Primary Care Practice Economics

Primary Care practices are under severe financial pressure. The costs of being in practice continue to rise, and the reimbursements are limited by contracts with insurance companies, Medicare, and MediCal. Up until this month Medicare was threatening a 10% cut in fees, but substituted a one-half per cent increase for six months. The future is uncertain.


Options for increasing practice revenues to cover these increasing costs are limited. In a recentMedical Economics article a Family Practice group was given a free formal practice management evaluation. They discussed many issues and fine points, but their conclusions were similar to other consultants — increase your patient volume and add new services, especially new cash services.


This explains the rise of the new hybrid medical practices. Dermatologists are now selling skin care products in their offices and on the internet. OBGYN Physicians have women’s health spas. General surgeons are providing hair transplants. Cardiologists installed nuclear imaging equipment. An ENT surgeon offers hair removal. And this is just in our local community.


Family Practice, Internal Medicine, and other non-specialty practices are more limited in their ability to add new services. There are a few creative practices, but most offices increase their patient volume. In the article, they recommended 35 patients in an eight hour day, which is less than 15 minutes per person.


Nurse Practitioners and Physician Assistants are helping the Primary Care Physicians manage the increased volume at a lower cost than a second physician. However, hospital nursing wages and increasing competition for their services with specialists, has raised their costs for the primary care practices.


Primary Care Physicians are being offered moonlighting employment after-hours at the hospitals admitting unassigned patients from the emergency department. The hours are from 10 PM until 6 AM. Labor laws designed to prevent excessive fatigue do not protect practicing Physicians.


Financial pressures are changing the way primary care is practiced. Office overhead is 50% of revenues. A 10% decrease in patients (4 patients) causes a 20% decrease in the Physician’s income. It is expensive for a Physician to leave and idle his staff to go to the hospital for an urgent visit. In fact, at a 15 minute per person pace, a few 5 minute telephones call from the hospital upsets patient flow. This is forcing Primary Care Physicians to abandon their traditional role in the hospital and turn their patient over to a Hospitalist.


Office efficiency is affecting the scheduling of patients. In the past a Primary Care practice would schedule patients until 2or 3 PM and allow unscheduled urgent visits to fill the remaining time at the end of the day. If the schedule remained open, the Doctor would complete his hospital work early and be home for a regular dinner with his family. Today, the schedule is probably overbooked to account for cancellations.


Pre authorization programs are taking more staff time. A recent letter from Blue Cross, in partnership with the National Imaging Associates, Inc (NIA), outlined new utilization procedures to be followed by the referring office for non emergency imaging procedures. These programs are designed to reduce costs for over utilization of expensive imaging tests. The additional Physician and staff time required to request the test is not offset by additional insurance payments. It is an example of rationing by inconvenience. (Incidently, NIA is owned by Magellan Healt Services, MGLN, on the NASDAQ. It is interesting to look at their stock price over the last 3 years to see another area of growth and thus cost is in health care.)


Every insurance plan has different benefits. Office deductibles, co payments, and covered services are difficult to calculate. This causes a delay in payments or the need for a refund check. Postage expense at HMC is 1000 dollars a month, and at 5% interest, the cost for the accounts receivable is 2000 dollars each month.


High office overhead is causing Primary Care Providers to close their practices. Without office overhead, Hospitalists earn the same income working 10 to 12, 12 hour hospital shifts each month. Physicians just completing their training are going directly into these programs. There is going to be a shortage of Internal Medicine Physicians in Redding. Look in the Yellow pages and count the number of Internists, and then guess dhow many of them are over the age of 55.


Each year our Medical societies and politicians ask the Primary Care Doctors to be patient, that help is on the way. They have excellent analysts and advisors. I believe that they understand the problems, but that they have a fundamentally different plan or solution.


Change is evolution, sometimes difficult and frustrating, but a little easier to accept when you understand the cause.

Please follow and like us: