Put Doctors on Salary, Part 2

The previous post generated some consternation among several readers (for good reason). Here's a (somewhat) related article published in Fierce Health which highlights that independent practices earn more than their hospital owned counterparts. No wonder policy wonks, more likely to be from academia and academic hospitals, suggest everyone should be on salary: They can better control costs (aka your income) and preserve critical services (aka their income).

Clearly we're setting up for a significant power struggle in MA since ~60% of physicians are part of small independent practices yet legislators have decided that more consolidation in the form of ACOs is the solution to controlling costs. 

There's more money in independent practices...sort of

October 29, 2010 — 11:35am ET | By Dan Bowman

Apparently it pays--quite literally--to be part of an independent physician practice as opposed to a hospital-owned practice. According to a Medical Group Management Association survey presented at the group's annual conference in New Orleans earlier this week, the median total revenue at independent practices per full time physician in 2009 was just over $780,000, vs. roughly $448,000 for hospital or integrated delivery system-owned practices, a 44 percent difference reports Medscape Medical News.

But those numbers don't necessarily indicate that independent practices are more lucrative than their hospital/IDS-owned counterparts. Rather, hospital/IDS-owned practices tend to "reallocate income and costs," say the authors of the Cost Survey for Integrated Delivery System Practices: 2010 Report Based on 2009 Data.

"Everyone talks about how hospitals lose money on their own practices," MGMA president and CEO William Jessee said at a press conference. "And yes, they have lower revenue than non-hospital-owned practices, but a lot of this comes from how they account for the revenue. For example, a non-hospital-owned practice may account differently for the ancillaries they purchase, so there are some accounting differences."

In terms of compensation, doctors working in independent practices earned close to 20 percent more than those in hospital/IDS-owned practices. On average, hospital/IDS-owned doctors took home $294,984, compared with $353,549 for non-hospital/IDS-owned docs.

The survey reports statistics from 1,003 practices nationwide.

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Put Doctors on Salary, Survey (by Commonwealth Fund) Says

Here's an interesting article that will surprise few that follow the Commonwealth Fund's work. For the unfamiliar, the Fund does extensive health policy research and is regularly commissioned by the states to support their policy development efforts. Familiar or unfamiliar, the article is worth reading since it gives a glimpse into an idea that, for better or worse, is gaining steam: End the independent physician practice and put everyone on salary.

The NY Times ran a story which mirrors this theme earlier this year and highlighted that "an increasing share of young physicians, burdened by medical school debts and seeking regular hours, are deciding against opening private practices. Instead, they are accepting salaries at hospitalsand health systems. And a growing number of older doctors — facing rising costs and fearing they will not be able to recruit junior partners — are selling their practices and moving into salaried jobs, too."

Apparently, the Commonwealth Fund decided to put some numbers behind the anecdotes. Note they do not list independent physicians on their list of groups surveyed. Makes you wonder...

Put Doctors on Salary, Survey Says
October 26, 2010

The healthcare system would be much improved if physicians were all on salary, according to results from a survey by the Commonwealth Fund.

"The way we currently pay for healthcare leads to unnecessary confusion and wide variation, and sometimes borders on chaotic," said Commonwealth Fund president Karen Davis, PhD.

"Experts agree that if private payers and public programs could come together and agree to pay the same way, and the same amount, we can improve the efficiency of our healthcare system, eliminate administrative waste, and create better experiences for patients," Davis said.

The Commonwealth Fund, a left-leaning think tank, and Modern Healthcare magazine commissioned Harris Interactive to survey healthcare academics and researchers; leaders in healthcare delivery, business, insurance, and other health industries; and key players in government, labor, and advocacy groups.

A total of 190 experts participated in the survey, which was conducted between Sept. 7 and Oct. 6. The results were summarized in a brief written by Kristof Stremikis, MPP, Stuart Guterman, MA, and Davis. All three authors work for the fund.

When asked whether they supported salaried medical practice with "appropriate rewards for quality and prudent use of resources," only 11% said they did not.

Nearly three-quarters (73%) said they supported salaried practice with rewards for both quality and resource use. The remaining 16% supported salaried practice with rewards for quality, "but not connected to prudent use of resources," the authors noted.

Nearly half of respondents (49%) agreed that it was "important or very important" for patients to choose services and providers on the basis of cost.

Respondents also agreed that the reimbursement system needs to be simplified.

"Currently, public and private health insurers engage in a complex and continuous process of negotiations with multiple healthcare providers to establish reimbursement rates for services," the authors noted. "This increases administrative expenses among payers and providers and leads to wide variation in prices."

Related to that, 56% of survey respondents said they supported replacing the current system with either all- payer payment rate setting or a single system of payment rate negotiation on behalf of all payers.

Another 23% of respondents supported letting each provider set its own prices, where insurers would pay the lowest price and patients would pay the difference in cost for seeing higher-priced providers.

Just 9% of respondents supported keeping the current system.

Survey respondents also supported several other changes to the reimbursement system, including "value- based benefit design," in which cost- sharing for individual services varies based on the established effectiveness and potential benefit of the treatment or service; and "reference pricing," in which insurers and public programs pay for a drug, device, or service based on the lowest price of equally effective treatments.

Just over half of respondents (53%) of also supported using tiered networks, in which premiums for enrollees would vary based on the level of spending by the hospitals, physicians, and other providers they used.

The survey also asked respondents about transparency in healthcare pricing. Nine out of 10 respondents agreed that it was important for the public to have information on clinical quality, prices, and patient experiences.

"Such information could be used to encourage physicians to meet local and regional benchmarks, allow public and private payers to become more prudent purchasers of care, and to empower patients to identify and receive care from high quality providers," according to a statement from the Commonwealth Fund, which also noted that the new healthcare reform law, the Affordable Care Act, contains provisions aimed at increasing transparency.

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