara Ravi. Um, we're speaking with Tara and Kristen in follow up to the transactions conference where they presented on the topic, higher stakes, upping the ante on physician transactions. We're gonna use that conversation to kind of take it a little further and follow up on some of the themes there, um, and get into the weeds maybe. And some of the topics that I heard during that presentation chair and Kristen get excited about, or kind of start sharing more stories on. Um, but before we do that, I'm gonna let Kristen and Tara introduce themselves. Um, Kristen, you wanna introduce yourself?
Speaker 3:Thanks Jessica. Um, Kristen, McDermot, Woodrum, I'm a partner in the Atlanta office of McGuire woods and I've been on all sides of these physician hospital PE transactions over the years, and know Tara and I are not big gamblers. We had a loose theme for our presentation, just talking about the trends and regulatory challenges that we were seeing impacting the different players and their strategies for winning this high stake of physician transactions.
Speaker 4:Uh, I'm Tara Ravi I'm of council at Parker, Hudson based out of Atlanta. Um, my practice area is physician transactions, um, hospital transactions, PE transactions, regulatory, and reimbursement, some compliance work as well. Great. And I'll just start, I mean, I, I, I think the Genesis of Kristen and I brainstorming on this topic was, you know, obviously there's been like the boom in physician hospital PE transactions, but also then there was COVID and, and this idea of if I'm a very profitable physician practice and I'm still autonomous and, and not affiliated particularly with any hospital or for private equity, you know, how, what does that look like five years from now? Does that remain the same or kind of applying the recent factors?
Speaker 2:Yeah, you'd shared, uh, I think in the presentation, just the upswing in transaction activity and physician and physician groups continuing to leave their independent status and join partnership. Um, did you observe sort of two questions? Were there any themes in the types of groups that were joining or was it still just across the board and do you see that trend continuing or do you think it was a pandemic focused trend?
Speaker 4:Well, I'll let Kristen start with all the stats. She is like the numbers, the numbers expert here<laugh> um, then we can kind of speak to specialties after that.
Speaker 3:Yeah. So I think Tara and I were both handling a lot of transactions, um, involving physician practices and, um, kind of anecdotally seeing shifts in the types of specialties that were being targeted both by health systems and PE and some increased competition there. Um, but we in our presentation cited a study that AOR health released last month and they had looked at physician employment over a three year period was January 1st, 2019 through January 1st of this year. And they found that as of the start of 2022, almost three and four doctors, 73.9% were employed by hospitals or other corporate entities. So that's PE and, um, non-physician entities like Optum and Walmart even. And so then they also looked at the focus of COVID on the transaction activity. So over the three year period, the total percentage of employed physicians grew by 19%, but 76% of this shift occurred after the onset of COVID. And for PE it was a steady growth rate, um, a big growth rate, 43%, um, for hospitals, they now employ just over half of all, ho of all physicians, 52.1%, but there was a really steep uptick that began in July of 2020 at the peak of the pandemic. So I think that for hospital transactions, COVID probably accelerated that trend and those study reports were consistent with other other stats that we've seen.
Speaker 2:And you said there was a shift in type of specialties. Was there anything in particular you saw that stood out to you?
Speaker 4:You know, what I think is interesting is it when we started seeing PE investment, what 20, 30 years ago, it was what I would call an like exclusive, um, arrangement practices, anesthesia, ER, radiology, and, and those original PE rollups tend to be some of the biggest right now. And, and frankly, most powerful when it comes to some of the lobbying. And then of course we transitioned into what would be, what I'd call kind of middle, um, surgical practices. So nothing as maybe as big as ortho, but gastro dermatology ophthalmology, where you were doing services as ASCs became more popular than were practices that were more ASU dependent. And now, I mean, it's almost a free for all right. Like there there's practices that are specialties for being invested in that nobody even thought you could make money off of from a PE aspect, like OB GYN, primary care pain management. I mean, if you wanna get into some of the wacky stuff you see down in Florida, it's just investment in like ketamine treatment centers, investment in, I mean, it's almost anything and everywhere, it's, it, it's almost like everybody wants to have a stake in anything healthcare related. So, um, you know, everybody's always kinda waiting for the bottom to fall out, but until it does, it's gonna get more saturated even in these non-traditional areas is what it looks like.
