Skip to main content
The Keckley Report

The Independent Practice of Medicine: Pipe Dream or Realistic Aim for Physicians

By June 15, 2020March 1st, 2023One Comment

Last weekend, Susan Bailey, M.D., an allergist and immunologist from Fort Worth, Texas, was sworn in as the 175th President of the American Medical Association (AMA) at its virtual House of Delegates meeting. In her acceptance remarks, she vowed to advocate for protection of the independent private practice of medicine and financial support for clinicians.

“Taking good care of our patients requires much more than the time we spend with a patient in the exam room,” Bailey said. “It requires advocacy at the highest levels to fight against the quagmire of regulation and for the support we need to sustain private practice during a pandemic that threatens its very survival. It requires us to confront insurance companies and all their familiar tricks that seem to raise insurance premiums year after year without spending a dime more on patient care.”

Dr. Bailey’s sentiment is widely shared among clinicians. But is it realistic?

The AMA traces its U.S. roots to 1847. Its membership, a tightly kept secret, is estimated to be 19-27% of U.S. active, retired, and medical students. Only $35 million of Its 2019 revenues, $392.3 million, are from member dues that range from $60 to $420 per physician. The rest comes from its diverse operations ranging from publishing (i.e. JAMA), licensing (i.e. ICD Codes), health insurance and other activities. It’s a complex organization that employs 1146 perhaps best known for its advocacy efforts and peer-reviewed publications.

The protection of the independent practice of medicine is an understandable issue for AMA. The reality is this:
 
 
Before the coronavirus pandemic, the independent practice of medicine was a declining option for most physicians.

According to the AMA Policy Research Perspectives, in 2018, 47.4% of practicing physicians were employed with that number increasing every year since 1988. The majority of these join large medical groups but increasingly other options are considered. Hospitals directly employ 169,000. Insurers employ clinicians including Optum (UnitedHealth Group) that now employs 45,000 clinicians and 9000 advanced practice nurses. And perhaps the fastest growing option for physicians, and potentially most controversial, is employment in a private equity (PE) owned group. As medical practices have struggled to remain competitive, more than 850 practices have been acquired by PE since 2013. 

Private equity plays a prominent role in healthcare: companies like Apollo, BlackRock, Blackstone, Goldman Sachs, KKR, Carlyle, Warburg Pincus and others are major players in hospitals, nursing homes, urgent care, and other sectors.  The PE business model is straightforward: they buy assets using debt and then focus on improving their financial performance through cost reductions, revenue enhancements, debt re-structuring and tight management. Their aim is to sell the asset within 5 years at a handsome profit to investors or worst case, declare bankruptcy and walk away. For physicians employed in PE owned groups, return to shareholders is uncomfortable but not a primary concern to most until changes made by their PE-employed managers threaten patient care, their clinical autonomy or take-home pay. But employment in a PE backed medical practice remains an option for growing numbers of clinicians.
 
 
During the pandemic, use of physician services has plummeted making financial survival difficult for more clinicians.

Last week, several prominent organizations released studies reflecting the negative impact of the pandemic on practitioners:

  • Healthcare professional services utilization dropped by 70% in April year over year, resulting in a 50% decline in revenue. In the hardest hit region, the Northeast, utilization fell 80% and revenue dropped 79%.

  • 30% of physician practices in Massachusetts are considering closing down including 42% of specialists and 20% of primary care and behavioral health physician groups (Massachusetts Health Policy Commission and the Massachusetts Chapter of the American College of Physicians)

  • 27% of adults say they will not go to a doctor’s office except for emergencies until a vaccine or treatment for COVID-19 is available (Fairleigh Dicksenson University Poll)

These hit independent practitioners hardest. For younger physicians, employment is a matter of where and contractual conditions; for older established clinicians, it’s a hard choice.

Private equity backed, physician roll up models were not immune to the financial downturn either. With a heavy focus in the elective market space, many of these groups have been forced to restructure their financing as their revenue stream has dried up, and these now distressed assets look to be discounted opportunities for longer term investors (quick side note: don’t be surprised if we see an uptick in these types of deals).

