CNN recently published an article titled “Doctors Going Broke.” It described several cases of independent physicians who are near bankruptcy.
The article detailed the case of Dr. William Pentz, a cardiologist in a small group practice, who had to borrow money last month to make payroll. He and the other cardiologists have cut their salaries in order to meet overhead.
Dr. Pentz ascribed the budget problems of the practice to the 35% to 40% cut in Medicare reimbursements for certain tests, such as stress tests. The practice overall saw a 9% decline in income compared to 2010.
Although some point to new regulations and declining enrollment as the source of the troubles, some financial experts point out that the problems may be due to the lack of business acumen of physicians and their staff.
A day after this report the Wall Street Journal published an article about the bankruptcy and decline of several large corporations, including Kodak. It compared these organizations to successful ones such as IBM. The piece emphasized that the successful organizations were willing to take some risks on future developments and invest some of their capital into these risks.
Like these businesses, physician practices that adapt to their changing environments succeed where others languish, subside or sell their practices to hospital groups or insurers.
Independent Physician Challenges
What are some of the common challenges that independent physicians as well as those that are part of hospital groups must face that directly affect income?
- Doctors face a 1% cut in Medicare reimbursement this year if they have not successfully demonstrated that they are using ePrecribing in their practice.
- They must start using the new HIPAA security protocols this year or face cuts in reimbursements.
- This is the last year that physicians can receive the full $44,000 for the adoption of EHRs.
These are the most prominent challenges facing physicians, but there are many others.
Primary Opportunities
What are some of the opportunities for independent physicians? Many independent physicians have looked at the changing landscape of reimbursement and have altered the way that they provide their services to maximize these new sources of income.
It seems that many of the increased sources of income are for primary care groups and others who provide primary care services. One such example that comes to mind is the Patient-Centered Medical Home (PCMH).
Although CMS is not reimbursing groups for becoming PCMHs yet, some private insurers are. Blue Cross Blue Shield of Michigan is rewarding practices financially that become qualified as PCMH’s. WellPoint and Aetna are also beginning to reward primary care physicians for becoming certified PCMHs.
Another example is the formation of Accountable Care Organizations (ACO) by physician groups. Most medical professionals think about the CMS’s rules for ACOs, but several physician groups are contracting with private payers to form ACOs, such as Advocate Care in Illinois.
How to Change
I have found some good resources that describe pathways for physicians to take to improve their income and outcomes for patients in this new landscape for reimbursement. One, in particular, is Pathways for Physician Success Under Healthcare Payment and Delivery Reforms; it is posted on the AMA website.
It describes in some detail the major new initiatives in payment reform, including PCMHs and ACOs. It also describes in some detail the skills needed by physician groups to successfully accommodate the new payment models.
Among the skills are the ability to improve the delivery of care, the quality of service, and the ability to be able to read and interpret data for the improvement of the quality of services delivered.
The AMA also has a webpage that has many other resources for the successful adoption of new payment models. The American Society for Quality also has resources for healthcare that help develop the skills necessary for the adoption of the new payment models.
Lean Healthcare, Six Sigma, and Total Quality Management are a few change processes physicians can adopt in order to improve their practice efficiency. At the heart of most of them is the Plan-Do-Check-Act cycle, a skill that most professional healthcare providers can learn. At its heart are teamwork and effective leadership.
Looking ahead to 2012 for your healthcare business, which pathway will you take? It seems manifest to me that continuing on the traditional pathway of the fee-for-service model exclusively only will result in a steady decline in income for most providers.
Adapting to new payment models gradually, but with willingness for some risk, likely will reward providers with new revenue sources and stable incomes.
Donald Bryant is a healthcare consultant who helps healthcare providers meet their challenges. Visit Bryant’s Healthcare Solutions website to get a free article: 7 Challenges in Healthcare and How to Solve Them. You may also contact Mr. Bryant directly at 616-826-1699.
