“The Future of Medical Practice: Creating Options for Practicing Physicians To Control Their Professional Destinies,”

White Paper for Physicians Foundation, by Jeff Goldsmith, PhD, Associate Professor, Public Health Services,  University of Virginia with Comments In Red  by Richard L. Reece, MD, Medinnovation Blog

The Shape of Things to Come

H.G. Wells(1866-1946), title of book, 1933

October 9, 2012 – This is the summary of a 70 page White Paper commissioned by the Physicians Foundation.  Its author is a well-known and highly regarded futurist, President of Health Futures, located in Charlottesville, Virginia.   I have organized this post by citing verbatim each paragraph of Goldsmith’s paper, which is excellent and perceptive with a comment of my own.

“The practice of medicine was damaged by the recession, but the reports of the demise of private medical practice are, to paraphrase Mark Twain, exaggerated.  Overhead costs for private physician practices increased markedly over the past five years as the number of physician office visits has fallen. Physician morale has fallen both because of these economic pressures and because of the failure health system reform to address how to improve professional practice.  However, physician costs have been supplanted by hospital and health insurance premium costs as the driving foes in U.S. health cost inflation.”

Private practice still lives. But on the health inflation front, as physicians become hospital employees, hospitals charge more for physician employee services, and hospitals can negotiate higher rates from health plans.

Much of the turmoil in the physician market over the past five years has as its root cause the impending retirement of the large baby-boom cohort of practicing physicians. More than 230,000 U.S, physicians older than 55 have seen their retirement plans disrupted by the recession.  The continuation of an economic and stock market recovered could lead to a sharp withdrawal of older physicians from medical practice, perhaps as many as 80,000 to 100,000, in the next five years.

Baby boom physicians began turning 65 in 2011, and according to a September Physicians Foundation survey, six of 10 will retire if given the opportunity.  With recovery of the economy will come the opportunity?

This withdrawal will coincide with 36 million baby boomers entering the Medicare program and perhaps 30 million more Americans receiving health coverage from health system reform, creating a catastrophic physician access problem.  The Association of American Colleges (AAMC) has predicted that despite a 20% expansion of media school class size, the United States faces a physician shortage of up to 160,000 by 2025.

A “catastrophic physician shortage” is an apt way to put it. A political crisis over this issue will explode in 2015.

The employment of physicians by hospitals sharply increased in the past eight years: the impetus appears to be physicians seeking income security, as much as overt hospital strategy. In 2012, full-and part-time hospital employment of physicians represented little more than 15% of all practicing physicians.  That same year, hospitals’ economic lasses per physician average $212,000, potentially threatening hospitals’ financial positions and bond ratings.  Hospitals have neither the economic resources nor management capacity to absorb a much larger portion of the practicing physician community.

A hospital in the Northeast recently cut its physician workforce’s salaries by 30% across the board. You’ll see more of these cuts in the future, as Medicare cuts hospital reimbursements.

Even with the expansion of hospital employment, physician care remains highly fragmented.  Even in competitive urban markets, more than 40% of physicians still practice in groups of fewer than five.  While there do not appear to be compelling economies of scale in physician practice, large practices have strategic advantage in improving services, upgrading and leveraging information technology (IT), and managing health care costs. Group practice membership, regardless of sponsorship, given by 1% from 2003 to 2010, and appears poised to continue growing.

Size matters – in marketing, efficiency, and administrative reasons – but because of its very nature, medical practice will remain a one-on-one enterprise.

New practice models – from the solo “micro practice” to the patient-centered medical home to direct-pay practice – hold promise for diversifying physicians’ service offerings and for improving physician productivity.  Moreover, digital technologies that enable real-time claims management and payment, automate dictation and coding, and improve physicians’ communication with each other and with patients could lower overhead costs and enable more efficient practice.  Medical practice innovation holds the key to private practice being a viable alternative to salaried employment for the next generation of physicians.

Spot on.   Digital technological innovations could prove to be the salvation of private practice through increased productivity and real-time humanization of patient-doctor relationships.

