10 Ways Market Changes Will Reshape Physician Practices

Laura P. Jacobs, MPH


November 07, 2012

In This Article


Healthcare reform is sweeping the country; and while many elements were instigated by the defining federal legislation passed in 2010, the Affordable Care Act (ACA), many other factors are creating one of the most transformational periods that the healthcare industry has experienced.

For one, while the trends have improved, healthcare costs are still accelerating at rates greater than general inflation. This affects our general economic recovery because the government, employers, and consumers must pay more for healthcare than for other things that can create jobs or put dollars in consumer pockets. So Medicare, Medicaid, commercial payers, and consumers are all looking for ways to reduce healthcare costs.

Second, purchasers of healthcare are expecting greater value for the money spent -- better quality and a better patient experience. In addition, the proliferation of clinical information technology is finally taking hold, making clinical integration between and among physicians, hospitals, and other providers much more achievable.

In short, the combination of regulatory changes, economic conditions, demographic changes, and technology advances has created an environment that is truly transforming the practice of medicine and medical practices -- and, in most markets, physicians are in the eye of the hurricane. If you don't feel the wind gusts yet, you will, and if you think you can wait it out, you'll likely risk being submerged or being that lone person on a rooftop waiting to be rescued.

Listed below are the top 10 ways in which the changes in the market, including healthcare reform, are affecting physicians. Some may be more effective in individual situations than others, but they cannot be ignored for those who, at the very least, wish to "ride out the storm" successfully. For while some are hunkering down to "survive," others are seizing the opportunity to lead. Here are the trends to watch for in your market.

1. Reductions to Traditional Fee-for-Service Payments

As payers (including Medicare and Medicaid) seek to reduce costs, their primary "weapon" to accomplish this is either to reduce the rate of increase in rates paid to providers or to reduce rates altogether.

Because the sustainable growth rate trigger has not been fixed for the Medicare fee schedule, another 27% overall rate reduction looms in January. Although it is once again likely to get postponed for another time, expect at most a moderate 1% or 2% increase at most and likely a freeze.

Specialists are likely to see reductions in fee schedules, with primary care hanging on to moderate increases. In some markets, primary care physicians are being paid "care management" fees by some payers as part of medical home initiatives. The bottom line, as most payers seek ways to move off of fee-for-service to some type of fee-for-value payment, is that you can expect limited to no increases on fee schedules in the short-term.