Independent Physician: 6 steps you can take to remain independent-for now

If Marcus Welby, MD, were in business today, he might have sold his medical practice to the local hospital.

Practicing solo, or even in very small groups, is becoming an increasingly difficult-although possible-proposition for many family and internal medicine physicians.

Growing regulatory pressures, privacy rules, the burdens of billing and collections, steep investments to incorporate electronic health record (EHR) systems, and onerous requirements of data collection are all difficult to manage on one’s own. These forces, coupled with declining revenues, are causing more doctors in small practices to consider employment over independence.

“What you’re seeing largely is that, as insurers continue to underpay providers, providers have no choice but to go into the arms of someone with more money,” says Joseph Valenti, MD, board member of the nonprofit Physicians Foundation. “Physicians are being placed into an economic situation which is untenable.”

Given that reality, it’s little surprise that a recent survey conducted by the healthcare staffing firm Jackson Healthcare found that not only are hospital acquisitions of physician practices up (52% of hospitals plan to acquire practices in 2013 as compared with 44% in 2012), the majority of those deals-70%, in fact-are initiated by doctors looking to sell.

“We expected hospitals to be acquiring internal medicine and primary care practices, most probably, to develop [accountable care organization (ACOs)]. That’s what we assumed. However, we’re finding that it’s more opportunistic than strategic at this point,” says Sheri Sorrell, market research manager with Jackson Healthcare. “Physicians are knocking on the door, and hospitals seem to be jumping at the opportunity.”

That doesn’t surprise American College of Physicians President David Bronson, MD, who says it makes perfect sense for doctors to approach their local hospitals or to listen when hospitals approach them. These days, doctors in private practices “are under more and more financial strain and don’t have the capital to invest in things that would help them,” he says.

Although recent acquisitions predominantly are about opportunity, hospitals also cite other reasons for the trend, the Jackson Healthcare survey finds:

• 58% of hospitals are scooping up physician practices to build a competitive advantage;

• 57% say practice acquisition is a doctor recruitment strategy;

• 55% say they want to maintain a competitive advantage; and

• 30% are acquiring practices as part of an ACO formation strategy.

Characteristics of the sale

Given the Affordable Care Act’s (ACA’s) emphasis on primary care, it’s not surprising to see that among the practices most desired by hospitals are those focused on general internal medicine and family medicine (see the tables on pages 30 and 31). In time, however, that scenario is likely to change.

According to Lou Goodman, PhD, president of the Physicians Foundation, several specialties, including colorectal surgery, ob/gyn, plastic surgery, anesthesiology, and radiology, thus far have been able to successfully maintain their independence. But in time, he adds, “specialists will be at the mercy of the hospitals. So the trend is [for doctors] to group together and get as large as they can.”

Another interesting aspect to the current acquisition trend is that selling seems to make the most sense for physicians who have been in business for a long time. “A lot of the older doctors are saying, ‘I can’t deal with it-EHR, administration, everything else. I think I’ll sell,’ ” Sorrell says.

Generally, she says, older doctors are finding compliance with the health reform law to be much more difficult than they anticipated-and a lot more expensive. And, of course, longer-practicing physicians are most likely to have well-established practices, which will be of greater value to hospitals.

But a generational mind-set also is at play here, experts say. Newer doctors-those in their 40s and younger-tend to be much more comfortable with the idea of employment than their older colleagues.

“We find that physicians under 40 are, by and large, employed,” Bronson says.

One reason for that situation is the high cost of medical education. “With medical students coming out [of school] with $300,000 of debt per individual, and then marrying another medical student whose story is the same…they’re in a financial situation where they’re not able to capitalize a practice by themselves,” Bronson says.

Industry surveys also indicate that newer doctors want to be in a system that offers health insurance coverage and doesn’t require them to put in the same hours as was once expected of physicians. “They want to raise their families. For them, employment is attractive,” Bronson says.

The Physicians Foundation has found the same thing in its surveys of doctors. Among the newer set, Goodman says, “the last choice is solo independent practice, which up until the last decade was the number one choice for doctors.”

Will the trend continue?

