Physicians overcoming gap between revenue, expenses

This article appears in the 4/25/18 issue of Medical Economics.

The opioid epidemic and the fate of Obamacare occupy most of the public’s attention  but outside the media spotlight many primary care practices face the more basic challenge of staying afloat financially. 

In fact, 79 percent of primary care physicians (internists, family doctors, pediatricians and obstetricians/gynecologists) surveyed by Medical Economics about the financial condition of their practices said it was worse or about the same compared with the previous year. Among those who said they were worse off, two of the top reasons cited were higher overhead costs (64 percent) and lower payer reimbursements (54 percent).

Closely related to these was the growing quantity of time spent on tasks for which they are not compensated, a problem cited by 69 percent of primary care doctors. The findings are part of the exclusive 89th annual Medical Economics Physician Report. 

In follow-up interviews, survey participants say they are using a variety of strategies to bridge the widening gap between practice revenue and expenses. On the revenue side, they are seeing more patients and seeking out new sources of income, such as taking on additional employment or adding ancillary services to their practices.

On the expense side, they are reducing staffing and/or asking existing employees to take on additional tasks, and in some cases making adjustments to their lifestyles.

“You start saying, ‘I’m not going to buy that new car, or I’ll skip the ski trip,’” says Howard Mandel, MD, a Los Angeles-based OB/GYN in his 34th year of practice. “I’m comfortable with making less money today than I used to. I don’t think it’s fair, but then I ask, ‘What’s my alternative?’ And there
really isn’t one.” 

As for what keeps them going in the face of mounting frustrations and often-declining incomes, physicians who spoke with Medical Economics are virtually unanimous in their response: relationships with patients. 

Next: MACRA impact still uncertain

MACRA impact still uncertain

Doctors’ concerns over reimbursements, expenses, and uncompensated tasks all jibe with what Ken Hertz, FACMPE, a long-time practice consultant and principal with the Medical Group Management Association, sees among his clients. Exacerbating physicians’ worries, Hertz says, are uncertainties over the impact of Medicare’s Quality Payment Program, which took effect last year. 

“They’re worried what reform means in terms of how they have to see patients, how they have to check boxes in order to be compliant,” Hertz says. Moreover, many practices are struggling to meet the growing complexity of documentation and coding required by payers and the introduction of the ICD-10 coding set. “We’ve got practices that are not documenting and coding as effectively as they could and so are leaving money on the table,” he says. 

As an example, Hertz cites a February, 2018 study in Health Affairs showing that as of 2015 more than half of medical practices were not taking advantage of Medicare’s Annual Wellness Visit, despite its higher reimbursements compared with problem-based visits. The study’s authors attribute the reluctance to use these visits in part to their “complex and sometimes confusing requirements.”

Lauri Miro, MBA, RN, vice president of consulting services for the Halley Consulting Group in Westerville, Ohio, notes that MACRA is part of the broader shift away from fee-for-service reimbursement and toward rewarding providers based on patient outcomes-a trend that frequently leads to higher overhead for practices in the forms of additional staff and/or technology. 

“The increases in expenses practices are having to incur to take advantage of value-based reimbursement and increased tracking and reporting of quality metrics is increasing expenses at a faster rate than reimbursements are increasing,” Miro says.

That dynamic has played out to some extent in the practice of Leroy Fleischer, MD, an internist in Broomall, Pa., who practices in a multi-site primary care group. “Reimbursements haven’t been declining per se, it’s more that they haven’t kept pace with what it takes to operate a practice,” he says. “And it’s not always direct costs like for more employees as much as maybe having to spend more time on things like data entry. There’s an opportunity cost to that.” 

Now in his 26th year of practice, Fleischer has seen a significant increase in time spent charting since he began using EHRs, in part because of the quantity of data the systems require for each patient.

“It used to be that if a patient had, say, a stress test, we filed the results in the paper chart, and I didn’t perceive I had to have them at my fingertips,” he says. “Now, I have to make sure I document the negative stress test that the cardiologist did and that he changed their Metoprolol from 25 to 50 milligrams. It’s a lot more time and it’s uncompensated.”

Next: Growth of uncompenstated tasks

Growth of uncompensated tasks

For Ann Pollock, MD, a partner in a two-physician internal medicine practice in Frankfort, Ky., the likely impact of Medicare payment reform will be her retirement in the next year or so, which is earlier than she expected. “I’ve got to do a lot more data mining and reporting for which I’m not getting compensated, but they’re telling me I’ve got to do this just to keep my reimbursements where they are now,” she says. 

Pollock explains that her EHR system isn’t able to report data required by the Merit-based Incentive Payment System, and the necessary upgrades would cost around $10,000. “I’m 62 and already close to retirement, so why would I want to do that? I think MACRA is set up against doctors, and it’s going to end up causing a lot of us to retire,” she says.

Pollock says her experience with uncompensated tasks mirrors the experience of other physicians who complain they’re having to spend more time with EHRs than they are with patients. 

“I try to give patients my attention, but it means I end up taking home a couple hours of chart work each night,” she says. Partly as a result of this added time burden, Pollock has stopped making hospital rounds for her patients. Moreover, the hospitals themselves are putting increasing time demands on physicians. 