Speaker 2:Yeah. You talked in your presentation about,
Speaker 3:I'd
Speaker 2:Say being at the table as well as hospitals is sort of two of the major historical players wanna, I wanna ask, but you know, Chris, I heard you kind of jumping in there. So go ahead. Um, if my question is taking us a different direction, go ahead and finish your thoughts.<laugh> but cause I wanted to ask about those that remain independent and if they're characteristics about them that are helping them do so. Um, but Kristen, were you gonna add to what Tara had said?
Speaker 3:Yeah. Or headset? Yeah. Um, and, and that's a great question, Jessica, but we are definitely seeing an uptick in a, across all specialties, urology, cardiology, orthopedics, women's health GI it's everything. And I think that's really getting the attention of hospitals, um, who didn't, maybe weren't as concerned when it was just the radiologist or the anesthesiologist hospitalist ERs. Um, and then it's also the primary care. And I think there, we're also seeing this huge push of the disruptors as non-traditional corporate healthcare players who are investing in primary care. So I mentioned Walmart and Optum, but you also have, um, a lot of the primary care investment platforms that are making a kind of risk based play for Medicare advantage patients. Um, so, you know, primary care central to population health and to referrals and hospital networks. So that that's a big change with a lot a crowded space.
Speaker 4:Yeah. To your question. Some of the specialties that, that remain independent, frankly, it's the ones that are so profitable that hospitals given to deep water, trying to employ them for private equity, given the multiples out there still can't, can't get to the right number outside of the money itself. I mean, I like to focus kind of on ortho because we've seen, okay, ortho, we're gonna have all these rollups and, and I don't, you know, it is happening solely but surely, but Ortho's a good if you've got a successful independent ortho practice, you've got a lot of ancillaries involved. You've got various type of practitioners. It's not just mid levels or, um, physicians, but you have like physiatrists or sports medicine doctors. And you know, you almost got what I call different sublines of business and you've got the successful ones will have practice, not just ortho, but large number of physicians across practice area, internal kind of sub practice areas and age groups. So, you know, diversity among practices, sub-practices of age of motivations and being able to, frankly, self-manage appropriately without the need of a hospital or, um, or private equity puts private equity or hospitals on the defense, particularly hospitals, because you notice, if you look at all the fraud cases, it's almost gonna be nine out of 10, some employment arrangements. Now we're starting to see some new PSA arrangements, but trying to employ a very profitable surgical practice that has a lot of inpatient surgeries and outpatient surgeries, it's gonna be difficult to come up with the numbers.
Speaker 2:Yeah, that makes sense. I mean, the, you talk about ortho and, um, something we've been thinking about on a different topic where if you're just a clinical practice with professional services, it's not gonna be a lot harder to stay independent. And then also whether, um, I think you've talked about in the presentation, the financial stress, the administrative burden and all of the, the difficulty of managing a practice as a physician. So if you're just doing that with your clinical services and your direct patient, um, visits, so it's gonna be a lot harder, but if you can build out all of those, um, extensions, the imaging, the ancillaries, the, and then build the platform and then have that breadth internally to be in and of yourself, a group that has that diversity, um, yeah. It's physicians are much better.
Speaker 4:Yeah. And you know what I've found? It's interesting. I think, practices that took advantage of investing or building out ASCs back when they weren't so trendy, when the concept of outpatient surgeries they tend to do well, because they, they were managed well enough to come up with that idea. And then to, if they were able to manage that concept through, these are very now profitable ASCs versus let's say you're gastro or your kind of DM or ophthalmology where you've got an ASC, maybe two or three in a particular region, but you're just not managed that well, because you've kind of added this onto your practice to increase revenues. It wasn't a long term business plan, perhaps.