Regardless of affiliation- independent practice or PPM model- the goal is still the same: it’s about financial security.
 
 
In the economics of the U.S. health system spending, physicians have fallen behind. 

In March before the pandemic, the federal government released its national health expenditures forecast for the next decade (2019-2028):

  • Total spending is are projected to grow from $3.8 trillion to $6.2 trillion at an average annual rate of 5.4% to 19.7% of gross domestic product.

  • Among all major payers, Medicare is expected to experience the fastest spending growth (7.6% per year) while the privately insured share of the population is expected to fall from 90.6% in 2018 to 89.4% by 2028.

  • Spending for hospital services will increase from 32.9% in 2019 to 33.7% in 2028 while spending for physicians will decrease from 19.9% to 19.7% in 2028.

Thus, before the pandemic, the portion of spending for physicians was already shrinking. The regulation, costs, and complexity of competing for patients had already taken its toll on private practices. For the majority of physicians, practicing independently with complete clinical and financial autonomy is a pipe dream held by few.
 

MY TAKE

Physicians enjoy enviable trust among consumers: per Gallup, their standing remains highest among all professions except for nursing but trust alone is no guarantee of sustainability for individual practitioners and the profession.

Dr. Bailey is stepping into the lead role at AMA at a critical time for the profession. It is not the strong unifying voice of the profession it once was: surveys show medical professionals regard their specialty society as their primary affiliation and the AMA secondary. Its advocacy has been laudable, but sometimes slow to develop around timely issues like opioid addiction, surprise medical bills, patient affordability and reduction of medically unnecessary tests and procedures. Its concern about physician burnout is not matched by its concern for nurse burnout and patient anxiety. And its consistent antagonism toward electronic medical records, clinical decision support systems, scope of practice constraints on others, data-driven delivery and resistance to price and outcome transparency are stains on the profession’s claim as “patient advocates’.  

For most physicians, the independent practice of medicine is aspirational. For many, it’s not an option. AMA can be substantially more effective if it equips its members to better navigate the realities of a marketplace that’s responsive to consumer preferences, economic realities, technologic innovation, and competition based on differentiated value. And it can be an important voice in detecting and monitoring employment models that compromise clinical outcomes and patient safety when disguised by the physician’s employer as efficiency improvements. 

The future for the profession is bright for those who are prepared. Instead of mourning the erosion of independent practices, AMA should endeavor to equip its members to lead.

Paul

P.S. This week, a major theme will be the potential for a second surge of the Covid-19 virus and its impact on economic recovery. The Federal Reserve is expected to provide guidance about a $2 trillion relief package targeting small businesses and hard-hit industries. The nation is reeling from 42 million job losses and coming to grips with its deeply embedded systemic racism. For all of us, these are unprecedented times. Stay well. Be part of solutions that matter.
 
 

RESOURCES

“Healthcare Professionals and the Impact of Covid-19: A Comparative Study of Revenue and Utilization” June 11, 2020; https://www.ajmc.com/contributor/robin-gelburd-jd/2020/06/health-care-professionals-and-the-impact-of-covid-19-a-comparative-study-of-revenue-and-utilization

Alex Kacik “Massachusetts physician practices considering closure, consolidation” Modern Healthcare June 10, 2020; https://www.modernhealthcare.com/operations/massachusetts-physician-practices-considering-closure-consolidation

“Majority of Americans fear for their health due to delaying routine care as a result of corona-19”  Fairleigh Dickinson University Poll June 10, 2020 https://view2.fdu.edu/publicmind/2019/200610

Joynt Maddox  KE, McClellan  MB.  Toward evidence-based policy making to reduce wasteful health care spending.   JAMA. 2019;322(15):1460-1462. doi:10.1001/jama.2019.13977

