[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
HEALTHCARE REALIGNMENT AND REGULATION: THE DEMISE OF SMALL AND SOLO
PRACTICES?
=======================================================================
HEARING
before the
SUBCOMMITTEE ON INVESTIGATIONS, OVERSIGHT, AND REGULATION
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
SECOND SESSION
__________
HEARING HELD
JULY 19, 2012
__________
[GRAPHIC] [TIFF OMITTED] TONGRESS.#13
Small Business Committee Document Number 112-080
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HOUSE COMMITTEE ON SMALL BUSINESS
SAM GRAVES, Missouri, Chairman
ROSCOE BARTLETT, Maryland
STEVE CHABOT, Ohio
STEVE KING, Iowa
MIKE COFFMAN, Colorado
MICK MULVANEY, South Carolina
SCOTT TIPTON, Colorado
JEFF LANDRY, Louisiana
JAIME HERRERA BEUTLER, Washington
ALLEN WEST, Florida
RENEE ELLMERS, North Carolina
JOE WALSH, Illinois
LOU BARLETTA, Pennsylvania
RICHARD HANNA, New York
ROBERT SCHILLING, Illinois
NYDIA VELAZQUEZ, New York, Ranking Member
KURT SCHRADER, Oregon
MARK CRITZ, Pennsylvania
JASON ALTMIRE, Pennsylvania
YVETTE CLARKE, New York
JUDY CHU, California
DAVID CICILLINE, Rhode Island
CEDRIC RICHMOND, Louisiana
JANICE HAHN, California
GARY PETERS, Michigan
BILL OWENS, New York
BILL KEATING, Massachusetts
Lori Salley, Staff Director
Paul Sass, Deputy Staff Director
Barry Pineles, Chief Counsel
Michael Day, Minority Staff Director
C O N T E N T S
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OPENING STATEMENTS
Page
Hon. Mike Coffman................................................ 1
Hon. Kurt Schrader............................................... 2
WITNESSES
Mark Smith, President, Merritt Hawkins, Irving, TX............... 2
Louis F. McIntyre, M.D., Westchester Orthopedic Associates, White
Plains Hospital Physicians, White Plains, NY................... 4
Joseph M. Yasso, Jr, D.O., Heritage Physicians Group,
Independence, MO............................................... 6
Jerry D. Kennett, M.D., F.A.C.C., Senior Partner, Missouri
Cardiovascular Specialists, Vice President and Chief Medical
Officer, Boone Hospital Center, Columbia MO.................... 8
APPENDIX
Prepared Statements:
Mark Smith, President, Merritt Hawkins, Irving, TX........... 29
Louis F. McIntyre, M.D., Westchester Orthopedic Associates,
White Plains Hospital Physicians, White Plains, NY......... 35
Joseph M. Yasso, Jr, D.O., Heritage Physicians Group,
Independence, MO........................................... 39
Jerry D. Kennett, M.D., F.A.C.C., Senior Partner, Missouri
Cardiovascular Specialists, Vice President and Chief
Medical Officer, Boone Hospital Center, Columbia, MO....... 44
Additional Materials for the Record:
``So Long, Marcus Welby: Obamacare, Market Kill the Solo
Private Practice,'' by Bruce Japsen, Forbes................ 51
``Henninger: Obamacare's Lost Tribe: Doctors,'' by Daniel
Henninger, The Wall Street Journal......................... 55
``More Doctors Giving Up Private Practices,'' by Gardiner
Harris, The New York Times................................. 58
``Is Private ObGyn Practice on its Way Out?'' by Lucia
DiVenere with OBG Management Senior Editor Janelle Yates,
OBG Management............................................. 64
``Demise of the Solo Doctor,'' by Parija Kavilanz, CNN Money. 72
``A Small Business Plan All Can Agree On,'' Chairman Sam
Graves, POLITICO........................................... 75
HEALTH CARE REALIGNMENT AND REGULATION: THE DEMISE OF SMALL AND SOLO
MEDICAL PRACTICES?
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THURSDAY, JULY 19, 2012
House of Representatives
Committee on Small Business,
Subcommittee on Investigations,
Oversight and Regulations
Washington, D.C.
