Private Practice: The Challenges of Independence and the Key Steps of Survival
With a constantly changing landscape of new regulations and consolidation, private practices are facing a period of unprecedented change and challenges administratively and financially.
Among the biggest concerns of private practices are:
- Declining reimbursement
- Rising costs
- The Affordable Care Act
- Coding/documentation changes, including ICD-10
- Costs related to the adoption of electronic health records
The Struggle to Stay Independent
Despite the increasing wave of acquisitions by larger practices or by hospitals, many established private practice physicians are not looking to sell, according to a 2013 survey. However, federal regulatory requirements continue to have an impact on maintaining a private practice as well as on doctors’ personal finances.
According to the 2014 Survey of American’s Physicians about 35% of physicians indicated they were practice owners or partners, down from 48.5% in 2012. Not unsurprisingly, the physicians who maintain private practices tend to be more established and older. Although both private practice and employed physicians cited patient relationships as the most satisfying part of their profession – owners reported a much higher level of satisfaction in this area than their employed counterparts.
Key Steps for Private Practice Survival
Successful independent physicians will devise strategies to keep their practices afloat against the economic and regulatory headwinds. A recent article in Medical Economics outlines the top 15 challenges for doctors in 2015, including HIPAA and ICD-10.
So how can independent practices plan for the road ahead? A PhysiciansPractice.com article on Medical Practice Survival, said that it is essential for a private practice to analyze itself, understand strengths and weaknesses and lay out an action plan. Key steps are to:
- Benchmark and manage your business plan: By comparing a practice’s performance to benchmark data, key areas of weakness can be identified for action.
- Evaluate and monitor payer performance: Compare contracted rates and actual rates as well as the cost of collecting claims. Doing this will enable a practice to be more data-driven about the payer mix while also providing valuable information for payer negotiations.
- Transition to new technology: Technology has finally progressed to the point that it affordably fits the needs of private practices. Two major trends are mobility and the cloud. Assess alternatives that may not only cost less money and time, but result in more effective administration and care delivery.
- Document and developed a structured process for moving to ICD-10: Not doing so could actually bankrupt an ill-prepared practice. Plan prudently and don’t rely on expect another delay.
- Re-commit to a strong patient engagement plan: Build strong, pro-active patient relationships and put them at the center of all practice activities. Have clear financial policies. Understand patient population including payer mix and evaluate possible expanded care services.
Personal Wealth Management
In this challenging environment, a doctor in private practice needs to pay extra attention to his or her personal financial situation and long term goals.
- Do you have a good cash reserve to weather fluctuations in income?
- Do you have the appropriate plans in place to maximize your tax-deferred retirement savings?
- What is the plan when it is time to retire or otherwise transition out of the practice? The buyout and succession steps need to be clearly agreed upon with the other physicians in your practice. If you own a share of your building or other facility, what is the plan for that?
A few years before retirement, it is critical to review your overall financial plan with your financial advisor and your accountant to make sure your transition is as smooth and tax-efficient as possible.