Speaker 2:So in terms of your two major players and then we'll, we can get to the disruptors into, um, your PE and your hospitals. What have you seen change or has anything changed? You can talk, I think you talked about different deal structures, um, that you've been seeing like the PSAs versus employment, um, and then other attempts to sort of develop joint ventures. Did that change at all during the pandemic? Or is it just sort of a continuation with the increase in transaction volume?
Speaker 3:That's a good question, too. Jessica, I think a lot of this is just a continuation of what was happening pre COVID. I think during COVID, perhaps some hospitals had to take a pause and focus on patient care, um, while PE continued to accelerate their pace of acquisitions. Um, and others, you know, did a good job of picking up those, those groups that were looking for financial security. But I think increasingly we're seeing situations where groups are sort of looking at different suitors and considering what a relationship with a hospital might look like there's traditional employment, which involves giving up a lot of autonomy. Um, and then there are PSA models where they're, you know, a little bit more engaged, um, and are billing under the same managed care contracts and have, you know, some financial alignment, but isn't true integration. Um, and then there's the promise of PE, which a lot of times will involve, um, remaining a little bit more autonomous and independent. There's this entrepreneurial drive and development and growth, which appeals to many doctors. Um, and then there's this second bite at the apple where, you know, there's hopefully gonna be an exit transaction to an acquirer, um, or an IPO at some point where the physicians get get cash. Um, and, and that's appealing to many of them. And so I think another Genesis for this presentation, Tara and I have seen hospitals struggling to kind of counter that, that offer that PE has, and they can't do it exactly the same way, um, because of just their business operations are different and there are very stringent regulatory constraints on what they can do and offer. Um, you know, one example that sort of is more aligned with what hospitals do is the co-management arrangements and the joint venture surgery centers. Um, there's definitely risk there.<laugh> and then we're even seeing all three of these groups get together and do joint ventures. So a PE backed practice is involved with a clinically integrated network of a health system or providing services through service line or co-management agreement, um, and developing JBA ASCs. It's kind of, if you can't beat them, join them.
Speaker 4:Yeah. I think, I wouldn't say there's so much change from last year or the, this year or the last year, the year before, but if you look back maybe five or 10 years, what's interesting is, you know, PEs got, like Kristen said the great advantage of upfront cash and rollover equity. I, I think to some extent, nobody that it is a disadvantage. In some instances, when you're recording these like independent great practices, the PEs kind of limited to one structure, it's gonna be your captive model and maybe you'll have various subcategories or MSOs or sub pods, but, but it is a basic structure for hospitals. Hospitals kind of have the opportunity now to play the long game, have maybe a five year engagement before, you know, sometimes it comes as a shock to physicians when you're recording them. Especially if you've got a range of ages that this is what it's gonna be, this is your upfront cash. This is what your partnership may look like. But for hospitals, they can take advantage of strategic affiliations and it can be hospitals have a lot of leeway as far as what those strategic affiliations will be. Especially as we move more towards coordinated care and value based. And, um, and they can use that. I think I've seen it used as both a, a tool to attract a good practice or a weapon to force maybe a, a smaller practice to affiliate with them in a much move them towards an employment agreement or an acquisition. Um, so as hospitals really get a grip on value based care, clinical clinically integrated networks, and they expand those, they've got more options may not be a bigger upfront cash option, but they have more options in their tool bag to try and attract a practice than perhaps private equity. Does.
Speaker 2:I work with a lot of hospitals and that's the question they're always asking is how do we compete? How do we stay at the table? You know, what is our, uh, you know, we, we don't, we're not playing with the same deck of cards that the private equity has<laugh>. And so, yeah, I think to hear some, some hope there are some different strategies that they can
Speaker 4:Yeah. I think you have to think about it like a, like a long term engagement trying to court. Somebody it's not gonna be a quick, like, you know, swipe left, swipe swipe, all right. Maybe as it, maybe with private equity comes along, comes up with an offer, here are your terms. Okay. Does it work for everyone that might be like a six to nine month process? It might be like a three to five year process for a hospital.
Speaker 3:Yeah. And I think ultimately the, everybody has the payers to contend with, so hospitals are big and they have problem with payers. The physician groups are smaller, even the PE backed ones. And, you know, they, they struggle to, to secure favorable payer contracts, just given the size of payers nowadays. Um, so I think those CINs and value based, um, you know, the promise of value based enterprises are, are interesting and appealing.
Speaker 2:Something you had mentioned during the presentation that peaked my curiosity, and maybe it was just sort of a one off situation. So you can tell me if I'm taking this on a tangent. Um, but you talked about not just PE kind of getting immediate more media attention, but, um, some situations where maybe this is, like I said, if I'm going on tangent, um, where maybe they will have more attention and future limitations, given the idea that if they're bringing all these together and negotiating and raising, um, increasing pricing, um, that was one sort of topic. And like I said, if I heard it wrong in the presentation, correct me, and then the other one was just, I think there was a case you'd raised, um, where the PC MSO joint venture structure got scrutiny. Um, and they'd raised this question of group practice definition. So the theme of, I guess the question I'm trying to ask is, are you, what are you seeing in terms of maybe not just media attention, but any risks that the PEs have of future limitations that they don't currently have today?
Speaker 4:Uh, you know, I, I thought just kind of on a most more basic level, but PE somewhat seemed not so much unregulated, but there were all these like regulatory questions that never got answered outright by government agencies. We've got like earn out questions and kickback applying some of these areas and fee splitting and corporate practice in medicine. And it seemed like for the most part, the government was staying quiet or, or in some cases taking favorable positions. And I, I kind of thought maybe that was because it was, they wanted to see what was this competition now between hospitals and PE and would it bring something better and would it bring more competition? Which, which makes sense. But now it seems like, you know, that silence is gone and people are ready to put the people, the government is ready to put a spotlight on PE as well, because they're also getting big. So it's, it's not so much okay. Let's see how hospitals respond to having a competitor out there. It's okay, well maybe we've got two monopolies going on and, and they're, and finally you're starting, not finally, but you know, you are starting to see some oversight via surprise billing and, um, FTC is starting to think about it and start shining a spotlight there. And, you know, I wonder if we're gonna start seeing more advisory opinions or maybe CMS opinions on these. Earnouts how they're getting paid. Um, investments might there joint, there's been, there's a dear of regulatory opinions in this area. So, um, I guess as far as, I don't even know if I've answered your question, but, you know, I, I do think that obviously the government wants more competition in healthcare. Um, so the question is, is PE under the spotlight and maybe these general disruptors now will, will be able to run under the radar for a little bit. And, and we're gonna hope a third person comes in,
Speaker 3:Done a lot of focus on PE. Um, there was a study that looked at the results of envision and team health acquisition of a lot of this hospital based practices. And the use of maybe surprise bills out of network billing is a strategy to negotiate with payers or just the higher rates that they're able to get, but makes sense, cause they're negotiating against big payers. Um, so that that's gotten a lot of scrutiny. The Intertrust enforcement is, you know, definitely I think something states and the federal government are looking at in terms of these acquisitions, fraud and abuse has picked up. Um, the government has made it very clear that they're gonna hold all responsible parties, um, accountable for fraud and abuse. So in some cases that's even the private equity, um, funds that are sponsoring the, the platform companies, if they're not passive investors. So, um, you know, that's, that's definitely a risk and, you know, you mentioned the co type laws, which are a limitation for hospitals and for physicians. Um, and I think the case you mentioned is, is just a position that's being taken here in Georgia. That physician practices that have Ms O P C relationships with management companies, don't really qualify as physician practices that should be able to, um, enjoy an exemption from the co N roles for office based surgery centers. So it, it's just sort of that, that market play of hospitals versus physicians and, and PE,
Speaker 2:And then why are you seeing this different about the disruptors? You, we kind of mentioned them here and there, but we really haven't talked about what, what they're doing and how they're inter interrupting the game as usual.