The Subcommittee met, pursuant to call, at 10:00 a.m., in
Room 2360, Rayburn House Office Building. Hon. Mike Coffman
(chairman of the subcommittee) presiding.
Present: Representatives Coffman, Tipton, Schrader, and
Hahn.
Chairman Coffman. Good morning. The meeting is called to
order. I want to thank our witness list for being here today.
We look forward to your testimony.
Today, we meet to examine the changing landscape of small
and sole position practices. For many years, newly-licensed
physicians typically joined a private practice or open one of
their own. According to Merritt Hawkins, a national physicians'
recruiting firm, whose president is testifying today, only 1
percent of its searches in 2011 were for independent practices,
the lowest in the firm's 28-year history and down from 22
percent in 2004. Many people believe that small and solo
practices in order to survive, they will look very different
than the medical practices in past years. These shifts appear
to be rooted in the increasing economic pressures, younger
physicians, they want freedom from the long hours and
administrative burdens of owning a private practice and they
need financial help with student loans, medical liability
insurance, and health information technology. Established
physicians have cited declining reimbursements and increasing
regulations such as the reporting requirements for health
information technology and the push towards accountable care
organizations as reasons small and solo practices have become
economically unsustainable.
In a recent Wall Street Journal op-ed, Daniel Henninger
described practicing medicine as a health care law's biggest
loser. We are interested in learning how all of these factors,
including the requirement of the health care law which was
upheld by the United States Supreme Court may affect small
practices.
We have an exceptional panel of witnesses to help us
understand these issues. Welcome, we look forward to your
testimony.
Dr. Schrader, do you have any opening----
Mr. Schrader. I will just submit mine for the record, Mr.
Chairman. Thank you.
Chairman Coffman. Thank you.
The subcommittee members have an opening statement prepared
and that is within the Senate for the record. I would like to
take a moment to explain the timing lights to you.
You will each have five minutes to deliver your testimony.
The light will start off as green. When you have one minute
remaining, the light will turn yellow. And, finally, it will
turn red at the end of your five minutes. I ask that you try to
adhere to the time limit.
Our first witness today is Mark Smith, president of Merritt
Hawkins in Irving, Texas, a leading physicians' recruiting firm
for small, independent practices, group practices, and
hospitals. Mr. Smith has over 21 years of experience with
Merritt Hawkins and is an expert in medical staff planning and
physician staffing. He is a graduate of Oregon State
University. Welcome. You have five minutes to present your
testimony.
STATEMENTS OF MARK SMITH, PRESIDENT, MERRITT HAWKINS; LOUIS F.
McINTYRE, M.D., WESTCHESTER ORTHOPEDIC ASSOCIATES, WHITE PLAINS
HOSPITAL PHYSICIANS; JOSEPH M. YASSO, JR, D.O., HERITAGE
PHYSICIANS GROUP; JERRY D. KENNETT, M.D., F.A.C.C., SENIOR
PARTNER, MISSOURI CARDIOVASCULAR SPECIALISTS, VICE PRESIDENT
AND CHIEF MEDICAL OFFICER, BOONE HOSPITAL CENTER
STATEMENT OF MARK SMITH
Mr. Smith. Thank you. Mr. Chairman and distinguished
subcommittee members, good morning. My name is Mark Smith and I
am president of Merritt Hawkins Associates, the largest
physician search consulting firm in the nation and a member of
the AMN Health Care.
In the course of my 22 years at Merritt Hawkins, I
consulted with thousands of physician practices and my company
has produced numerous white papers, surveys and books
concerning physician practice pattern related topics.
I appreciate the opportunity today to address the
subcommittee on the decline of solo and small physician
practices.
For those who remember the ``Marcus Welby, M.D.'' nightly
TV show, we still have an image in the mind of a physician as a
small business owner running their own practice. This classic
model of an independent physician practice still exists today,
but is rapidly becoming a relic of a bygone era.
Today, physicians are more likely to be employees than they
are to be medical practice owners. This is particularly true of
medical residents completing their training. In the 2011 survey
of final-year medical residents by Merritt Hawkins, only 1
percent chose to be a solo private practice physician. By
contrast, 60 percent said they would prefer to be either a
hospital employee or work for another entity. In short,
virtually no one wants to be a Marcus Welby anymore. This
represents a fundamental transformation and structure of
physician practices away from the classic private practice
model and towards employment and an increasing number of other
practice options.