Carol Kane “Policy Research Perspectives: Updated Data on Physician Practice Arrangements: For the First Time, Fewer Physicians are Owners Than Employees” American Medical Association 2019 https://www.ama-assn.org/system/files/2019-07/prp-fewer-owners-benchmark-survey-2018.pdf

“The Physicians Foundation 2018 Physician Survey” September 18, 2018 Physicians Foundation https://physiciansfoundation.org/research-insights/the-physicians-foundation-2018-physician-survey/

American Medical Association Activists facts https://www.activistfacts.com/organizations/american-medical-association/

Keehan et al “National Health Expenditure Projections, 2019–28: Expected Rebound In Prices Drives Rising Spending Growth” Health Affairs March 24, 2020 https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2020.00094?journalCode=hlthaff

Zhu “Private Equity Acquisitions of Physician Medical Groups Across Specialties, 2013-2016” JAMA. February 18, 2020;323(7):663-665. doi:10.1001/jama.2019.21844

Todd Shryock “Private equity in healthcare” Medical Economics November 12, 2019 https://www.medicaleconomics.com/news/private-equity-healthcare

“Updated Physician Practice Acquisition Study: National and Regional Changes in Physician Employment 2012-2018” Physicians Advocacy Institute February 2019 http://www.physiciansadvocacyinstitute.org/

Gretchen Morgenson, Emmanuelle Saliba “Private equity firms now control many hospitals, ERs and nursing homes. Is it good for health care?” NBC News  May 13, 2020; https://www.nbcnews.com/health/health-care/private-equity-firms-now-control-many-hospitals-ers-nursing-homes-n1203161

Atul Gupta et al “Does Private Equity Investment in Healthcare Benefit Patients? Evidence from Nursing Homes” November2019; https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3537612
 

CORONAVIRUS NEWS

Coronavirus Dashboard: As of Monday, June 15

  • 28 states are not following CDC guidelines for coronavirus reporting

  • 19 states are seeing increases in coronavirus cases

  • In Arizona, the state has told its hospitals to activate emergency plans.

  • In the U.S., more than 2 million people have been infected by the virus in the US, and more than 113,000 have died.

Physician Utilization Down 70% in April

Fair Health compared utilization and revenue of healthcare professional services for the period of January-April 2020 vs. January-April 2019 by analyzing 31 billion commercial claims. Key findings:

  • From March 2019 to March 2020, utilization of professional services declined by 65% nationwide, professional revenue decreased 45% and both fell further in an April 2019 to April 2020 comparison (utilization fell 68% and revenue decreased 48%).

  • Healthcare professional services utilization dropped by 70% in April year over year, resulting in a 50% decline in revenue. In the hardest hit region, the Northeast, utilization fell 80% and revenue dropped 79%.

  • The hardest hit profession was oral surgery: utilization dropped 81% and revenue dropped 92%.

  • The least hit was pediatric primary care: utilization fell 58% and revenue decreased 35%.

“Healthcare Professionals and the Impact of Covid-19: A Comparative Study of Revenue and Utilization” June 11, 2020; https://www.ajmc.com/contributor/robin-gelburd-jd/2020/06/health-care-professionals-and-the-impact-of-covid-19-a-comparative-study-of-revenue-and-utilization
 

Massachusetts Health Policy Commission: A Third of Massachusetts Medical Practices Consider Closing

According to a survey of more than 400 practices by the Massachusetts Health Policy Commission and the Massachusetts Chapter of the American College of Physicians from late May to early June:

  • 30% of physician practices in Massachusetts have been considering closing down including

  • 42% of specialists and 20% of primary care and behavioral health physician groups.

  • 20% of Massachusetts physician practices are mulling consolidating with other practices, joining hospitals or health systems, or selling their practice, according to the survey.

  • 36% of physician practices said they were aiming to provide more services to increase revenue,

  • 30% reported considering boosting revenue through improved diagnostic coding.

