Since the 1980s, the number of physicians who are in private practice has been trending downward, with an acceleration of this trend being due to both the Affordable Care Act and related market factors. A recent study by Accenture found that a large percentage of formerly independent practitioners cited continuing pressure and volatility in factors relating to reimbursement as well as increased overhead costs as the reason why they left private practice to become employed by a healthcare group or hospital system.
Meanwhile, the buzz of the past few years has been centered around integrated delivery systems, the discussion of which has basically left out any mention of private practices. Can private practices remain viable and relevant in this changing paradigm where more healthcare systems are consolidating and integrating? The straightforward answer is yes, but before going into more detail, let’s look at some historical context surrounding the movement towards integrated delivery.
There are four models of an integrated delivery system. Of these, the most notable is multi-specialty group practice or MSGP. A prominent example of MSGP is Kaiser Permanente, the billion dollar non-profit based in Oakland, California.
Credited with being the first to take the core concept of healthcare services integration — including both the horizontal (within separate departments) and vertical (they both insure and care for clients) — and build a viable system, Kaiser Permanente pioneered a system which deliverers care to over 9 million people, providing comprehensive services such as outpatient, inpatient, specialty and primary care. Out of the four factors that enabled Kaiser to be successful — full integration, a prepayment system that offers doctors an incentive to keep clients out of the hospital, a sophisticated IT system and effective physician leadership — probably the most important factor (and the most difficult to emulate in other locations) is their use of a prepayment system.
The question is, if the model represented by Kaiser Permanente is so successful, why does it only account by some estimates for just 8% of American’s healthcare? The answer is that it is the classic ‘the chicken or the egg’ scenario of prepayment and integration.
Coming anywhere near achieving the triple aim of healthcare reform requires all key stakeholders to experience a shift in mindset. In order to lower costs while maintaining a high standard of care, healthcare systems must pivot from a volume driven, pay-per-service approach to an integrated, value-based paradigm. But how? The key is pre and advanced payment, which works to align doctor incentives with positive healthcare outcomes for clients.
The crucial dilemma facing hospitals and health groups is, without payment reform, there is little incentive to integrate to the extent Kaiser Permanente has; and, of course, without integration, reforms such as switching to bundled payment or prepayment systems present a formidable logistical challenge for institutions to test and apply. Despite these challenges, the two aims of integrated healthcare and payment reform remain mutually reinforcing.
So where does private and solo practice fit into all of this? As mentioned above, many private and solo practices are struggling to contain the costs of overhead while adhering to public and private insurance requirements.
But there are opportunities for independent practitioners. American healthcare — an industry that consumes an average of over $10,000 per person per year — is currently in transition and it’s outcome is uncertain. This precarious situation also presents an opportunity for doctors with an entrepreneurial and independent spirit who look to take advantage of the gaps, especially in more in rural areas, where larger healthcare systems aren’t well established. These entrepreneur/physicians will most likely persevere, and in so doing keep alive a long cherished way for people to receive healthcare.