04/21/2023
Have you been wondering why so many doctors are leaving their small private practices?
I will tell you what I tell my patients: is no longer a profitable enterprise. That is why doctors are leaving it and selling their practices to corporations. Drive down any street and you’ll see a plethora of retail pharmacy clinics, hospital owned urgent care centers and large health systems with big ads all over the place. Where is Jane Smith, MD hanging out her shingle? She can’t - and here are four factors at play:
1. Rising administrative costs - The cost of running a business is always on the rise. This is true for everyone from Amazon to my hairdresser. In medicine, however, we have some unique challenges. There are a host of non paid tasks that take up ever more time- coding and prior authorizations for example. Hours are spent on these tasks. People are hired to navigate these complex systems- with no direct return in reimbursements to the practice for the time and money spent on them.
2. Low and falling payment rates - While the costs of running a business are increased, reimbursements from insurance have either plateaued or decreased. Basic math tells you that this won’t end well for a small business. Yet medicine’s business model is such that insurance sets our prices- we do not have the ability to charge more (or less).
3. The doctor differential - Did you know that as an independent physician, I get paid less by insurance for doing the same work as a health system employed physician? An annual exam or procedure done in my office reimburses me less than it does for my colleagues employed by the large health system down the street. It is true, for reasons listed below.
4. Lack of negotiating leverage - When negotiating with insurance, it helps to be a big fish. Small doctor owned practices do not have the same resources to negotiate with insurance, and our voices are often ignored. We have to take what they give us- no room to argue. While many doctors made do with less for many years in order to practice medicine the way they knew was best, in the end the economics of the system took over.
For these reasons and many more (rising malpractice costs, anyone?) most independent doctors have decided to sell their practice to the large health systems, or to private equity firms that promise them less headache and larger returns.
The most recent numbers from early this year confirm this - only 26% of physicians in the US today are in private practice. Medicine in a small practice is simply not sustainable!
