Why are physicians abandoning private practice?
What’s behind the U.S. physician shortage?
Could Medicare for All help?
There has been a dramatic shift in the nature of physician practice during the past 40 years. Not only is there a growing shortage of physicians, the number of physicians working in their own practice has dropped since the 1980s.
How significant is the physician shortage? Why are many physicians abandoning solo practice? Are these two processes connected in some way? How would things be different for doctors if the U.S. had a Medicare-for-All, single-payer type healthcare system?
How significant is the physician shortage?
A 2020 study by the Association of American Medical Colleges projects “a shortfall of up to 139,000 physicians by 2023.”
While the study suggests two major causes – the increasing healthcare needs of the aging U.S. population and the expected retirement of many doctors – there may be more to the story.
A 2018 article in Medical Economics suggests that “paperwork and administrative burdens” are among the top challenges faced by medical professionals today, and the situation appears to be worsening.
According to respondents to a Medical Economics survey three years later, in 2021:
…prior authorizations consumed, on average, more than 16 hours per week of practice time, including 11.6 hours for staff members and 4.6 hours for themselves.
Paperwork and administrative requirements are also linked to the alarming increase in physician burnout rates, especially among primary care doctors.
What about the shift away from private practice?
In 1983, 76.1% of physicians owned their own practice, according to the American Medical Association (AMA).
In 2018, 54% of doctors reported working in a physician-owned practice.
Just two short years later, in 2020, only 49.1% of 3,500 U.S. physicians surveyed by the AMA were working in a physician-owned practice.
Moreover, the number of physicians working in larger, nonphysician-owned practices continues to rise.
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Listen & Learn!
This post was inspired by interviews with Dr. Nancy Niparko, a pediatric neurologist, who left private practice several years ago. She argues that health insurance companies are “putting private practice out of business.” Listen to her compelling story in these super-short podcast episodes:
(9 minutes)
(8 minutes)
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Why are physicians abandoning solo practice?
Physicians have various options besides being a solo practitioner, such as joining a group practice as a partner or employee, working as an independent contractor, etc. Each option comes with its own benefits and risks. Some offer more independence yet higher financial risks while others offer less autonomy and fewer risks. See the appendix below for more details.
There are many reasons a physician might leave a solo practice, including financial pressures, reimbursement hassles and overhead costs.
According to a recent report by Jackson Healthcare, physicians employed in hospital primary care increased from 10 percent in 2012 to 20 percent in 2014.
When asked why they are choosing hospital employment over private practice, 37 percent said they are tired of dealing with the administrative hassles of private practice and want to focus on being physicians, not businessmen.
–HealtheCareers, 6/11/2018
In addition, the upfront costs of establishing a solo practice are considerable, especially for a newly graduated doctor who might have student debt that averages between $200,000 and $250,000.
Another primary consideration is the considerable billing and administrative burden practicing physicians face as a consequence of America’s multi-payer health insurance system. When a practicing physician operates a solo practice, administrative costs are not shared. The solo practice must cover all the collections costs.
Would things be different with Medicare for All?
Some doctors are starting to think so, according to this article in The Hill from February 2020:
“Physicians are increasingly frustrated with paperwork” … which stems in part from having multiple insurers — all with different rules and documentation requirements. One possible solution is to have just a single payer: the government.
Not only would insurance-related billing expense be significantly reduced, so would the numbers of uninsured and underinsured patients:
“…[doctors] see the lack of insurance as standing in the way of their patients getting affordable care,” said Bob Doherty, senior vice president of governmental affairs and public policy for the American College for Physicians. “And increasingly, they’re finding [that in] an employer-based private insurance system, because of rising deductibles, even people with insurance can’t afford the care.”
But there’s more. According to a survey by the Alliance for the Adoption of Innovations in Medicine, as reported in Fierce Healthcare:
The survey (PDF) of 600 doctors found that 89% said they no longer have adequate influence in the healthcare decisions for their patients. And 87% reported that health insurers interfere with their ability to prescribe individualized treatments.
