Here is a recent post from Dr. Wes’ blog:

Patients are increasingly moved through a healthcare system unaware of the powerful market currents shaping the direction and costs of their healthcare. A moonscape of larger and larger behemoths of healthcare are slowly taking shape across America as more and more doctors succumb to the inevitable market forces intent on squashing the former entrepreneurial healthcare climate, resulting in fewer patient options for affordable healthcare.

Are you positioning your practice to fight against these “inevitable market forces”?  Are you looking outside “business as usual” for your practice to find ways to expand your revenue sources, decrease costs, and strategically plan for the future?  Are you preparing that inner entrepreneur that exists inside of you to allow your independent practice to flourish?  If not, your practice may just be gobbled up by hospitals or large groups.

I’m beginning to feel as though this next decade will see the end of medicine as we know it. The market forces have become too powerful to fight anymore.

We frequently consult with practitioners on exit strategies from their businesses.  The most common theme that we see is that the practitioner-owner has pulled out every last dollar from the business and when it comes time to exit they are left with a business that isn’t worth very much.  At that point, it makes more sense to unwind the business rather than try and sell it.

When consulting these individuals on building value into their business prior to exiting, we often discuss moving some income into investments for the business (i.e. savings, money market, portfolios, joint ventures, ownership in subsidiary companies, etc.)  We try to instill that these are strategies that need to be implemented well before that moment of exit so that when it does come time to sell the net worth of the business is substantial enough for someone to take a second look at.

On the list of investments provided above, I left out Real Estate.  Here is a recent post on the idea that Real Estate may be the most valuable item on the books.

In any small business, including running a physician’s office, the most valuable piece of your business is the real estate. Most people have heard the McDonald’s story of founder Ray Kroc, who believed that the most valuable aspect of McDonald’s was the real estate underneath each restaurant. For small business owners including physicians, getting a piece of the dirt underneath their business is essential.

Here is an interesting take from an economist looking at the “business model” of small health care practices.

For most small business owners, the productivity of each employee increases revenue. Whether the product is a widget or a hot-dog or computer software, the general concept of employee productivity is that employees increase revenue and the more revenue per employee the better. Thus as sales escalate to the point of needing another employee, the revenue from that person’s productivity more than covers his cost. Thus scaleable businesses typically have desirable business models.

In private practice medicine, revenue is dependent on the productivity of one person - the doctor. Hiring more employees does not increase his productivity. The only thing that can increase revenue is for the doctor to work harder and faster to see more patients or do more procedures. He is the rate-limiting step in the business model. This is the reason why your trips to the doctor’s office get shorter and shorter.

Check out the rest of this article here.

We’ve blogged a lot about the primary care shortage in America (read a few posts about it here and here and here…and here) and the resulting impact this is having on patients who are looking for a primary care physician and can’t find one.  But this is only one impact the shortage is having on the healthcare economy.

There are many primary care doctors who have made the choice to stick it out and remain “cognitive specialists” in a failing system, and while it is a struggle, many find a way to survive.  There is strength in numbers though, and the ability for primary care physicians to stick together, recruit, and partner together to tackle the challenges that are thrown their way is reaching a tipping point whereby the numbers aren’t there to support a group approach to primary care practice - there simply aren’t enough doctors, especially in rural and underinsured areas.

Read more in the Baltimore Sun about a report released by the National Association of Community Health Centers on the topic.

When his colleague departed in December, family doctor Charles Bennettthought he would soon find a new partner for his private practice in Lusby. But he has had no luck for the past eight months.

“I’m still trying to find someone, but I don’t think it will get any better in the foreseeable future,” said Bennett, whose Calvert County practice employs four staff members. “The process is very time-consuming, and I am already very busy as it is.”

Bennett’s troubles stem from the fact that the United States faces a serious shortage of family physicians, especially in rural and poorer communities. There are too few primary care doctors and nurses to meet growing health care needs, according to a report released yesterday by the National Association of Community Health Centers. The study found availability depends on location.

There’s a reason that the California Healthcare Foundation has raised $10 million to create a low interest loan pool for California clinics serving low-income and uninsured persons - and it’s not because they have cash on hand.

We regulary recommend that private practice owners prepare their practices for unforseen circumstances by building up several months cash on hand.  This isn’t easy to do, and the temptation to bleed cash out of a business for personal income is difficult to resist when building up a stockpile of cash - but, boy can it be worth it.

Having several months of operating cash on hand both prepares a practice for opportunity that may present itself (expansion, new hires) as well as protection against downturns in the economy or other undesirable scenarios.

Have a strategy of infusing cash back into your practice over several months or years in order to meet a reasonable objective for cash on hand.  Whatever you do, avoid having to dip into credit lines that require a bail out such as this.

The state as of August is deferring to providers Medi-Cal payments, which account for up to 50 percent of health center revenue, to address the state’s crisis. According to the California Primary Care Association, the action is costing its 700 member clinics and health centers $1,500 each minute that the state budget impasse continues.

Some 41 percent of clinics report being able to cover operating expenses without Medi-Cal reimbursement for 30 days or less, according to the association. Interest on traditional lines of credit available for these clinics can range as high as 14.5 percent.

How’s this for a healthcare policy trifecta? - Gift bans for pharma reps, $25 million in EMR incentives for private practices, and university requirements to boost primary care graduates.  Three big issues in healthcare today…one clean law to deal with them.

Tackling major issues in healthcare policy isn’t easy, and tackling three large ones with one fell swoop is quite ambitious.  Pushed forward by Senate President Therese Murray, the new Massachusetts law was signed into law yesterday by Governor Deval Patrick.

