With 2017 pulling into the rear-view, it’s time to take a look back at what we learned in what turned out to be an extraordinary year. In healthcare, we mean. We’re not including that sweet eclipse over the summer.
It was a year fraught with change, uncertainty and continued growth. From the shaky survival of the Affordable Care Act to the expanded legalization of marijuana, it’s been difficult to keep up with all of the changes, let alone manage them and their effect on private practices. Nevertheless, we have enjoyed being a part of some of the most important aspects of these changes and helping our clients navigate them. It’s difficult to pare the list down, but here are our top five developments in healthcare for 2017:
1. Private Practice Consolidation. With interest rates low and uncertainty high, private practice consolidation maintained its torrid pace in 2017. The number of physician medical group mergers and acquisitions rose to 48 in the first quarter of 2017, which is a 78 percent jump from the fourth quarter of 2016. Physician job satisfaction continues to languish near 50 percent despite an average pay increase for doctors of more than 40 percent since 2011. More and more physicians are retiring early and looking for an exit opportunity. Banks seeking lending opportunities are turning toward private practice physicians, with nearly every major commercial bank creating specialty groups to service practice transactions. It’s a great market for both buyers and sellers, with low inventory, accessible credit and motivated sellers. IBP helped buyers and sellers alike, representing an interest in more than $50 million in transactions in 2017.
2. Foreign Investment in Marijuana. In July 2017, Nevada legalized recreational marijuana sales, cultivation and production, completing the legalization process. The law around cannabis business continued to expand, including robust regulation regarding the sale of these companies (and equity interests therein). This allowed for expanded transaction opportunities including foreign investment. Friendly international and domestic laws in each country allowed for a unique opportunity for investment by Canadian public companies in local cannabis businesses, and additional consolidation and merger possibilities already being explored between those public acquirers. IBP again worked with both buyers and sellers in this unique market, with five separate transactions, representing more than $50 million in enterprise value.
3. HIPAA Compliance. The Office of Inspector General continued its aggressive pursuit and prosecution of HIPAA violations, including an expanded audit program and continued investigation of business associates rather than just covered entities. As EHR/EMR systems continue to grow and expand, so do the HIPAA breach possibilities. 2017 included more than $19M in fines to violators, which doesn’t include the cost of the stringent remedial programs required from each violator, which can often double the effect of such a breach. This included a single $38,000 fine for a covered entity that failed to have a single Business Associate Agreement in place. IBP represented a number of practices in desk audits, self-reports and remedial actions in 2017, none of which resulted in a fine to the covered entity. Additionally, IBP continued its support of sister company ComplyPro, offering a one-stop HIPAA compliance solution for modern, private practices, helping these physicians all but eliminate their compliance risk.
4. The Rise of the MSO. The Management Services Organization model continues to provide unique structures for parties who can realize increased value from working together, but who can’t directly participate in that value, owing to regulatory and statutory prohibitions. The MSO structure allows for indirect participation that is compliant with both the letter and spirit of these laws, and is being used in increasing frequency for a wide variety of healthcare transactions. However, despite the widespread employment of this model, misinformation about how it works and how to ensure its compliance with these laws continues to abound. For its part, IBP researched, drafted and published an informational white paper,”The ABCs of MSOs: How and why to form a compliant, lasting and profitable Management Services Organization.”