Primary care is the loss leader of medicine

Medicare’s sustainable growth rate, or SGR, has been the bane of doctors for years now.

To encapsulate, this is the reason for Medicare’s annual threat to cut doctors’ fees by 20% or more, only to be staved off at the last minute.

Emergency physician Shadowfax has a nice take on it, explaining why it has devastated primary care:

Primary care has many fixed expenses in addition to those we bear: they pay rent, nurses and techs and secretaries, healthcare costs for their employees, equipment, scheduling software, etc etc. The fixed costs portion of a typical office practice can be much higher, consuming 60-80% of gross revenue. Worse, many of these “fixed costs” for primary care are not truly fixed, but increase annually consistent with inflation.

I wrote several years ago that primary care is the “cheap DVDs” of the medical profession — a loss leader to bring people in the door for more lucrative services.

Shadowfax agrees, arguing that it’s unlikely there will be any independent primary care practices in the near future:

I predict that, if nothing else changes in the overall model of physician reimbursement, within a decade there will be almost no independent primary care left in existence — they will all have been subsumed into hospital-owned or group practices to serve as “loss leaders,” existing solely to drive referrals to profit centers like surgical services and imaging facilities.


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  • Umair U. Khan

    If what you’re saying is true, the incentives for good primacy care will be completely misaligned. PCPs will have every incentive to refer further within their group/hospital instead trying to provide great preventative care.

  • PAUL

    We are seeing that now in NH. Not really quid pro quo kickback payments per se, the more they refer into the system for lucrative payments, the better the bottom corporate line and the better their RVU based bonuses come year end. The following years contracting will also be based on this “indirect productivity”. Stark anyone?

  • Dr. Grumpy

    Agree. The SGR needs to go. And it looks like it won’t. Even as a specialist. I’ll likely be dropping Medicare if a long-term fix isn’t made.

    If not fixed, it will drive good primary care people into specialties or boutique medicine to make ends meet.

  • Doc99

    Why do I get the feeling the Medical Home will be a Retirement Complex for PCP’s?

  • Nicholas Swetenham

    The trend towards group practices is also occurring in the UK. Despite the radically different funding model, it is simply more economical for GPs to group together.

    The difference, of course, is that British General Practicioners (GPs) are considered the gate-keepers of the NHS. Their role is to provide as much care as possbile in the community and primary setting. They aim to prevent unnecessary use of secondary services, rather than generate increased load.

  • jsmith

    Do you want to be a loss leader for a living? I don’t. Seems to me to be a recipe for disrespect and lack of control. When I worked for a health system as a PCP, I was the low man on the totem pole and I felt it. Better to have your job stand on its own two feet economically, one of the attractions of concierge. We’ll see what the med students think about all this.

  • Dr Lemmon

    A family practitioner employed by a hospital has pressures to be productive. Maybe never able to actually earn his keep simply through E&M coding.

    To the degree an FP is successful, the hospital is unsuccessful. A good FP will only refer when necessary, will not order unnecessary expensive tests or imaging, will spend adequate time with patients. Hospital admissions will probably drop the better the care provided by FPs. These kinds of things will not enhance revenue for the hospital and will actually hurt the FPs productivity.

    Actually diagnosing acute self limited illnesses when they present drives down reimbursement as level of medical decision making drops. Hence some doctors strive to over-diagnose to help with E&M coding.

  • family practitioner

    Dr Lemmon is absolutely correct.
    The better we are at what we do, the less we cost the system; except the system is designed to do more and more, so doing less does not make anyone happy, including the patients, who crave more in most circumstances.
    If you only knew how much a well qualified pcp saves everyone.

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