Health-care law driving doctors away from small practices, toward hospital employment


Health-care experts who tesitified on the Hill on Thursday warned that Obamacare may be sending more private physicians fleeing for employment at large hospitals. (Michael Schennum/AP)

The health-care reform law is accelerating a shift away from private practices as doctors, fearful of new costs and regulations, “run for cover” under the protection of large hospitals.

During a hearing before the House Small Business Committee on Thursday, health-care professionals explained that the shift has already been picking up momentum in recent years, driven largely by growing regulatory and administrative burdens, rising malpractice costs and declining reimbursements from insurers — all of which they say have hit small practices especially hard. Consequently, doctors are shying away from the traditional solo practitioner model in favor of employment at large hospitals, which amid constant industry changes, can provide more financial security and take responsibility for keeping up with new regulations.

Research by Accenture shows that the number of physicians who own their firms dropped from 57 percent in 2000 to 43 percent in 2009, and it’s projected to continue falling to 33 percent by 2013. Mark Smith, president of national physician recruiting firm Merritt Hawkins, added that only 2 percent of his company’s search assignments this past year were on behalf of small practices, down from 42 percent in 2004.

“The classic model of independent, small physician practice still exists today, but it’s rapidly becoming a relic of a bygone era,” Smith said during his testimony. “This model is only likely to persist in any numbers in smaller, rural areas where there are few physicians; and even here, physicians will likely need to partner or affiliate with larger entities in some way.”

Now there’s an additional catalyst physicians say may expedite the decline of small practices — the Patient Protection and Affordable Care Act, passed in 2010 and recently approved by the Supreme Court.

For starters, PPACA made Accountable Care Organizations — referring to groups of providers that take responsibility for the care for an entire patient group — an official part of the Medicare program this year, giving hospitals added incentive to scoop up physician partners.

“Because of bundled payments and other measures in the law, hospitals want to make sure they have enough primary care physicians, particularly, as well as specialists that they can have in their Accountable Care Organizations so they can participate,” Dr. Jerry Kennett, senior partner at Missouri Cardiovascular Specialists in Columbia, Mo., told lawmakers.

But the law also comes with new regulations and non-compliance penalties that could further deter doctors from self-employment.

“There is no question that it has accelerated that process,” Smith said, referring to the health-care reform law. “Physicians are running for cover because of the intensity of the penalties within the new system. There is so much more regulation, and the penalties are so great, physicians are very fearful that they’ll make an honest mistake and be held financially accountable.”

Doctors on the panel also warned that PPACA’s $500 billion cut to Medicare could translate into even less reimbursement for those who care for patients insured by the government. Already, many physicians are turning away new patients because they’re taking a loss or barely breaking even when working with Medicare.

The more patients private practitioners are forced to turn away, the less viable their business model becomes.

Dr. Louis McIntyre’s physician group, Westchester Orthopedic Associates in White Plains, N.Y., has already fallen victim to the evolution. Once an expanding independent practice with nearly 50 employees, the business was eventually saddled with plummeting Medicare reimbursement revenues (which fell roughly 18 percent nationwide over the past decade) and a 300 percent increase in malpractice insurance rates between 1994 and 2010. Legislation passed in 2009 piled on new technology burdens, pushing the firm to invest about $500,000 to adopt and later update an electronic medical records system.

Profit margins quickly disappeared, and McIntyre and his fellow physicians ultimately abandoned the private model to become employees of White Plains Hospital in 2011.

Nevertheless, the Westchester native noted that independent medical practices represent a “significant economic engine,” commonly contributing some of the most income and corporate taxes of any sector. He also stressed that, at least in his county, they were the once the fifth largest employer.

“If private practice disappears, patient access to care, local employment and tax revenue will all suffer,” McIntyre said, noting that White Plains Hospital has since absorbed the only other orthopedic group in the area. “We need to strengthen private practice as well as the other models of health-care delivery to ensure patient access to quality care.”

Follow J.D. Harrison and On Small Business on Twitter.

J.D. Harrison covers startups, small business and entrepreneurship, with a focus on public policy, and he manages the Post's On Small Business blog.
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