Time for Physicians to Take Care of Business (Part I)

Arlen Meyers, M.D., M.B.A., recently asked a provocative question of members of the Medical Group Management Association: “Why do doctors have an aversion to business?¹”

His case that the medical and medical educational culture makes it that way is a troubling observation. According to Dr. Meyers:

“The culture teaches patients first, not profits. There is a conflict between the ethics of medicine and the ethics of business.”

“Practice management is not a priority in medical school” despite there being plenty of people on faculty and in the community to teach it.

“Students and residents are not interested in learning business because they are tired and have too many clinical obligations…”

I do not believe that doctors have an aversion to business, and will better manage the ethics of it themselves. I do believe that they will be a victim of the business of healthcare if they do not act now to consolidate into diversified, vertically integrated practices with economies of scale and parity with hospitals and payers.

Here’s why:

This time, even the healthcare industry is a victim of the economy. The Department of Health and Human Services released its healthcare spending report for 2010 on January 9, and spending has not only slowed, it has slowed to the second lowest rate in 51 years - the lowest being in 2009 - and then only by one tenth of a percent. Last year and the foreseeable future does not promise to be much better.

People are postponing elective surgery, doctor visits, even prescription refills according to the report. Physicians providing elective services are hardest hit. High unemployment, loss of healthcare benefits, plummeting incomes, and depleted cash and credit reserves continue to take their toll. High deductibles and copayments often make accessing healthcare services a major financial decision - one often delayed for as long as possible. Sooner or later, the increasing acuity borne of later diagnoses, and cost of treating them, will further stress the system.

Few dispute that Medicare is in trouble, a condition exacerbated with 10,000 seniors qualifying for benefits every day, and that the river of cash has to be stemmed to save the system. The only way to do it is to reduce benefits, eligibility ages, and reimbursements.

Healthcare reform, if it survives, will dump millions onto the Medicaid roles, and not only from the uninsured. Hundreds of very large employers have been given waivers from insurance mandates and thousands will opt to pay fines rather than provide coverage, shifting their employees, who used to reimburse at commercial rates, into a system paying at cost or less. Real healthcare reform, from the tort system to the patent office and FDA, are distant dreams. Add a global economy destined to struggle for the better part of a generation, divided political leadership, a multi-trillion dollar industry full of disparate, competing interests and the outlook is grim.

All of this leaves only one certainty - whether the real problems are addressed or not - there will be deep and deepening insurance reimbursement cuts forced by economic realities. Care won’t have to be rationed. It will largely be, as it already is for many today, unaffordable despite being insured. Mainstream physicians and surgeons are already beginning to offer financing options from companies that built their businesses on uninsured electives such as plastic surgery and orthodontics.

Episodic healthcare providers have seen this coming for years, and they have acted by consolidating regionally and nationally while diversifying their services and vertically integrating.

Next week, I’ll get into the role of the private physician in this healthcare crisis.

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¹Why do doctors have an aversion to business?
Posted: 12/24/2011 www.sopenet.org – Society of Physician Entrepreneurs, Arlen Meyers, M.D., M.B.A.