There are many factors threatening the survival of private medical practices.
Rising business costs, changing healthcare regulations, and shrinking physician reimbursement are among the factors many say are leading to the demise of the private practice.
According to a 2011 survey conducted by the Medical Group Management Association (MGMA), medical professionals said the top five challenges in running a group practice these days are:
- preparing for reimbursement models that place a greater share of financial risk on the practice;
- participating in the Centers for Medicare & Medicaid Services’ Electronic Health Records (EHR) Meaningful Use incentive program;
- dealing with rising operating costs;
- selecting and implementing a new EHR system;
- and implementing and/or optimizing an accountable care organization (ACO).
Like many industries, healthcare providers were hit hard during the recession and they are still staggering. Fewer patients are coming in for primary care and others can’t pay their bills.
“Healthcare delivery is no different than any other supply-and-demand, market-driven commodity,” says Benton L. Busbee, Ph.D., adjunct faculty member for the Healthcare Management program at South University, Montgomery. “The downturn in the economy has forced the consumers of healthcare to prioritize healthcare expenditures along with mortgage expenses and other cost-of-living expenses.”
Instead of being paid by patients, healthcare providers are being reimbursed by third-parties such as insurance companies. Thus, doctors are not setting their own prices and are paid only what the third-party vendors deem appropriate.
“[There] is a very real reduction in reimbursement,” explains Busbee, who is also the executive director of the Charles Henderson Child Health Center in Troy, Alabama. “Insurances — both private and government-sponsored — control the fee schedule and as insurance companies’ costs go up, there seems to be a direct correlation in reduced insurance payments to healthcare providers.”
Cuts in the amount of reimbursements have left many doctors struggling to cover costs for medical equipment, medications, and staff.
More and more physicians see hospital-based practice as the safest and more economically secure route today.
They are also feeling the pressure to invest in electronic medical record systems. Larger medical systems can more easily adopt electronic medical records, whereas smaller independent practices might have trouble implementing the records.
“It is not only the upfront costs associated with electronic medical records, there’s also the maintenance costs — software upgrades and such,” says Dr. Terry McGeeney, president and CEO of TransforMED, a subsidiary of the American Academy of Family Physicians (AAFP) that helps primary care practices implement the patient-centered medical home model of care. “It is a significant administrative burden for smaller practices. The larger health systems have economy of scale.”
Some physicians are also frustrated with having to learn new electronic medical record systems and technology.
“This relates to the ‘hassle factor’ in some regards, but one of the biggest frustrations from the older physicians is the feeling that they are now glorified administrative clerks,” Busbee says. “They feel their time is spent primarily on learning new IT systems, and inputting data on the fly, [more] than treating their patients.”
Meanwhile, fewer new physicians are choosing to open or join private practices, which has caused many experienced physicians to also fear that they will not be able to recruit young doctors. With so many operational and financial challenges at their front doors, many private practice physicians are choosing to close shop and join hospital-owned health systems themselves.
According to American Medical Association news, hospitals increased their physician hiring in 2011 and there are no signs of this trend slowing in 2012, as physician hiring becomes a major strategy for hospitals preparing for healthcare reform.
“Younger physicians don’t seem to be interested in private practice and running a business,” McGeeney says. “They are more interested in having their career fit other aspects of the lifestyle.”
Busbee adds that most physicians entering the workforce do so with substantial debt, making a salaried hospital job more appealing for them.
“The combination of a slow economy, reduced insurance reimbursement rates, and considerable education loan repayment commitments has younger physicians looking for ‘employment’ options vs. partnerships or solo practices,” he says. “More and more physicians see hospital-based practice as the safest and more economically secure route today.”
The economic pressures contributing to doctors’ migration from private practice to hospital-owned health systems does not look like it will be going away any time soon. But, there is still a place for private practice within the medical landscape. Some say it is more important now than ever for independent physicians to focus on the business and entrepreneurial aspects of their practice.
“Smaller medical practices are no different than any other small business. They must have a good business plan and stick to it,” Busbee says. “They must exceed the standard of customer service and think outside the box when it comes to care delivery.”
Author: Darice Britt