The five primary reasons for this transformation taking
place: flat or decline in reimbursement, growing regulatory and
administrative burden, malpractice costs, information
technology implementation, and the effects of health reform,
both the legislative and evolutionary.
First reimbursement. For today's Marcus Welby, both
Medicare and private insurers typically pay physicians for
usual and customary charges. Physicians generally were paid for
services invoiced in an amount above the cost of doing
business. This system has been repeatedly modified in an effort
to reduce cost and to manage care. Physician reimbursement in
some cases has been cut or has not yet faced with inflation.
As a result today, physicians see little connection between
their costs and the amount to which they are reimbursed. This
is a difficult business model to sustain. Some small private
practices are having trouble keeping their doors open. There
have even been reports in recent months of a growing number of
practices going out of business, something I have not seen in
my 24 years with this organization.
By contrast, employment provides physicians safe harbor
from today's challenges and from the uncertainties that lie
ahead. Regulatory burdens, virtually all businesses are subject
to regulatory compliance of some kind. Medical practices are no
different. As a small business owner, physicians must abide by
Equal Opportunity and worker safety laws, state and local
ordinances, and many other rules and regulations. Adding a
layer of complexity, physicians must work in the most highly of
all regulated professions, having to comply with HIPAA, stark
laws, Medicare, and many other regulations. It is concerning to
me that a survey conducted by Merritt Hawkins stated that
physicians spend 26 percent of their time doing paperwork. Many
physicians see employment as a way to escape the rising tide of
risk and regulation and allow them to focus on patient care.
Malpractice. Among the greatest cost of doing business,
small business owners must pay for their own malpractice
insurance, the cost of which could be debilitating.
For example, the annual premium for malpractice in some
parts of Florida for an obstetrician can exceed $160,000 a
year. As malpractice rates remain high, the former becomes an
attractive option to physicians, as employers typically pay for
this benefit.
For a variety of reasons, physicians are obliged to
incorporate a growing level of information technology into
their practice, particularly EMR or Electronic Medical Records.
While the federal government has provided reimbursement
funds for physicians to implement EMR, many still find it
difficult due to a lack of time and available expertise. EMR
implementation is the key example of resources, expertise, and
time a small medical practice are being taxed in today's
increasingly complex medical environment. A growing number of
physicians are embracing employment again as potential refuge
from these challenging concerns.
Health reform is a driver of a number of health care
trends, including the decline of small, private
practices.Health reform encourages the consolidation of physicians into
larger entities to be economies of scale.
In addition, health reform promotes the formation of new
delivery models such as Accountable Care Organizations or ACOs
which depend upon hospital and physician alignment in the use
of advanced information technology. ACOs are also risk-bearing
entities and as such require a high level of administrative and
business expertise and it is difficult for a solo and all
practice physicians to participate in these models, which
naturally lend themselves hospital employment for physicians.
Combined, these factors with others have created conditions
in which small, private practice is increasingly untenable.
This model is only likely to survive in small, rural areas,
where there are few physicians and even in these segments,
physicians will need to affiliate with larger entities.
Otherwise, physicians are likely to be employed by multi-
physician groups like hospitals and the era of Marcus Welby
will rapidly disappear into our rearview mirror.
Thank you for the opportunity to address the subcommittee
for examining the challenges facing America's solo and small
practice physician.
Chairman Coffman. Thank you for your testimony.
At this time, our next witness is Louis F. McIntyre, a
medical doctor, a board-certified orthopedic surgeon practicing
in White Plains, New York. Dr. McIntyre and his partners had
operated a small practice since 1994, but in the fall of 2011,
they sold their partnership to a hospital group and joined the
hospital's employees. He earned his medical degree from the New
York Medical College at Valhalla. How do you say it?
Mr. McIntyre. Valhalla.
Chairman Coffman. Valhalla.
Mr. McIntyre. Land of the gods.
Chairman Coffman. Okay. Dr. McIntyre is a member of the
American Association of Orthopedic Surgeons and is testifying
today on their behalf.
