Saving Private Practice

Private medical practitioners were struggling even before COVID-19 in the face of innovation, technological transformation and regulatory and rules changes that are increasing their costs of doing business, changing delivery channels, lowering their revenues, and interfering with their ability to take care of patients. Now, the threat to private practices is even worse.

Who owns your doctor’s office? Increasingly nowadays, the answer is a private equity firm — a type of investment fund that buys, restructures, and resells companies.

Over the last decade, private equity firms have?spent?nearly $1 trillion on close to 8,000 health care deals, snapping up practices that provide care from cradle to grave: fertility clinics, neonatal care, primary care, cardiology, hospices, and everything in between.

Last year, the AMA conducted a survey on the?financial impact of COVID-19 on physician practices?and found physicians have averaged a 32% drop in revenue since February 2020.

Expenses are also up, as 64% of physicians surveyed reported that they were spending more on personal protection equipment (PPE). The average increase was 57%.

This report?(PDF) describes changes in physician employment status and practice size, type, and ownership between 2012 and 2020. Although the 2020 data are consistent with earlier trends, the size of the changes since 2018 suggest that the shifts toward larger practices and away from physician-owned (private) practices have accelerated. 2020 was the first year in which less than half (49.1%) of patient care physicians worked in a private practice, a drop of almost 5 percentage points from 2018. 17.2% of physicians were in practices with at least 50 physicians in 2020, up from 14.7 % in 2018.

Doctors are calling it quits. Thousands of medical practices have closed during the pandemic, according to?a July survey?of 3,500 doctors by the Physicians Foundation, a nonprofit group. About 8 percent of the doctors reported closing their offices in recent months, which the foundation estimated could equal some 16,000 practices. Another 4 percent said they planned to shutter within the next year.

While there are some indicators that the employed physician trend is flattening, most residents and medical school students say they are not interested in working for themselves, particularly the increasing number of women medical graduates.

A?new survey?from the American Medical Association found that 2018 marked the first time that more doctors were employed by provider organizations rather than owning their own practices. Back in 1983, 75% of physicians were independent, but in 2018 only 45.9% owned their own practice,?according to Axios. Consolidation is a major driver of this trend.

The AMA has created a section of private practice. The need for this support is driven by changes in the medical marketplace. As of 2018,?fewer physicians, 45.9%, own their own practices?than are employed by other organizations, about 47.4%. This evolution of practice ownership away from private practice and toward health systems has not resulted in hoped-for improvements in care.

Although there are fewer physician private practices around now than a decade ago, the authors noted that?49.1% of doctors either own or are employed by a physician-owned practice, so the number of people who rely on these practices for care is still high. The physician leaders identified three benefits of this practice model for physicians and their patients: accessibility, flexibility, and autonomy.

However, there are signs that the trend to private practice is increasing. ?More than half (52%) of all self-employed doctors responding to Medscape's 2014 Employed Doctors Report say they were previously employed, and anecdotal reports suggest the share may be rising.

A new national, multispecialty advocacy organization representing independent practices has launched.

The American Independent Medical Practice Association (AIMPA) says it is the first advocacy organization of its kind focused on supporting private medicine across specialties. It is made up of 5,000 physicians collectively treating 10 million U.S. patients and includes specialties ranging from cardiology to gastroenterology to medical oncology to OB-GYN and more.?

AIMPA's formation comes amid growing consolidation in the healthcare sector. Between 2012 and 2022, the share of physicians working in private practices fell by 13 percentage points from 60% to 47%, according to one estimate.?In the same period, the share of docs working in hospitals as direct employees or contractors increased from 6% to 10%. The share of docs working in practices at least partially owned by a hospital or health system increased from 23% to 31%.

In this rapidly evolving pandemic situation, it is imperative for physicians and their practices to focus on their business and financial operations in order to sustain the practice and care for patients in the long term. To aid in this effort, the AMA has developed?14 tips to help physicians keep their practice in business?amid the COVID-19 pandemic.

Here are 8 threats to private practice.

The impact of Obamacare and the rules and regulations that have been promulgated?as a cause of all this is debatable. Some think that neither Democrats or Republican administrations can save it. Now that there is a new sheriff in town, we'll have to await the outcome of the shootout at the OK corral.

Is it worth saving private practice??I believe it is essential because:

1.?A significant percentage of patients prefer to get their care from private practitioners.

2. Private practitioners are more nimble?innovators

3. There are limits to BIG MEDICINE consolidation and private practitioners?fill the void. Like the states are to the federal government, private practices are laboratories of creativity.

