12.21.10 | Sally C. Pipes

Private practice doctors: Another Obamacare casualty?

While making the case for his health reform package, President Obama argued that his proposal would make life easier for small-business owners.

Unfortunately, Obamacare threatens to undermine a group of small-business owners that is perhaps more important than any other to his reform effort — doctors in private practice.

The number of privately owned medical practices has declined sharply in the past five years. In 2005, at least two-thirds of practices were in private hands. That figure has dropped to less than half today — and is expected to sink below 40 percent by next year.

Many doctors, specifically those who have just completed a resident specialty, are now choosing not to enter private practice in the first place. Instead, they’re heading to salaried positions at large hospitals. Last year, 49 percent of first-year specialists chose hospital employment.

Obamacare will only exacerbate these trends. Some of the law’s dictates will make it more expensive to operate small practices — even though the rules are supposed to reduce medical costs.

Take the new law’s health IT initiative, which pushes doctors to set up extensive electronic health records in hopes of better coordinating care among providers. More information, the law’s boosters argue, means less waste and lower costs.

But many private practices can’t afford to drop five or six figures on expensive health IT systems that may not even save them money.

Boosters of health IT acknowledge that large organizations are more likely to enjoy its benefits. But shoving patients into ever-larger medical groups may not actually bring down costs.

The reason, as representatives of the American Medical Association recently warned, is that big hospital networks have greater market power. They can use that power to keep prices high, and there’s little that insurers — and even less that consumers — can do about it.

Paying more for treatment doesn’t necessarily guarantee better access or quality. Without an ownership stake in their practices, salaried doctors have an incentive to work the hours for which they’re paid — and no more. Fewer hours for doctors means fewer appointments for patients.

History demonstrates that these incentives matter. In the 1990s, several large hospitals bought up practices and put doctors on flat salaries. As Dr. Bill Jessee, CEO of the Medical Group Management Association, observed, doctors suddenly “weren’t working as hard as they were before their practice was acquired.”

Proponents of Obamacare have conveniently ignored these lessons. President Obama’s top health care aide Nancy-Ann DeParle, for instance, wrote in the August issue of the Journal of Internal Medicine that the new law is “likely to lead to the vertical organization of providers and accelerate physician employment by hospitals.” These organizations are called Accountable Care Organizations, or ACOs.

Such vertical integration may prove costly. Already, hospitals lose money on a substantial chunk of the people they see. In New York, for example, hospitals take a loss on more than 70 percent of patients.

That’s mostly because of the stingy reimbursement rates paid by government health programs like Medicare and Medicaid. In 2008, the average Medicare reimbursement in New York represented a 4.7 percent underpayment. Medicaid’s reimbursements were even worse — as little as 64 percent of a hospital’s actual treatment cost. Those with private insurance are forced to pay more for care to make up the difference.

Hospitals’ Medicaid losses are compounded by the fact that the program’s beneficiaries use far more medical services than other patients. On average, the privately insured visit the doctor three and a half times a year. Medicaid patients make an average of seven visits.

Yet Obamacare will add 18 million new individuals to the program’s rolls by the end of the decade — and thus stretch our healthcare infrastructure even thinner.

Primary care physicians are already in short supply. The Center for Workforce Studies predicts that by 2020 there will be a shortage of 45,000 family doctors and 46,000 surgeons. Unfortunately, Obamacare provides no funding to significantly increase their numbers.

Emergency rooms will have to pick up the slack. The new law could result in as many as 41 million additional trips to the emergency room each year.

The health reform law was sold as a way to fill in the cracks in America’s fractured healthcare system. Instead, it has only made them wider.

Sally C. Pipes

Sally C. Pipes is president, CEO, and Taube Fellow in Health Care at the Pacific Research Institute. Her latest book is The Pipes Plan: The Top Ten Ways to Dismantle and Replace Obamacare (Regnery 2012).

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Tags: doctors, hospitals, Politics, US healthcare reform

Comments Post a comment

What incredibly flawed logic. (did you want to mention “Obamacare” more than 6 times in your article) It’s more than obvious when someone has an agenda. (the “truth” about Obamacare”?) What “truth”? Yours? Sorry Sandy, but this article is a joke that caters to a 4th grade reading level and 1st grade comprehension.

