Why it?s Critical to Preserve Private Practice Medicine

Thursday, August 18, 2016 | Larry Sobal

 

Private medical practice is dead. Long live private practice. With apologies to French history (Le Roi est mort. Vive le Roi!), my modern analogy to this saying is that there seems to be a perception that private practice medicine is becoming extinct—or at least an endangered species—but I feel strongly that we must make sure it lives on.

The media is filled with articles that would lead one to believe private practice is fading quickly. Consider these recent proclamations. According to a 2016 report by the Medicus firm, which tracks annual physician hiring, an overwhelming majority (more than 90%) of new physicians are choosing employment over private practice. In the 2015 Independent Physician Outlook Survey, published by medical management consultancy ProCare Systems, 44% of respondents reported they are likely to sell their practice at some point in the next decade. Merritt Hawkins, a large physician recruiting firm, reports that when it comes to practice model, just 17% of physicians are in solo practice and 35% overall are in private practice. More than half of physicians (53%) are employed by either a hospital or group. Finally, a study by the National Bureau of Economic Research suggests patients are likely to choose a hospital where their doctor is employed.

It is estimated that about 60% of physicians were in private practices back in 2000, so a drop to 35% is significant. The trends of physicians selling their practice to hospitals or health systems has been underway for some time, going back to the early days of managed care and the initial proliferation of HMOs in the 1990s (and in anticipation of the Clinton administration’s proposed health reforms). At that time, both hospitals and practice management companies, such as Phycor and MedPartners, went on buying binges. They scooped up independent medical practices—and mostly failed. In many cases, the doctors unwound the relationships and went back to running their own offices. Now, many are becoming employed again.

The more recent trend for physicians to become employees is often attributed to three factors:

• First, the recession, which started in 2007, began to erode physician practice margins and upended the retirement plans for many physicians. Employment offered a payout and simplified exit strategy.

• Second, a slew of onerous administrative burdens, including Electronic Medical Records, insurance regulations, and various legislative acts that created more paperwork (or mouse clicks), have dramatically increased the non-patient time being spent by physicians. Employment can be seen as bringing relief, having an employer deal with some of those hassles.

• Third, the Affordable Care Act (ACA) of 2010 virtually ignored the task of renovating and strengthening medical practice. While its main focus seemed to be on reforming and expanding health insurance coverage, it triggered a desire to create Clinically Integrated Networks and Accountable Care Organizations, which seemed to demand that physicians become employees of health organizations.

Consider these 2010 comments from Dr. Bob Kocher, who played a major role in the creation of the ACA: “Only hospitals or health plans can afford to make the necessary investments in information technology and management skills. This is not inevitable. As physicians organize themselves into increasingly larger groups, they are, out of necessity, investing in information technology tools that are becoming both cheaper and more capable, and investing in the acquisition or development of management skills that could provide these organizing functions efficiently for physician groups. Physicians who embrace these changes and opportunities are likely to deliver the greatest benefits to their patients, the health system, and themselves. Physician practices that accept the challenge will be rewarded in the future payment system.”

That’s a pretty strong statement—but here’s where it gets interesting. In Dr. Kocher’s July 31 commentary in The Wall Street Journal, he stated: “What I got wrong about Obama Care was how the change in the delivery of health care would, and should, happen. I believed then that the consolidation of doctors into larger physician groups was inevitable and desirable under the ACA. What I know now, though, is that having every provider in health care owned by a single organization is more likely to be a barrier to better care.”

Talk about doing a 180°.

The cynic in me might be tempted to disregard Dr. Kocher’s about-face due to his being on the board of Aledade. That’s a company focused on organizing independent physicians into ACOs, for a monthly fee, of course.

Rather than dwell on that curious irony, the point is there is no evidence that any single model (employment or private) is the panacea to create better health care. My personal experience, having been the lead executive in private practices, employed practices, single specialty and multi-specialty, is that the determinants of what makes a great medical practice are more about the culture, governance, physician leadership and other organization-specific factors, than whether the practice model is employment or private.

Furthermore, as a cardiovascular program membership organization, MedAxiom works closely with around 400 organizations (about 70% employed and 30% in private practice). My colleagues and I can validate through our experiences and an extensive data survey from this diverse population, that when we think of which members exhibit the greatest degree of innovation and transformation, both private and employed groups come to mind.

One last thought to consider. The past few years have seen a proliferation of physician practices being purchased by hospitals. Off the record, many hospitals and physician groups have shared that this arrangement has not been the marriage they hoped it would be. Among the reasons most often cited is the difficulty in merging very different physician practices and hospital cultures, causing physicians to be frustrated with loss of autonomy and more bureaucratic decision-making in hospitals. Meanwhile, hospitals cite frustrations that employed physicians don’t automatically become engaged employees and don’t respond to the same management methods as other hospital employees. In addition, both sides are often at odds about how practice profitability and return on investment is measured for what was once a robustly profitable private practice.

Fortunately, there are some progressive organizations beginning to explore ways to “unwind” the employment agreements while still maintaining close alignment. These models offer the possibility of a win/win relationship that allows physicians to return (or stay) in private practice while still being effective leaders and partners with hospitals in clinically integrated networks.

The fact is our health care system is better off with a mixture of private practice and employed physicians. Both can be, and are, successfully finding better ways to improve quality and reduce costs within their existing environments.  

I am hoping that reports of the demise of private medical practice are, to paraphrase Mark Twain, greatly exaggerated.

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Larry Sobal is Executive Vice President of Business Development at MedAxiom. He has a 35-year background as a senior executive in medical group leadership, hospital leadership and insurance. As part of his current role, Larry consults, writes and presents on topics relevant to transforming physician practices and health systems.

 

 

 

Illustration: Lee Sauer

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