Lawmakers warned of demise of solo medical practices

Health system reform may be driving some of the decline, but some say medical homes and accountable care organizations offer new opportunities for small groups.

By — Posted July 30, 2012

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Physicians and health analysts testified to lawmakers that growing evidence shows doctors are shutting down their small private practices to join larger health organizations due to administrative, payment and medical liability pressures — and that health system reform may be playing a part.

Independent small physician practices are becoming an anachronism, said Mark Smith, president of Merritt Hawkins, a national consulting and search firm in Irving, Texas. Testifying before the House Small Business Subcommittee on Investigations, Oversight and Regulations on July 19, Smith said physicians today are more likely to be employed by medical groups or hospitals than to own their practices.

In conducting more than 2,700 physician search assignments on behalf of hospitals, medical groups and small practices in 2011-12, Merritt Hawkins reported just 2% of these assignments involved finding a doctor to join a solo practice as a partner or to start a new solo practice. This is a huge drop from 2004, when 42% of the firm’s search assignments featured solo practices or small practice partnership, Smith said.

The specter of declining payment, especially with the sustainable growth rate formula threatening cuts to Medicare payments each year, as well as increased reporting requirements and doubts over future earning potential, “are driving private practice physicians to seek employed positions,” said Louis McIntyre, MD, who testified on behalf of the American Assn. of Orthopaedic Surgeons.

Doctors also are facing increases in overhead costs and a decline in office visits as health plans and Medicare place a tighter hold on managing clinical decisions, according to a separate report from the non-profit Physicians Foundation. The foundation, led by representatives of state and local medical societies, was formed as part of a settlement between physicians and third-party payers.

Pressures of this type are what prompted Dr. McIntyre and his partners to forgo their private orthopedic practice in Westchester County, N.Y., to join a hospital in 2011. Another local orthopedic group followed suit this year. “Clearly, the employed model is winning out over private practice in Westchester County,” he said.

The need for huge outlays for technology improvements is another stressor for small practices, Dr. McIntyre said. His practice invested in a $500,000 electronic medical record system in the hopes that the new technology would reduce costs and improve quality. It initially saved the practice money, but the need to hire more information technology personnel and install upgrades eventually negated these savings. Quality data collection and reporting rules for federal EMR incentives also presented a significant burden for the practice, he said.

Contributing to the decline of independent practices is the Affordable Care Act and other health system market reforms, Smith said. Health reform encourages consolidation, in particular the formation of new risk-bearing health system delivery models such as accountable care organizations. He said small practices will find it difficult to participate in ACOs, “which more naturally lend themselves to hospital employment of physicians.”

Still, ACOs need to be driven by physicians because their offices are “where the care is given,” said Joseph Yasso Jr., DO. He’s medical director of Heritage Physicians Group, a small physician practice owned by the Hospital Corporation of America.

“There’s no reason why solo practices can’t be a part of these delivery models” provided they can work with other entities within the ACO, Dr. Yasso said following the hearing, where he testified on behalf of the American Osteopathic Assn. In his testimony, he said both ACOs and medical homes encourage care coordination and allow physicians to share resources.

Physicians on the panel suggested additional steps Congress could take to ease the burden on small or solo practices and encourage them to stay in private practice.

One key step is to eliminate Medicare’s SGR formula, said Jerry Kennett, MD, who testified on behalf of the American College of Cardiology. A stable platform for payment that reflects the appropriate services provided should be established so that physicians don’t have to keep guessing on a monthly or yearly basis what their payments are going to be, he said.

Dr. McIntyre said private practices should be allowed “to band together to negotiate rates without onerous overhead structures” so they could compete with larger entities. Also, medical liability reform “would go a long way to decreasing costs of not just private practices but medicine in general,” he said.

At its House of Delegates Annual Meeting in June, the American Medical Association approved new policy to channel AMA resources to protect and support solo and small group practices, and their ability to provide quality care.

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How private practices might be encouraged to stay in business

Physicians are seeing their independence deteriorate as they face increasing costs and declining office visits while health plans and Medicare tighten management of clinical decisions, according to the Physicians Foundation. A report from the group makes several recommendations for policymakers to help sustain private practices.

  • Boost Medicare fees by 30% for both management of clinical problems and diagnostic decisions. Make the increase applicable to primary care physicians as well as such diagnostic decision-makers as radiologists, cardiologists and pathologists.
  • Develop patient-centered medical homes and other new practice models to improve physician productivity and diversify the services offered by practices.
  • Reduce hospital payments for outpatient imaging and surgical services relative to the fees offered for the same services in lower-cost, private settings.
  • Eliminate the Medicare site-of-service differential that allows hospitals to charge more for physician services offered in a facility setting than for those offered in a private practice office.

Source: “The Future of Medical Practice: Creating Options for Practicing Physicians to Control Their Professional Destiny,” The Physicians Foundation, July 17 (link)

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External links

“The Future of Medical Practice: Creating Options for Practicing Physicians to Control Their Professional Destiny,” The Physicians Foundation, July 17 (link)

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