Saturday, November 1, 2008

Health care and the economy - Positive Impact of Private Practice on the Economy

The news for private practice has not been good in recent years. Private practice is said to be “fragmented,and its practitioners are deemed responsible for much of the increase in health care spending. Furthermore, private physicians are criticized for being slow to install EMRs. The thrust of criticism of physician economic activities is that these practices drain government treasuries and budgets.

Suggested Solutions

Solutions to slow spending generally impinge on physician’s autonomy. Solutions suggested include

• abandoning private practice to assume salaried positions,
• minimizing fee-for-service incentives through capitation or salaried arrangements,
• relying heavily on “best-practice protocols” to make clinical decisions,
• employment as hospitalists or in hospital “owned” practices,
• joining large groups,
• curtailing utilization,
• ceasing “self-referral” to facilities in which physicians have a financial interest,
• bundling of fees with hospitals,
• limiting payment updates in high-cost areas,
• cutting fees, making it difficult to practice profitability
• extending Medicare payment rates to all of private practice

The Flip Side

As with other economic debates, a flip side exists -
private offices powerfully stimulate local and state economic activities, employment, and tax revenues.

GEMS (Georgia Economic Modeling System) Study

A September 2008 study by the government of Georgia’s
– GEMS (Georgia Economic Modeling System), “The Estimated Impact of Private Physicians’ Offices in Georgia,” byWes Clarke and Adam Jones of the Carl Vinson Institute of Government – indicates that in 2008, private physician offices in Georgia,

• supported nearly 190,000 jobs,
• generated more than $10 billion in private income,
• increased total economic activity by nearly $20 billion.

Impact of Each Private Physician

Each private physician directly or indirectly supported or generated

• 13 additional jobs
• $640,000 in personal income
• $1.5 billion in total economic activity
• More than $1.2 billion in state revenues
• $15. billion in local government revenues.

What Study Did Not Include

These economic impacts are even more impressive considering they did not include hospital-based physicians, hospitals themselves, or other components of the health industry. Private practice office economic activities were almost one-half the size of the entire contraction industry in Georgia and as large as the financial and insurance industries combined.

Purposes of Study

Why was study done? It was a collaborative effort between the Georgia Medical Association and the Carl Vinson Institute of Government. Its purposes were to encourage the Georgia graduate education system to produce more physicians and to highlight the physician shortage in Georgia, which currently has 17,500 physicians but expects to fall 2,500 short by 2020.

Given current economic projections, by 2020 private practice offices will support more than 270,000 jobs, generate $17.8 billion in revenues, and increase total economic activity in Georgia by $32 billion.


In addition to delivering essential health care services to patients, private practice physicians’ offices in Georgia provide jobs and economic activity vital to the communities they serve and the rest of the state.

In 2008, the estimated impact of private practice physicians in Georgia totaled more than $20 billion dollars in
output, supporting nearly 190,000 jobs and producing more than $10 billion in personal income for Georgia’s families. Based on current trends, that figure is expected to grow 43 percent to about 270,000 jobs by 2020.

Each physician in private practice supports between 6 and 20 other jobs, depending on medical specialty, and produces significant economic activity in the state. If Georgia’s graduate medical education capacity is increased to decrease the projected physician shortage, the economic output of private practice physicians could grow to nearly$35 billion by 2020.

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