Business Monday

Doctors’ dilemma: Physicians consider ways to thrive economically — and sometimes even to survive

It’s getting harder to be a doctor. Gone are the days of Marcus Welby, when a doctor focused solely on treating the sick, assured that bountiful compensation would follow. Today, physicians are as much business people as healers, hamstrung by rising staffing and technology costs, increased paperwork demands by the government, stratospheric malpractice premiums and limited reimbursements from muscle-flexing insurance companies.

The price tag for healthcare in the United States, says the federal government, was $2.7 trillion in 2012, or about 18 percent of gross domestic product. Less than 9 percent of that goes to physician compensation, reported a 2012 study by Jackson Healthcare, an Atlanta-area staffing company. That works out to a national median salary of about $184,000 for a general practioner, according to 2013 data from the federal Bureau of Labor Statistics, with Florida doctors earning only about $3,000 more per year. Specialized surgeons earn close to $400,000. Florida has more than 10,000 doctors — second only to California, home to at least 15,000 physicians, according to the BLS.

Still, more than 80 percent of medical students graduate with $100,000 or more in debt, reports U.S. News & World Report. Tuition and fees at the private University of Miami Miller School of Medicine, for instance, are estimated at about $42,000 for out-of-state students and $36,000 for Florida residents for 2014-2015. At the public Florida International University Herbert Wertheim School of Medicine, the costs are nearly $70,000 for out-of-staters and around $38,000 for the same period.

Add in office start-up costs that run into hundreds of thousands of dollars, and it’s easy to understand why many physicians are turning away from solo practices and small doctor-owned offices. Some are selling their practices to hospitals or joining large doctors’ groups. Others are banding together and creating their own group offices and vertically integrated practices that offer a range of services within a single medical specialty. Still others are staying on their own by charging annual access fees or requiring patients to pay up front and seek their own insurance reimbursements.

The process of running a business “can be overwhelming for physicians,” said Steven G. Ullmann, the director of health sector management and policy programs at the University of Miami’s School of Business Administration. By joining a hospital or a group of doctors, he said, “you give up your independence, but you also give up some of the anxiety.”

Traditionally, private-practice doctors became affiliated with hospitals, which granted them rights to refer patients to the facility, and visit them there. Today, for instance, about 2,000 private physicians are credentialed to practice at Baptist Health hospitals, according to Jack A. Ziffer, an executive vice president and chief medical and clinical transformation officer at Baptist Health South Florida, the region’s largest medical system, with seven hospitals. The advantages: access to a wide range of specialists and 24/7 care.

But increasingly, physicians aren’t just affiliating with hospitals, they’re becoming employees, said Yolangel Hernandez-Suarez, the chief executive at FIU Health, the clinical enterprise of Florida International University’s Herbert Wertheim College of Medicine, “The technology platform and the increasing overhead needed to provide quality care make it increasingly difficult for physicians to practice alone or in small groups.”

For instance, the Baptist Health system now has about 225 doctors who are full-time employees — “two or three times” the number employed just a few years ago, Ziffer said. In addition to providing a range of facilities, a large hospital “can be seen as a stable environment that offers a multispecialty culture,” he said, with more employment stability and fewer administrative headaches.

And from the hospitals’ point of view, patients’ needs are met more efficiently when medical care is consolidated under one roof.

Professor Min Chen, who teaches in the College of Business at FIU and has conducted analyses of various economic aspects of the health industry, said that the trend toward such consolidation makes economic sense, not least because employing more physicians increases a hospital’s ability to “lock in referrals,” which keeps most of the business in-house. Employing more doctors may also preempt competition from specialists with their own outpatient services, and may increase hospitals’ bargaining power, enabling them to negotiate higher rates from health plans.

“If the health plan does not increase the rates, it may lose both the hospital and its many integrated or affiliated physicians,” Chen said. In addition, “hospitals are better able to spread fixed costs — for example, administrative, billing, overhead — over a larger number of physicians, and receive volume discounts on supplies. As a result, they have lower per-unit costs than do independent physicians.” Still, one in two physicians in 2013 were self-employed.

