The Reports of the Death of the Independent Practice Have Been Largely Exaggerated

Monday's New York Times feature "New Law’s Demands on Doctors Have Many Seeking a Network" interviews two practices in Louisville, Kentucky — one owned by the hospital and one owned and operated independently by a physician. The article illuminates many of the hurdles that all physicians are working to overcome: insufficient reimbursement, rising regulatory and compliance costs, and a seismic change from volume to value due to the Affordable Care Act (aka Obamacare). The piece wasn't meant to be a report on the independent physician as a whole — just a profile of two practices responding the changing dynamic of the industry.

Why Hospitals Can Do What Independent Practices Can Not

One of the things that stood out starkly for me in the article was the Medicaid discussion. Most physicians would like to care for at least some Medicaid patients if their practice can afford it. The article emphasized that the hospital-employed physician, Dr. Jonsson, could see Medicaid patients because the hospital will recoup some of those fees by serving Medicaid patients in other areas of the hospital, particularly ancillary services such as lab and imaging, and potentially outpatient or inpatient procedures or surgeries. In addition, the hospital has a community mission to fulfill. The independent physician Dr. Ragland, on the other hand, has to be very careful about taking Medicaid patients as she has no other potential fees from Medicaid patients to offset office visits as a "loss leader" and she is not a non-profit entity. She is a small business trying to make a go of it.

Hospitals are required by law to see any patients who come to the Emergency Room, whether or not the ER is the right level of care for the patient's medical problem. It is in the hospital's best interest to redirect patients away from the ER and into primary care practices such as Dr. Jonsson's. Hospital-owned practices currently have the ability to charge more for the same office visit than independent practices do, and most payers will pay the larger charge! Just this week, Highmark (Blue Cross of PA) said that as of April 1, 2014, it will no longer pay more for the same care rendered in a hospital-owned practice than it will in an independent practice. Many physicians employed by hospitals don't realize that their patients are receiving two bills for care — one for the physician's care and one for the use of the facility, and that the patient has to shoulder an additional financial burden because of it. It will be interesting to see if hospitals begin to winnow their employed physician numbers if all payers follow Highmark's lead.

Who Is Hospital Employment Right For?

There is no doubt in my mind that hospital employment is the right choice for many physicians. For a physician right out of residency with big loans to pay, a guaranteed paycheck can be the right thing. For physicians who are tied to their current practice by partnership agreements and a heavy debt burden, selling to the hospital can be the way to untangle from big buildings, costly medical equipment and an expensive electronic medical record system (EMRs) and eventually, emerge back into private practice with a clean financial slate and a desire to restart small.

How Physicians Can Afford to Be in Independent Practice in 2014

Starting small and possibly staying small is the advice I give to most of the physicians who approach me about starting a new practice. Today, physicians can have their own practice with any of a number of new models that allow them to start lean and stay lean. Some of these models are:

• Micropractice - a physician and a computer
• Direct Primary Care (DPC) - the patient pays a monthly fee for all primary care and has insurance for specialists, tests and hospitalization
• Cash Practice (may be called Concierge) - no insurance accepted, an annual fee for all care from a primary care physician or specialist
• Traditional Insurance Practice With Limited Medicare or Medicaid
• Traditional Insurance Practice Without Medicare or Medicaid - accepting commercial insurance only which eliminates the requirement for EMR, Meaningful Use (MU) and other compliance mandates
• House Call Practice - a physician and a computer
• Telemedicine - a physician and a computer
• Nursing Home Practice - a physician and a computer
• Visiting Surgeons - a physician and a computer seeing patients in the Primary Care Physician's practice

These models all address the Big Three traditional financial barriers to independent practice. They are:

The Office

The physical space of the physician's office has changed drastically in recent years. With electronic record storage, a single doctor with a laptop or tablet in a patient room can be the entire practice. Physicians can rent space from other practices or systems with available space, or find office space intheir own home, a time share medical space or a non-medical office building. Telehealth can even completely eliminate the need for office space under certain circumstances.

The Technology

Practice Management (PM) and Electronic Medical Records (EMR) software has always been a big investment for practices, independent, affiliated or otherwise. Between hardware, software, training, and maintenance, the costs for implementing the PM/EMR programs could be a significant barrier to starting a practice - or even changing vendors. Today, the declining cost of computing and the availability of cloud-based storage and software has meant a significant reduction in costs, and a shift from large capital outlays at the beginning of the contract to monthly service operating costs that can be better controlled and planned for. Some packages are even available for free or on a freemium model.

The Management

The administrative burden, and pace of change in the industry can give physicians the sense that they can't handle it all on their own. The marketplace for experienced management talent is competitive and expensive, and small practices are managing these costs in addition to all of the others. However, new networks of physicians like ACOs and new variations on the Independent Practice Association, as well as the widespread availability of cheap internet voice and video communications means that practices can bring in more resources — the negotiating power of an ACO, or IPA, or fractional administrator services via video — without losing their independence.

To be clear — it is tough out there, especially for the independents, and especially in primary care, which encompasses pediatrics, family medicine, OB/GYN, internal medicine and geriatrics. But physicians have options — a lot of them — and they have a lot of tools at their disposal that make it possible to practice on their own terms. For those willing to adapt to the new paradigm, it is a great time to be in independent practice.

Mary Pat Whaley is a Physician Advocate and Consultant who blogs at Manage My Practice; her LinkedIn Group by the same name is for those interested in healthcare management. You can contact Mary Pat at marypat@managemypractice.com.

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