Declining reimbursements, skyrocketing operating costs and rising medical debt are just a few of the reasons physicians are finding it harder to remain independent.
Six physicians joined Becker’s to discuss how physicians can sustain themselves long term.
Question: As reimbursement rates fail to keep pace with rising practice costs, how can physician practices sustain themselves long term?
Daniel Del Gaizo, MD. Orthopedic Surgeon at BOSS Orthopaedics—Hilton Head (S.C.): Reimbursement rates have been falling for as long as I have been in medicine. Physician practices should expect more of the same in the future and factor further reimbursement rate cuts into short, mid, and long term strategic planning. Physician practices need to be continuously working on increasing efficiency, cutting what is not needed, and growing what is profitable including service lines and ancillaries.
Surinder Devgun, MD. Managing Partner of Rochester (N.Y.) Gastroenterology Associates: Looking forward there are only a few outcomes for this scenario. As costs increase and income remains static, there is an inflection point where providers in small practices either take a pay cut as a sacrifice for independence, exit the workforce (such as early retirement or alternate non clinical employment) or join a larger entity. Therefore, joining a larger entity is the most likely outcome in order to remain in clinical practice. The options may be in the form of joining your local health system, banding together with like minded providers or private equity models. Basically, the bigger you become as a private practitioner the more stable your practice becomes and the more say you will have in your day to day practice. These benefits of independence may not translate to employment unless some guarantees can be secured at the time of initial contracting. As physicians, we are blinded to join our colleagues in private practice using small differences in practice patterns as petty excuses but the consequences are dire and eclipse these small differences. All physicians regardless of their site of practice want the same result, to get paid a fair wage for work completed.
John Donovan, MD. Otolaryngologist at ENT Salem (Ore.): As reimbursement rates fail to keep pace with rising practice costs, how can physician practices sustain themselves long-term? Private practices cannot sustain themselves indefinitely given these conditions. There is an absolute limit to physician [work relative value units] production. Once that is reached in any practice, falling payments and general inflation in tandem become an unstoppable tide. This leaves one sustainable option; transition from private practice to an employed model.
Cory Koenig, DO. Vice President of Operations at Providence Anesthesiology Associates (Charlotte, N.C.): Downward financial pressures have really caused anesthesia to go back to the drawing board and have some difficult discussions. This really boils down to utilization and efficiency of our staffing. These issues can be difficult talking points but the facilities must realize that they must fully partner and align with anesthesia to be successful. The days of poor utilization and efficiency must come to an end for sustainability. Block time scheduling, add ons, facility hours, requirements for flip-and-toggle rooms and very detailed anesthesia staffing agreements are becoming critical. Many practices are having to approach facilities for financial support for the first time ever. This brings a heightened amount of stress for everyone involved. Be creative and think outside of the box. Although it takes a lot of time and effort from leadership, we have found that being up front, honest and attempting to partner with the facility has been the most successful approach.
Klaud Miller MD. Orthopedic Surgeon at Windy City Orthopedics and Sports Medicine (Chicago). The literature is clear that Medicare reimbursements have dropped as much as 40% or 50% in real dollars over the last 20 years. Obviously, expenses have only gone up. Obviously, simple arithmetic says that this cannot persist forever. The two lines have to cross. I can only speak from my own experience. I’m a solo orthopedic surgeon. From a simple dollars standpoint, my best year was 1990! There has been a slow decrease in take-home pay since that time. I will retire before the lines cross but if I was continuing to practice for another 10 years or so, it would certainly be financially impossible. I have also been able to mitigate the decline by doing a lot of medical legal consulting. Without that, I certainly would have had to close the practice years ago. In other words, if someone is depending only upon practice income from treating patients, it is financially hopeless. That is why so many physicians invest in MRIs and physical therapy in their office. As a solo practitioner, that was simply not financially possible for me. In other words, the day of the solo physician or small group is certainly impossible in any major metropolitan area except for perhaps a “concierge” type practice which are already established and the surgeon has a “name draw.” I suspect that prospects are somewhat better in nonurban areas where a small or a small group of orthopedics could have a corner on the local market. However, no situations or also been to have much more difficulty with finding staff with appropriate skills and will probably have higher staff costs. For practical purposes, the net effect is that the solo and small group orthopedic surgeons will simply not exist except in isolated corners of the country. As we speak in Chicago, I don’t have absolute numbers but I am one of only five or six solo orthopedic surgeons. I just don’t see how any orthopedic surgeon could open up the solo office in Chicago at this time.
Mike Milne, MD. Orthopedic Surgeon in Santa Barbara, Calif: Orthopedic private practices in the Midwest can stay profitable by focusing on efficiency and expanding revenue streams. Maximizing surgical efficiency — like optimizing OR time, streamlining pre- and post-op processes and negotiating better implant pricing — helps keep costs down. Bringing imaging, physical therapy and durable medical equipment in-house can add significant revenue without relying solely on surgery. Utilizing PAs and NPs effectively allows surgeons to focus on high-value procedures while keeping patient flow steady. Negotiating better payer contracts and exploring bundled payment options can improve reimbursement rates. Cutting unnecessary costs by automating administrative tasks and outsourcing billing helps keep overhead low. Many practices are also shifting procedures from hospitals to ambulatory surgery centers, where reimbursement is often better and efficiency is higher.