Welcome. You have five minutes to present your testimony.
STATEMENT OF LOUIS F. McINTYRE
Mr. McIntyre. Thank you, Mr. Chairman and members of the
committee to allow me to testify today and tell my little small
practice story.
I joined Westchester Orthopedics in 1994. The practice
resided in a small office and we had a few employees and we
wanted to grow the practice and improve the quality of care
that we delivered. So, in 1995, we moved to a much larger
office space, hired more physicians, free parking. Patients
love free parking, and added more docs.
The late 1990s brought two challenging trends: decreasing
reimbursement and increasing business cost. We needed more
employees to handle the clerical demands and by managed care
and yearly malpractice premiums went from $40,000 to $110,000
per doctor from 1994 to 2011. As a small practice, we were
unable to negotiate favorable rates because we did not have
market share. We formed a network of orthopedic surgeons to try
to change that, but we were unable to affect rates because of
anti-trust concerns.
To remain viable, we added more doctors in ancillary
services and implemented an electronic medical record. Our
total cost for the EMR implementation was about $500,000, which
represents about $100,000 per doctor. Initially, we saved some
money with EMR, but over time, that was negated by the need to
upgrade the system and hire data entry personnel. We built an
ambulatory surgery center and acquired additional office space
to build a physical therapy center to standardize the quality
of the physical therapy that our patients received.
When completely configured, we had just under 50 employees.
All had health insurance, all had a generous profit-sharing
plan, all had paid vacation and leave and sick leave. Patients
appreciated the convenience of being able to receive all their
musculoskeletal care in one coordinated and contiguous setting.
The negative pressure on reimbursement, however, continued.
The American Academy of Orthopedic Surgeons estimates that
orthopedic surgeons with Medicare reimbursement revenue
decreased 28 percent in the last decade alone. Reimbursement
from private payers has also fallen and practice costs,
unfortunately, continue to rise.
Laws recently passed by Congress have further stressed
private practice. The American Recovery and Reinvestment Act
mandated the adoption of EMR for all physicians serving
Medicare patients. Even though we had previously implemented an
EMR, the meaningful use criteria accompanying the regulations
still represented a significant cost burden for us in terms of
data collection and quality reporting rules.
The Patient Protection and Affordable Care Act proposes
new, complex risk-sharing methodologies that many small
practices, if not most, will not be able to comply with. The
combination of decreased reimbursement, increased reporting
requirements, huge outlays for technological improvements, and
uncertainty about future potential earnings are driving
physicians to seek employed positions. Doctors know that they
cannot meet all the demands placed upon them now and see
patients at the same time. According to the AAOS, the
employment of orthopedic surgeons by hospitals has increased
300 percent in the last 5 years.
Last year, we decided to become hospital employees. This
year, the other orthopedic group in our town also is going to
become employees of the same hospital. The multi-specialty
group next use, WESTMED, has 225 employee positions. Clearly,
the employee model is winning in Westchester County.
There are advantages for employee positions. Doctors have
more financial security with a salary, they do not have to
worry about losing money taking care of uninsured patients,
they are free from dealing with some of the troublesome human
resources and IT issues, but employment, however, significantly
decreases physicians' autonomy and infecting the care
environment. Physicians are in a unique position to interact
with patients on a daily basis and identify deficiencies in
care. Physicians' ability to advocate for patients is
diminished by employment because they no longer manage the care
environment.
As more physicians seek employee positions, there will be a
generation of physicians who will never experience private
practice and the business of taking care of medicine. They will
be unaware of the costs and management issues of providing
care.
There is concern that an employed position will see less of
a need to join medical specialty societies that have added
great value to patient care. How these concerns will affect the
profession is unknown at this time.
In the future, I fear that physicians may unionize to
protect their economic interest. I believe this would herald
the end of medicine as a profession and the start of medicine
as trade associations.
It is rarely mentioned, but private practice employs people
and pays taxes. A recent study conducted by the Medical Society
for the State of New York showed that the private practice of
medicine was the fifth largest employer in Westchester County,
second in business establishments, third in personal income
taxes paid, and seventh in corporate sales taxes paid.
