The Bankrupting of Physicians

Posted by Stephen E Weinberg, MD FACC FACP

Physicians have been selling their practices to hospitals at an alarming rate. In 1983, 76% of physicians owned their own practices, but only 53% were owners in the 2012 survey. The pace of this conversion has been dramatically accelerating over the past 2-3 years. Why is this occurring?

 According to government surveys, the cost of running a medical practice from 2000 to 2012, increased by an annual average of 3% for a total of about 40%. On the other hand, the “conversion factor” used to determine the amount of Medicare reimbursement has fallen by 7%. Most of the decreases have occurred since 2009. In addition, Medicare has combined numerous codes thereby eliminating reimbursement for many procedures physicians perform. Private insurers follow Medicare guidelines so these changes become universal. With increasing expenses and markedly decreasing reimbursements, it should be no surprise that practices are losing money and going bankrupt.

I believe the dramatic fall in reimbursements is in large measure the result of the President’s desire to push private practice into bankruptcy and force physicians to sell their practices to hospitals. The reason he wants this is to eliminate fee for service medicine and have all of us salaried since he believes this will reduce the cost of healthcare. As pointed out in another post, there is no evidence that this conversion will actually save money, but let’s not muddy the waters with scientific evidence.

“So what, you say. Let all the physicians be salaried. Who cares?” Let’s look at what happens when physicians become salaried. They develop a corporate mentality. “I am being paid for 9-5 work and that’s what I will do.” So, at 5:01 pm, the day ends and someone else can care for the patient. Don't forget, many of these physicians were in private practice and were forced to sell to the hospital because of extreme financial pressure. Their entire philosophy of practice is different and they are not at all happy. That personal touch is gone as is some continuity of care. Because the outpatient office is now owned by the hospital, they charge a “facility fee” for everything from an office visit to all the testing that is done as an outpatient. The cost of healthcare has just significantly increased. Furthermore, that fee is not covered by Part B of Medicare and therefore it has just become your responsibility. The outpatient fees for hospital owned facilities are uniformly greater than physician owned facilities. Healthcare costs have gone up again. There is a general belief that Medicare will not lower the hospital outpatient fees since the hospital lobby in Washington is too powerful. So you can expect higher outpatient fees for the foreseeable future and as more practices are purchased by hospitals, you will have fewer choices.

Aside from cost, you will have other, more serious problems. Consider this. You see your cardiologist and you are diagnosed with a cardiac valve problem that requires surgery. Your cardiologist is salaried by hospital X. This hospital does good bypass surgery, but hospital Y 3 miles away does much better valve surgery. Your cardiologist is obliged to send you to his hospital, hospital X, since they pay his salary. You will likely never know that you are not receiving the “best” care possible. You think he is looking out for your interests, but actually he is concerned about his job. This issue is the most important problem patients will face as more practices become owned by hospitals. At the very least, there should be disclosure to patients regarding potential conflicts of interest that physicians are involved with. I think all patients need to be aware of these potential conflicts. Physicians not owned by hospitals have the option of sending patients to the best practitioners and hospitals for their patients.

How does the future look for private practice finances and will this trend stop? Frankly no. Congress is in the process of trying to "fix" the reimbursement problems. They are negotiating a deal to replace the Sustainable Growth Rate formula  program that has been a disaster for the past decade. In the absence of a resolution, Medicare reimbursement will fall about 24% this year. The proposal on the table would be a .5% annual increase in Medicare fee schedule rates  for 5 years  tied to a plan to dramatically incentivize physicians to become part of an alternative healthcare delivery system. Once again, there is no good scientific evidence that any of these proposed systems will actually save money. Ultimately, they will put all of these organizations at financial risk so that if the cost of your healthcare is greater than the amount of money paid by the government to the organization, the entity loses money. Enter rationing of healthcare! This is precisely what we had years ago with HMO's which took about 20 years to fix and eliminate. Instead of HMO's, the new system will be ACO's (Accountable Care Organizations). Do we really want physicians making critical decisions about our health concerned that if they ask you to get a CAT scan to look for cancer, the cost may be coming out of their pocket? I don't think anyone, including physicians, wants that type of system.

Consider this. The CEO of the Mayo Clinic (apparently the most cost effective institution in the country) has stated in interviews that they lose money on Medicare patients. They have no plans to participate in alternative models of healthcare delivery. In fact they are spending $6B ($3.5B of their own money. Where did that come from considering they are a not for profit organization?) over 20 years to improve their facilities and expand their reach in order to gain more market share and promote their program of excellence. They want the Mayo Clinic to be a magnet and I am inferring that means that people from all over the world who have the money to spend on healthcare will want the Clinic and be willing to continue to pay whatever the costs may be. This will obviously continue to offset the losses from Medicare and other insurers. If the Mayo Clinic can't make a go of it in today's Medicare environment, how can any of us and still provide high quality care? It's not going to happen. This is a zero sum game and in the absence of other sources of income, rationing will occur, knowingly or unknowingly.

It seems to me we need to have a comprehensive national debate with all the facts on the table and then have a vote as how to proceed. Washington is not providing full disclosure since our leaders realize that, if we know the hard truth, we would likely rebel. It's time for honesty and transparency.
Wake up. Call Congress and call the President.