4. Medical practice entrepreneurs want to work for themselves, add value to their patients and keep what they earn

5. Innovation ecosystems, the engines of regional and US global competitiveness, are driven , in part, by medical practice entrepreneurs

6. Successful medical practice entrepreneurs have a multiplier effect, providing high wage jobs

7. Generational attitudes are driving the demand for opportunities in the sick care sharing and?the gig economy

8. Voters have lost confidence and trust in the ability of "big anything" to improve their lives and that of their families

9. Historic lows in US productivity, particularly in the sick care sector, needs attention and will only come from innovation

10. It is the American thing to do and why other countries look towards us as the global leader in biomedical and clinical innovation and how we create innovation ecosystems

11. Less burnout compared to employed physicians. Just 13.5 percent of providers who work in SIPs reported being burnt out,?according to a study published in the?Journal of the American Board of Family Medicine, titled “Correlates of Burnout in Small Independent Primary Care Practices in an Urban Setting.”?Physician burnout is a major driver of turnover, resulting in direct costs associated with recruitment. It also contributes to lost revenue during recruitment, onboarding, and the time it takes for a new physician to reach optimal efficiency within a new system. Replacing a physician often?costs a practice?two to three times the annual salary of the physician who left.

For example, if nothing were done to address burnout, almost 60 physicians would leave?Stanford Medicine?within two years. The cost of recruitment for each physician—depending on the specialty and rank of faculty—would range from more than $250,000 to almost $1 million. And, for those 58 physicians, Stanford’s economic loss over two years would range from a minimum of $15.5 million to a maximum of $55.5 million.

12. Here's how to start and run a private practice taking advantage of the opportunities.

Here's why owning a private practice is better than working for someone else:

1. Unlimited Earning Potential

2. Autonomy and Control

3. Flexibility and Work-Life Balance

4. Pursuit of Passion

5. Personal and Professional Growth

6. Building a Legacy

7. Networking and Relationships

The Medical Group Management Association (MGMA) made a series of suggestions in prepared testimony sent to the House Committee on Ways & Means Subcommittee on Health’s “The Collapse of Private Practice: Examining the Challenges Facing Independent Medicine” hearing.

The suggestions call for policy changes to remedy the exodus of doctors from private, independent practice.

Other public and private interventions include:

• Financial Support and Incentives: Providing tax breaks, grants, or low-interest loans to private practices can help alleviate financial burdens. Incentives for practicing in underserved areas can also attract healthcare professionals.
• Reducing Administrative Burden: Streamlining billing processes and reducing paperwork can help private practices focus more on patient care rather than administrative tasks.
• Medicare and Medicaid Reimbursement: Improving reimbursement rates for private practices participating in these programs can make them more financially viable.
• Telehealth Expansion: Supporting telehealth initiatives can help private practices reach more patients and adapt to changing healthcare needs.
• Training and Resources: Offering resources for practice management and business operations can help private practices navigate challenges more effectively.
• Insurance Reform: Encouraging insurance companies to offer better rates and simplify claims processes can enhance the viability of private practices.
• Support for Collaborative Care Models: Promoting models that allow private practices to collaborate with hospitals and larger systems can improve care coordination and resource sharing.
• Legislative Advocacy: Engaging in policy discussions that protect the interests of private practitioners and address issues like scope of practice can help sustain their operations.
• Student loan forgiveness for those entering private practice, particularly those in rural and underserved urban areas in primary care.
• GME reform: Changing the primary care from specialist residency funding model
• Medical education: Curriculum reform that included the business of medicine and medical practice entrepreneurship

Saving private practice will take following the rules of Othercare. Here's how one start up is accepting the challenge. The doctor-technologist-entrepreneur is the new triple threat.

In addition, we are experiencing the next wave of consolidation, as demonstrated by the CVS-Aetna merger, from horizontal to vertically integrated systems independent from hospital based integrated delivery systems. Consequently, CVS will be the new community health center and "convenience and coordinated care centers" will draw traffic away from lagging primary care offices and inappropriate urgent care visits. Convenience and coordination now trumps credentials.

As of 2015 (the most recent healthcare employee turnover data available), the turnover rate among primary care and family medicine physicians averaged around 14%, annually. As the turnover rate of non-physician sick care professionals continues to increase, it is not unreasonable to expect the same increase in employed physicians. Here's what to do when your white coat gets the pink slip.

Saving private practice is mission-critical if we are to win the war against escalating costs and further system deterioration. Look for the Spielberg movie soon at a theater near you.

Arlen Meyers, MD, MBA is the President and CEO of the Society of Physician Entrepreneur on Substack