The law is just the beginning however, and much more planning will be required to achieve what the law intends over the coming years.  Read more about the law at the Boston Globe.

Patrick’s Human Services Secretary JudyAnn Bigby said that while universal health insurance is an important goal, the current system is lacking if everyone cannot get access to quality care, or premiums and out-of-pocket costs become too costly for patients.

“We have to make sure that people have access to high quality care and that we are being efficient in the way we pay for that care and that we are paying for the right things,” Bigby said in an interview. The law Patrick signed yesterday “puts the challenge to those of us who have to implement it to do more planning.”

This article in USA Today reports on a trend reported by the CDC regarding the frequency of visits to the physician’s office.  The CDC reports that visits increased 26% between 1996 and 2006, the same time period that experienced an 11% growth in population.

The reason?  An aging population.

Juxtaposed against this information from the University of Missouri which predicts a shortage of 44,000 primary care physicians by 2025 (I blogged about this recently in a post about supply in demand in healthcare here) and we’ve got a problem on our hands.

Time to get crafty with our access points into the healthcare system…

The aging of the U.S. population is translating into many more visits to doctors’ offices and hospitals, a reality that is taxing weak spots in the health-care system, according to a government report released Wednesday.

One of the core services offered within the healthcare industry is time.  Time to ask questions of our physicians, one-on-one time with our physical therapists, and time for our providers to actively evaluate and make recommendations for us as patients.  As a core service, time is both a driver of revenue and costs within the healthcare model, making it one of the most important and most scrutinized variables by physicians, practice administrators and insurance payers.

The notion that a correlation between the amount of time providers spend with patients and the quality of service provided is conceptually valid and serves as a platform for many of the ethical debates waged in today’s healthcare arena between providers and insurance companies.  If providers are increasingly paid less by insurance companies for the time they spend on their patients, it’s easy to see that incentives will be in place to increase the volume of patients seen, and decrease the amount of time seen with each patient.  From a qualitative standpoint this sets the stage for the ethical and political battlefield between providers, patients and payers.

Interestingly, a recent systematic review of 5 studies performed in the United Kingdom has called into question the correlation between time spent between provider and patient and the quality of care delivered, bringing another variable into the equation - the way that the time is used.  Appearing in the Cochrane Library, the review suggests that patient satisfaction was not significantly higher when more face time with physicians was made available and physicians did not practice in a manner significantly different depending upon the amount of time they spent with their patients.

Now, I don’t believe this review in any way wipes out the validity of the argument that there is a correlation between time and quality in healthcare - it simply stands to reason that providing more time allows for the opportunity to provide better care.  It does however bring to the table fodder for discussion about the “elements” of time that are important as relates to quality of care, rather than simply the time itself.

Some patients might feel like they spend more time in the waiting room than actually talking with their doctor, but a new review of studies suggests that these consultations would not be much different if patients had more face time with their physicians.

In five studies conducted in the United Kingdom, doctors did not discuss more problems, prescribe more drugs, run more tests, make more referrals or do more examinations when they had a few additional minutes with patients.

Interesting theory here: pay more money to the initial point-of-contact physicians, allow them to spend more time with the patient, let them perform a more thorough screening, and just maybe it will save money in the long run.  It makes very good sense and early experiments in several states by multiple payers presented in this article show that it might just be true.  It might also entice more medical students back toward primary care.

The idea is that by paying family physicians, internists and pediatricians to devote more time and attention to their patients, insurers and patients can save thousands of dollars downstream on unnecessary tests, visits to expensive specialists and avoidable trips to the hospital.

Nationally, Medicare and commercial insurers pay an average of only about $60 a visit to the office of a primary-care doctor and rarely if ever pay for telephone or e-mail consultations. Many health policy experts say the payments are not enough to let the doctors spend more than a few minutes with each patient.

We blog a bit about healthcare policy at The Healthcare Entrepreneur, but mostly about the impact that policy has on practice owners and how practice owners must adjust in order to stay afloat in the midst of our turbulent healthcare landscape. 

There is no bigger influence on this landscape than Medicare, and the recent activity in Congress surrounding the scheduled 10.6% cuts to the physician fee schedule have had us all on edge, as we now wait for a final answer from President Bush who The White House confirms intends to veto legislation to reverse the cuts (HR 6331) - the legislation was recently passed by the House of Representatives and the Senate.

To put it bluntly - and quite obviously - this is a pretty big bummer for our Medicare practices.  With payment rates dropping by approximately 40% over the past decade, and practice costs rising every year, why would anyone think that medical practices wouldn’t have cause to adjust - if they don’t, they’re not going to survive.

So, as one would expect, physicians and other healthcare providers who accept Medicare patients are quite simply beginning drop the program.  Even worse, some are talking about leaving the profession altogether.  This ABC News report speaks to the pain that physicians are feeling and how they are responding to the pressure.

To [Dr.] Tipsword, this round of Medicare reimbursement cuts, to become effective July 15, could make or break her family practice. (In many states, these cuts affect Medicaid too.)

“I have struggled to build up my practice, but my outlook gets worse each year,” Tipsword said. “The current round of Medicare cuts — which will cut my repayments, which are miniscule right now — as well as increasing malpractice insurance coverage, despite an A+ rating, makes it less feasible for me to continue practice.”

However, the meeting yielded no short-term fix for the problem, and by the end of the session it was clear that the 10.6 percent cut would likely go through anyway.

Now, Tipsword says she is working on an exit strategy from the program. At times, the bureaucratic demands of the job make her consider going even further.

“Due to all the daily headaches of practice — referrals, endless duplicate paperwork to prove medical necessity, phone calls, documentation, etc. — I would honestly love to get out of medicine altogether,” she said.