Speaker 3:Yeah. That, that's a great point. And I think it's gonna be very interesting to see what healthcare looks like in five years just given the insurance of these new players. Um, you know, for example, Walmart is investing really big in primary care and retail health, especially in rural areas. And, um, they've invested in epic, which would be, you know, communicate with hospitals, EHR systems. So I think they could be a very big part of, you know, healthcare delivery in the future. Um, Optum is gobbling up physician practices, right? And left they're even going after practices that are currently aligned or employed by hospitals. Um, and so that changes things increasingly. And I think some of the focus of our transactions program in Nashville is just on the consumerization of healthcare and, you know, telehealth and going to a retail clinic and not waiting and traveling to a inconvenient medical complex to get care by getting it quickly and, um, more economically. Uh, and that's a lot of what the disruptors are promising.
Speaker 4:This might be a little bit of a tangent, but, you know, I find it, it's not that I'm just skeptical of the disruptors, but in the beginning we had like the big Amazon investment where oh, Amazon was gonna do healthcare. And then that like quietly disbanded. And then it was, you know, CVS was gonna have all of these up the street, local physical retail health clinics, and that's gonna be great. And, and, you know, to Kristen said, Walmarts, we're gonna have all these local health clinics. And the reality is now we're, we've switched from, is it telehealth or is it having a health clinic down the street? Or is it both, or how's that gonna work? And, you know, Walmart seems to be in a very good position to, because they control a large patient base. So it might be so much more so that you are you a company that has a large number of patients to offer. And can you then control the quality of care that those patients get, meaning wanting better care? I know Walmart has programs where they've, apparently they've got a lot of expense in orthopedic surgeries for their, for their employees. So they, they would rather ship the employee out somewhere to where they know the provider's gonna provide like great value care for the right price and have the patient get their kit replacement and then have'em come back. So those kind of concepts of directing providers on and ensuring that you're getting the best dollar for, for the service, um, might be a better strategy than some of the other ones we've seen in the past where there hasn't been a dedicated understanding perhaps of healthcare just wanting to get into the business.
Speaker 2:Yeah. If it, how ready are you to face the regulatory environment that you're entering? Um, right. Some of those that we're mentioning are big enough that I'm, they've crossed many different regulatory challenges in their operating history, but I think a lot of what we see from smaller disruption are attempts to enter, um, where there's, I think I've talked to Kristen, you about some of what you've seen, or people will call you or Tara, because they've tried to enter healthcare as a disruptor and then surprise there's all these regulations that they have to deal with and, and navigate and learn on the fly. Um, especially like with the yeah. Technology interruptions.
Speaker 3:Yeah. Always love being the bearer of that wonderful news. Um, but there's a way around it. It's just not as straightforward in healthcare.
Speaker 2:Do you see any of these, um, sort of at home health or telehealth, um, those types of opportunities where the physician groups are seizing them directly, or even, um, the hospitals, you know, the traditional providers of care that are staying in the mix with some of the, um, services provided that are part of the disruption model. I think Terry, you had talked about telehealth as an opportunity
Speaker 4:Yeah. In
Speaker 2:Physicians,
Speaker 4:You, yeah. Position, you know, I definitely think that physician what's interesting right now is there was such a push during COVID telehealth, telehealth, telehealth, and now it's like frozen still, and we don't know what the government's gonna reign back in. We don't know what the government's gonna move forwards. I think physicians could and should, Bevi incentivized to use telehealth to expand the services they can provide. What I think is interesting from like a patient perspective is that even though, like we had an in person conference for actually transactions, but I went to see a new new physician and it was the consultation was here's your tele, here's your options for the telehealth appointment? Like it wasn't even an option to see the physician in person for the first initial consultation. So, you know, some obviously that means some physicians really enjoy doing telehealth and maybe will add telehealth as much as possible. And, and some are, this is the same as going back to work. Right? Some people love being in back to work in person and some people wanna do it two or three days a week. So, um, I think from a personal perspective, it's interesting how telehealth is being used. But, um, as far as using telehealth to try and expand the scope of, of revenue for a physician practice, there's so many opportunities out there. And then I think when I presented, when I prepared this presentation, I thought, you know, so many opportunities and it's like dead silence. And everybody's in a holding pattern over the course of the last three, four months as COVID is, you know, and I don't even wanna make a commentary on COVID cuz there's all these cases now, but you know, we're, we're like in a holding pattern. So personally I think we need to just move forwards with telehealth because it can't just be okay, do we have COVID do we not have COVID it's this or that? Cuz it there's no controlling that. It's just a question that the government needs to say is yes, this is how we're moving forwards and they don't seem to be incentivized right now or at least are holding strong in, in a pattern of nowhere.
