At a Glance
- Physicians in independent healthcare practices face numerous challenges including financial strain from unequal reimbursement rates and stiff competition, especially from large healthcare organizations and private equity firms.
- Despite the obstacles, independent practices offer a more personalized and community-oriented form of healthcare, which can lead to higher patient satisfaction and creative solutions for underprivileged populations.
- While burnout exists in both private and larger healthcare systems, it seems to be less prevalent in independent practices where physicians have greater autonomy over their working conditions.
The Intake’s first State of the Independent Healthcare Practice Ownership report reveals a lot about the healthcare industry — mainly, that physicians face formidable challenges in today’s private practice landscape. With data from 112 physicians, our report demonstrates that while many are positive about their performance, many are anxious about the state of the industry.
To contextualize our findings, we reached out to 3 physicians for their take.
Considering the challenges in the industry, our experts are unsurprised by physicians’ negative outlook
It came as no surprise to the doctors we consulted that more than a third of responding physicians rated the industry as terrible or poor.
“The healthcare industry is plagued by dissatisfaction — both from providers and patients,” says Lauren Wheeler, a former family medicine physician who currently works as a healthcare advocate and medical editor. Wheeler notes that issues like burnout, physician working conditions and compensation, and the lack of fair footing for independent practitioners all contribute. “I think that as long as insurance companies get to negotiate different rates for different providers/provider groups, independent shops will always have something of a financial disadvantage,” she adds.
“The challenges that beleaguer private practices emanate from various quarters,” says Baran Erdik, a physician with further specialization in internal medicine/cardiology. “A significant proportion of these woes can be attributed to dwindling reimbursement rates.” Coupled with low rates, independent practices face arduous and convoluted processes for processing reimbursements. “This situation presents an unsustainable model that erodes the financial stability of these practices and threatens their existence,” he says.
“I think that as long as insurance companies get to negotiate different rates for different providers/provider groups, independent shops will always have something of a financial disadvantage. ”
At the same time, the surge in private equity’s market presence has made the business of healthcare even more competitive, while quality of care has deteriorated. “This phenomenon reduces patient care to mere transactions, detracting from the personalized and patient-centric approach that defines independent healthcare practices,” Erdik says.
The COVID-19-related revenue drop made it even tougher to compete with large healthcare systems
Independent practices were already facing steep competition in the increasingly consolidated healthcare market before the pandemic. But COVID-19 shrunk key drivers of revenue, like preventative care visits and elective procedures, for which big healthcare organizations are better resourced to handle. “Large systems simply had more reserves to withstand that strain in many cases,” Wheeler says.
At the same time, private equity continued to strengthen its hold in healthcare, strategically buying up practices. “As these firms have a knack for evading regulations, they could amass considerable market power through a series of small acquisitions that fell just below the reporting thresholds,” Erdik says.
This has made it even tougher for independent practices to compete, and has offered patients less options for providers — despite the effect on patient care. “These private equity acquisitions can result in a shift in priorities, with more emphasis on financial returns rather than patient care,” Erdik says.
Shrinking reimbursement rates remain the biggest threat to independent healthcare
The financial landscape for physicians in independent practice isn’t what it once was — a reality driven in part by diminishing reimbursement rates.
Many private physicians don’t accept Medicare patients because of low reimbursement. “There’s been a 26% decrease in Medicare physician pay since 2001,” Drew Sutton, a board-certified ENT physician, says. And those cuts aren’t slated to stop any time soon, with the “CMS proposing to decrease the conversion factor by 3.34%, to $32.75 in calendar year 2024, as compared to $33.89 in calendar year 2023.”
While independent practices face poor reimbursement rates, large healthcare organizations wield their size and influence to negotiate higher rates with insurers. “In contrast, independent practices lack this bargaining power, which further widens the income gap between physicians in private practices and those within large health systems,” Erdik says.
Even in the face of these challenges, there’s still opportunity to earn a great living, says Sutton, referencing the MGMA DataDive Provider Compensation for 2021-2023 which puts physician compensation at between $300,000 and $500,000. “Despite the doom and gloom about physicians making less money and having student loan payments, there is still tremendous opportunity for these professionals to have a lucrative career,” he says.
Free from bureaucracy, independent practices’ commitment to their patients and community leads to better patient care
Independent practices continue to be flexible, personalized, and community- and patient-oriented in ways that large healthcare organizations are not. “The independent practice has opportunities that larger conglomerates don't have,” says Sutton.
“There's a kind of accountability with a small practice that isn't there with some faceless conglomerate. ”
Without the revenue and productivity metrics or bureaucracy of a large organization to navigate, physicians are empowered to spend more time with patients, provide better continuity of care, make agile decisions, and develop closer relationships, which support preventative care, Erdik says. “Independent practices are often deeply rooted in their communities, providing care that is attuned to the cultural, economic, and health needs of the community,” he adds. “This connection can result in a higher level of trust and patient satisfaction.”
Wheeler notes that “independent practices are often more willing to deploy creative solutions for their low-income, uninsured patients too,” she says. “I suppose that really ties to the community aspects — because the business is so tied to the professional’s name, they can get a reputation for what they do at work that follows them to the grocery store. There’s a kind of accountability with a small practice that isn’t there with some faceless conglomerate.”
Burnout remains a challenge — but less so for those in private practice
Physicians with an independent practice are on the hook for 2 jobs: medical practitioner and business owner.
“When the stress of running a practice is added to seeing patients, many physicians give up on their own practice,” Sutton says. “In other words, physicians are already overworked with the ‘business of medicine,’ and adding a business to the mix is not always something physicians want.”
But those who leave private practice for the perceived security of a large healthcare organization may not fare any better. “Burnout is still a problem in private practice, but less of one than it is for employed physicians because self-employed professionals get to dictate their own working conditions,” Wheeler says.
Sutton says it’s possible to combat bias by having the right systems, tools, and people in place. “The best independent practices mitigate the challenges with outstanding office staff, good support systems, a culture of a family atmosphere, and more,” Sutton says. “It is all worth it.”