As a hospital employee, our practice is now tax-exempt. The
loss of employment and tax revenue resulting from private
practice physicians migrating to hospital employment may be
significant and worthy of further study.
Finally, there will not be employed positions for all the
doctors in Westchester County or the United States. There is
and will continue to be an increased need for physicians,
especially with the implementation of PPACA in 2014. If private
practice disappears, patient access to care, local employment,
and tax revenue will suffer. We need to strengthen private
practice as well as other models of health care delivery to
ensure patient access to quality of care. Thank you for the
opportunity to share these thoughts.
Chairman Coffman. Thank you, Dr. McIntyre.
Our next witness is Joseph Yasso, junior doctor of----
Mr. Yasso. Osteopathic medicine.
Chairman Coffman. Osteopathic medicine, I am sorry. A
board-certified family physician, medical physician, and
medical director of the Heritage Physicians Group in
Independence, Missouri. He is a member of the American
Osteopathic Association and is testifying today on their
behalf.
Welcome. You have five minutes to present your testimony.
STATEMENT OF JOSEPH YASSO
Mr. Yasso. Thank you. Chairman Coffman, Ranking Member
Schrader, and members of the subcommittee, on behalf of the
American Osteopathic Association, thank you for the opportunity
to testify today.
As a board-certified osteopathic family physician, I
proudly treated patients for over 30 years. My current practice
is comprised of three physicians, including myself and a family
nurse practitioner. We are owned by the Hospital Corporation of
America.
Today, I am pleased to share with you my personal
experience of how impactful health care realignment and
regulations are upon decisions made by new and established
physicians alike.
After leaving the Army in 1980, I entered a small practice
with two other physicians that we ultimately chose to sell in
1992, due to multiple financial and regulatory concerns similar
to those my colleagues in practice are facing today. Today,
physician practices face new demands as required by statute and
regulation. These include the adoption of electronic health
records and electronic prescribing systems, preparation for
coding under ICD-10, implementation of quality measures, and
adjusting to other changes in the health care delivery system.
These additional policies and procedures are important and are
primarily beneficial to efficiency as well as to providing
improved patient care. However, each new requirement can be
quite costly to the physician practice operating as a small
business.
The burden on small practices is particularly
disproportionate, detracting from the time available for
patient care. In addition, the looming physician payment cuts
under the SGR for small practices with limited revenues and
narrow margins to make difficult decisions about whether to lay
off staff, reduce the Medicare patient population, defer
investments, opt for early retirement, or sell their practice.
My first small practice of three buckled to these concerns and
we opted to sell.
Today's medical school graduates are faced with difficult
decisions after completing their education and training. The
average osteopathic medical school graduate has a debt nearing
$200,000. As you can imagine, this makes the prospect of
opening a small practice extremely daunting.
This spring, the American College of Osteopathic Family
Physicians conducted a survey of its membership, including
questions related to practice types and settings. The survey
found that 60 percent of family physicians are employees with
no ownership stake in the practice. Often, the overwhelming
collective burdens I mentioned today are cost prohibitive and
outweigh a physician's desire to enter or remain in a small or
solo practice. There are also physicians who wholeheartedly
embrace the choice of becoming an employee physician.
Physicians should not be forced to enter an employed situation
out of pure necessity. They should retain their option to
choose their ideal practice type absent undue financial
considerations and regulatory burdens.
Medical homes and ACOs provide opportunities for physicians
to continue managing patient care while still being able to
operate as a small or solo practitioner. Either model requires
a physician to be employed by a hospital or large health system
in order to be successful. Appropriately aligned, incentives
can serve to foster success regardless of practice type.
Regulators should be cautious in creating additional financial
burdens on physicians that would inhibit their ability to
choose a practice setting that is most appropriate.
In closing, the transformation of the practice of medicine
has undoubtedly impacted the ability of physicians to thrive in
a small practice or as solo practitioners. However, physicians
are adapting to the changing practice of medicine by becoming
patient-centered medical homes and participating in shared
savings programs. As we work to improve the health care
delivery system for patients, physicians must be provided
appropriate payment and incentive to practice effectively in
the setting of their choice. Patients deserve this level of
access.
