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Private practice wanes, physician employment shifts due to MU rules

The meaningful use program may push some doctors out of private practice ownership, a physician employment trend that threatens the delivery of care.

As the meaningful use rules grow more stringent and Medicare and Medicaid payment reductions loom, many doctors are making the decision to give up their privately owned practice rather than continue dealing with the electronic health record guidelines.

The trend of physicians opting for employment over practice ownership is not necessarily new. Medicare and Medicaid payment reductions that took place over the last couple decades made running the business side of a practice difficult for some doctors. More recently, aspects of health reform and the weak economy made physician employment at hospitals a more secure option for some doctors. But the meaningful use rules, which set the bar high in terms of EHR use for some doctors, are increasingly being seen as the last straw that makes operating a private practice financial untenable.

"Most [private practice owners] flat out do not have the ability to do this," said Travis Singleton, senior vice president at Merritt Hawkins, a Dallas-based physician recruitment firm, referring to the meaningful use requirements. "They're going to have to seek a larger partner; even the ones that want to just can't."

When you add things like EMR implementations or doctors who are being driven to a different delivery system, all this does is pour gas on the fire.
Travis Singletonsenior vice president, Merritt Hawkins

He said there are a number of economic factors that make it difficult for private practices, particularly small ones, to implement EHR systems in accordance with the meaningful use rules. First, getting a system up and running can be labor-intensive in the short-term. While the workflow disruptions may eventually pass, private practices that are already operating with slim profit margins may not be able to sustain a month of decreased patient volumes.

Second, few practice owners -- who Singleton said tend to be older than employed doctors -- have the technical skills necessary for implementing a complex system on their own. In many cases this means they have to bring on a new employee to handle implementation and maintenance, which can be costly.

Practices do have the option of not participating in the meaningful use program, which would mean absorbing Medicare or Medicaid payment adjustments starting in 2015.

"We hear a lot of providers who say, 'We'll put up with it till 2015, but then I'll either retire or go to one of those other delivery systems,' and that's a scary proposition in a system that already needs more doctors," Singleton said.

While the meaningful use program is voluntary, some say private practices don't really have any option, as sustaining payment cuts would make operating the practice impossible. Some evidence suggests that practice owners are already making other plans.

A November 2012 report from Accenture showed the percentage of independent physicians dropped from 57% in 2000 to 39% in 2012. That number is expected to fall to 36% by the end of 2013. As part of the report, researchers asked a group of independent doctors about their employment preferences. Among those who were seeking employment, 53% said the meaningful use rules were among their top reasons for leaving private practice and seeking physician employment.

"What's important is that there really isn't an option to do nothing," Kaveh Safavi, M.D., who leads Accenture's North American health industry division, told SearchHealthIT. "It really isn't an elective decision. They have to go forward into this digital world. The patients' expectations, safety expectations, public reporting expectations, reimbursement expectations basically say that the traditional business-as-usual world is just not viable."

Robert Smith, M.D., founder of Finger Lakes Family Care in Canandaigua, N.Y., likes his EHR system.

At this point, Smith said his EHR system makes him more efficient in the delivery of care, allowing him to operate with a smaller administrative staff, which limits overhead expenses. But it wasn't always easy. When the practice first started using its EHR system staff took longer to enter patient information, a problem that is commonly reported by recent EHR adopters. Smith said his practice was small at the time, but believes larger practices with more patients would struggle more to overcome the workflow disruption.

While enthusiastic about EHR adoption, Smith is no fan of the meaningful use program. He said the guidelines of the incentive program do little to support the efficiency of his practice. Ultimately it is the technology itself that does that. Nevertheless, he is following the rules, which he described as "silly," and is receiving incentive payments.

"Is the banking industry using paper anymore? Of course not," Smith said. "They're not getting kickbacks from the government. Meaningful use to me is just a silly windfall. It's not persuading me to use an electronic record."

Smith's practice was eventually able to compensate for implementation hurdles, but other practices continue to struggle. The situation is causing practice owners to make some tough decisions.

Smaller practices typically have fewer staff and financial resources to put toward EHR implementation and they may treat more Medicare patients, said Jason Fortin, senior advisor with Naperville, Ill.-based Impact Advisors. Even if a small practice was able to implement a certified EHR system and qualify for stage 1 meaningful use incentives, there is no guarantee this practice will survive stage 2 and beyond.

Fortin pointed out that the EHR market is currently crowded and many vendors who were certified under stage 1 may not make it to stage 2. This could leave many practices scrambling to implement new systems before the stage 2 deadline. A second implementation, which may require a second round of limited patient volumes, could pose a major financial challenge.

"For a smaller practice the requirements can be a little scarier," Fortin said. "They want to pick a vendor that will continue to achieve certification, and a small practice is going to have relatively fewer resources" to complete implementation.

Squeezing physicians out of private practice may have a number of implications to the health care industry. For one thing, it could worsen the looming physician shortage that threatens to limit access to care. Merritt Hawkins' Singleton said employed physicians see about 17% fewer patients each day than independent practitioners. Also many primary care doctors who work for hospital-owned practices are more likely to work part-time hours.

"These measures keep pointing back to the same problem. At a time when we're adding more patients to the system, we're seeing less patients per physician. And when you add things like EMR [electronic medical record] implementations or doctors who are being driven to a different delivery system, all this does is pour gas on the fire," Singleton said.

Fortin added that private practices where doctors are focusing on meeting the meaningful use rules may miss opportunities to improve care elsewhere. He said practices need to implement EHRs in the context of broader health care reforms, such as opportunities to participate in accountable care programs. But physicians who own their practice and are struggling to keep up with revolving meaningful use rules may not be prepared to transition away from fee-for-service payment models.

This story has been updated to reflect the correct spelling of Kaveh Safavi, M.D. We regret the error.

Let us know what you think about the story; email Ed Burns, news writer, or contact @EdBurnsTT on Twitter.

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