PATIENT SAFETY
Health care delivery consolidation: What it means for physicians By Hall B. Whitworth Jr., M.D., physician consultant, MagMutual
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or more than three decades, the number of health care providers in solo practice has steadily declined. In 1983, 41 percent of physicians were in solo practice, but by 2014 that number was a mere 17 percent. At the same time, the number of physicians practicing in groups larger than 25 has increased from five percent to 20 percent. In addition, the American Medical Association’s (AMA) 2016 biannual practice survey determined that, for the first time, more than half of American physicians did not have an ownership interest in their practice. What’s changed and what are the forces behind this change? These are the questions facing not only individual physicians but the health care industry at large. The majority of this change in practice group size is explained by the aggressive acquisition of physician practices by hospital systems. In 2016, data from the AMA showed that 32 percent of physicians or their practice groups were owned by hospital systems. In 2012, it was 29 percent. This trend has accelerated due to the result of changing payment models, the consolidation of health care delivery, and generational issues. In 2013, physician groups of nine or less accounted for 40 percent of practices; by mid-2015, this number had declined to 35 percent. At the other end of the spectrum, physician groups with more than 100 doctors have increased from 29 percent to 35 percent in the same time period. This trend impacts primary care physician (PCP) groups – where consolidation has happened faster in recent years as more PCPs join larger practice groups. Research suggests that hospitals in many regions were concentrating on organizing their current medical practices, while also trying to align with independent practices in ways other than direct purchase. Multispecialty practices that include primary care are especially attractive for hospital acquisition, with 45 percent of such groups currently owned by hospitals. There also appears to be a generational trend of young physicians choosing private practice less frequently. As older private practice and small group physicians retire, they’re not being replaced by younger ones. This is driven, in part, by younger physicians choosing practice environments with wage security and personal considerations – such as more predictable hours and work-life balance. Several changes in health care delivery and market dynamics have had significant impact on these shifts in practice organization. In addition to patient care, physicians have a 26 MAG Journal
new administrative burden on them, balancing the pressures of building and maintaining a business as well as managing employees. These pressures require more time and expense, often requiring a reduction in physician compensation to hire the necessary business and administrative employees. The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) was passed in an effort to move from a fee-forservice payment model that rewards volume to a value-based payment system. MACRA allowed two pathways for physician payment: a merit-based incentive payment system (MIPS), as well as advanced alternative payment models. These changes have placed a heavy burden on smaller independent practices. Significant reporting requirements regarding compliance, cost and quality are not only mandated for Medicare, but have been increasingly utilized by private insurers and employers. These programs require a significant increase in infrastructure to manage cost collection, management, and the data reporting – which can be overwhelming for smaller practices.
As older private practice and small group physicians retire, they’re not being replaced by younger ones. Furthermore, there are increased demands on physicians to provide a seamless coordination of medical care in order to manage patients with increasingly-complex, chronic medical conditions. Ancillary services – including quality assurance, nursing care, and population health initiatives – are increasingly required in an effort to reduce the fragmentation of care, improve collaboration and meet the demands of health care today. Population-based health care incentive programs require large practice populations to minimize downside risk potential to better manage the financial risk of incentive contracts. Larger practice settings have the economy of scale – along with the resources and capital – required to help manage these administrative burdens, make business decisions, and organize care coordination. Research suggests that in four common specialties, the average physician spends 785 hours per year in administrative time to report quality measures.