Both Medicare and commercial insurers likely will increasingly delegate both risk- and cost-management responsibility to physician groups and independent practice associations (IPAs) in coming years. This is due partly to the increasing concentration of hospital markets and partly to the recognition that improving physician decision-making holds the key to successful cost containment.

This is the thesis underlying Accountable Care Organizations – with capitated budgets and rewards for population health improvement.  This may be slow to come as both hospitals and doctors see ACOs as threats to their income and autonomy.  Both are loathe forming ACOs, given the expense, income risks, and anti-trust risks.

Promising physician-owned and directed risk-management models – from IPAs to special needs plans targeted at the chronically ill to physician –sponsored plans – can serve as organization templates for this expansion.  Physicians’ willingness to organize to manage population health risk will be essential to regaining control over their professional lives.  The alternative is to continue to have their clinical decisions micromanaged by health plans and Medicare.

I am not buying this argument.  Managing “population risk,” when you have no control over the make-up of the “population,” remains a gleam in the eye of idealistic reformer’s

The Affordable Care Act of 2010 virtually ignored the task or renovating and strengthening medical practice.  Its main focus seems to be on reforming and expanding health insurance coverage and searching for substitutes for physician management of patients.  Numerous policy changes are needed for physicians to be active participants in a reformed health care system.

So far, as reflected in physician opinions in the September Physician Foundation e-survey of 630,000 physicians, the Affordable Care Act is a monumental tactical and strategic mistake.  The election of November 6 may change dynamics and strategies of reform, making it more physician- and private-sector based.

The most important policy change needed is a dramatic increase in Medicare’s valuation of the physician’s exercise of professional judgment, both in diagnosis and management of clinical problems. The report proposes a 30% upward valuation in fees for evaluation and management, as well as for diagnostic decisions, under the Medicare program, in addition to the modest increase provided in the Affordable Care Act.  This increase would not be confined to primary care physicians, but would extend to diagnostic decision makers such as cardiologists, radiologists, and pathologists.

Presumably this would be done by upgrading valuation codes and downgrading certain performance codes.  This is tricky terrain, as clinical judgment tends to be subjective and the eyes of the beholder.

It is also recommended that Medicare eliminate the “site of service” differential that enables hospitals to charge more for physician services provided in a hospital setting than in private practice. Also recommended are reductions in hospital payments for outpatient imaging and surgical services vs. the same services in lower-cost private setting.

In other words, do away with hospital “facility fees.”  This would have two predictable consequences. One, hospitals would move outside their walls and acquire physician-owned revenue-producing services.  Two, physicians would organize to set UN and run their own services.   This is a centrifugal force, moving outside large institutions to provide services, as opposed to a centripetal force, concentrating everything inside hospitals.

A federal Commission for Administrative Simplification in Medicine (CASM) should be created to evaluate and reduce where possible physicians’ reporting requirements, both for claims payment and quality improvement rather do not return either savings or measurable reductions in patient risk relative to the documentation costs imposed on physicians and other clinicians.

“Federal Simplification” is a non-sequitur.

Physicians accepting debt reduction would agree to be paid somewhat lower fees from the Medicare program in exchange for debt relief.  Federal assistance should be available for physicians or physician/hospital organizations to create new provider-sponsored health plans or IPAs to compete in increasingly concentrated health insurance marketplace.

I like the idea, but am skeptical Medicare bureaucrats would go along with physician or hospital friendly policies.

State hospital associations should join state medical societies and business groups to advocate for meaningful tort reform. Further, malpractice “sea harbors” should be created for physicians who donate their time to community, public health, or nonprofit health enterprises and for physicians who become meaningful users of clinical information technology.

Malpractice “safe harbors”, “health courts, “and caps on malpractice damages are excellent ideas, and their time may have come.   I am dubious, however, about rewarding physicians as “meaningful users of clinical information technologies.”  In my experience, the word “meaningful” is a code word for progressives who espouse more federal intrusion into private affairs.

Tweet:  Read the White Paper “The Future of Medical Practice” by Jeff Goldsmith, PhD, by going to Physicians Foundation.org, and downloading.