But in healthcare, far more is at stake than dollars. Experts and doctors themselves debate which systems result in the best care.

Once a doctor is part of a larger entity, he or she must inevitably abide by strictures and practices that might have been merely theoretical when working alone, UM’s Ullmann said. Hospital administrators subject to quality ratings by outside agencies are “going to make sure that quality is not compromised,” he said.

Chen agrees. The growing emphasis by insurers, employers, and Medicare on quality reporting and pay-for-performance standards provides hospitals with a competitive advantage in attracting patients and receiving bonuses for achieving certain quality benchmarks, she said. And hospitals are better positioned than independent physicians to invest in clinical information systems and case management processes.

Others take a different view. For them, the V.A. scandal is a sobering reminder that large, unwieldy healthcare systems do not always focus on the best interests of the people they serve.

“Hospitals are taking over,” said Dr. Pepi Granat, a family medicine doctor in South Miami who has practiced alone at the same location since 1971. “Doctors have no powers now. We’re like little fish swimming in a huge pond.”

Granat and others lament the growing corporatization of medical care.

“Hospitals can become more bureaucratic and more micro-managerial,” said Richard Prager, a veteran pulmonologist who has been part of a three-doctor private practice in Miami for more than a decade. He has no intention of joining a hospital or a large doctors’ group, he said. “I can’t be in a system that tells me what I have to do. There’s something about the joy of medicine that’s lessened by being part of that. You’re enslaved to a larger system.”

Prager, who graduated from Chicago Medical School in his home town and moved to Miami in 1984, said he and his partners have a viable financial business while seeing only 10 or 12 patients for office visits per day. But some primary-care physicians, he said, are seeing as many as 50 patients a day.

“The system is so complex that they have to do that, but I don’t find that ethical,” Prager said. “How can any physician see that many patients and still deal adequately with them?”

Still he acknowledged that it is “very important to keep your overhead low.”

With the rising complexities of insurance and technology, that’s no easy task.

“You need to borrow at least $150,000 to get started to buy basic instrumentation, do a build out in an office and hire an office appointment coordinator, to get your name out to the community,” said Robert M. Easton, an optometrist who runs his own practice in the Broward County community of Oakland Park. (Although optometrists are often referred to as eye doctors, unlike ophthalmologists, they do not have medical degrees.)

Easton, who has been in practice for 32 years, pays a monthly rent of $4,000. He has four staff members who earn between $14 and $22 per hour. He pays $300 a month for electricity, $200 for water, $225 for internet and phone service, $200 for electronic health records, and at least $200 for maintenance on the building.

“If you add equipment purchases, your monthly overhead increases and the lists go on,” he said. “In order to pay the bills, I have to provide services to patients at least 40 hours per week.’’ That works out to 16 to 20 patients per day, with appointments lasting 15 to 45 minutes. “This barely covers the overhead and what I care to make.”

Easton, who accepts only Medicare and preferred provider organization policies, said that insurance payments “are probably barely paying the bills.” If a solo practitioner wishes to remain that way, he or she must accept the notion of earning less, Easton said.

“I teach a course in jurisprudence to my peers to make a few dollars on the weekends to supplement my income,” he went on. “I have a 10-year-old car and I’ve lived in the same house since 1986. The key is to live within your means.”

Other private physicians have turned to “concierge” practices that promise patients quick access and highly personalized care in exchange for a fixed annual fee. Office visits and other services typically bring an additional fee.

In South Florida, the going rate is $1,500 and $5,000 per patient per year. In some other markets, the rates go as high as $25,000.

Miami Beach cardiologist Juan Rivera turned to the concierge model 2 1/2 years ago, after years of working in a physicians’ group and for a hospital. That decision, he said, “is allowing me to stay in business and remain independent.” That arrangement, he said, eliminates “the pressure of doing unnecessary testing or seeing a lot of patients in one day."

