Big Problems for Small Practices

Big Problems for Small Practices: Examining the Effect of the Affordable Care Act on Entrepreneurship in the Healthcare Field

doctor-1461911946b29The doctor-patient relationship is an important aspect of healthcare. Small physician practices, offices with no more than a couple doctors, have been the long-standing foundation of this relationship. Unfortunately, legislative changes disincentivize doctors from being small business owners.

The Health Information Technology for Economic and Clinical Health Act (HITECH) and the Affordable Care Act (ACA) have discouraged physicians from starting their own businesses. They have done so by differing reimbursement rates and requiring unreasonable electronic medical record requirements. These conditions have decreased entrepreneurship in the healthcare field. A 2014 Physicians Foundation study found that among 20,000 U.S. doctors, only 35% described themselves as independent, not employed by a hospital or large group. This is a change from the 49% in 2012 and the 62% in 2008. Doctors now overwhelmingly choose employment at hospitals where they have less overhead, less administrative responsibilities, and better pay.

Reimbursement Rates

Reimbursement rates for Medicare actively discourage private practices. The government pays hospitals at a higher rate than independent offices for the same services. For example, the government reimburses hospitals $749 for heart scans but only gives small practices $503. Additionally, hospitals receive $876 but independent practices only get $402 for colonoscopies.

Electronic Medical Records

The required use of electronic medical records (EMR) increases administrative burdens and may decrease the quality of patient care.

Introduced as part of HITECH in 2009, EMRs were intended to increase efficiency, care coordination, and quality of patient care. Despite the apparent positive effects of EMRs, installation, maintenance, and training costs all serve as barriers to use.

The National Ambulatory Medical Care Survey found that quality of care was no different with the use of an EMR. The required system comes with an average cost of $163,765 for a single practice. For small practices this cost may be prohibitively expensive. As this is a fixed cost, it is cheaper to share the costs across multiple physicians, which incentivizes doctors to work at hospitals or large practices.

Meaningful Use and Quality of Care

Also introduced in HITECH, and further encouraged in the Affordable Care Act are “meaningful use” and “quality of care” measures. Meaningful use involves inputting specific codes that correspond with patient diagnosis into the EMR system. Many doctors find this a tedious process. However, they often have to spend a lot of time on it or risk losing a percentage of their reimbursements.

Quality of care involves the EMR system picking out documented points that are entered in a patient’s exam. It then calculates an improvement percentage that it requires doctors to meet. This is measured through filtering for certain code words or confirming that patient results are as good as the quality measure requires. For example, a month after cataract surgery, unless the patient has a previous condition, the patient should have achieved 20/40 vision.

The government instituted quality of care measures to help standardize patient care. However, this comes at the loss of human interaction between doctor and patient. Furthermore, all patients and their cases are different. Requiring certain points of improvement can be an impractical or impossible for doctors to meet. Quality of care should involve talking to patients and tailoring treatments to their needs, not a pre-defined set of instructions.

Penalties

Filing patient bills and participating in meaningful use or quality of care measures improperly can result in penalties. If a doctor cannot prove “meaningful use” of their EMR, they will receive a 2% deduction in medicare reimbursement. In 2017 the 2% will become a 3% deduction. If a physician even forgets to note that they sent a letter to the patient’s primary care doctor about a diagnosis of diabetes, the doctor can be penalized.

The quality of care requirement may seem beneficial. However, it is difficult for small practices to ensure that they meet the “meaningful use” and “quality of care” requirements. Reductions in reimbursement rates for hard to meet requirements further disincentivize doctors from owning their own offices. Independent doctors do not make as much money by seeing patients but still have to shoulder costs of running a business that hospital workers do not need to pay.

Time Wasted

Due to these new measures, physicians spend just 27% of their time in their offices seeing patients and 49.2% of time completing EMR paperwork. Even in the exam room, doctors spend 52.9% talking or examining patient and 37% of their time doing paperwork. A JAMA Internal Medicine survey stated that family practice physicians reported an EMR-associated loss of 48 minutes of free time per clinic day.

Some doctors who want to meet the regulatory burden while maintaining patient interaction choose to spend money to hire scribes or other technicians. However, this may pose too high of a cost for some small practices.

Benefits of Independent Practices

The close relationship that small practices can build between doctors and patients has shown to be helpful. The CommonWealth Fund found that small primary care practices have a lower rates of preventable hospital admissions. Hospitals or bigger practices may seem better or more efficient. However, the decrease in private practice can lower quality of patient care, increase the cost of health care, and harm the doctor-patient relationship.

Patients do want personal care. In fact, using a concierge health care service, is becoming more popular for those who can afford it. According to the American Academy of Private Physicians, in 2012, there were around 4,400 private doctors. This was a 25% increase from the previous year. This quality time, both in private practices and in concierge services, translates to being able to tailor treatments to patients needs individually.

Hospital Monopolies

The government must remedy the lack of incentive to operate a private practice. When hospitals get together, they can charge higher costs to patients for treatment. This raises the cost to the government for reimbursement rates. Reduced competition and the monopoly power of hospitals is bad for both patients and the government. The Journal of the American Medical Association found that patient costs are 19.8% higher for physician groups in multi-hospital systems compared with physician-owned organizations.

Policy Changes

The U.S. government should find a way to preserve the entrepreneurial spirit of the health profession. Without changes, doctors will lose the ability to start their own businesses as the system is rigged against them. Changing the reimbursement rates to be equal between hospitals and private practices would an important first step. Additionally, improving the requirements of meaningful use and quality of care measures so that they are less difficult to complete would alleviate the burden on private practices.

Overall, the requirements of the Affordable Care Act and other recent health laws should be changed to foster entrepreneurship in the healthcare community, not destroy it.

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