 Steph Sollis “Economic strain of coronavirus pandemic has some Massachusetts medical practices considering more layoffs, selling business” MassLive June 10, 2020 https://www.masslive.com/coronavirus/2020/06/economic-strain-of-coronavirus-pandemic-has-some-massachusetts-medical-practices-considering-more-layoffs-selling-business.html
 

ED Visits Down 49% Since January

According to an analysis from the Emergency Department Benchmarking Alliance:

  • Volume fell 49% between January and April, with facilities in urban areas seeing the largest drop.

  • ED volume rose 7% year over year in January, 4 % in February, likely due to flu season but fell.19% in March and 48% in April.

  • Pediatric ED’s saw a 71% decrease in volume between January and April — the largest drop of all ED types. Freestanding EDs had a 49% drop in use over the same time period, while general EDs saw a 50% drop.

Emergency Department Benchmarking Alliance https://www.edbenchmarking.org/
 

AHIP: COVID-19 Could Cost Insurers up to $547B through 2021

The estimated costs for treating COVID-19 range from $30 to $547 billion based on infection rate models of 10%, 20% and 60%, according to the study commissioned by America’s Health Insurance Plans (AHIP).

  • A 10% rate would lead to a total cost of $30 billion to $92 billion from 2020 to 2021; a 20% rate would be $60 billion to $182 billion; a 60% rate would cost $180 billion to $547 billion.

  • “We assume that a higher volume of COVID related services will be incurred in 2020 and lower volume in 2021, distributing approximately 75% of the total services to 2020 and 25% to 2021”

  • The report is an update to an earlier one distributed by Wakely back in March at the onset of the pandemic. That report pegged the total COVID-19 costs between $56 billion and $556 billion

  • The Wakely model also projects that testing costs for insurers will be between $6 billion and $25 billion a year, and antibody testing would cost between $5 billion and $19 billion a year

“COVID-19 Cost Scenario Modeling: Treatment” Wakely Consulting Group June 3, 2020; https://www.ahip.org/wp-content/uploads/AHIP-COVID-19-Modeling-Update_Wakely-2020.06.pdf
 

HHS to Distribute $25 Billion of Relief Funds to Medicaid & CHIP Providers and Safety Net Hospitals

Last Tuesday, the U.S. Department of Health and Human Services (HHS) announced it will distribute $15 billion from the Public Health and Social Services Emergency Fund (Relief Fund) to eligible Medicaid and Children’s Health Insurance (CHIP) providers that have not already received a payment from the $50 billion Relief Fund General Distribution. HHS also announced the distribution of $10 billion in Relief Funds to safety net hospitals, which the agency expects to distribute within one week. It includes $15 Billion Medicaid and CHIP Allocation and $10 Billion Safety Net Hospitals Allocation.

“HHS Announces Enhanced Provider Portal, Relief Fund Payments for Safety Net Hospitals, Medicaid & CHIP Providers”HHS June 9, 2020 https://www.hhs.gov/about/news/2020/06/09/hhs-announces-enhanced-provider-portal-relief-fund-payments-for-safety-net-hospitals-medicaid-chip-providers.html
 

Polling Last Week:  Public Remains Cautious about Return to Normalcy

The Fairleigh Dickenson University Poll surveyed 1003 adults (18+) nationwide by telephone between May 20 through May 25, 2020:

  • 54% are very/ somewhat concerned that their own or a loved one’s health is at risk due to delaying treatment for non-COVID-19-related medical problems because they fear doing so would put them at risk of catching the virus.

  • 27% say they will not go to a doctor’s office except for emergencies until a vaccine or treatment for COVID-19 is available

  • 24 % have seen a doctor or other health professional via online video conferencing since the pandemic began in March, with 72% saying their experience was the same or better than an in-person medical visit.

