Striving to Stay Afloat in Private Practice
With the economic downturn and slashes to the physician fee schedule, more and more practices have integrated with hospitals, despite the possibility of losing autonomy in the process. Those practices that strive to remain independent need to creatively manage budgets and clinical practice to avoid capsizing.

As of June 2011, nearly 60 percent of practices have turned to hospital integration, with some making the change because of fiscal uncertainty. In the long run, will independent practices that buck the trend reach long-term financial stability without the help of the hospital or will they be forced to close up shop?

Surviving despite cuts

Both private cardiology practices and hospital systems are facing cuts and the same grueling task—to maintain profits and offer the highest quality patient care. But with increasing financial pressures, it is often tricky for small private practices to stay buoyant. This is particularly challenging as more innovative and expensive technologies come onto the market, fee schedules are cut and overhead rises.

For private practice physicians, the reimbursement cuts put forth by the Centers for Medicare & Medicaid Services have been backbreaking. Most have reported reimbursement cuts in the 10 percent to 40 percent range. SPECT imaging received the brunt of the hits, taking an approximate 20 percent cut under the 2010 Medicare Physician Fee Schedule.

"Practices and physicians are now trying to provide the same level of care in an age where both health insurance and staff salaries are more expensive," says Patrick J. White, MPH, president of MedAxiom, a service provider and information resource based in Neptune Beach, Fla. "Practices are getting paid less, and this falls right to their bottom line."

For A. Charles Rabinowitz, MD, of South Texas Cardiovascular Consultants in San Antonio, countless changes have occurred over his more than 30-year career as a cardiologist, but the last 10 have been most practice changing. "Reimbursement cuts have been 30 to 50 percent and overhead has increased more than 100 percent," Rabinowitz says. In fact, cuts to reimbursement have put the 12-cardiologist independent practice in the red by more than $100,000, he says.

Due to these downward trends, the practice was forced to slash 30 percent of its workforce, cut all overtime and spend less time with patients. While Rabinowitz says he used to devote a half-hour per patient per visit, the current reimbursement model makes it difficult to spend more than 10 to 15 minutes with each patient.

And despite the fact that joining a nearby hospital would increase physician salaries more than 50 percent and potentially provide a safe haven from future cuts, staff members have put hospital integration on the backburner because they are afraid patient care would suffer, Rabinowitz says.

"Patients don't like going to the hospital to receive care," Rabinowitz notes, and some practices have reported losing up to 30 percent of their patient referrals due to that factor alone.

After integration, many patients see on average an increase of 20 percent in deductibles, higher than the entire bill would have been two years ago before the integration, says Rabinowitz. Hospitals have the capability to tack on facility fees, which can cost patients anywhere from $200 to $400. Additionally, tests are two to four times more expensive than those taken in the practice setting, despite the fact that "it's the same test, done with the same equipment, performed by the same physician," he claims.

"Doctors are being consistently enticed by the fact that they can make a lot more money after integration because of the higher fee schedules within the hospital," Rabinowitz says.

Private practices recalibrate

While cardiologists at South Texas Cardiovascular don't do "anything special" in terms of direct marketing or seeking patient referrals, Rabinowitz says that ensuring patients stay out of the hospital by increasing follow-up is integral. For example, South Texas Cardiovascular's physicians have increased follow-up visits for congestive heart failure patients to every two weeks or monthly to avoid readmissions.

Private practices also face another test—meeting meaningful use regulations. While health IT may be beneficial to help streamline practice, particularly when practices receive incentives for its use, implementing these types of systems is expensive, says White.

Currently, practices gain incentives for e-prescribing and EHR use, but transitioning to ICD-10 by Oct. 1, 2013, will be another major challenge and expense. The new code set will be beneficial for better coding and billing, but getting there is no easy feat—for large healthcare systems or small independent practices. In fact, practices will need to invest thousands of dollars for the health IT systems necessary to make the switch, and this does not include the cost of training employees.

In terms of new revenue sources, facilities should look to areas that can become prosperous, such as vascular medicine or partaking in clinical research, suggests White. Additional revenue may come from participating in quality-based programs, such as physician quality reporting systems (PQRS), meaningful use or e-prescribing. "While these won't be revenue sources for long [as they will turn into penalties], at least for now, these are some ways to protect revenue sources," White says.

The future of healthcare must focus on the patient, omitting unnecessary testing and better patient follow-up to prevent readmissions, according to Rabinowitz. Additionally, he says practices need to appeal to patients who value high-quality care.

Diversifying and partnering

"As practices mature, they must make sure that they are not reliant upon just one type of service," adds Ann E. Honeycutt, executive director at Virginia Cardiovascular Specialists (VCS) in Richmond, Va., an independent practice with 37 cardiologists. "You can't have your whole practice revolve around nuclear imaging or echo; you really need a diversified group of services to ensure that you have all the subspecialties of cardiology covered to put you ahead of the competition or radical fee schedule changes."

For practices attempting to be a cut above the rest, three things will be necessary:
  • Employing top-notch, highly skilled doctors;
  • Having the infrastructure to ensure efficient revenue cycle management and cost control; and
  • Developing partnerships with nearby hospitals or other independent groups.

The greatest pressures that independent practices face are determining how to partner with community hospitals and preparing for the changing ways of payment reform, she says. As the focus turns toward outcomes-based payments, bundled payments and accountable care organizations (ACOs), independent practices must be prepared. "One way is to position your group in the market, so it will be a valuable partner to local health systems," Honeycutt notes.  

"It's a competitive market," Honeycutt says. "Practices that want to stay independent need to have their best doctors and appropriately incentivize for quality of work."

VCS engaged in a rigorous marketing and branding strategy to help get the word out to the community. To do so, they used various communication mediums to show the community the gamut of care provided by the practice. "The patients must know that they don't need to choose a hospital system to receive integrated cardiac care."

While many practices have had trouble staying afloat due to new reimbursement trends, Honeycutt says remaining contemporary and patient-focused will be the key to survival. She recommends keeping up with the latest technology, ensuring easy access to your practice and offering a wide range of cardiology services, including screenings, preventive services and outreach programs.

"You will need to watch your revenue, manage your expenses and investigate potential partnership opportunities within your community," Honeycutt sums. In an era of healthcare reform, she emphasizes that practices will need to make smart choices to ensure that they stay afloat no matter what waves of change assail them.