The ACP Advocate Blog

by Bob Doherty

Wednesday, April 21, 2010

Is it too late for small practices?

I blog today from Toronto, Ontario, where ACP's elected Board of Governors is meeting to provide direction on the policies to be advocated by the organization.

One issue raised by many of the governors is the enormous economic pressure on smaller internal medicine practices, and what the ACP might be able to do about it.

Today, most physicians work in private practices of ten or fewer. An AMA survey finds "75.5 percent of physicians are office-based (61.1 percent owner, 14.4 percent office-based employee), and that this percentage increases with age from 68.9 percent for physicians under 40 to 81.2 percent for physicians over 54. Twenty-five percent of all patient care physicians, or one-third of the office-based ones, are in solo practice. Another 21.4 percent are in practices with between two and four physicians, and 12 to 13 percent (each) are in practices with between 5 and 9, and between 10 and 49 physicians. Less than 5 percent of physicians work in practices larger than that ... Only 16.3 percent of physicians report that they are employed by a hospital."

As older physicians retire, it is likely that share of physicians in smaller practices will decline relative to larger practices. The AMA reports that "only 13.6 percent of physicians under 40 are in solo practice, 23.1 percent of midcareer physicians and 36.2 percent of physicians over age 54 are in solo practice. More than twice as many physicians over the age of 54 are in solo practice as are institutional employees. At the other end of the spectrum, less than half as many physicians under age 40 are in solo practice as are institutional employees."

A recent New York Times article suggests that small practices may soon disappear; others are more bullish. Jaan Sidorov, a general internist and ACP member, blogs that "despite the dire circumstances, there are still plenty of practices out there that are and will continue to be profitable ... They won't go away and many will thrive."

The shift toward larger salaried practices pre-dates health reform. Yet it is fair to ask whether the Patient Protection and Affordable Care Act will accelerate the demise of small private practices, as some critics argue, or help sustain them. The PPAC actually includes several initiatives that could help the "bottom line" of smaller physician practice:

Streamlined insurance transactions. The federal government will issue rules to require insurers to reduce the paperwork burdens on physicians and patients, including processes relating to eligibility verification and claims status, electronic funds transfers and health care payment and remittance, claims, enrollment and disenrollment in a health plan, premium payments, and referral certification and authorization rules. A recent study found that solo or two-person practices spend 3.5 hours weekly interacting with health plans, significantly more than practices with 10 or more physicians.

Lower health insurance premiums. Small practices, like other small businesses, will be able to buy coverage for their employees through pooling arrangements (called state health exchanges). Premiums won't be based on the actuarial risk of the practice's own employees, but on all people included in the pool. If a small practice chooses not to provide health insurance, its employees will be able to purchase coverage through the exchanges, with subsidies to help them afford it if they earn less than the 400% of the federal poverty level.

Support for primary care practices. The legislation authorizes Medicare, Medicaid, and private health insurers to pay primary care physicians for managing and coordinating care through a Patient-Centered Medical Home, which creates the potential for smaller practices to earn additional revenue from a monthly risk-adjusted monthly care coordination fee in addition to fee-for-service. A new Center on Medicare and Medicaid Innovation will fund pilot tests of broad payment and practice reform in primary care. Local community health teams will be established and funded to provide direct support services to practices, such as care coordination personnel for smaller primary care practices that can’t afford to hire such staff on their own. A new grant program will fund local primary care learning collaboratives to assist practices in implementing best practices and learning more about the PCMH model.

Better collections and higher Medicare and Medicaid fees. The Center for Studying Health System Change found that in 2008 "on average, physicians who provided charity care provided 9.5 hours of charity care in the month preceding the survey, which amounts to slightly more than 4 percent of their time spent in all medically related activities ... Levels of charity care were highest among physicians in solo or two-physician practices (71.5%)." It stands to reason, then, that smaller practices will benefit the most from having more people covered and being able to pay their bills. The law also increases Medicaid payments to primary care physicians to no less the Medicare rates, and provides eligible primary care practices with a 10% Medicare bonus for office, home, nursing home, and custodial care visits.

