Stop Waiting! How to Thrive Under Health Reform

Stop waiting and get in the driver’s seat of your practice.

The entire health care industry first waited to see if the Patient Protection and Affordable Care Act (PPACA) would pass. It did on March 23, 2010. Then, the entire health care industry waited for over two years to see if PPACA would be upheld by the U.S. Supreme Court. It was on June 19, 2012. Now, some of you are waiting for the presidential election on Nov. 4, 2012 to see if President Obama is voted out of office and Mitt Romney along with a Republican controlled U.S. Senate and U.S House of Representatives will “repeal and replace Obamacare.”

The good ole’ days of a Marcus Welby style of practice are over. Let’s not romanticize the past. Instead, let’s focus on the ways that PPACA can benefit your practice acknowledging the aging population, increasing chronic disease, looming labor shortages and continuing calls for delivering more value at lower cost for all types of services from legal to medical.

The passage of health reform and the recent U.S. Supreme Court decision, while not the sole driving force behind changes in the business models of physician practices, is clearly an important driver. How PPACA will impact your practice and your ability to earn an income revolves around three factors:

• Your specialty

• Your business model

• Your current financial health

Specialty makes a difference

Under PPACA, primary care physicians stand to benefit economically. Oddly enough, general surgeons are included within the ranks of primary care. Primary care providers received additional Medicare payments in 2011 and will receive a boost in Medicaid funding in 2013 and 2014.

For all physicians, it is anticipated that with the opening of health insurance exchanges along with subsidized premiums by the federal government, more individuals will have insurance coverage than in the past — anywhere between 30 to 50 million people.

In health care though, volume does not automatically translate into practice success. Your costs cannot be higher than your charges and collections. Assuming that you increase the efficiency of your practice and expect that your patients take an active role in their own health and health care, your practice is likely to benefit from the following PPACA provisions:

• Insurance companies are prohibited from rescinding coverage (effective Sept. 23, 2010) which means that fewer of your patients will leave an unpaid bill.

• Lifetime limits on insurance coverage are eliminated (effective Jan. 1, 2014) which means that more of your patients can pay for more services without being concerned about dipping into their own pocket.

• Annual limits on insurance coverage are eliminated (effective Jan. 1, 2014) which means that more of your patients don’t have to consider cash on hand to avail themselves of your services.

• Paperwork and administrative costs are reduced by standardizing billing and requiring health insurance companies to use a health insurance exchange (effective Oct. 1, 2012).

Design of business model makes a difference

The solo practice was the business model of choice for decades. Today, fewer than one out of three physicians are practicing in a one- or two-person practice. Overhead costs have increased over the years with an increasing regulatory burden, escalating administrative burden associated with accepting payments from different insurance plans and the growing demands for advancing technology. All of these factors combined with downward pressure on reimbursement rates and declining ability of recession-weary patients to pay deductibles, co-pays and insurance have left many physicians with no option but to design a different business model that works financially.

Other business models include joining an independent group practice, becoming an employed physician of a hospital or health system, launching a concierge medical practice, venturing out to develop business that utilizes your medical knowledge and skills but does not require you to see patients, and preparing yourself for an administrative medical career.

The bottom line is that you have more choices today than you did during the Marcus Welby days of medicine. There are three keys to translate PPACA into a boom not a bust.

1. Develop multiple streams of income or revenue to diversify risk. Reflect for a moment on how many different ways that retail establishments allow you to pay for their services.

2. Wean yourself off government and private insurance. Position your medical services in a way that patients will pay out of pocket just like they did before the first health plan came on the scene in 1929 in Baylor, Texas.

If you provide value in the eyes of customers, they will reach into their pockets and pay for your services. Ask yourself this question, “What would happen if all insurance, government and commercial, were to disappear tomorrow?”

3. By fully utilizing and supervising advanced practice clinicians (APCs) with a full patient load, you can get reimbursed for engaging in more complex services at a higher rate.

Financial health makes a difference

As a practicing physician, your financial health is dependent upon your specialty given the income differences between specialists and primary care physicians although this gap is likely to narrow as pressure mounts to decrease specialist income and increase primary care income.

Your current financial health is also dependent upon factors that you can control such as: your practice overhead based upon your choice of business model; your spending habits both business and personal; and the rate of growth in your investments both financial and professional.

Thriving under health reform

Back in the 1960s, when Medicare and Medicaid were first launched, the predictions were that medicine would be destroyed. These dire predictions did not occur. It is reasonable to conclude that PPACA will not destroy medicine as we know it today.

Yet, it is also true, that to thrive as a practicing physician today you must seriously consider doing the following:

• Formulate your practice vision and write a strategic plan.

• Decide upon a business model that meets your financial, lifestyle and specialty needs.

• Leverage multiple streams of income and revenue to diversify your risk.

• Position your practice to exist and thrive even if reimbursement disappears or dramatically declines. Follow the lead of Lasik centers, concierge practices, plastic surgeons and dermatologists, not to mention dentists, optometrists and psychoanalysts.

• Pay down as much debt as possible today and set aside additional money for upgrading your practice, to position your practice to be sold at the highest value, to sell your practice at the highest price, and to prepare for a retirement in which your current lifestyle is maintained if not enhanced.

Marty Martin is on the faculty at DePaul University and is a financial psychologist at Chicago-based Aequus Wealth Management, a financial planning firm specializing in helping people bounce back and thrive during times of transition. For more than 10 years, he has conducted and applied research in the psychological aspects of money and how to help individuals, couples and entrepreneurs make better financial decisions. To reach Dr. Martin, email him at marty@aequuswealth.com.