  • 76% say they would be comfortable having a telehealth appointment with their doctor if they were unable to see them face-to-face

“Majority of Americans fear for their health due to delaying routine care as a result of corona-19”  Fairleigh Dickinson University Poll June 10, 2020 https://view2.fdu.edu/publicmind/2019/200610

CNN poll Conducted by SSRS June 2 through 5 Based on a Random National Sample of 1,259 Adults

Based on what you know right now about the coronavirus outbreak in the area where you live, would you feel comfortable or not comfortable returning to your regular routine today? (% who feel comfortable returning to routine May 7-10 vs. June 2-5):

  • Total Sample: 41% to 49%

  • Republicans: 63% to 73%

  • Democrats: 16% to 23%

  • Independents: 48% to 53%

46% think the worst is yet to come vs. 52% last month.

“CNN Poll: Public split on return to routine due to coronavirus” CNN  June 10, 2020 CNN https://edition.cnn.com/2020/06/10/politics/cnn-poll-coronavirus
 

INDUSTRY NEWS

Proposed IRS Rule Would Accelerate Concierge Medicine, Health Sharing Ministries as Part of HRA’s

According to a proposed rule from the Internal Revenue Service issued last week, payments for direct primary care arrangements and healthcare sharing ministry memberships would become “qualified medical expenses” under the tax code. They would be tax-deductible under certain circumstances and employers would be able to reimburse their employees for those expenses through health reimbursement arrangements, or HRAs.

Background: Next year, the deductible expense threshold increases from 7.5% to 10% of gross income. The Tax Foundation, a conservative think tank, expects 14% of taxpayers to itemize their deductions for 2019 thanks to the boost in the standard deduction.

Michael Brady “New tax rule could boost HRAs, but don’t expect a big impact” Modern Healthcare June 10, 2020; https://www.modernhealthcare.com/healthcare-economics/new-tax-rule-could-boost-hras-dont-expect-big-impact
 
 

Medicaid Managed Care Enrollment Growth down 1.8%

Highlights of the latest Mark Farrah analysis of Medicaid managed care released last week:

  • Total Medicaid and Children’s Health Insurance Program (CHIP) enrollment was over 71 million as of December 2019. Enrollment in managed Medicaid plans decreased approximately 1.8% to 48.3 million.

  • Centene, Anthem, and Wellcare gained membership with growths of 258,130 (4.28%), 136,870 (2.54%), and 124,357 (3.63%), respectively. Conversely, UnitedHealth and Molina experienced significant enrollment decreases, with UnitedHealth losing 604,998 (11.57%) and Molina dropping 374,362 (11.84%).

  • The top five companies maintained a strong market presence during 2019, ending with 47.1% of the total Medicaid managed care market (compared to 47.2% in 2018). Membership among the top five companies experienced an overall decrease of 460,003 (1.98%), while membership across the remainder of the market decreased by 421,852 (1.62%).

“Managed Medicaid Market Trends” Mark Farrah & Associates June 4, 2020 http://www.markfarrah.com/mfa-briefs/managed-medicaid-market-trends/
 

340B Program Impact $30 billion

The hospitals in the 340B Discount Drug Program purchased at least $29.9 billion worth of medicines in 2019, which was 23% more than the year before according to the U.S. Health Resources and Services Administration. Since 2014, purchases under the 340B program have tripled and the program has grown to account for more than 8% of the total U.S. drug market. The program requires drug makers to offer discounts of up to 50% on all outpatient drugs to so-called safety net hospitals.

340B Drug Pricing Program, HRSA 2019 https://www.hrsa.gov/opa/index.html
 

Cost of Cancer Care is Projected to Rise by More Than 30% by 2030

Researchers analyzed adults 65+ diagnosed with cancer between 2000 and 2012 to calculate their cost of care. Key findings:

  • The cost of cancer-related care is projected to increase by more than 30% in the next decade.

  • Costs at the end-of-life stages are highest ($105,000 per patient per year) followed by when treatment was first initiated ($42,000 per patient annually).

  • Total costs of cancer care including hospital stays and oral prescriptions cost were $183 billion in 2015, which they forecast to increase 34% to $246 billion in 2030.

