The path for physicians who want to remain in private practice

What is the path forward for physicians who want to remain in private practice, outside the constraints of health system employment? How will the environment change and what new demands will that place on practices and physicians? What follows are the observations of one industry-watcher who has worked on all sides of health care, but who now spends most his time focused on the interests of those who pay for it. No crystal ball, but several trends are clear.

There are now concrete signs that health care’s purchasers are exhausted and seeking new solutions, that a competitive marketplace is emerging and getting increasing traction. As they abandon ineffective approaches, the paradigm that has dominated the industry for the past 50 years will be upended. The financial pressure felt by buyers will transfer to the supply side health industry that has come to take ever more money for granted.

For decades, fee-for-service payment, inclusive health plan networks, and a lack of quality, safety and cost transparency have been enforced by health industry influence over policy, effectively neutralizing the power of market forces.

The path for physicians who want to remain in private practice

Without market pressure, physicians have felt little need to understand their own performance relative to that of their peers. The variation of physician practice patterns within specialties has been high, with some physicians’ “optimizing their revenue opportunities” by veering wildly away from evidence-based practice. Even so, until recently in this dysfunctional environment, it has been nearly impossible to identify high and low performers.

The impacts of this variation on cost have been staggering. Health care premiums – where costs throughout the system converge – have grown 4.5x times as fast as general inflation for more than a decade. Over the same period, personal health care expenditures – contributions to premium and out-of-pocket payments – have consumed $4 of every $5 dollars of the growth in household income, and the percentage of working age Americans (and their children) with private coverage fell by 14 percent.

While implementation of the health reform law dominates the health care news, there is little in it that will substantially drive down cost or improve quality, at least in the near term. The much-heralded accountable care organization (ACO) program is still mostly based on fee-for-service reimbursement, allowing the rank and file of health systems to cruise without really changing care and cost patterns.

At the same time, though, a mushrooming cottage industry is dedicated to disrupting the many ways that health care organizations profiteer. Most are within niches – e.g., primary care, evidence-based formularies, chronic disease management, oncology benefits management – but a few have taken a more multi-vectored approach.

One of the most powerful of these mechanisms is the narrow, high performing network. A core tenet here is that “choice” in health care, particularly in the absence of performance information, is a false value. Giving patients’ access to doctors who consistently produce poorer outcomes at higher episodic cost does nobody any favors.

The logical solution is to identify physicians who produce better care at lower episodic cost, then contract with and steer to them. The smart money will also pay them higher rates for excellence.

Evaluating physicians is not difficult. It requires medical/surgical, full continuum regional claims data sets large enough to yield credible patient sample sizes for specific conditions. Snapshots in time or more longitudinal data will do. Analytics can help purchasers zero in on high vs. low performers, so they can steer to the high performers and, just as importantly, avoid the low ones.

My firm - we develop and operate work site primary care medical home clinics that become aggressive medical management platforms for mid-sized and large employers – directly contracts significant cost reductions for a range of services, including drugs, advanced images, ambulatory surgeries and pain management. In the process, we focus on identifying the subset of physicians who are most likely to produce better health at lower episodic cost for our patients.

The point here is that a rapidly growing cadre of sophisticated purchasers – the early adopters are in large corporations but benefits managers in smaller self-insured firms are catching on as well – now realize that buying value requires scrutinizing physicians and other providers. Narrow networks built on this approach are exploding around the country. One firm I recently encountered has developed narrow regional provider networks in 138 markets around the country.  The premium costs of members of Savannah Business Group, a small regional business health coalition that uses data to identify high performing providers and then contracts directly with them, are significantly below those of non-members in the same metroplex.

Last year Walmart contracted with six Centers of Excellence – Mayo, Cleveland, Geisinger, Scott and White, Mercy Springfield and Virginia Mason – for costly heart, spine and transplant procedures. Not only did Walmart get very favorable pricing, but each system agreed to share its protocols, share data associated with the procedures, and work collaboratively on transitions with each patient’s local physicians. Think through the economic impact this one maneuver has had for Walmart, as well as for local health systems, and the power of the approach becomes evident.

The path for physicians who want to remain in private practice

Obviously, if purchasers are intent on understanding physician performance, it makes sense for physicians to understand their own as well. Oncology Metrics is a firm that aggregates, analyzes and benchmarks clinical, resource, productivity and financial data from oncology practices around the country. Practices and physicians receive detailed information about how they compare to their colleagues, which provides a basis for understanding what needs improvement. Physicians without access to this kind of information are flying blind in terms of market capability.

The business requirements of becoming market competitive are enormous. Practice efficiencies become critical, so it may make sense to participate in groups and management services organizations that offer shared arrangements on practice management, billing/collections, human resources, health information technologies, group purchasing, and other mission-critical functions. At the same time, better real time sharing of patient information with other physicians becomes essential to care coordination, which in turn can positively impact quality and cost outcomes. And, in an environment that must ultimately move away from fee-for-service to some form of risk, an ability to confidently manage a population of patients within parameters is paramount. Larger practices with more resources are necessary to finance the infrastructure required for this level of management, as well as to facilitate the team-based care that is needed to optimally manage clinical and financial risk.

When markets work, they lavish rewards for excellence and are unforgiving of mediocrity. Look at Toyota and Chevrolet, Google and Hewlett Packard, Costco and JC Penney. Health care has largely evaded the disciplines of the marketplace for decades, at immense cost to American patients and purchasers.

Enough financial pressure has now built that that time appears to be fading. Physicians will succeed who understand that the challenge is as much in business as clinical processes. Those who simply hope for the best probably will not.

Brian Klepper is chief development officer, WeCare TLC, and blogs at Care and Cost.

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  • buzzkillerjsmith

    Not buyin’ it. You neglect the fact that docs in many specialties are in great shortage. If you tell us to shape up, we can tell you to take a hike. Or we’ll leave the area. And you’ll take what you can get.

  • Mengles

    Nice try, in using “evidence” that just so happens to come from your blog. Worked on all sides of healthcare? Sure. More like the corporate side as demonstrated by your Linkedin profile. Newsflash: the entrance of Medicare and Medicaid automatically makes healthcare not a free market system. Apparently you fail to understand supply and demand – esp. in much needed subspecialties. Who are you going to be able to evaluate on performance if there are no doctors willing to play according to your corporate metrics? Doctors still hold the cards if you’re not able to recruit someone in a highly desired specialty, like Heme-Onc, where there isn’t anyone else for hundreds of miles. Unlike other workers, doctors especially in competitive fields can tell you to buzz off, when they don’t want to play by your rules (and word will get around), due to their desire to do what’s best for their patients, and you’ll continue to have no one and your business collapses. It’s your choice.

  • icecoldchickenwings

    I am a private practice Endocrinolgist who was the second Endocrinologist to leave a now two county area that still doesn’t have any Endocrinolgists because the multi-specialty private practice that I used to work for was bought by coporate beancounters and policy makers who have no experience taking care of patients like the author of this paper. How do you think my excellence return on investment blah blah blah scores for the management of diabetes were going to be practicing as the only Endocrinologist in two of the poorest counties in my southern state? Practice efficiencies? How about the average level of education of those not retired is dropping out of highschool and one of the major issues with seeing the doctor is transportation? Median famliy income of $29,000? I had patient’s who couldn’t come to see me because they couldn’t afford the gas for visits. I actually enjoyed my patients and working there, until my payment was going to be tied to “work efficiencies” and “meaningful use scores.” among other “carrot and stick” ideas like you propose. Genius, now the small town living doc left and the area has nobody. There are only 5,000 Endocrinologists in the United States, good luck finding a replacement.

  • southerndoc1

    “Evaluating physicians is not difficult.”

    Stopped reading there.

    • icecoldchickenwings

      Then you missed beautiful statements like

      “Snapshots in time or more longitudinal data will do.”

      Like the pilot study for diabetes management my old employer was involved in where all the Endocrinologists had the worst A1c levels of every doctor in a multi-specialty practice. People like the author of this piece would think that means Endocrinologists are worse at taking care of diabetes than NP’s and primary care doctors, not that they get the most difficult/non-compliant cases. If pay for performance were in place during the study period the Endos would have gotten paid less for caring for more complicated patients. You should have really kept reading. This guy doesn’t have a clue.

  • azmd

    Actually the most effective way to make sure that market forces result in low-cost, high quality care would be to cut out third-party payers and let patients pay their own non-catastrophic medical expenses.

    • Mandy


  • Jason Simpson

    “What follows are the observations of one industry-watcher who has worked on all sides of health care”

    Wow that is some incredible hubris. Let me get this straight. A PhD wonk who has never treated a patient in his entire life, has worked on “all sides” of healthcare?

    Yes, this bean counter has worked on “all sides” of healthcare, except the one that really matters.

  • Jason Simpson

    People like Brian Klepper are hangers on who have no clue what they are talking about. They siphon profits off the heatlhcare system while providing no real value. If Klepper switched to corporate finance tomorrow, nobody in healthcare would miss him — unlike the doctors whom he denigrates.

  • Nuel

    I am not a physician, but what are “work relative value units” and how are these computed? I honestly have my doubts.

    Secondly, if these guys have good intentions about healthcare costs, they could start my removing themselves and their outrageous salaries/profits out of the system. For people who provide little value to patients (and in some cases make healthcare worse), they make far too much.

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