We believe physicians are confronted now with a major career decision. Physicians will need to decide whether they go along with the Obama Administration’s plan for their career, or if they will seize upon the opportunity system-wide change now presents to re-design their own practice path. Healthcare will not be the same as it was. Physicians cannot practice the same way as they have. The first step for survival is to understand the “New Rules” of our healthcare system.

This article is the first in a four-part series of blogs that will discuss these new rules on four dimensions of physician life:

Physician Compensation
Managing a Private Practice
Changing Patient Demographics and Attitudes
Physician Career Satisfaction
Physician Compensation

Old Rule: Physicians could earn a decent living by receiving their income from third-party (insurance carriers and government paid health care) reimbursement.

New Rule: Surviving on third party reimbursement will be increasingly difficult. You will either need to be absorbed by an integrated delivery system or diversify your income through ancillary services, lifestyle medicine, etc., much of it paid in cash directly by the patient.

Old Rule: Insurance carriers and government health plans offered fee-for-service arrangements

New Rule: There is still time to get on high reimbursement contracts, however, fee-for-service reimbursement will diminish over the next five years. Value-based, performance-based compensation will become the primary form of reimbursement from carriers and Medicare/Medicaid.

Old Rule: Physicians could make a good living without having much business sense; just being a “good doctor” was enough for practice success.

New Rule: Those days are gone. Change is the “new normal”. Physicians will need to be astute observers of healthcare economic conditions and determine how they need to respond to change from a business practice standpoint.

Old Rule: Enough healthcare dollars were available to allow physicians to make their fair share of the pie.

New Rule: The per-patient healthcare dollar available will decline for the remainder of today’s physicians’ careers. Smart physicians will find ways to gain more control of the healthcare dollar they produce.

Old Rule: Insurance carriers had few restrictions on raising their premiums to earn the profit they needed. (enabling most physicians to make adequate incomes)

New Rule: If you thought it was bad before, wait until carriers are limited in their ability to raise premiums. Physician reimbursements will be slashed. Smart physicians will look to alternative sources of income and prepare for changes in the fee-for-service reimbursement model.

Old Rule: Doctors believed that patients would not pay cash for healthcare and structured their practices accordingly. Physicians believed that third-party reimbursement was a “normal” way to do business.

New Rule: Patients are already paying high out-of-pocket amounts for physician services and even more for non-physician related healthcare products and services. This trend will increase dramatically over the next five years. Wise physicians will position themselves to be part of the “retail medicine” trend.

Old Rule: A doctor could make a good living by limiting his income to his basic professional service menu and refer ancillary products and services to others.

New Rule: Physicians need to realize they refer out more revenue than they make. (Ever wonder why the pharma and medical device rep drive a nicer car than you do??). To stay profitable, physicians will capture more control of the healthcare dollar spent by their patients, including DME, pharma, lab services, nutritional supplements, alternative treatments, etc.

Old Rule: You could go it alone and make it in the third-party reimbursement model of healthcare.

New Rule: To play in the third-party reimbursement world, you will need to become part of an integrated delivery system, joining forces with hospitals and other specialists, dependent upon each other for compensation. There are still some good third-party reimbursement contracts out there, however, to remain independent you will need to structure your services to capture patient, direct-pay revenue.

Summary

It is decision time for physicians. Will they continue to devote their practice to “reimbursement medicine” or will they diversify into “retail medicine” and ancillary income opportunities? Most every specialty has an opportunity to capture part of the retail and ancillary dollar spent by patients at other healthcare outlets and gradually wean themselves off ever-declining third-party reimbursements.

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9 Comments (and one trackback)
#1 by This e-mail address is being protected from spambots. You need JavaScript enabled to view it on November 30th, 2010

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good article on the future of medicine.
#2 by SMWaldron on November 30th, 2010

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Excelent artical. Any ideas for hospital based Ridiology or Phychiatry
#3 by C.J. Occhiuzzi on November 30th, 2010

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How does the chiropractic profession fit into the new model of healthcare?
#4 by Chris Carraway, DC DIBCN on November 30th, 2010

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C.J.,

There are two ways that I seen chiropractic going. The first is bright and cheerful. There is a move a foot for outcome based care that is based on solid RTC studies with proven positive results. Treatments that do not produce excellent results will not be paid for. Good results = good pay. If this is the face of things to come. The chiropractors are going to benefit and come out on top in a lot of areas. There may be a bright light at the end if the tunnel.

The second option is that the small dollars available for providers are going to be fought over bitterly. I am sure this is going to happen. The AMA is trying now to get laws passed that will only allow MDs and DO to call themselves Doctor. (like that makes them any better at what they do Pffft.) They are not going to stand by and let the treatment dollars be divereted to alternative care providers. The AMA is already pissed that more and more patients are seeing chiropractors, massage therapist accupunturist, etc. This had been a trend since 1995. The number of total visit to \alternative\ providers out number the MD, DO visits each year already.

I am counting on science and superior results to save chiropractic in part. I am working hard to develope cash for services in my office and not worrying about third party payment. I already tapped an extra 60k for this year that was not there last year for me. I am looking to bump that to 100k in 2011.
#5 by teri on November 30th, 2010

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But how do we re-train the physician to think outside the box? It is common knowledge that physicians are great at their skills/ education but when it comes to collecting money/or running the financial side of business, there is a lot more to it and most physicians would rather not. They practice medicine–they are good at that so how do we retrain them to think outside the box for patient care services??
#6 by Fred Roh, EdD on December 1st, 2010

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I think about 20-30% of physicians will get it. The other 70-80% will follow the herd…meaning they will become employees or affiliated in some way with large healthcare organizations. Physicians need to be enlightened that there is another way to practice medicine but it will require CHANGE. Those who make that change generally report much greater satisfaction in their careers. They need help to change their way of thinking and to change some of their clinical skills. Our goal at this time is to make physicians aware of where the future healthcare system is headed and to expand their choices. It starts there.
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#7 by Nicholas Tsambassis, M.D. on December 7th, 2010

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Those of us in primary care need to get away from managed care as much as possible and look into private contracting and concierge medicine, either as part of a more diversidfied menu or the main sources of revenue for the practice.
#8 by Chris Carraway on December 8th, 2010

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Fred, I feel that most are going to have to be force to change or be forced out. Despiration is a powerful…and uncomfortable motivator.
#9 by Ven Challa, MD on December 15th, 2010

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Yes. We should think outside the box and fight for our rights to have a free-competition market. My cousin in India with a basic medical degree has a 32-bed predominantly Ob/Gun nursing home with general surgery facilities. All experts in town are welcome to use her nursing home. She flies to US by first Class ($ 9,000) to visit her son. When I go to India, it is economy only ($ 1300) for the past 30 years and I don’t see that changing soon.