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.

Bingo.

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