The State of Medicine on the Provider Side

DECEMBER 12, 2013
Monica Kaden, MBA, ASA
While it is noble to try to provide insurance to every citizen in our country, we cannot do it on the backs of our providers (physicians, medical students and hospitals).
The control of physician costs (their compensation) must be balanced by fairness and our country’s long-term objective of keeping smart, motivated students going into medicine and keeping our valuable physicians still working and in the belief that medicine is still a good career.
Let’s take a look at pros and cons health care reform offers for doctors, future medical students and hospitals.
This is a very challenging time for physicians for many reasons. Reimbursements are declining for physicians and there is uncertainty regarding future reimbursement. Medical practice costs are increasing.
There is more regulation and oversight by insurance companies and Medicare regarding coding and billing. New electronic health record requirements are expensive and time consuming. Physicians and staff must be trained on how to use these new systems. Coding is changing next year from ICD-9 to ICD-10, which will change coding and billing for physicians. This could pose temporary glitches in practices’ cash flow cycle. Physicians must keep up with new regulatory requirements such as HIPAA.
There is uncertainty regarding new accountable care organizations (ACOs) that have been formed and whether there is an actual benefit to ACOs. As of this writing, just a few of these organizations realized reported cost savings. It is questionable if the financial objectives of ACOs will be achieved. There is uncertainty as to whether bundled payments for an episode of care will benefit physicians. Insurance plans are creating their own networks for the exchanges, and deciding which physicians they want to invite to be in their exchange plan. They only want providers who have proven to be low cost. Again, this is out of the providers’ control.
Plus, there is significant acquisition activity. Practice management companies are buying up smaller medical practices (as are hospitals) and physicians are losing autonomy and the ability to control their own destinies. Initially, the compensation offered may be higher than historical, but that may be a short-term benefit.
Health care reform is changing compensation from volume-based, fee-for-service care, to quality-based care and reimbursement. Physicians can see reimbursement rates decline if the insurance company or Medicare decides that quality care was not provided. For hospitals, a new quality measure is the readmission of patients within 30 days. Hospitals’ are getting penalized with reduced payments due to readmissions.
For all of the aforementioned reasons, it is a difficult time for physicians to be in independent practice or practice at all. There is genuine concern regarding reimbursement and how the medical profession is changing. Reviewing compensation for physicians in many specialties, I believe overall compensation is still good relative to other professions. But for how long is the question.
I do believe in economies of scale for physicians and promoting more groups that can enjoy synergies and saved costs. However, I do think that physicians considering employment should give serious thought to what the culture will be going forward, and whether they are prepared to be an employee versus a part of management. In most cases, there is a financial incentive to becoming an employee; however, the jury is still out whether the financial incentive is short- or long-term. In many situations, physician compensation is revisited a few years after the acquisition and compensation could be adjusted downward, perhaps substantially, based on reimbursement rates, productivity change or other factors.
Certainly primary care physicians have suffered from reduced compensation. The investment of money and time in their education and post-graduate training is not yielding the return that it should due to reimbursement reductions to primary care physicians. Health care reform developers recognize this and have tried to implement some changes (loan forgiveness, reimbursement for Medicaid at Medicare levels, etc.).

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