“They’re wanting us to do things a certain way and follow a bunch of time-consuming rules, so I just decided I’d eliminate my night call,” she says. “In some ways it’s been nice, but I don’t think it’s good patient care.”

In the meantime, Pollock’s practice has sought ways to reduce operating expenses and boost revenue. It has achieved the former mainly by cutting back on vaccinations for shingles and influenza, since the cost for both have increased dramatically in recent years, says Annalisa Davis, the practice’s long-time office manager.

“We used to have a flu clinic where we’d give 300 to 400 shots a day, but we don’t carry nearly as much vaccine now because if we don’t use it we can’t return it,” Davis says. Instead, the practice now refers patients to local pharmacies for flu shots. 

The practice has captured additional revenue by participating in a program offered by Humana aimed at improving patient outcomes, for which Humana sends the program monthly bonuses. But doing so requires reporting data not always captured in a  chart, such as results of a diabetic patient’s eye examination.

“Much as we try to remind them, the patient isn’t always going to remember to tell their eye doctor to send us that information,” Davis says. As a result, she has to spend time following up with the patient’s eye doctor to get the results. 

Internist Ajith Purush, MD, who practices in Prescott, Ariz., says reimbursements from his payers have trailed his expenses practically since he established his solo practice in 2011. 

“Even private insurances are paying terrible,” he says. “We had to terminate our contract with United HealthCare because they were paying us close to 30 percent less than Medicare and weren’t willing to go up at all.”

How does he bridge the gap between reimbursement and practice expenses? “Working longer hours,” he says. “Putting in a lot of 12-to-14 hour days.” But a considerable chunk of that time is spent entering data into his EHR, a task that leaves him feeling like “a glorified clerk for an insurance company,” he says.

Contributing to Purush’s frustration is the inability of EHR systems to communicate with one another, forcing doctors to employ time-consuming workarounds when they want to exchange patient data with each other or send it to government agencies-time that could otherwise be spent treating patients.

“If the government really wants us to give them data, they should have developed a unified system so this problem of interoperability wouldn’t exist,” he says.

In Purush’s view, EHR manufacturers take advantage of the situation by making it expensive and disruptive for practices to switch systems. “We are trying to mix an altruistic service with business and that never goes well,” he says.  

Next: Exploring new revenue sources

Exploring new revenue sources

Mandel, the Los Angeles OB/GYN, faces dual reimbursement challenges, both related to his decision not to participate in insurance networks while retaining a fee-for-service practice model.

Reimbursements to nearby practices that are in networks have been stagnant or declining, he says, which means those practices aren’t raising their rates, “So even though I’m out of network, I can’t push my rates when the competition isn’t,” he says. 

In addition, payers have been scaling back or eliminating payments for out-of-network coverage. “I get patients saying, ‘My insurance used to pay 70 percent of my bill but now they’re only paying 50 percent, so I’ll need a discount or I’ll have to leave you,’” he says. 

Mandel makes up for the lost revenue by looking for other sources of income and cutting costs. For the former, he is taking on legal and forensic consulting work, much of which actually pays more per hour than his medical practice.

To reduce expenses, he no longer purchases educational materials to give to patients, and laid off a staff member at the beginning of the year. But the biggest expense reduction has been in his own take-home pay. Not counting for inflation, “I made three times as much money in 1988 as I make today.

“Luckily, I’m 61-and-a-half years old and I worked my a-- off for the last 35 years and didn’t live above my means,” he says. “But if I were five or 10 years younger or had younger kids who still needed to be put through college, it would be a bigger issue.”

Drawing strength from relationships

Physician Report participants acknowledge that the ongoing struggle to find the time and money to properly care for patients sometimes dampens their enthusiasm for medicine. What keeps them going, many of them say, is the relationships they’ve established with patients over decades in practice. 

“Because I’m out of network, I know that my patients come here because they really want to see me,” says Mandel, adding that not being in an insurance network gives him the luxury of spending as much time with each patient as he thinks necessary. 

“If I were in network, the only way to survive would be to churn through patients quickly, and the docs I know who are spending six minutes per patient are all miserable,” he says.

Like Mandel, Fleischer draws energy from his ties to patients. “I really value my relationships with my patients, maybe because being in a practice where I’ve taken care of some families for three generations allows me to build a strong bond [with them],” he says.

In addition, Fleischer sits on the board of directors of an ACO. “It gives me the semi-delusional and probably misguided notion that maybe I’m at the forefront of changing healthcare for the better,” he says.

Purush remains inspired by recalling what drew him to medical practice. “When you’re young, you’re altruistic, before you get jaded by the business end of medicine, was a time when you wanted to make a difference in people’s lives,” he explains. “So if you keep going back to that place, it gives you the encouragement to stay with it.”

For Pollock, continued enjoyment in practicing medicine comes from fulfillment of the basics. “I love seeing my patients, and I like the staff I work with,” she says. “I have a beautiful office that’s about five minutes from my home. So for as long as I can make it last, it’s a pretty sweet gig.”