4 Ways the Affordable Care Act is Impacting Physicians

Heraclitus, the famous Greek philosopher said “The Only Thing That Is Constant Is Change -” Our team could research and write for weeks on various topics related to the implementation of Affordable Care Act – how it affects patient care, changes to how healthcare is delivered in the United States, its impact on how hospitals and private practices are operated, etc.

No doubt the ACA is controversial, with a great deal of uncertainty surrounding it and pundits beginning to discuss if it will be repealed following the 2014 elections. We know you wouldn’t have a difficult time soliciting opinions about it from your colleagues and patients one way or the other. However, this post is not intended to solicit opinions, but instead discuss a few consequences for physicians and practical strategies for navigating the changing healthcare landscape.

1) Decreased Reimbursements for Providers will Pressure Budgets

New regulations will decrease the reimbursements that providers are paid for care services, the rationale of this being that the increased volume of newly insured Americans will offset decreased reimbursements. Cuts to what the government pays providers for Medicare and Medicaid patients was a key piece in financing the Affordable Care Act. In September, the Cleveland Clinic announced that it would cut up to 6 percent of its annual $6 billion budget in response to the anticipated costs associated with the implementation of the Affordable Care Act. The cuts represent $330 million to the city’s largest employer and the second largest in the state of Ohio. Cleveland is not alone. Similar stories are pouring out from Louisiana State University, Wake Forest Medical Center, and Orlando Health System to name a few. See Cleveland Clinic Announces Job Cuts to Prepare for Obamacare

2) Group Benefits will Change as Employers Cope with New Mandate

With the new employer mandate, employers are required to provide minimum acceptable levels of insurance for employees. Additionally, those employers that are currently providing high cost “Cadillac” health plans will be taxed, incentivizing employers to pare back benefits to avoid paying additional taxes. Regardless of situation, employer benefits will be changing. As hospitals and health systems strategize to cope with increased costs, other employer benefits such as retirement funding and matching will come into the crosshairs to help shore up budgets. See How Obamacare will Change Employer Provided Insurance

3) Increased Consolidation and Death of the Solo Practitioner

Acquisitions by large hospital systems and overall industry consolidation has been the norm due to lower Medicare payment rates for hospital owned practices which makes similar care services more expensive for independent medical practices. Additional regulations and changes to how hospitals are paid will continue to fuel this trend. In today’s world, being an expert in any specific specialty is no longer sufficient for managing a successful practice. With regulations requiring physicians to incorporate new technology and administrative functions, smaller independent practices will have a much tougher time working to become compliant versus larger hospital systems with significantly more capital and resources. For those physicians running independent practices and nearing retirement, closing practices may make more financial sense than investing in additional administrative staff and new technology.

4) Continued Experimentation with Payment Models

The ACA will have an immediate impact on how physicians are paid for the care they deliver. Most physicians are accustomed to “fee for service” payments and being compensated for the number of tests and procedures they provide. One of the biggest unknowns is whether the fee-for-service model for medicine will go away and the fear that medical decisions will be second-guessed. Will physicians be properly paid for the service provided in the best interest of the patient, or by what the government thinks an illness should cost? One thing is certain, the government and insurance companies will continue experimenting with various types of payment models. In a value-based payment plan, the effectiveness of a treatment is taken into account. The quality of care comes into question when payment cuts are made to hospitals as a penalty for patients coming back in for hospitalization for complications that could have been avoided. The focus has been on saving money in healthcare, but the reality exists that physicians could see their income decreased.

Frustrated by the declining reimbursements and pressure to see more patients per day, many doctors are leaving traditional settings and transitioning to a ‘concierge’ or ‘direct pay’ model. While the current number of physicians going into concierge medicine is still relatively small at 4,400, that’s an increase of 30% over last year. The model is promising as it allows physicians to care for a more manageable number of patients, in a range of 400 to 500 instead of 2,000+. Initially, this model catered to wealthier clientele, but has become surprisingly affordable for middle income Americans.

Here are a few important tips for physicians beginning their career:

– When exploring opportunities with smaller, independent practices, it’s critical to understand how the ACA will affect the financial performance of the potential employer and have faith in the leadership and business management of the practice to successfully navigate ongoing changes
– With constantly changing payment models, employers will continue to look for ways to tie compensation to productivity. It is critical to fully understand how you are being compensated and any formulas you may be tied to
– Ask how the private practice is prepared to address accelerating technology requirements such as the cost of implementing and maintaining EHR’s and possibility of wide adoption of the International Classification of Diseases diagnostic code set

Contact us today to talk to an advisor about negotiating physician employment contracts.

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