If trends continue the way they have been, more than 75% of newly hired physicians will be hospital employees within the next few years, according to a survey conducted last year by the physician search and consulting firm Merritt Hawkins.

The question is, can this spree of physician practice purchases continue?

“It will cool down, but it won’t go away,” Bronson says. “It’s not going to do what it did in the 1990s, where everybody bought everything and then they sold everything,” he adds.

Things are different this time around because market forces, coupled with provisions of the ACA, are forcing more fundamental changes, including clinical integration models and a greater focus on population health. Hospitals may become more selective over time, however, weeding out those practices that are less efficient.

Valenti also points to a tendency on the part of hospitals to buy practices that they feel very little commitment toward, creating a high degree of churn in many markets. “One of the trends we’re going to start seeing is all these doctors finding out that it’s not as great as they thought and leaving the hospitals and going back out [to private practice].”

Staying somewhat solo

The impulse to stay independent, regardless of market trends, is still strong among a significant number of doctors in practice today. A survey of more than 5,000 physicians conducted last year by malpractice insurer The Doctors Company found that 56% of respondents believed they were unlikely to change practice models over the next 5 years.

Regardless, it’s clear many will continue to feel the pressure to partner. “Physicians are being forced to look for ancillary sources of income because they just can’t make it on their practices anymore. That’s why you saw physician-owned hospitals open. And then the moratorium came out and made those illegal,” Valenti says.

Still, some options are available to doctors interested in remaining independent in today’s changing environment:

• Focus on value. According to Bronson, it’s important for doctors to look for opportunities to provide higher-value care through value-based purchasing approaches, such as ACOs and Patient-Centered Medical Homes.

“To do that requires practicing in a clinically integrated system that’s not necessarily financially integrated,” Bronson says. “These clinical integration models can help doctors both improve quality and, hopefully, reward them financially so that they are in a more viable situation.”

• Gather together. It’s becoming much more difficult for a very small family or internal medicine practice to survive in many markets today. But physicians who shudder at the thought of selling their practices to become employees should at least look to partner with other practices. This strategy can be a way of increasing efficiencies, lowering overhead, and increasing negotiating power for higher reimbursement.

• Take control. “What I would like to see, if we’re going to have consolidation, is that these consolidated groups at least be physician-led and physician-driven,” Valenti says.

And just that sort of trend is under way, according to Sorrell. “Physician groups are trumping hospitals by developing their own ACOs and then pitting one hospital against another and saying, ‘Okay, who wants to play?’ ” she says.

• Explore new models. Newer medical models, including concierge and micropractices, are working for a small minority of physicians, experts say, although currently they don’t seem to be a remedy for what ails the masses. “Those are experiments right now, and they are interesting concepts, but there is very little of that actually going on at the moment,” Goodman says.

• Choose carefully. If you do decide to sell your practice to a hospital, carefully evaluate your purchaser. If possible, avoid joining a hospital with a culture that is going to dictate how you practice medicine.

“You want to be able to add value to the system so that you are a partner with the hospital, even as you’re employed,” Bronson advises.

• Look for experience. Talk with others in the community to assess what kind of experience the hospital has with employed doctors. What’s it like for other physicians working in that environment?

“You’re going to find places that do it wonderfully well, and you’re going to find places that are very inexperienced and haven’t figured it out yet and make some mistakes,” Bronson says. Learn ahead of time, if possible, which one you’re dealing with.

A glimpse into the future

Will the market be full of independent primary care physicians in the years to come? Generally, the experts think not.

“Over the next 20 years, I would predict that we’re going to see a substantial decline in the truly independent physicians,” Bronson predicts.

As that decline occurs, however, both Valenti and Goodman see unintended consequences associated with widespread consolidation.

“Doctors and the health insurance companies seem to be fairly aligned on a lot of issues right now in that if physicians remain independent, the insurance business stays whole. If physicians don’t stay independent and become employed by institutions, those institutions will become so vertically integrated that they will be able to self-insure and write their own insurance,” Goodman says.

That’s something to watch as markets shift around the country.

Still, Goodman acknowledges, true independent practice, if not set up as a medical home or some other model that rewards coordinated and comprehensive care, is just not going to be possible going forward.