Point the fingers at those who have caused the problem, not those trying to fixed this flawed system.

Comment by JakeF — January 5, 2011 @ 4:14 pm

The comments by JakeF are totally offensive. He obviously knows nothing about the author, Sally Pipes, who happens to be an EXPERT in the field of health care in both the United States and Canada. Her agenda that JakeF must be speaking of is her in-depth knowledge of PPACA (better known as ObamaCare). Just because you don’t like what she calls this nightmare of legislation, ObamaCare, ObamaCare, ObamaCare doesn’t mean Sally’s well documented opinions are wrong. Sorry JakeF, you are WRONG.

Comment by MFrank — January 5, 2011 @ 9:39 pm

Love it when criticisms are made without explanation. JakeF calls this “flawed logic” and proceeds to not explain himself and his reasoning. Typical of all blind sheep.

Comment by JSmith — January 6, 2011 @ 3:43 am

Yes, Jake is way off base about this article. I know personally of physicians from both large and small clinics who are either retiring (early) or taking jobs as paid physicians at a hospital or health care system like BCBS or one of the other companies. This is because they are unable to operate with the federal mandates for upgrading to expensive IT equipment, We had a large Heatt specialty clinic in St. Paul Minnesota which was top notch and had been in business for years with many extremely qualified cardiologists, surgeons and peripheral support. They closed at the end of 2010 and half went to work as paid physicians for United Hospital and the other half went to Health East and St. Joseph’s. So yes it is true and I know of it first hand – the other reason is that I work in health care and I see and hear about it on a daily basis. Thank you.

Comment by Moey — January 6, 2011 @ 4:15 pm

Change presents danger and opportunity. I’d have to ask why are private practices running their own IT? Does it make the doctors more effective to have an IT staff? The real issue is that the model of providing your own IT systems to support medical records is as dead today as provding your own electricity.

Comment by Eaxelrod — January 20, 2011 @ 12:50 pm

It’s painfully obvious this healthscare bill has little if no mention of reform — plenty of mandates — this is one thing that many people are mad about —- they’re not so blind to see that if the “horrible insurance companies”, that have a huge profit of around 3%) are forced to cover pre-existing conditions, they will go out of businesses — why would anyone buy insurance if they can wait til they get sick, and sc**w the private insurance companies at that time. Reform would put mandates on the insurance companies that make sense —- not kill them. It has never been about health care, — but people, and politicians continue to believe absurdities, that’s how the healthscare bill got passed.–amestrib-com/articles Full text of President Obama’s health care speech Thursday, September 10, 2009
In Obama’s healthcare speech he said the following :
—- “Some of people’s concerns have grown out of bogus claims spread by those whose only agenda is to kill reform at any cost. The best example is the claim made not just by radio and cable talk show hosts, but by prominent politicians, that we plan to set up panels of bureaucrats with the power to kill off senior citizens. Now, such a charge would be laughable if it weren’t so cynical and irresponsible. It is a lie, plain and simple.” (Applause.)
Partially Agree — There are those whose only agenda is to kill reform at any cost. — This bill has little if any actual reform & plenty of mandates, many demands seem to ensure gov. will have total control of private citizens healthcare decisions. — it is NOT talk show hosts and politicians that form the decisions of people that think critically (which is most of the private citizens) — in contrast to the assumption by the Congress for decades that people need to be told what is good for them — let the gov. take care of the important things, like your personal health care; — it is NOT cynical and irresponsible for people to call bureaus that mandate their healthcare bureaucrats with the power to kill off senior citizens — it is definitely NOT laughable; and to say there are no panels of bureaucrats with the power to kill off senior citizens is — a lie, plain and simple. Many people have seen what gov. run social programs do to their loved ones — Medicaid and Medicare RATION CARE — people are told what pills are covered by these social programs —- what procedures are covered —- and they are responsible for trying to find an adequate Dr. that will take someone that relies on the gov. “help”. Healthcare workers were pressed very hard to find somewhat adequate service for their clients — now it looks like more of the same — why would good doctors put up with this gov. control that has little to offer doctors. Presently people can buy supplemental insurance to cover what the gov. does not pay, but with the mandates now being considered for insurance companies, these companies will be FORCED to close, and there will be nowhere but gov. bureaucracies to take “care” of us — and to many THIS JUST ISN’T ACCEPTABLE — THOSE REPS THAT SUPPORT GOV. CONTROL ARE GETTING VOTED OUT.
-rightvoices-com/2008/10/16/On Obama: Big Lies And What Must Be The Largest Rug To Sweep Them Under Oct/16/08
— youtube-com The Day the Dollar Died —- from China “… we feel that a Western recovery is impossible until they reform their entitlement programs…”
- aei-org (American Enterprise Institute for Public Policy Research) – excellent resource for researching nearly any subject, also youtube-com, and articlesbase-com

