The volume of activity for physician practice acquisitions by hospitals has certainly increased from the late 1990s and has been moving at warp speed in the past year. Hospitals are struggling to maintain market share as patient care continues to shift from an inpatient setting to an ambulatory setting. Physicians are exhausted with the political bureaucracy of both governmental and private insurance carriers. Both are worried about the impact of health care reform on their business. Technology has become an overwhelming prospect for those who have not keep equipment and software updated. Consequently, both physicians and hospitals are rushing to the table to best position themselves for what's ahead.

In the 90s hospitals purchased medical practices and expected that the combined mass would result in negotiating power with managed care plans. They expected referrals from purchased groups to flow to the hospital, anticipating that they would be able to manage physician practices more efficiently and enjoy increased revenues from doing so. The model failed. Hospitals lost millions of dollars. Many released the physicians and practices back into the community divesting themselves of these financial burdens.

Wherein the past hospitals were the drivers of these transactions and many physicians left private practice reluctantly, today is somewhat different. In the current marketplace, a significant number of small practices have at least one senior partner looking for an exit strategy over the next five years.Additionally, younger physicians are not seeking partnership in the traditional sense. Rather, they are seeking employment in large private practices or in integrated hospital-based health care systems. Combine these two factors with the challenge of managing a practice, decreasing reimbursements and the anticipated cost of implementing electronic medical records technology, and you have physicians lining up at the front door of the hospital.