I would again like to thank you and the members of the
committee for affording me the opportunity to share my
experiences and the AOA's perspective regarding this important
topic affecting osteopathic physicians and our patients. We
appreciate the work that you do to promote policies that enable
physicians to successfully operate as small business absent
undue regulatory and financial burdens. We look forward to
working with you in the weeks and months ahead to ensure that
congressional action fosters rather than impedes the physician-
patient relationship.
Chairman Coffman. The Chair now yields to Dr. Schrader for
the introduction of our next guest.
Mr. Schrader. Thank you, Mr. Chairman. It is my pleasure to
introduce Dr. Jerry Kennett. Dr. Kennett has practiced
interventional cardiology in Missouri for the last 30 years as
a senior partner of Missouri Cardiovascular Specialists and
vice president and chief medical officer of the Boone Hospital
Center. He has maintained a busy clinical schedule while also
participating in a lot of clinical research in education. He is
testifying today on behalf of American Academy of Cardiology.
The college has 40,000 members and he has dedicated to
enhancing people's lives through cardiovascular treatment
intervention. We welcome Dr. Kennett.
STATEMENT OF JERRY KENNETT
Mr. Kennett. Good morning. Thank you, Member Schrader and
Chairman Coffman and members of the subcommittee. We appreciate
your inviting us to testify here today.
I am Jerry Kennett, chairman of the American College of
Cardiology Advocacy Steering Committee. The ACC, as said, is a
40,000-member medical society serving the needs of both
providers and patients.
I am a cardiologist with Missouri Cardiovascular
Specialists, a 17-person cardiology and cardiovascular surgery
practice in Columbia, Missouri.
My group was one of those typical office-based practices
with over 100 employees. Our practice included a cardiac
diagnostic center, where patients had easy access to
echocardiograms, stress tests, and even an outpatient cardiac
categorization laboratory.
A little more than a year ago, our group was an independent
practice, but now we are integrated with Boone Hospital Center
in what is termed a professional service agreement. According
to the 2011 Lewin Group report on the economic impact of
office-based physician practices, these small businesses, such
as ours, account for 4 million jobs across the United States
with $833 billion in wages and benefits. These small businesses
generate $63 billion in state and local tax revenue.
Physician practices are different from almost any other
small businesses. The payment for services performed is not
controlled by free market dynamics, but instead payment is
tightly regulated by Medicare and Medicaid and private payers
who essentially follow the lead of the government with the
recipient of the services or patient often paying only a
fraction of the cost.
Recent events have had a dramatic effect on private
practice cardiology. The ACC estimates that 60 to 70 percent of
our current physician members have now integrated with
hospitals.
Why has this happened? There are a variety of factors that
have contributed to this evolution. The prominent reasons
relate to Medicare physician payment not keeping up with actual
practice costs, direct cuts in Medicare physician
reimbursement, and increased administrative and regulatory
burdens. All these add up to tremendous uncertainty among
physicians as to what the future holds and so many physician
practices such as mine see hospital integration as their only
choice.
Every year since 2002, physician practices have been
threatened with significant cuts in Medicare reimbursement, the
so-called SGR. This uncertainty stifles physicianpractices from
making real investments in improving coordination, reducing the current
fragmentation of care, and reducing waste.
Another major turning point for cardiology occurred in 2010
with the Medicare Physician Fee Schedule, which reduced
payments to cardiology practices or some in-office procedures
as much as 35 percent. How many small businesses could survive
a 35 percent cut in payment for the exact same service? Our
practice, like many others, could not.
There are also a significant number of regulatory and
administrative burdens that contribute to the uncertainty for
physician practices and hinder their ability to grow. A few
examples are audits. While physician claims for services are
generally subject to contractor medical review, greater
scrutiny in recent years has increased costs and uncertainty.
Physician claims must comply with multiple edits, as well as
recovery audit contractors.
ICD-10. The Center for Medicare and Medicaid Services will
soon implement ICD-10, a diagnostic coding system that will
increase the number of diagnosis a physician has to choose from
15,000 to over 87,000.