All of these may help. But smaller practices also need access to trusted advice. ACP’s Center for Practice Improvement and Innovation is expanding its resources, including a new, free, web-based resource, the AmericanEHR Partners Program, to help physicians and other healthcare professionals compare, evaluate, select and learn how to use certified EHR systems effectively. The ACP Medical Home Builder provides affordable, accessible on-line guidance and resources for practices involved in incremental quality improvement changes or significant transformation of their practices.

I think that that the physician practices that do well in the future will be those that are able to demonstrate to buyers of health care that they are able to provide measurable "value" for the money being spent, defined as good or better outcomes at lower cost. With the right mix of supportive public policy and trusted advice and practical resources to help them succeed, I believe that the future for smaller practices may be much brighter than conventional wisdom suggests.

Today's questions: How do you see the future of small private practices? How can ACP help?

6 Comments :

Blogger Steve Lucas said...

A couple of points:

One: Much of this is based on government action. My experience is that politicians can mess up any good idea.

Two: This requires that young physicians be in a position, and have a desire, to go into solo or a small practice.

The current debt and educational system does not support the small practice model. Doctors, like many professionals today are burdened with an unrealistic debt burden as education has moved to a business model where they will charge what the market will allow.

My understanding is that the educational system does not promote the private practice of medicine. Specialties and hospital medicine are now the hot career fields.

As I look at the business aspects of running a private practice I see a very difficult situation. Government regulation, if done poorly, will place a burden of the small practice. Competition from hospital owned practices can create a barrier to success.

Even with an increase in Medicare rates the simple economics of generating enough income to result in a fair, my fair and you fair may be different, compensation package for the doctor and staff may be difficult.

I certainly hope the stand alone practice is able to survive. I have posted a number of times I do not want to increase doctors pay, but I do want to change their working conditions. The point has been made else where: it is the job that is unappealing. We need to change the job.

Steve Lucas

April 22, 2010 at 8:46 AM  
Blogger Robert J. Sobel, M.D. said...

We'll fight, as we remain efficient and provide a good service. How did we get to this point? My father is at almost 50 years continuous practice in downtown Chicago. He predated Medicare and saw early changes in the program that should be reassessed. Since I joined in 1995, the bureaucractic increases have come from all sides. The changes in lab reimbursement via AMA and CPT "reform", the threats of wholesale change from private insurance, the complexity added by HIPPA with little effect on patient's insurance portability and little in the way of changing patient privacy, the goofiness of buying into ICD-10, as if numbers now in my head should be obsolete because they do not differenitiate the left side from the right side (I could go on.).

ACP has helped by outlining comprehensive principles. We comment on the particulars, because that is where the action is. I always argued for attention to detail, incremental approaches, and no new bureaucracies. Setting a fair playing field with the universal mandate was a clear pre-requisite. De-Wall Streeting (divesting from public shareholder status)the insurance industry would be another reactionary necessity.

What I need is protection from imposed change. We are adapting. We have unlimited access to information sources. Please return to me prescription authority. Considering my licenses, I cannot believe I continue to struggle in the basics of getting my patients their medications. There is more harm in patient access from the over-developed and over-compensated managed care interventions than in poor physician judgement.

The failure to address the chaos wrought by brand-generic games will continue to penalize us, as it has for over two decades. The commercialization of medicine should be confronted. Leaving independent physicians to compete for patient confidence in a stable reimbursement field is the only way for me to attract the best. Favorable debt relief and a reduction in the income discrepancy are the only way.

April 22, 2010 at 9:27 AM  
Blogger Jay Larson MD said...

The fate of small internal medicine practices will go by the way of the Dodo bird. The incentives/disincentives have shifted so much in the past couple of decades that being in a small practice has become very difficult and is not very appealing to younger physicians.

Hospitals and larger clinics can afford lucrative ancillary services which are financially not feasible for a small office. With extra capital generated by ancillary services, hospitals and larger clinics can offer better “packages” to the younger physicians.

Hospitals have the extra benefit of being able to bill Medicare part A and B for services provided by employed physicians. This process is known as “provider based billing”. Many physicians, especially in private practice, do not know about provider based billing. For example, a patient is seen for an outpatient “limited” visit by a hospital employed physician for follow up of diabetes. Medicare part A is billed a facility fee at 100% rate of a 99213 and Medicare part B is billed a professional component fee at 75% rate of a 99213. The end result is that the hospital collects 175% of the 99213 fee compared to a non-hospital employed out patient physician. Obviously this costs Medicare more for the same service if the physician is a hospital employee. It also puts the private offices at a financial disadvantage.