Speaker 3:Yeah. But I, I don't know that the commercial, um, is necessarily gonna stay in that holding pat pattern and some of the, the payers. And you mentioned Walmart, the self-insured plans are forming coalitions that really wanna drive people to what they consider the right care, the right price at the right place. Mm-hmm<affirmative> um, another thing that was interesting is the transactions conference, the keynote, um, speaker from Bain indicated the average wait time to get into primary care was I can't remember several months. Um, and so, you know, if we can ease up on that pressure by shifting some of the younger patients to telehealth who would prefer that, you know, giving the physicians more time with the boomers and the people who loves to go to the doctor, um, may maybe that's an opportunity. And then just back to your original question, Jessica, um, and shifting care, I think that's gonna be a huge trend and without COVID and the regulatory flexibility that we're enjoyed and not really abused, um, you know, it's gonna be hard to, to go back, but it's not gonna be an immediate, just the door is wide open. So we'll be working through that for a few years, but just from a, a fried abuse perspective, you know, we've talked a lot in our presentation about group practices and ancillary revenues. And, you know, there are some very stringent requirements for group practices to make inter practice referrals and to share in overall profits of the practice and give out productivity bonuses that include those designated health service revenues. And, um, you know, one of the development free flagged was, uh, CMS advisory. It was a frequently asked question just about the, um, in services exception and where items have to be furnished to qualify. Um, and they were talking about mailing, um, certain items and services to the patient and, and CMS said, Nope,<laugh> you can't do that. You're not dispensing it to the patient in the office. You're dispensing it in the office if you're not dispensing it to the patient in the office. So again, just looking at the traditional regulatory framework, kind of limiting this sort of transformation of healthcare or ability to, to provide care in a more patient friendly way.
Speaker 2:You also talked about just, I think some of the challenges, uh, not just the pandemic itself, but that happened to me in the past couple years, um, the Medicare fee schedule and how that interrupted potentially PSAs and just employment arrangements. Um, but just the challenge of trying to navigate those changes at the same time. Um, and then currently the staffing challenges that are being faced as well. I don't know if there's anything you wanna talk about on either of those and if not, that's fine too, but those were, there were some other, I think, um, challenges that you've covered given changes in some of the updates and regulations too.
Speaker 4:Yeah. I think those came up in the concept of hospitals getting the one, two punch during, um, COVID we have the staffing issues and physician burnout, et cetera. And you know, some, you know, in my experience there were some, I wouldn't say litigious, but there were, there were some conflict between physicians and, and hospitals during COVID, particularly I think for profitable practices that got sidelined, um, when it came to what was there like work RVU comp Finity for some years, um, for some periods. And then with regard to the fee schedule changes as, and mixed with all of this was fee schedule changes to work RVU, right?<inaudible> grossly simplifying what happened. But, um, these schedule changes to work RVU values for 2021, which kind of gave physicians who, who did get sidelines, some positioning, some leverage to maybe renegotiate their PSAs or, um, specifically PSAs. And, and that just created some conflict between those relationships physicians and, and hospitals in a time when hospitals were just bleeding money and were unable to staff and getting hammered. And like Kristen said, PE was kind of, as soon as his PPE PE loans came through, PE was like moving swimmingly, like nothing even happened and hospitals are still recovering. So, you know, it doesn't at some point, it just seems like, is it even a fair fight? Right. So that we were just highlighting the, the many ways hospitals were having to like duke and pivot and deal with both regulatory and pricing and just kind of staying, keeping your head above water during this period of time.
Speaker 3:And we're sure Jessica, you dealt with all of the, the challenges of the E M and the, the, um, survey data and just how to, how to deal with it and when to deal with it.
