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The Future Of Small Practices

This blog was written from Toronto, Ontario, where ACP’s elected Board of Governors met to provide direction on the policies to be advocated by the organization.

One issue raised by many of the governors is the enormous economic pressure on smaller internal medicine practices, and what the ACP might be able to do about it. Today, most physicians work in private practices of ten or fewer. 

An AMA survey finds “75.5 percent of physicians are office-based (61.1 percent owner, 14.4 percent office-based employee), and that this percentage increases with age from 68.9 percent for physicians under 40 to 81.2 percent for physicians over 54. Twenty-five percent of all patient care physicians, or one-third of the office-based ones, are in solo practice. Another 21.4 percent are in practices with between two and four physicians, and 12 to 13 percent (each) are in practices with between 5 and 9, and between 10 and 49 physicians. Less than 5 percent of physicians work in practices larger than that … Only 16.3 percent of physicians report that they are employed by a hospital.”

As older physicians retire, it is likely that share of physicians in smaller practices will decline relative to larger practices. The AMA reports that “only 13.6 percent of physicians under 40 are in solo practice, 23.1 percent of midcareer physicians and 36.2 percent of physicians over age 54 are in solo practice. More than twice as many physicians over the age of 54 are in solo practice as are institutional employees. At the other end of the spectrum, less than half as many physicians under age 40 are in solo practice as are institutional employees.”

A recent New York Times article suggests that small practices may soon disappear; others are more bullish. Jaan Sidorov, a general internist and ACP member, blogs that “despite the dire circumstances, there are still plenty of practices out there that are and will continue to be profitable … They won’t go away and many will thrive.”

The shift toward larger salaried practices pre-dates health reform. Yet it is fair to ask whether the Patient Protection and Affordable Care Act will accelerate the demise of small private practices, as some critics argue, or help sustain them. The PPAC actually includes several initiatives that could help the “bottom line” of smaller physician practice:

Streamlined insurance transactions. The federal government will issue rules to require insurers to reduce the paperwork burdens on physicians and patients, including processes relating to eligibility verification and claims status, electronic funds transfers and health care payment and remittance, claims, enrollment and disenrollment in a health plan, premium payments, and referral certification and authorization rules. A recent study found that solo or two-person practices spend 3.5 hours weekly interacting with health plans, significantly more than practices with 10 or more physicians.

Lower health insurance premiums. Small practices, like other small businesses, will be able to buy coverage for their employees through pooling arrangements (called state health exchanges). Premiums won’t be based on the actuarial risk of the practice’s own employees, but on all people included in the pool. If a small practice chooses not to provide health insurance, its employees will be able to purchase coverage through the exchanges, with subsidies to help them afford it if they earn less than the 400% of the federal poverty level.

Support for primary care practices. The legislation authorizes Medicare, Medicaid, and private health insurers to pay primary care physicians for managing and coordinating care through a Patient-Centered Medical Home, which creates the potential for smaller practices to earn additional revenue from a monthly risk-adjusted monthly care coordination fee in addition to fee-for-service. A new Center on Medicare and Medicaid Innovation will fund pilot tests of broad payment and practice reform in primary care. Local community health teams will be established and funded to provide direct support services to practices, such as care coordination personnel for smaller primary care practices that can’t afford to hire such staff on their own. A new grant program will fund local primary care learning collaboratives to assist practices in implementing best practices and learning more about the PCMH model.

Better collections and higher Medicare and Medicaid fees. The Center for Studying Health System Change found that in 2008 “on average, physicians who provided charity care provided 9.5 hours of charity care in the month preceding the survey, which amounts to slightly more than 4 percent of their time spent in all medically related activities … Levels of charity care were highest among physicians in solo or two-physician practices (71.5%).” It stands to reason, then, that smaller practices will benefit the most from having more people covered and being able to pay their bills. The law also increases Medicaid payments to primary care physicians to no less the Medicare rates, and provides eligible primary care practices with a 10% Medicare bonus for office, home, nursing home, and custodial care visits.

All of these may help. But smaller practices also need access to trusted advice. ACP’s Center for Practice Improvement and Innovation is expanding its resources, including a new, free, web-based resource, the AmericanEHR Partners Program, to help physicians and other healthcare professionals compare, evaluate, select and learn how to use certified EHR systems effectively. The ACP Medical Home Builder provides affordable, accessible on-line guidance and resources for practices involved in incremental quality improvement changes or significant transformation of their practices.

I think that that the physician practices that do well in the future will be those that are able to demonstrate to buyers of health care that they are able to provide measurable “value” for the money being spent, defined as good or better outcomes at lower cost. With the right mix of supportive public policy and trusted advice and practical resources to help them succeed, I believe that the future for smaller practices may be much brighter than conventional wisdom suggests.

Today’s questions: How do you see the future of small private practices? How can ACP help?

*This blog post was originally published at The ACP Advocate Blog by Bob Doherty*


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