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Posted by on Aug 26, 2010 in Health care, Legislation

And…Small Medical Practices in Jeopardy

And…Small Medical Practices in Jeopardy


Two looming factors are set to ring the death knell for the small medical practice: 1) the sustainable growth rate formula; and 2) the Patient Protection and Affordable Care Act.

The former, set to kick in in December after numerous Congressional stays,* now dictates a 20-something percent drop in Medicare reimbursement to physicians. That alone could put the kibosh on many small physician practices that don’t have the financial reserve to withstand such a precipitous drop in revenue. And while the Obama administration supports a financially responsible (if one exists) repeal of the SGR formula, Congress is unlikely to act. Repeal of the 12-year-old legislation would be viewed as an untenable increase in spending. Consequently Congress has repeatedly suspended the formula, while keeping the law “on the books” to avoid a monstrous increase in the already monstrous deficit. 

Whether Congress will suspend the SGR formula yet again is a mystery, albeit a short-term one. General opinion appears to be swinging in the direction of allowing the legislated cuts to begin. In fact, Medicare’s trustees recently issued a rosy financial report on the program’s Part B service, which assumed the SGR-defined cut.

The second impending factor for small-practice physicians, PPACA, heavily promotes the consolidation of healthcare providers into large groups to withstand the number of legislated reforms, including investment in information technology. In fact, buried in an opinion/cheerleading piece for PPACA, newly published in the Annals of Internal Medicine, is the following forecast from White House health-policy advisors.

These reforms will unleash forces that favor integration across the continuum of care. Some organizing function will need to be developed to track quality measures, account for and manage shared financial incentives, and oversee care coordination. Consequently, the health care system will evolve into 1 of 2 forms: organized around hospitals or organized around physician groups. These coordinating functions, to the extent that they currently exist, traditionally have been managed by hospitals or health plans. Only hospitals or health plans can afford to make the necessary investments in information technology and management skills.

But the advisors spin not-so-different alternatives: 

This is not inevitable. As physicians organize themselves into increasing larger groups—patient-centered medical home practices and accountable care organizations—they are, out of necessity, investing in information technology tools that are becoming both cheaper and more capable and investing in the acquisition or development of management skills that could provide these organizing functions efficiently for physicians groups.

They then make a promise or threat, depending on your viewpoint:

Physicians who embrace these changes and opportunities are likely to deliver the greatest benefits to their patients, the health system, and themselves. Physician practices that accept the challenge will be rewarded in the future payment system.

It’s a spoonful of PPACA medicine that not everyone’s willing to swallow, however. Over at Medscape, reporter Robert Lowes found several physicians and/or health-policy leaders who argue against the seemingly inevitable vertical integration of healthcare. For some, like Dennis Smith, former Medicaid director under George W., the push is an “example of big government meddling,” Lowes reported. Lowes also obtained a nice quote from Smith: “If a physician’s only choice is to join a large corporation, we’re going down the wrong path.” There are plenty of physicians still around who remember not-particularly-happy experiences with large HMO-led practices in the 80s and 90s. 

* Five or 6 in the last year; I’ve lost count.

Still from Black Narcissus trailer. Here Kathleen Byron (in a sinful red dress) plays the role of PPACA, and Deborah Kerr (in a nun’s habit) is the physician in a small medical practice.

bmartin (1130 Posts)

A native East Tennessean, Barbara Martin is a formerly practicing, board-certified neurologist who received her BS (psychology, summa cum laude) and MD from Duke University before completing her postgraduate training (internship, residency, fellowship) at the Hospital of the University of Pennsylvania in Philadelphia. She has worked in academia, private practice, medical publishing, drug market research, and continuing medical education (CME). For the last 3 years, she has worked in a freelance capacity as a medical writer, analyst, and consultant. Follow Dr. Barbara Martin on and Twitter.