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Consolidation slow to reach N.J., but is the norm around country

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As a more litigious state, New Jersey is behind other parts of the nation in consolidating practices, says Monica Kaden. – AARON HOUSTON
As a more litigious state, New Jersey is behind other parts of the nation in consolidating practices, says Monica Kaden. – AARON HOUSTON

The fragmented nature of New Jersey’s health care system has left the state behind other areas of the country in terms of consolidating physician practices.

Monica Kaden, a principal in the health care practice with Fischer, Barr & Wissinger PC, said other areas of the country see large practice groups and hospital networks as second nature.

“There are almost parts of the country that are better at doing groups than other parts of the country. The Midwest is better at doing groups than the East Coast,” said Kaden, whose husband was part of a large ophthalmologist group in Lansing, Mich., before moving to New Jersey 17 years ago, when he became a solo practitioner. “We’re in a more litigious environment. It’s harder for people to make agreements.”

“We haven’t been good at it in New Jersey over time. It’s been a much slower process to integrate. First you saw it with the hospitals in the 1990s and early 2000s. … You’re seeing it pick up again,” said James Robertson, chair of the health care practice at McElroy, Deutsch, Mulvaney & Carpenter LLP. “Physician practices, though, are very fragmented, and in fact, the whole New Jersey health care market is still very parochial in a lot of respects.”

Hospital acquisitions of physician practices have gained steam, which Robert Charlton, leader of the health care practice at Nisivoccia LLP, said seems to buck most industry trends. Typically, sales of physician practices slow during slow economic periods, as do requests for valuation, but because of health care reform, his accounting and valuation practice has seen an uptick in business.

The Affordable Care Act has been the catalyst for many consolidations, as there are more incentives for practices to combine, as well as financial and regulatory pressures that may be too much for a single practice to handle.

“Certainly, there is a lot of action in the health care field right now. I think because all of the additional issues that doctors have to deal with right now, it makes more sense for them to be in groups,” Kaden said. “There is significant expense related to purchasing electronic health records and making this capital investment in computers and software and scheduling systems — and this is a requirement now. This isn’t an option for doctors.”

“There are several large multispecialty group physician practices in New Jersey that might be a good choice signing up with,” Robertson said. “Summit Medical Group is the perfect example of that. They’re a powerhouse, and they are positioned well in this market to not just survive, but thrive.”

Robertson said community hospitals have had to decide between investing in remaining independent or working with larger networks — and now, physicians are being forced to make similar choices.

“With physicians, you have a little bit of reluctance because they’re used to practicing in a certain way, and that’s just fine with them,” Robertson said. “Now, you have outside forces, you have health care reform and the federal government telling you how you must practice in the future if you’re going to survive.”

E-mail to: melindac@njbiz.com
On Twitter: @mcaliendo33

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