Health care incentives could lead to more hospitals acquiring doctors' practices.
Deborah Schu, a nurse practitioner at Internist Associates of Central New York, talks with Jessica Hehl, of Manlius, about her sinus infection symptoms during an office visit Friday. Schu is one of five nurse practitioners at the practice that soon will be acquired by Crouse Hospital.Syracuse, NY -- Crouse Hospital is buying one of the Syracuse area’s biggest primary care doctors’ practices in a move that could foreshadow big changes in the way Central New Yorkers get their health care.
The Syracuse hospital is acquiring Internist Associates of Central New York, a practice with 15 doctors, five nurse practitioners and 90 employees who care for about 40,000 patients. Internist Associates operates from the Central New York Medical Center at 739 Irving Ave., across the street from Crouse. It also has a Manlius office.
Its doctors will become employees of a new subsidiary created by Crouse, Crouse Medical Group PLLC, when the deal closes Sept. 30. Crouse officials declined to reveal the purchase price. The acquisition includes the practice and equipment, but not real estate. Crouse officials said the change will have no immediate effect on Internist Associates patients, but should eventually improve their care.
Experts say the deal may be just the first in a wave of medical practice acquisitions by hospitals in Central New York.
The goal is to get primary care doctors and the hospital working more closely together to care for patients, said Dr. Paul Kronenberg, Crouse’s CEO and a former partner in Internist Associates. A major focus of national health care reform is to integrate what is now a largely fragmented health care system where there’s often little or no communication among doctors, hospitals and other health providers caring for the same patients. To accomplish this, the government wants doctors, hospitals and other providers to share payments and financial incentives for improving care and cutting costs. “Getting a more integrated delivery system is going to be the way future care will be delivered and paid for,” Kronenberg said.
Internist Associates has close ties to Crouse. Before he became CEO at Crouse, Kronenberg was a partner and president of Internist Associates. He gave up his financial interest in the practice when he became the hospital’s CEO. His son, Dr. Seth Kronenberg, is a member of the practice. Dr. Louis M. Green, another Internist Associates doctor, serves on Crouse’s board of directors.
To minimize any conflict of interest, Kronenberg said he and Green stayed out of negotiations with Internist Associates and board discussions related to the deal.
U.S. hospitals went on a physician practice buying binge in the 1990s as a way to increase patient volume. That strategy turned out to be a prescription for financial disaster for Crouse and other hospitals.
Many hospitals lost money because they paid too much for practices and did not know how to manage them, according to Tom Dennison, a health care expert and professor at Syracuse University. “They gave physicians sweet deals, incurred huge capital debt and that was disastrous,” he said.
Anne Zysk, medical assistant for Dr. James Blanchfield at Internist Associates of Central New York, checks in with a patient over the phone on Friday. At one point, Crouse had eight primary care practices. It lost more than $7.5 million on them. That was one of the factors that drove Crouse into Chapter 11 bankruptcy in 2001. It subsequently sold off or closed the practices. St. Joseph’s and Community General also closed or sold some practices they bought.
Kronenberg said hospitals learned from their mistakes and now manage physician practices differently. Doctors who become employees now have financial incentives to keep them productive. “If they slack off or work less, that will compromise their salary,” he said.
Experts say they expect to see other area practices sell out.
“There are a couple other big practices that are shopping themselves around,” Dennison said.
He said the trend may bode well for patients if it means they get better care from a streamlined system and can avoid hospitalization or unnecessary emergency room visits.
St. Joseph’s Hospital Health Center is not actively looking to buy practices, said Kerri Ganci, a hospital spokeswoman. St. Joe’s already owns four primary care practices. “But we are hearing from physicians who want to be employed,” she said.
Community General is not looking to buy practices, said Tom Quinn, Community’s president and CEO. To position itself for the changes coming in health care, Community is seeking to merge with Upstate University Hospital.
“For a stand-alone hospital to take on the investment and management and risk of employing many physicians is a huge task, a huge investment and a huge risk,” Quinn said. “Hospitals here and elsewhere have failed at this before. That’s why we’re looking to develop initiatives with University Hospital, with its larger base, its broader specialty panel and its established employment opportunities, at the same time we continue to work with private practitioners.”
George Chapman, a Syracuse health care consultant, said hospitals are asking him to evaluate doctors’ practices as potential acquisition targets. He’s also hearing from practices considering selling out.
Interest in hospitals buying practices is particularly keen in rural one-hospital towns, where hospitals and private practices are finding it hard to recruit doctors, he said.
“They have to be on the same page when it comes to recruiting doctors,” Chapman said. “They cannot be seen as competitors.”
The trend also is being fueled by new doctors who would rather be employed than be partners in private practices, according to Chapman.
“They are looking for set hours and want to maintain a quality of life,” he said.
Declining insurance payments have made it less lucrative to be a partner in a private medical practice, he said. Doctors typically have to buy in to a practice to become a partner. They used to be able to recoup their money in one to three years, Chapman said. Now it takes much longer because of shrinking reimbursements. Many young doctors can make just as much money employed by a hospital, he said.
Hospitals getting into the physician practice acquisition game are a lot smarter now because they learned from the mistakes made in the 1990s, according to Chapman.
“They seem to be doing it now for the right reasons,” he said.
Kronenberg said Crouse may buy other practices, but it will proceed with caution.
“We want to get this right,” Kronenberg said. “We don’t want to do too many different things at the same time.”
--James T. Mulder can be reached at 470-2245 or jmulder@syracuse.com