Report Reveals Employed Physicians Losing Money for Employers

The Physicians Foundation has once again published their excellent report, 2014 Survey of America’s Physicians Practice Patterns and Perspectives. The Foundation once again contracted with Merritt Hawkins – a subsidiary of AMN Healthcare – to conduct the survey. For those of us who like these kinds of reports, this one carries some of the interesting trends and data from their 2012 report forward, and adds a number of pertinent and timely new questions to the mix. The 2014 report is chocked full of interesting information, trends, data points and facts about how physicians are responding and adapting to the Affordable Care Act. Over the coming days we will be assimilating more of this information and relating it to other trends, reports and raw data. Keep checking back as we do so to stay abreast of this new information as it is digested, analyzed and evaluated.

As so often happens, one small entry grabbed our attention as it is highly indicative of a trend-line that is becoming of significant concern to us and many others. The foundation reports that for 2012 the median LOSS for an employed physician – meaning a doctor that is an employee of a hospital or group practice, a significant and growing trend – was $176,463. To be clear organizations that had doctors working as employees had a median loss of over $175,000 per physician, per year, on the services they performed.

The median loss for employing a physician in 2012 was $176,463, which causes some observers to question the long-term financial sustainability of the physician employed model. (Making Physicians Pay Off, Modern Healthcare. February 22, 2014)

This is a shocking revelation in that we are led to believe that physician owned private practices, either small group or individual, while seeing small to modest gains in overall income last year are losing money. This trend to unprofitability in individual practices is supported both in other reporting and in some of the empirical data from the Physicians Foundation’s report.

The trend to aggregation of independent practices, by hospitals and large groups, has been driven by the belief that, generally, the economies of scale gains of aggregation will deliver consistent return to profitability during this time of declining margin in healthcare. Simply put it is based on the concept that, “We can make it up in volume!” Any retailer will tell you the failing of such an idea. Circuit City and many others have learned these lessons and can offer chapter and verse examples. If those physicians that have already aggregated and sold out their practices are still losing in excess of $175,000 per year, what does this portend for independent practice physicians today?

Looking at various other more consumer based models, tells us that it is not often aggregating volume that will return profitability in a declining margin industry; it is through the management of the mix and margin of services offered that is the key to sustainable performance. Sure, increased volume can bring economies of scale, but simply increasing the volume of negative margin services can have disastrous effects on a business or industry if you can’t also reduce the number of losing operations you must perform to a minimum and replace the time saved with higher margin services. The next question will be how do we re-educate patients and physicians and rebuild our healthcare system to actually yield better results?

This and other questions are exactly the kinds of issues Health Reform 2.0 was created to address. Stay tuned for more tidbits from this Physicians Foundation report.

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About Thomas W. Loker

Meet the Author - Thomas Loker is a Startup Consultant and Advisor at SYDK.ORG, Angel Investor, Mentor and Advisor at Keiretsu Forum & Venture-Med and an established operations guy with serial successes with startups, transitional companies and turnaround situations. He has had a long career serving in the fields of science, technology and healthcare related industries. He is an active board member in both for-profit and not-for-profit companies. Tom has written numerous articles in the areas of healthcare, technology, politics and the economy. He is currently the principal author of Health Reform 2.0: Beyond partisan divide lies pragmatic solutions – a whitepaper focused on moving beyond the partisan rhetoric of the ACA (Obamacare) to a simple, efficient, effective, accessible and affordable healthcare system. He maintains a passion for serving the underserved and has founded, supported and worked in various companies to serve the most fragile among us. Because of his expertise on the business of healthcare, he was invited to conduct multiple congressional briefings on healthcare reform in Congress, meeting with more than 100 congressional representatives. He has been a guest on HuffPost Live to talk about health care issues, and is a frequent keynote speaker on the topic for many groups and events. Prior to his latest book, The History and Evolution of Healthcare in America: The untold backstory of where we've been, where we are, and why healthcare needs more reform, Tom published “Delusional Ravings of a Lunatic Mind”—a collection of essays on healthcare, politics and their interaction with the economy, available at Amazon, Barnes and Nobles, and other bookstores. Tom's passion for Music is currently expressed by his role as VP Operations and General Manager of David Victor Presents. See www, to find out more. You can find Tom online at: Website: Blog: LinkedIn: Photography:

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