Speaker 2:Yeah. I mean, I think it was wild how that coincided with the pandemic, um, because you, we, we do advisory with hospitals that want transition physician compensation, um, you know, pre pandemic where if you got a bunch of different positions and different models and you wanna put them on one, um, consistent model and you gotta figure out what that's gonna be or you're transitioning it. Um, and the work is one of the examples we give is start early and try to give them, um, enough information about what the comp would look like under the new model versus what they're making now. And so I kind of think about that in this perfect storm of, oh, well, the work reviews are calculated differently, so we could try to show you that, but your volume's also
Speaker 4:Yeah.
Speaker 2:All out of whack and it's not even just lower, higher, the kinds of visits you may still be doing is one type of visit, but others are gone. Yeah. So it's just like such a mess that it was yeah. Like you said, the one, two punch, like all of it coming at once, it was kind of wild. Um, a lot, I think there was just like in the deals, a lot of bandaids placed, just sort of holding together with the exceptions. Um, and now we see really some jumped on it sooner, but the rollout of, okay, here is the math that shows you that while the per unit rate might change, it shouldn't actually change your total comp and those conversations, um, are now the, now the theme that some of them have already ha happened. Like I said, but that's definitely coming, coming due. It hasn't been done. It needs to be done. Yeah. It's now 2020,
Speaker 4:But you know what, that's right. It's the coming due part, which is kind of interesting.<laugh> um,
Speaker 3:There's always more to do.
Speaker 2:Of course<laugh> and now everyone's really definitely focused on just 20, 22 with its own struggles with first quarter, and then the staffing challenges with nurses and everything. It's just a whole nother tangent cause that it's not just the hospitals that are experiencing those. Some of you know, we talked about the ancillaries for the physician groups that remain independent. Um, but they're gonna have some of the same challenges with their, their staff needs.
Speaker 4:Yeah. I mean, and, and we did highlight in our presentation, there seems to be an addition, there seems to be more of a push for expanding the scope of practice or utilization for mid-level and, um, basically midlevel professionals because we've got such a staffing problem. And to some extent, physicians were like a little obstinate, not obstinate, but hesitant to outsource everything to mid levels. But I think that's kind of dialing back just outta necessity, um, needing some help and, and mid levels. I think we're very profitable during the last couple years, more so than usual. So we were seeing some, I mean, at least we've seen instances where hospitals were initially hesitant to bring in mid levels. Now obviously definitely wanna bring in some mid levels. Uh, and those mid levels are just, the profitability is almost like two X, what they thought they were gonna get out of those mid levels when initially they thought they were gonna take a loss in some places. So, um, and CMS seems to be kind of opening out kind of payment structures for that who can do what, and mm-hmm<affirmative> the state level is where you've seen more action just during COVID. You've had a lot of, um, mid levels being able to, as far as ancillaries supervise some radiology services, um, be able to provide supervision where otherwise they weren't able to physicians. Now they're CMS is opening up the idea of, or propose the idea of physicians being able to do their supervision elements via telemedicine, radiology, which I think is interesting for ancillaries. It's interesting for ancillaries under a PSA where normally some of those radiology services are carved out. Cause it's just technically very complicated under star law. Um, so that's a trend I don't think will be dialed back. I do think we're gonna see a lot more mid-level and, and profitability from them, you know, but that also comes the age old question of how much do you pay a position from two when you're midlevel it's like very, very profitable. I think then you've got, if you're group practice, you get to split that profitability, right. If you're an, a physician employee, then you start to wonder, you know, how am I gonna make money off of my super profitable mid-level that I'm supervising. And I don't think you guys run the numbers, Jessica<laugh>, I don't think from a regulatory perspective, we've got a lot of wiggle room as to, um, how to compensate physicians for highly profitable, mid levels.
Speaker 2:No, I mean then you're back in that profitable group model or full circle to employment, isn't gonna close the gap. So is the physician group gonna stay independent, go with PE if there's an option yeah. Or you're right back to that, how does a hospital play or is the group just, you know, on its own? And that, that is what it is.
Speaker 4:Yep.
