Brave New World of Physician Compensation

conferenceI just came back from a weekend “retreat” sponsored by my local medical center for board of directors, physician leadership and patient advocates.  This gathering was to discuss the coming changes in medical compensation both at the doctor and hospital levels.  Several national speakers talked at length about how Medicare and private insurance companies plan to expand plans to transition from traditional fee-for-service medicine to quality-based or accountable care compensation.

I have been involved with my physician-hospital organization (PHO) for over 20 years and running my own practices for over 30 years.  From that perspective, I knew that this day was coming.

doctor_shockThe shocking aspect for me was how many members of the audience were not aware of these changes being afoot.  Whenever I brought up this possibility to doctors in meetings, many did not feel that this change was going to affect them.

However, unless retirement is imminent and by that I mean in the next year, the medical care system is going to go through significant change.  Ultimately, hospitals will only be compensated for the right care at the right time, and at the price determined by the government entities that control the purse strings.

Now, I am not going all “Tea Party” on you here as I am the furthest from that viewpoint politically and socially.  However, I see it as a relatively simple math problem.

older_peopleOur society is getting older partially because of our efforts to prolong life, and that’s a good thing.  The bad part of the equation is that the older are getting sicker and more expensive due to chronic diseases that we cannot cure but can only manage.

Because the older and poorer citizens are covered by government-based insurance (mostly due to the fact that private marketplace either won’t or can’t cover them), government in the form of Center for Medicare Services (CMS) will make the rules on reimbursement.  Frankly, there is a limited number of dollars that our society can expend on health care, and the fee-for-service pie cannot keep on growing without bankrupting all of us.

big_billWhat I tried to express to the doctors in attendance at the retreat is that this new compensation model will affect them in their pocketbook eventually.  If you are an employed physician, eventually the hospital or group employer is going to demand that you be more efficient and cost effective, or face pay reduction or even dismissal from employment.  If you are in private practice, you will have to be nimble and accountable to prove to the payers that you are able to deliver quality care by whatever metrics they determine.

Obviously, one other approach is to drop out of the system altogether by not accepting insurance reimbursement and going fee-based or concierge model.  The bottom line is going to be your bottom line.  If you do not save or invest enough on the front end, you will not have enough freedom to choose on the back end.

By adhering my high savings and low debt model, which included practice options that did not depend on insurance reimbursement, I was able to make choices in the past several years that led my current practice.  Very little of my cashflow now depends on insurance payers.  I can make decisions on what I want to do or how I want to practice without feeling like I am being painted into a corner.

train_rollingAs Bob Dylan sings, the times they are a changing.  They will continue to change mostly because the current system, even the advocates of stopping Obamacare have to agree, is unsustainable.

If we as physicians don’t want to be run over by this train coming down the tracks, we must be prepared to change with the times or jump off the tracks.  In either case, you need to know what is coming, have a plan to deal with it, and gather the resources to implement that plan.

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