“Medical professionals feel angry and frustrated knowing that unqualified insurance company personnel have the power to override their professional judgment and that the long-term health of their patients is being compromised so health plans can achieve short-term cost savings,” said Shannon Ginnan, M.D., director of medical affairs for Aimed Alliance, in an announcement about the survey.”
Bringing all this together is Dr. Carol Paris, past president, Physicians for a National Health Program, writing in Common Dreams (2018)
“Since for-profit insurers ultimately decide what will be covered, it’s like having a third party in the exam room second-guessing our medical decisions. This process disrupts the doctor-patient relationship that we work so hard to build. And copays and coinsurance (what patients pay out-of-pocket) mean that even smaller practices must employ several full-time staff just to handle payments, billing, and collections.
“Smaller practices spend an average of $83,000 per year on claims, coverage and billing. Doctors personally spend nine hours each week on billing and admin; that’s time we’re not seeing patients. It’s no surprise that doctors today report unprecedented levels of exhaustion and burnout.”
Bottom Line
Medicare for All could increase the job satisfaction of U.S. doctors by reducing the cost of overhead and billing-related administration, eliminating health insurance interference in treatment decisions and assuring that every American patient has guaranteed, affordable health care.
Eliminating the hassles and costs associated with the complex, multi-payer commercial health insurance system improves the chances that a small physician practice can cover expenses, while at the same time offering doctors a better quality of work life.
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APPENDIX
Physician Practice Options, Benefits & Risks
From the American College of Physicians website
Physicians have various options when it comes to setting up their practices. Each option comes with its own benefits and risks.
Solo practice: While solo practices offer physicians a degree of independence and the ability to work more closely with a smaller patient base, there are significant downsides to this form of practice from a business perspective. For example, there is a substantial and often expensive burden related to private health insurance billing and regulatory compliance documentation. In addition, the solo practitioner takes on the financial risk of this business model alone.
Group practice: In this form of practice, two or more physician partners have the ability to serve a larger patient base than a solo practitioner, while sharing the financial risk of running the business. This includes dividing business expenses such as the billing department and the expense of other administrative tasks associated with the practice. Nevertheless, individual physicians in a group practice may feel a loss of autonomy, and the potential for conflict is real.
Employed Physician Practice: Physicians may be employed directly by hospitals or clinics, or solo and/or group practices may be purchased and managed by hospitals. Also, a physician-owned practice may be set up like a corporation and employ physicians rather than bringing them on as partners. Again, this model allows sharing of the administrative burdens and can provide a greater measure of security around compensation and support services. It may also offer physicians the ability to better afford the cost of group benefit plans for practice physicians and employees. However, this form of practice again involves the sacrifice of physician autonomy as policies, procedures and organizational activities are defined by others.
Direct Primary Care: This type of alternative practice shuns the traditional health insurer payment model and instead charges patients a flat periodic fee for a defined set of primary care services. Some alternative practices will work with high-deductible, supplemental insurance plans that cover a broader set of medical services not including primary care. This type of practice greatly diminishes the administrative burden on both doctors and patients, as it eliminates provider network issues, co-pays and third-party billing administration while bringing price transparency to the medical transaction. However, in this model it is the patients who assume the financial and health risk of gaps in coverage for specialty care and hospitalization.
Independent Contractor: A physician may work for a solo or group practice as an independent contractor. Again, as with employed physicians, independent contractor physicians lose some autonomy, but they may be able to share the expenses of running their practice.
Locum Tenens: A locum tenens physician is usually hired as an independent contractor to provide temporary support in a variety of clinical settings for a stated duration of time. This form of practice allows physicians to try out different types of practices in different parts of the country or even internationally. These positions can pay more than a salaried position, but they do not come with benefits or malpractice insurance coverage.
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