Mariotto et al “Medical Care Costs Associated with Cancer Survivorship in the United States” Cancer Epidemiology, Biomarkers and Prevention June 8, 2020; https://cebp.aacrjournals.org/content/early/2020/06/08/1055-9965.EPI-19-1534
 

Urban Institute: Medicaid Expansion would Reduce Uninsured 28%

According to the Urban Institute analysis, if the 15 holdout states had expanded Medicaid eligibility as envisioned under the ACA, 3.9 million fewer people would be uninsured. Medicaid expansion in the remaining 15 states would lead to an overall 28% reduction in the number of uninsured people in those states combined including significant reductions in Alabama (43.1%), Mississippi (39.0%), Missouri (36.4%), and South Carolina (36.3%).Wisconsin would see the smallest percentage decrease in the uninsured (16.0%) under expansion.

Federal spending on health care for nonelderly people in these states would increase by about $30.4 billion, a 23% increase taking Medicaid acute care, Children’s Health Insurance Program, and marketplace subsidies into account. State spending on Medicaid in those states would increase by $4.7 billion, or 9%.

“The Implications of Medicaid Expansion in the Remaining States: 2020 Update” Urban Institute June 8, 2020; https://www.urban.org/research/publication/implications-medicaid-expansion-remaining-states-2020-update
 

Kaiser Family Foundation: Workplace Wellness Programs Provide Marginal Value

According to new KFF Employer Health Benefits Survey of 2012 companies:

  • In 2019, 88% of large employers (200 or more workers) offering health benefits offered a workplace wellness program, such as those to help people lose weight, stop smoking, or provide lifestyle and behavioral coaching (4% offer health screening only).

  • An estimated 63 million covered employees, including 59 million at large employers work for firms which offer health benefits and one of these workplace wellness programs.

  • In 2019, 72% of large firms that offer health benefits, employing 48 million covered employees, offered the opportunity to complete either an HRA, biometric screening, or both.

  • Use of HRAs has increased among large employers offering health benefits – from 47% in 2008 to 65% in 2019.

Pollitz et al “Trends in Workplace Wellness Programs and Evolving Federal Standards” Kaiser Family Foundation June 9, 2020; https://www.kff.org/private-insurance/issue-brief/trends-in-workplace-wellness-programs-and-evolving-federal-standards/
 

Bill Would Make Medicare Telemedicine Permanent for FQHCs, Rural Clinics

Last Thursday, Rep. Glenn ‘GT’ Thompson (R-Pa.) and Rep. G.K. Butterfield (D-N.C.). introduced the Helping Ensure Access to Local TeleHealth—or HEALTH—Act of 2020a bill to make Medicare reimbursement permanent for telemedicine services for federally qualified health centers and rural health clinics.

Jessica Kim Cohen “Bill would permanently boost Medicare telemedicine pay for health centers” Modern Healthcare June 12, 2020 https://www.modernhealthcare.com/politics-policy/bill-would-permanently-boost-medicare-telemedicine-pay-health-centers

CMS Announces Primary Care First Model Delay for Seriously Ill Populations

Last week, CMS announced its Primary Care First option for general practices will begin on January 1 as scheduled but the Seriously Ill Population component won’t start until April 1. Primary Care First is a voluntary alternative payment model aiming to lower Medicare spending by cutting back on avoidable inpatient hospital admissions and improving care coordination for people with complex chronic conditions and serious illness. Advanced primary care practices, including Medicare providers that deliver hospice or palliative care services, can accept responsibility under the Seriously Ill Population option for seriously ill patients that don’t have a primary care provider or someone to coordinate their care.

Park et al “Association of Changes in Primary Care Spending and Use With Participation in the US Affordable Care Act Health Insurance Marketplaces” JAMA Netw Open. 2020;3(6): e207442. doi:10.1001/jamanetworkopen.2020.7442

One Comment

  • Leon Harris says:

    Dr. K – insightful information per usual. Innovation must be a key area of focus of the AMA if it plans to survive in my honest opinion. Embracing technology is more of a need now more than ever as the landscape of healthcare is evolving.