Speaker 2:Um, I mean, any recommendations or thoughts as, as, um, I mean, you work with all these different client types. Is there a challenge that they're facing specifically that, um, or a question that comes up frequently in, in this theme of doing these challenging deals, um, that you've heard or that you've experienced sort of a success story with or anything?
Speaker 4:Well, you know, it's the question of, I have seen some deals, I would say very recently that seemed like they were gonna very easily move forward with PE or some physician practices that fell apart at the last hour. And, and maybe that's not any different than other deals that fall apart at the last hour. But I think what you have are physicians who are increasingly more knowledgeable about PE type deals and hospital deals than they were years ago, because we've got so much past history, they've got so many other peers who have gone through that experience themselves. And now that you see so much saturation by PE, they're asking some very difficult questions. They're, you've got some very business savvy positions who are negotiating hard on their behalf, um, and, and set, you know, forcing these PE firms to go back and reevaluate and reevaluate and reevaluate. And that keeps, you know, you all very busy. Um, so I, I do think that's interesting. I, I have seen from my physician practices much more business savvy asking the right questions. And that seems to be dragging these deals out a little bit more than usual, but that makes sense a lot large profitable practice. You're gonna have some business savvy people if they've stayed independent and profitable throughout all of this mess. Sorry, Kristen didn't mean to cut you off.
Speaker 3:Yeah, no, no. I agree with what you're saying. And I mean, I think for both the hospitals and the PE they wanna be an attractive partner. And so the question is how to do that and then meet the objectives of what this transaction would look like. And so, you know, for PE you've got the constraints across the country with the CPO laws of the MSC structure and, you know, putting together the group and the comp plans and figuring out the management fee and the expenses, um, you know, getting the ancillaries in the right place. Um, I do feel a lot of continued interest in expanding ASCs, you know, even though CMS kind of reversed on facing out the inpatient only list. I think a lot of us are still bullish on ASCs, um, doing JV still with hospitals and physicians, including, you know, PE physicians. Um, and then also kind of looking into the future. You know, we were all really excited when the regulatory front rules came out in particular, the, the stark and the kickback rules, um, you know, perhaps for hospitals, more than anyone, some of those technical rules kind of eased some of the burden of enforcement over practice losses and what's commercially reasonable. Um, and then for, you know, PE it's the continued challenge of navigating the group practice. We had an advisory opinion come out to give us some guidance that a lot of what people have been doing with keeping subsidiaries in place is permissible under this, you know, one of the elements of the group practice, um, requirements, um, but just continuing down the path of, you know, bringing in the right revenues, getting it to the physicians, um, and keeping an eye on what the other players are doing.
Speaker 2:Yeah. So I think we're coming up at the end of our time. So I just wanted to, it's been a pleasure talking to you guys both today. I'm glad we had this opportunity. Um, any last closing thoughts before we wrap up today?
Speaker 4:No. In fact to our gambling theme,<laugh> it, it's hard. It's hard to make a bet on. Who's gonna be the winning horse. Right. So I do, if I had to bet I don't, I just don't see 10 years from now, how you're gonna have even still imagine the most profitable ortho practice. You just don't see how, how that would continue just given the many larger, just payment structures and manage care and government regulation. Um, we're down to, like Kristen said in, in the beginning with the statistics, we've like whittled it down to a select few. Um, and it may be that these younger doctors just see the world in two ways, it's either hospitals or it's private equity, right. The concept of maybe being independent is, is a, is a, might be like a older concept. So I'm gonna put my money on either hospitals or PE, but probably not on practices to be honest, make two bets.
Speaker 3:Yeah. And I mean, at the end of the day, I mean, we talked about like, are the cards stacked against one player or another, um, with a lot of, you know, economic and regulatory variables. And I'll just go back to this quote we used in our, our PowerPoint deck. It was from the author, Jack London, and kind of applies to both poker and these position transactions life is not always a matter of holding good cards, but sometimes playing a poor hand. Well, so I think that's what we'll be trying to help our, our clients do great seeing in Nashville and participating today.
Speaker 4:A
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