Independent Medical Practice: Does Healthcare Reform Mark the Beginning of the End?

Declining reimbursements, uncertainties about the future and the hassles and costs of running a practice have all combined to make many of today's physicians yearn for some sense of security. In a growing number of cases, they have found it by giving up their independent practices in favor of employment arrangements.

With this trend already established, some observers say healthcare reform, while perhaps not driving the independent physician into extinction, will make it a lot more difficult or unappealing to practice medicine in the traditional way. The law's focus on quality, efficiency and accountability make alignments with hospitals more appealing and may make life even more difficult down the road for those doctors who choose to go it alone.

"I think the independent small medical practice, given the need for integration into delivery systems, given the expense and need for healthcare IT, will not be able to afford to exist," says Patrick Breaux, MD, president of the Louisiana State Medical Society. "I think those will be a thing of the past."

Cardiology takes a hit
Dr. Breaux, a cardiologist and internist whose multispecialty group practice was lost in Hurricane Katrina, now is employed by Ochsner Health System and says many of his colleagues, especially those in cardiology, are joining integrated systems like his. "Within the last year, lots of doctors have been giving up independent practice," he says. "The cost and expense of running a cardiology practice is huge."

Recent Medicare reimbursement cuts to various cardiology procedures, especially those involving imaging, threaten to cut physicians' payments by 10-40 percent, according to the American College of Cardiology. This has led many cardiologists to join hospitals just within the past year. In fact, roughly half of cardiology practices have now migrated into hospitals, says ACC spokeswoman Amy Murphy. "Practices are going away, hospitals are gaining cardiologists, but the costs of the same procedure are higher in the hospital setting than in the practice setting," she says, which leads to higher costs to payors and higher co-pays for patients.

Cardiologists are not the only physicians embracing employment models. In 2003, 8 percent of the Medical Group Management Association's members were in hospital-owned practices. In 2008, that figure rose to 10 percent, a 25-percent increase, according to MGMA data. In that same time period, the size of hospital-owned practices grew from a mean of 64.3 physicians to 76.3 physicians.

Specter of accountability drives alignments
This trend is likely to accelerate under healthcare reform, especially among specialty surgeons such as gastroenterologists, orthopedic surgeons and other major users of ancillary services, predicts David Gans, MGMA's vice president of innovation and research.

Also of note, he says, is healthcare reform's promotion of so-called "accountable care organizations." In one policy brief by Urban Institute researchers Robert Berenson, MD, and Kelly Devers, PhD, an ACO is defined as a "local health care organization and a related set of providers (at a minimum, primary care physicians, specialists and hospitals) that can be held accountable for the cost and quality of care delivered to a defined population."

Under healthcare reform, ACOs will likely be able to share in the cost savings to Medicare that they achieve. A hospital-physician integrated system is better positioned to take advantage of such opportunities than the independent physician, Mr. Gans says. "They already have the governance in place, the methodologies in place, and could take care of cost sharing and have a single contractual relationship with the government," he says.

Primary care physicians join hospitals
Kenneth Bertka, MD, FAAFP, CPHIMS, a director of the American Academy of Family Physicians, went from being in a small group practice for 20 years to becoming the chief medical information officer for the Northern Division of Catholic Healthcare Partners, a 34-hospital system based in Toledo, Ohio.

While Dr. Bertka says he is still "very passionate about private practice," he found he was able to better satisfy his interests in larger reform issues and engage in leadership roles within the AAFP by joining a system. Juggling these responsibilities and interests would have been far harder had he stayed in a small practice environment, he says.

While Dr. Bertka does not see independent medical practice going the way of the dinosaur, he says evidence suggests that 40 percent of primary-care physicians will be employed by hospitals or systems within the next two years, up from "the mid to upper 20s" today.

"The government and the private side want to switch from paying for procedures and volume to paying for outcomes and value," he says. "To do that you really need that team approach and clinical integration."

The current physician shift is partly the result of "psychological" factors such as uncertainty about the future, says Tommy Bohannon, the vice president of hospital-based recruiting at Merritt Hawkins, a physician search and consulting firm. "We don't really know what's going to happen, and it's going to be a long time before we do, so maybe it's better to be in a seemingly more stable environment with a hospital," he explains.

His firm got caught in the middle when it was hired to recruit for an independent physician practice that switched gears midstream and decided to align with a hospital. "Between the time we found (a candidate) and the interview a week later, the group had decided to enter into discussions with a hospital to acquire the practice," he says. "We had to change the spin to the candidate."

Jeffry Peters, chairman of the board of Health Directions, a consulting firm that focuses on hospital-physician strategies, says the combination of the expense of ancillary services, the sophistication of billing and collections processes, the depth of healthcare IT systems and increasing staff costs have driven physicians to seek out new models. Some 75 percent of all physicians coming out of medical school are looking for employment opportunities, and he expects private practice eventually to drop to less than 25 percent of all physicians and practices.

While independent practice may not become totally extinct, Mr. Peters offers another possible analogy. "It's going to go the way of independent grocery stores," he says. "They're still there, they still have a place, but it ain't what it was 20 years ago."

Contact Barbara Kirchheimer at barbara@beckersasc.com