When hospitals first began buying physician practices, their IT acumen wasn’t an issue – most were just using basic systems. And the acquisitions happened so infrequently that management would just tell IT staff, “Okay, go see what they’ve got.”
Due diligence wasn’t very involved, recalls Kent Gray, vice president at Impact Advisors, a consulting firm. For example, a physician would retire, and a hospital would just assume ownership of the practice without understanding the practice’s competitors or the quality of the acquired staff.
However, that laid back approach won’t work in the age of accountable care, Gray says. Hospitals are increasingly buying primary and specialist practices and making them part of their delivery systems, and they’re getting smarter at making practice acquisitions, he adds.
For example, hospital executives are paying attention to a practice’s billing, scheduling and electronic records applications before making the purchase, Gray says. Those IT specifics weren’t considered problems in past years – acquiring organizations would just ask their information technology departments to integrate systems from the acquired practices with existing hospital systems.
Now, acquired practices often are being converted to a standard EHR, Gray notes. “That’s just the cost of the acquisition and not, ‘We’ll worry about that later.’” With the need to better coordinate care with other providers in the region, hospitals need to build referrals and centralize scheduling, and conversion to a standard EHR helps in achieving that level of coordination.
Acquiring organizations also need to have formal plans to determine what will be done with all the information in paper charts and EHRs that come with a new practice. Will the information be archived, destroyed or imported into the delivery system’s EHR?
Various state laws govern how long records must be retained before they can legally be destroyed, but records on patients with complex ongoing conditions might need to be kept longer to ensure the patients continue to be properly treated, and for liability reasons as well.
Hospitals, if able, might want to keep just the past two years of electronic data from an acquired practice’s information systems and leave it to the IT department to decide what data stays and what goes, but IT is in no position to understand the context of the data.
Deciding how much paper and electronic information to retain “is an issue about continuing liability on what may have happened in the past,” Gray explains. For instance, what happens if a patient’s past treatment now is called into question, or a critical drug a patient is taking is recalled and a hospital doesn’t have a complete history of the patient?
There are lesser but still important issues to consider when buying small practices, Gray cautions, such as looking at equipment leasing contracts and termination clauses in information systems contracts that could hamper using the equipment or the data systems. And, a hospital might assume it is buying the IT systems along with the rest of a practice, but it isn’t.
Gray recalls a hospital that bought a practice and, over time, the physician became unhappy with the relationship and left. But the hospital could not get access to the EHR because the doctor had not bought the system in the practice’s name, but in his name—it was his system. Protracted legal hurdles surfaced before the hospital was able to get access.
In the case of larger practices being acquired, hospitals should make sure the software licenses do not prohibit transfers to another organization. When IT was 2 or 3 percent of the total operating budget, that wasn’t a big worry, Gray says. Today, IT assets are so much more important. And that’s one more reason not to buy a practice and then tell staff to see what they’ve got.
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