Report: Physician compensation on the decline
As medical costs rise and reimbursement rates drop precipitously, small-physician practices are going by the wayside in Westchester County.
While the trend is far from new, Alan Badey, managing partner of accounting, tax and consulting firm Citrin Cooperman”™s White Plains office, said even those doctors who chose to join a hospital or larger practice are facing the prospect of significantly lower compensation.
Badey and John Bryan, partner in Citrin Cooperman”™s office, are drafting a white paper on different tactics being explored by hospitals and physician-owned medical groups as they seek to balance patient care and profits.
Under all of the various scenarios, compensation is shrinking, they write.
“Amidst all the aforementioned maneuvering by doctors to fit into the new health care compensation paradigm, a sobering fact is unavoidable: The overall revenue pie is shrinking,” a draft of the white paper concludes.
While in smaller physician groups doctors were able to divide profits among themselves, hospitals and larger practices are now devising formulas intended to provide for a fair compensation model.
A common method is basing compensation on relative value units, a phrase coined by a Harvard University professor, the report states.
Hospitals and multispecialty practices choosing that route, though, must then determine exactly how to value a cardiologist versus a general practitioner, or a dermatologist versus a brain surgeon.
“Years and years ago, a doctor used to deal with performed services and make a nice healthy living off of providing those services,” Badey said in an interview. “A decade ago there was ample profitability in those (independent medical) groups.”
Now, Badey said, “that has gone by the wayside.”
Among the risks being assumed by hospitals and multispecialty practices, Badey said, is that profits could come before patient care.
“That”™s one of the big rubs that”™s going on in the whole medical industry, that the government and insurance companies have set the formulas up so that physicians are chasing profits,” he said.
“It”™s just the way the system has been set up, that that”™s the way you get compensated. It”™s a problem ”¦ they”™re trying to figure out how to get this delicate balance of patient care and reimbursement to work in sync with each other.”
Compensating doctors based on their relative value “is intended to take some of that away,” Badey said, by posing the question, “What”™s the underlying work component and expense component of actually performing this care for this patient?”
The effect of the compensation declines is that it will be more difficult for doctors to practice in Westchester County and other areas that feature a relatively high cost of living.
For patients, that means there will be fewer physicians to treat them just as millions of additional people nationwide will now be insured under the Affordable Care Act.
“I think that what”™s going to happen is you”™re going to have to leverage the industry. In other words ”¦ more of the patient care is going to have to be done by nonphysicians, both in primary care and specialty practices.”
Badey said that ultimately, practices will look to productivity and how much in profits each physician generates.
“They (the practices) are going to use some measure of productivity to generate compensation, and that”™s probably the only fair way to do it.”