Future of Private Practice

A recent article from the Minnesota Hospital Association’s Ebriefing, by Dr. Daniel K. Zismer, who is the associate professor and director of the MHA and Executive Studies Program, conveyed why he feels that there are significant challenges to the private practice business model in our futures.

No doubt there will always be some room for private practice. He feels that there are six common challenges that are causing private practice models to be stressed and thus leading to more and more physicians wanting to be employed with hospital systems.

Those pressures are the following:

  1. the cost of electronic health records. It is staggering for groups to have to implement an electronic health record. It is neither a luxury nor a strategic differentiator any longer but is rather a required ticket to relevancy he says. We will need it to be part of an accountable care organization and to be relevant to the consumers in health care into the next decade.
  2. Health systems can outspend private practice for physicians. The larger the system the more money they have available to go out and seek the more specialists, and especially the higher end specialists, while private practice has difficulty. For those who want to be employed there is no practice investment.
  3. Reimbursement lightning strikes. The larger the organization the more they are able to handle quick strikes by the government or the payers of reimbursement problems. While the larger systems also have this difficulty it is not to the same degree.
  4. Young physicians wants and needs. Almost 85 to 95% of residents and students coming out of residency want to be employed. They no longer are looking for the private practice model.
  5. Routine practice overhead inflation curves. Groups are having a more difficult problem keeping up with the inflation cost of operations, thus physicians take home less compensation. Independent physicians will endure this dynamic until the economics of private practice become unsustainable.
  6. Routine practice recapitalization – It is getting harder to find dollars to capitalize things. These forces are out there for everyone and will continue to be a cultural change that is occurring in medicine.

Phil Kibort, MD, is Children’s vice president of medical affairs and chief medical officer. Read his bio here.

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