Even though the ACP can support smaller practices by offering helpful information, it can not change the reality of our current system. The losers in the trend toward “bigger is better” will be patients. There is no large medical center that can provide the compassion as well as a small office with familiar faces and people that know your name.

April 22, 2010 at 8:13 PM  
Blogger Arvind said...

Mine is a 8-year-old solo practice. I am an early adopter of IT, being fully electronic since 2002 (even before the Cleveland Clinic). We were one of the participants of the Center for Practice Innovation project from 2006-2007. I was actively involved in helping set up the ACP EHR Partners Program and the Medical Home Builder. Going through all these in addition to working on the NCQA PC-MH program, I was optimistic that these would eventually lead to concrete processes that would help bail out small practices. As we document in the ACP video presentation "Small Practice in America", our community loves our way of providing individualized care and attention. So logically we should be thriving financially, correct?

Incorrect! Because of a price-fixed system that encourages mediocrity and volume-based services, there is no way we can thrive. The government has actually made this worse by refusing to open its eyes to recognize that small practices are the ones that actually make a positive difference in the communities. Instead, the President and others have gone out of the way to say that they favor large organizations like Kaiser, or Cleveland Clinic, while downplaying the value of small practices. Similarly, their payment policies have also encouraged "pooling of payments" where the small practice will have no role.

How the ACP can help:
1) Stop unequivocal support of the current Law
2) Make it know to the HHS that small practices provide the most appropriate and cost-effective care to the communities
3) Encourage HHS to visit those of us doing it in the trenches (they could start by viewing the video at the CPII website).
4) Work to abolish the price-fixed payment system and CPT codes for office visits
5) Nudge the govt to look at the innovative care methods that small practices have been using (not just the large systems).
7) Educate govt about the desperate situation small practices fins themselves in primarily due to govt regulations and mandates, and why these regs are serving no goo purpose.
8) Start believing that free market principles can bring higher value to the health care arena
9) Better define "buyers of health care" - is the buyer and consumer the same, or the buyer is different from the consumer. Unless it is the latter, nobody can or should expect higher quality care at less cost. The reasons for this are very obvious.
10) Work to level the playing field for small practices in real terms - i.e. ability to conduct meaningful negotiations with private and governmental payers for reimbursement rates, allowing balance billing for Medicare, providing monetary value for time spent (for clinical or nonclinical activity), process of rapid adjudication of disputes between various parties, removal of the RACs and resorting back to the constitutional language of "innocent unless proven guilty", retuning of the clinical decision-making to the physician and strengthening of the physician-patient relationship.

April 22, 2010 at 10:25 PM  
Blogger Steve Lucas said...

As a follow on to the above comments: In my community we are watching a nonprofit hospital, that owns a for profit insurance company, purchase more and more medical practices. A trial currently under way is assessing the validity of kickbacks paid to brokers for signing up to clients to this system.

The result of this is as Jay describes, a very vertically integrated system, designed to maximize insurance income from government and other sources, while minimizing cost to the hospital owned insurance company.

This has really created an 800 lb. gorilla in the community that makes it almost impossible for the other hospital, and independent physicians, to compete.

Steve Lucas

April 23, 2010 at 9:12 AM  
Blogger Julie said...

The cost of ICD 10 implementation will be devastating to small practices. The ACP's support of this legislation is not consistent with support for cutting administrative costs. Just like the costs and benefits of testing are issues for cost containment the costs and benefits of each update in administrative toys should be evaluated. It is an unfunded mandate.

This is why Universal Healthcare is a worrisome issue. Historically the government creates administrative mandates that are easily recommended by people that have little true clinical experience. Physicians are forced define and defend each decision to people that didn't see the patient.

The VA has great data to prove they provide good care. This is not consistent with most physician experience at these institutions. Data alone does not improve care.

The ACP should ask again its members their opinions on these issues. Support for the official positions is far from universal.

April 25, 2010 at 4:52 PM  

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About the Author

Bob Doherty is Senior Vice President, American College of Physicians Government Affairs and Public Policy; Author of the ACP Advocate Blog

Email Bob Doherty: TheACPAdvocateblog@acponline.org.

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