Ear, Nose And Throat, P. A.: A Case Study

North Carolina Eye, Ear, Nose & Throat, P.A. (NCEENT) is a private physician-owned medical practice based in Durham, North Carolina. NCEENT is in the process of evaluating a possible merger or affiliation with a larger health system. NCEENT’s primary goal in merging with a larger health system is to increase patient volume through patient referrals from that system. However, the practice will likely benefit from increased revenue per patient visit due to better insurance contracts within the hospital system. Also, being part of a larger system will make it easier to participate in value-based payment models, since the system can provide the full continuum of care for patients and the sheer size and negotiating power of these systems, ensures they have a seat at the table with insurers to build these models out. Finally, other benefits are the creation of economies of scale, clinical integration, and connectivity.
One of the reasons the physician owners of NCEENT joined a private practice in the first place, is the level of autonomy created by this type of structure. The physicians are involved in the decision-making process of the
practice from operational decisions to patient care issues. Therefore, in discussions around the potential of merging with a larger system, the physician owners have indicated a desire to retain as much autonomy as possible. As a result, an analysis of the types of affiliation agreements available and the pros and cons of each will be necessary.
On a positive note, recent research conducted by Healthcare Financial Management Association (HFMA) on acquisition and affiliation strategies in healthcare, indicates that the current conditions of the healthcare market, specifically the shift from fee for service to value-based payment models is creating new organizational arrangements that are collaborative.
Furthermore, a recognition that organizational needs vary widely from one company to another and from one market to another has created some non-traditional affiliation strategies that could be beneficial for NCEENT (Healthcare Financial Management Association, 2014). Also, affiliation strategies are becoming more popular as alternatives to a full merger, especially in circumstances where a particular physician practice is not constrained financially or strategically (Spees,
2014).

Purpose
The goal of this report is to determine which type of merger/affiliation arrangement will result in the highest degree of autonomy for NCEENT while;
1) Generating increased access to patients within the health system.
2) Retaining at least the current or higher insurance reimbursement rates and gaining entry to value-based payment models.
3) Gaining the benefits of reduced costs due to economies of scale.
4) Obtaining clinical integration and connectivity with the health system, especially from the perspective of value-based care.
In addition to the four categories above, consideration will also need to be given to several other areas. First of all, keeping in line with the Institute of Medicine’s perspective on patient centeredness as an integral part of evaluating healthcare (Institute for Healthcare Improvement, 2016), the voice of the patient should be kept in mind throughout the analysis of the various affiliation models. Secondly, the type of affiliation model chosen should be a good fit with NCEENT’s culture. Specifically, discussions should center not only around economic and patient considerations but also on how each respective group hopes to benefit from alignment; what the shared goals are and also what obstacles may lay in the way (Healthcare Financial Management Association, 2014). Thirdly, each party should have a clear understanding of the governance structure post-affiliation and how various decisions will be made.