Multiple Medicare penalties. Starting in 2011, Medicare
began to penalize physicians for not meeting the requirements
of certain incentive programs. In the coming years, physicians
will be penalized for not prescribing electronically, not
participating in meaningful use of an electronic medical
record, and not submitting quality data through the Physician
Quality Reporting System, as well as a yet-identified value-
based modifier.
Finally, physicians have significant anxiety regarding the
future of Medicare payment reform, as you have heard. The new
payment methodologies, such as ACOs, bundled payments at
medical homes will require additional staffing with no
assurance they will produce any shared savings. Physicians are
afraid of being left out.
In conclusion, the financial pressures associated with
declining reimbursements and rising operational costs on
private cardiology practices have resulted in the rapid
migration of practices to hospital affiliation. Continued cuts
in Medicare reimbursement combined with increasing overhead
costs, increased regulation, unfunded mandates, a micromanaged
payment system, and an uncertain future are making it difficult
for practices to remain viable. We believe that a well-
functioning Medicare payment system could provide opportunities
for physicians to practice both independently or as employees
of a hospital. Increased payments should come from increased
quality and demonstrate appropriate utilization and physicians
should be appropriately paid for the increasing expectations
associated with the practice of medicine.
Thank you for the opportunity to share my views and look
forward to any questions.
Chairman Coffman. Thank you so much for your testimony. I
really appreciate all of you taking the time to be here. Let me
just open it up with a few questions and then I will defer to
my colleagues on the subcommittee.
All of you had mentioned rising administrative costs as a
factor in hurting solo and small practices. Back home in my
district, I was just talking to a woman who is starting a new
concept to help child care providers by simply doing their
administrative work to back office work to allow them to focus
on child care and her entity then focused on the administrative
compliance.
Is there any movement to assist small practices with these
third party organizations? I know they have existed in say
Medicaid, Medicare, but just in overall administrative work and
all the compliance things that you have to do to--are there
such entities emerging to relieve some of the cost pressures on
small and solo practices?
Mr. Smith. There are businesses that have evolved to fill
that need that exists with physicians, I mean, more of these
administrative burdens placed on their shoulders and some can
work quite well. In the new legislation, that intensifies
greatly the changes, as mentioned, are very significant, but
even if you are able to outsource that, it comes at a cost and
it comes at a cost when you are looking at your revenues either
being flat invests or declining. So, again, it opens up that
option to make employment seem much more attractive as to
transferring that burden to someone else.
We mentioned in the survey that Merritt Hawkins had that 26
percent of a physician's time was in paperwork. And, so, in
essence, you have a hidden army of about 200,000 physicians out
there that are doing something other than they were trained.
So, anything that we can do to relieve that burden outside of
just the pure employment option that will allow them to focus
on patients which I am sure that folks sitting at the table
would much prefer to do than to do paperwork would be of great
assistance.
Chairman Coffman. Dr. McIntyre.
Mr. McIntyre. My experience in our practice was that there
were many entities that could help us with individual things.
Billing. We outsourced billing. IT. We could outsource a lot of
stuff to IT, but there was not any umbrella organization that
would come in and say we will do it all for you. It sounds like
a great business, actually.
So, the hospital assumes all those tasks for you. I think
that is what makes it attractive to many physicians who are
just looking for a way out so that they can concentrate on
patient care instead of regulatory burdens.
Mr. Yasso. When we sold our practice in 1992, of course, we
did not have the IT piece to worry about back I those days, but
we were doing our own billing and managing the practice
ourselves and doing quite well.
When we sold to TriSource, they right away started charging
us a $7,000 a month management fee and a $7,000 a month billing
fee. That was $14,000 a month of overhead that we did not have
before. So, all of a sudden, the practice that was in the black
was now in the red because we had such a tight margin. And, so,
if you do those kinds of things, that is the cost that you have
to bear to get those things done.
Mr. Kennett. In private practice, there are always
consultants and companies that want to come in and do things
for you. They say they can do it more efficient and better and
usually that does not have to be the case, that usually the
costs are as great as before.
As you might imagine in these small businesses, the
physician practices, they are so regulated and so many things
we have to deal with that your overhead sometimes in small
practices can be as much as 80 percent. So, it becomes
overwhelming and that is one of the reasons that as mentioned
they tend toward employment.
Chairman Coffman. