The Health Care Reform bill passed by Congress and signed by President Obama was represented as allowing people to keep their present health care providers if they wanted to. The bill itself will not force anyone to change health care providers, but that doesn’t mean you’ll still be able to go to the same doctor the same way. If that sounds like double-speak, you’re paying attention. While the law doesn’t force anyone to choose a different doctor, it is forcing some doctors into rather dramatic solutions, not the least of which is selling their practices to hospitals and becoming employees of that hospital. What’s behind this new business model for health care providers? Let’s take a look:
The first line to fall may be at the insurance companies. The law that requires that they spend 15-20 percent maximum on overhead may not play out as planned. On paper, the insurance companies would cut costs, so that the individual isn’t paying for a CEO to have a different sports car for every day of the week. In practice, some fear that individual policies will be affected, because it costs more to market to an individual than to sell policies in bulk to large companies. The discrepancy is between individual and institutional sales. Is 5% enough extra to cover the costs? We’ll find out starting next year. Who knows? Insurance companies might learn that they can provide coverage without building new sky-rise office buildings after all.
Another concern is the standardization of insurance benefit (beginning in 2014). Insurance companies will be required to cover expenses in full on several procedures which are currently co-pay, but it’s unlikely they’ll be allowed to raise rates to cover the difference. This leaves them with very few options. The obvious one is that they’ll have to lower costs. But how will they do so? Some health care professionals fear that the accepted fees will be driven lower still, and use/coverage for more expensive diagnostic tools will be denied. Those who worry about this suggest that the quality of care is bound to suffer. Meanwhile, the Congressional concept is simply that the insurance companies will have to learn to do more with less excess. With the insurance industry having enjoyed wide latitude in price-setting for many years, it may seem impossible to reduce spending internally. Those with faith in the free market realize that the insurance companies will adjust. They just won’t pay dividends as often.
Now comes the Exodus. Hoping to control costs, insurance companies have begun buying up medical clinics and physicians’ practices, so that they can enjoy lower costs without tightening their own belts. Frankly, Congress should have seen that one coming. With insurance companies in control of the care their customers receive, the whole country starts heading towards being one huge cluster of HMOs. And it’s not stopping at buying out entire practices either. In areas where they can’t buy the practices out in their entirety, it is expected that they will initiate networks tied together by contracts with those individual doctors. Either way, the fox is then running the chicken coup.
Some doctors have decided to beat the insurance companies to the punch by selling their practices to local hospitals. This is not a new trend. In 2005, physicians owned over 66% of all medical practices. Some predict that within a year, the number will have shifted down to 60%. At present, about half the job offerings for physicians are being placed by hospitals, a raise of 5% per year for the past 5 years. Doctors are selling off their practices to become employees, and hospitals are eagerly embracing the opportunity to buy up those assets and gain highly paid specialists in the process.
If practices in an area are consolidated, patients may not have a choice of doctors. This will be up to the hospital administration to determine. While it may mean fewer options for patients, such practices may ultimately prove more efficient and cost effective. With a glaring, gaping hole in the lack of tort reform, many more physicians may decide it’s just not worth the hassle of owning one’s own practice.
Another factor pushing doctors to sell is increased overhead. Electronic records will cost money. While there is some funding being made available to assist practices in the transition, there’s also a new mandate to keep larger records on each patient. Another hurdle is that Medicare reimbursements are falling. Some specialties are expected to lose 10% or more by next year. And all of that while concurrently malpractice premiums are on the rise — in some cases as much as 10-20%!
Congress wants the insurance industry to trim the fat. But they haven’t provided enough emphasis on (or motivation) for that approach to work. Instead, a fearful insurance company will become joyful owners of the fearful EveryDoc’s practice. With insurance companies still running the show and controlling the purse strings, the entire idea of a patient choosing his or her health care provider may soon fall by the wayside — not by Congressional order, but because the choices will simply cease to exist! A great deal of this is going to be decided by how far the insurance companies are willing to tighten their belts, verses how eager they are to buy into the health care business.