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.