How Sustainable is Your Primary Care Practice?

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How much of every dollar that you make are you paying out to someone else?
How much of every dollar that you make are you paying out to someone else?

When I entered my first primary care practice in 2002, I had great doubts that the traditional model was sustainable. So I spent the next 12 years studying. My field research included stints as a hospitalist, Corp Med doc, private practitioner, and concierge physician. 

I also became a legal expert, medical director of multiple nursing facilities, took on a job as an assistant medical director of a hospice, started a palliative care program, and consulted with home healthcare companies.

And I read every white paper, medical economics article, and op-ed that I could get my hands on. I learned many details, but my research can be distilled into one overwhelming and primary concept. This “secret sauce” is, I believe, what will separate the men from the boys and the women from the girls. 

It is the most basic question that each primary care practice has to ask itself if it wants to survive the slaughter that is surely coming.

But first, a few principles that the reader may or may not agree with:

  1. Whether we like it or not, health care's pound of flesh is coming from physicians and patients. That's right — at the end of the day, pharmaceutical companies, insurers, politicians, and administrators will all come out of this catastrophe with healthy bank accounts and bulging pockets. If you don't believe this, I can't help you. The Medicare data dump and Obamacare's large out-of-pocket deductibles are just a few glaring examples.  I won't go into depth about this subject because it would require a series of blog posts — at minimum.
  2. The primary goal of both the government and insurers is to cut costs, not to improve care. Said another way, payers may give extra money for innovative models that reduce healthcare costs and produce more healthy patients in the short term.  But eventually, they will stop. They want to have their cake and eat it, too. I don't care if your model creates a 15% future savings, if it costs insurers 15% extra up front, it is a zero-sum game. Don't expect their support in the future.

Will any of this ever change, and will change come from outside or from within? I don't have the answer. That being said, the litmus test for any current practice model has become the overhead.

Let me say this again:

If you want to survive today in primary-care medicine, you must have an extraordinarily low practice overhead.

The government will not pay you more. Insurers will not pay you more (ex, the pound of flesh we talked about previously). Patients can afford some concierge and direct-pay fees, but do not expect to be able to leverage them, either — they're also getting squeezed by health care.  

In addition, because of inflation, meaningful use, technology, rental fees, etc, the cost of doing business and compliance will only go up in the next decade.

Primary care doctors who have been drowning for years understand all of this. I believe that they have one of two options: They can either throw their hands up in the air and join Corp Med for stability (the majority), or they can begin an alternative low overhead practice (concierge or direct pay). Mind you, those PCPs who opt for a new model are generally working very lean.

Non-primary care doctors trying to enter this space, I believe, have not benefited from the years of being caught under the wheel. They generally opt for high overhead, personnel-intensive, high-flair practices that truly deliver an awesome product.

But my prediction is that these practices will die an unfortunate and costly death. Because, in the end, no one will pay for it. Medicare won't pay for it; the insurers may pay for a period of time, but not indefinitely; patients won't pay for it; and while venture capitalists and tech visionaries may pay in the short term, eventually they won't like losing money, either.

That's why I blended a home-based practice and nursing home work as the two arms of my new business. The common thread, of course, is almost zero overhead. That is where my experience has led me.

Do you want to know if your practice has the right stuff to survive the turbulent future that primary care faces? Ask yourself this question:

How much of every dollar that you make are you paying out to someone else?

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