His decision was in part driven by the math. To launch his practice, Rivera took out a loan of $300,000 and split the cost of his office and overhead with another cardiologist. The revenue from a traditional practice, where a doctor might see an average of 20 patients per day, is no longer sufficient to cover the overhead of a fully staffed clinic, with its machinery and other technology, he said, forcing doctors to increase patient volumes and seek other revenue streams from cosmetic surgeries, alternative therapies or weight-loss programs.

“Unless you are independently wealthy, it is almost impossible to finish your specialty and set up a private practice,” Rivera said. “The banks are not lending money for that any more, and reimbursement from insurance is too low.”

Atlanta-based Medicast has devised a “Doctors on Demand” model that last summer began sending physicians on house calls in South Florida at a cost to the patient of $199 per visit or a monthly subscription fee of $29 or $49 per month, depending on the level of care required. For that they can expect a visit from a doctor any time they ask for one, within two hours, day or night.

The average waiting time for such visits since Medicast’s launch has been 46 minutes, said Sam Zebarjadi, the 30-year-old co-founder of Medicast. The company has signed up a handful of South Florida physicians, he said, though he declined to give specifics.

“Doctors hate that they have to see 30 to 40 patients a day, and patients hate that they have to sit in a waiting room for an hour to see a doctor for six to eight minutes,” Zebarjadi said. “People deserve access to high-quality healthcare — when and where they want it.”

The doctors who work for the company — all as private contractors — are paid according to the number of patients they see in a day, which is now an average of five. All the doctors are paid outside the traditional insurance system. Each is provided with an iPad equipped with the company’s tools, through which they can generate medical charts and conduct other tasks.

Medicast expanded its service to Los Angeles on June 1 and plans to open up shop in coming months in San Diego, San Francisco and New York.

Other doctors are banding together on their own.

“In order to survive at least somewhat independently, you’re going to have to develop an infrastructure across a number of doctors,” said Dr. James S. Leavitt, one of the partners at Gastro Health, comprised of 57 doctors at 17 “care centers” in Miami-Dade County. The practice has expanded to Palm Beach County and is planning to do so in Broward. The group hopes to expand statewide.

Leavitt started out in 1980 as part of a three-doctor office. In 1993, the group began adding physicians with expertise related to a wide range of gastrointestinal afflictions, such as diseases of the liver or inflammatory bowel syndrome.

The group has combined resources to acquire same level of diagnostics and technology in its main South Dade location that might be available in a small hospital. For patients, that means one-stop shopping for care such as consultation and a complex screening procedure.

And with a wide range of specialties, referrals generally go to colleagues within the practice. For the doctors, that means consistency in both pricing and care levels. Those critical variables have become increasingly important under the Affordable Care Act, which favors pay for coordinated care and outcomes over the traditional pay-for-procedure model.

Medical care groups — called Accountable Care Organizations — will soon be the norm for serving the growing number of Medicare patients, predicted Dr. Sanford Silverman, president-elect of the Broward County Medical Association. “Within 10 years or so — maybe even five — if you’re not a member of an ACO, you might not get paid [by Medicare].”

Strength in numbers also makes it easier for groups to compete with hospitals. “Our goal is not to be bought by a hospital,” said Leavitt.

“The cost of care goes up dramatically in a hospital. I can do a CAT [computerized axial tomography] scan for $400; a hospital can’t do it for $1,000 and make money.”

For the doctor-members, joining a group can erase the non-medical headaches of negotiating leases, hiring staff and dealing with auditors while maintaining their medical independence.

After 20 years as a solo practitioner, Kendall family physician Fleur Sack joined a large doctors’ group last fall.

“If you look at the future of medicine, you can’t survive as a solo physician,” said Sack, whose employer is VitalMD Group Holding, a privately held Miami-based entity that claims a roster of some 330 doctors, including specialists in radiology, pediatrics, urology, maternal-fetal medicine, obstetrics and gynacology, dermatology and internal medicine.

One of the big advantages, she said, is that matters such as insurance coverage are now out of her hands. “They do the negotiating for me,” Sack said. Her last insurance negotiation as a solo practitioner took 18 arduous months, she said.

“And no one’s telling me what to do,” she said, “or how to practice medicine.”

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