Comment by Kate — February 21, 2011 @ 3:37 pm

The gov. already has a lot of control over private insurers — by reading the healthscare bill mandates, private insurers’ will be forced out of businesses; people will be forced to pay for an inefficient excuse for healthcare — government run —- not dumping on the CBO, but people that believe this administration will save money with this healthscare scheme are delusional. Now that people have to live with the consequences of this atrocity, some are finally waking up —- it’s going to be real hard to reverse the damage this piece of dung will dump on the Republic. People seem to believe 2+2 = 5, the sooner we realize the elites know more than we do — the sooner this compassionate administration, that’s “representing” what’s left of the Republic will be happy.
It’s painfully obvious this healthscare bill has little if no mention of reform — plenty of mandates — this is one thing that many people are mad about —- they’re not so blind to see that if the “horrible insurance companies”, that have a huge profit of around 3%) are forced to cover pre-existing conditions, they will go out of businesses — why would anyone buy insurance if they can wait til they get sick, and use the private insurance companies at that time. Reform would put mandates on the insurance companies that make sense —- not kill them. It has never been about health care, — but people, and politicians continue to believe absurdities, that’s how the healthscare bill got passed.
-glennbeck-com Glenn Beck: Healthcare bill taxes November 19, 2009
-westernfrontamerica-com/2010/05/16 The Tale of Two Obama Minions “… “Berwick complained the American health system runs in the ‘darkness of private enterprise,’ unlike Britain’s ‘politically accountable system.’ The NHS is ‘universal, accessible, excellent, and free at the point of care – a health system that is, at its core, like the world we wish we had: generous, hopeful, confident, joyous, and just’; America’s health system is ‘toxic,’ ‘fragmented,’ because of its dependence on consumer choice. He told his UK audience: ‘I cannot believe that the individual health care consumer can enforce through choice the proper configurations of a system as massive and complex as health care. That is for leaders to do.’” …”

Comment by Socialists are against Capitalism — February 21, 2011 @ 3:38 pm

HEALTHSCARE TAX OR FINE—- It’s not good to believe false prophets —
No Republican voted for the healthscare bill in the Senate — THANK YOU – whatever your political party, if you voted against the healthscare TAX; Much of the current bills/ “reforms” have more socialistic mandates than carter has pills.
— Why can’t sensible mandates be enforced, not something that’s going to kill private industry?
*Congressman Paul Ryan – Creating Jobs and Generating Economic Growth – “Roadmap for America’s Future”
-thehill-com blogs THE EUROPEAN BAILOUT PROTECTION ACT: A BILL TO PROTECT U.S. TAXPAYERS By Rep. Cathy McMorris Rodgers (R-Wash.) 06/11/10
- nytimes.com/2010/07/18/Insurers Push Plans That Limit Choice of Doctor “… As the Obama administration begins to enact the new national health care law, the country’s biggest insurers are promoting affordable plans with reduced premiums that require participants to use a narrower selection of doctors or hospitals…”
-mcmorris.house-gov MEMO TO E.U.: SLASH SPENDING OR NO BAILOUT May 2010

Comment by The emperor has no clothes — February 21, 2011 @ 3:41 pm