Physician practices on the brink: A warning for Congress

Tags: COVID-19, practice viability, SBA loans, Congress

By Tom Banning

There is no question that  the COVID-19 pandemic has created unprecedented financial pain throughout our health care system. Primary care physicians have seen a drop in patient visits of more than 50%, specialty physicians have seen patient volume evaporate, and hospitals are burning through cash as patients avoid going to the emergency room and non-urgent surgeries and other elective procedures  that make up the bulk of hospital revenue have been canceled.

In a Stateline article this week, The Pew Charitable Trusts warns of the “possibility that the non-hospital health system will be decimated, and many of the surviving providers will be ill-prepared to deal with the pent-up demand that emerges from this crisis.” They predict a near future rife with acquisitions and mergers for independent physicians unable to survive months with no revenue.

That aligns with what we’re hearing from our members. Take Guy Culpepper, MD, whose here-to-fore successful practice, Bent Tree Family Physicians in Frisco and North Dallas, has furloughed 70 employees and cut physician pay by 20%. He applied for an SBA paycheck protection loan and like so many others, he was told “The money’s all gone.” He told the Dallas Morning News his practice is now in jeopardy of “serious financial ruin within a matter of weeks.”

He’s depending on securing a loan during the expected second round of SBA relief but that’s far from a sure thing. He expressed the frustration of so many independent, community-based physicians recently when he published a LinkedIn post: “If we are ‘essential’ workers, then why weren’t we first in line for an ‘essential’ loan?” he began. “Can you imagine facing this crisis, or any health care challenge, without the heart and soul of primary care physicians?

“How did the first to serve become the last in line for a small business loan?”

For hospitals, this is a different story. Congress passed a $100 billion stopgap measure to temporarily staunch the bleeding caused by COVID-19. In the last couple of weeks Baylor Scott and White Health received $100 million, Texas Health Resources said it would get about $50 million, UT Southwestern will get about $25 million and Parkland Health and Hospital System, which cares for many uninsured in Dallas and the broader region will get $12.4 million. Not to be cynical, but it begs the question of whether creating a business model built on ER use (you’ve seen the bill boards advertising wait times) and lucrative elective surgeries was in the best interest of our communities, but that is a debate for another time.

And more help for hospitals is likely on the way in the $484 billion relief package the Senate passed yesterday, complete with $74 billion earmarked for hospitals. If passed, transparency on how these funds are distributed and used will be essential.

It is important to recognize that the strength of our health systems and hospitals vary greatly state-by-state and community-by-community. It is also important to remember the COVID-19 pandemic has affected regions of our country and hospitals differently. For the sake of simplicity, we can describe the health systems and hospitals as the haves and have-nots. For example, there are some health systems that are sitting on massive reserves. Those health systems have also seen astronomical year-over-year net asset growth as well as revenue growth. Yet there are others, particularly rural, community-based hospitals that are running on fumes.

As Congress continues to debate the next COVID-19 relief package, I hope they keep a couple of things in mind:

  • A hospital without physician workforce cannot function. Congress should help physicians and other health care clinicians — not just hospitals — who are working on the frontlines of care meet the demands of the rapidly evolving COVID-19 pandemic.
  • Use this opportunity to promote more efficient health care and expand health insurance to the uninsured. Expanding access to coverage through the health insurance exchanges, employer plans and Medicaid would allow new enrollees to take advantage of subsidies that are already available to them. Since people with insurance are more likely to seek medical attention when needed rather than delaying until their conditions become acute, it is a better strategy for the long run.
  • Immediately begin paying primary care a prospective payment. This means health insurance companies, Medicare, Medicaid and all other payers would pay primary care providers a fixed monthly fee for a broad range of services rather than paying a claim for each service.
  • And finally a WARNING:

If the federal government deploys capital in a way that supports already well-capitalized health systems and institutions, we are giving them a significant advantage to further consolidate the market through horizontal mergers (weaker community or rural hospitals) and vertical mergers (buying physician practices and other ancillary services). The evidence is clear: a primary force driving up health care costs is the wave of health care consolidations that give dominant providers the market leverage to raise prices, undeterred by competitive forces. The empirical evidence points to this sobering conclusion: Health care market consolidation significantly increases prices without offsetting improvements in quality or efficiency. Consider these facts from the National Academy for State Health Policy, “State Strategies to Address Rising Prices Caused by Health Care Consolidations.”

  • Nearly half of all hospital markets in the United States are “highly concentrated,” including nearly all major metropolitan areas (more than 88%). Most rural areas are concentrated because they cannot support more than one major health care provider. No hospital markets are considered highly competitive.
  • Hospital concentration has increased by 40% in the past 30 years. In the 1980s, the average hospital market had five independent firms. That has now decreased to three independent firms (usually one is dominant), drastically reducing the ability of health plans to refuse to contract with dominant, costly providers.
  • Vertical consolidation of hospitals and physician groups has similarly increased, from 2004 to 2011, hospital ownership of physician practices increased from a quarter (24%) to nearly half (49%).
  • Providers are also merging across geographic markets at a rapid pace to form large health care systems that span geographic regions. In the roughly 10 years starting in 2000, one-third to one-half of all hospital mergers were across geographic markets, thus escaping antitrust review.
  • Horizontal hospital consolidation leads to 20 to 40% higher prices, with greater price increases in concentrated markets.
  • Vertical consolidation leads to higher prices. Hospital ownership of physician practices is associated with higher hospital prices, nearly 14% higher physician prices, and 10 to 20% higher total expenditures per patient.
  • Geographic cross-market health care mergers have led to 6 to 9% price increases, compared with controls, and is currently unchecked by existing antitrust enforcement.

If we want to come out of this pandemic crisis with a primary care system that can deliver its potential of high-quality, coordinated care at lower costs, we must do something now to protect this infrastructure. If we don’t, private equity firms and consolidated health systems will act to maximize their power.

4 Comments

  • Charles J. Neilson MD said

    As I have said since around 1988, the government (Medicare/Medicaid and innumerable regulatory agencies), insurance companies, and hospitals with their development of allied corporate practice of medicine have all been allowed to destroy the physician-based private practice of medicine. This seems to have been for the ostensible reason of saving money for government, insurance companies, and patients yet we find ourselves now with physicians no longer at the helm and the current outrageous costs of medical care making it the most lucrative of all American industries in terms of profit and pervasiveness.

  • ARLENE said

    I agree! What can the individual physician do? What are the AMA. TAFP AAFP, ACP etc doing?

  • Tom Banning said

    Physician & patient stories are very powerful. Please share how this pandemic has impacted your practice and patient care. Your stories will help drive policy decisions. Feel free to email me directly at tbanning@tafp.org

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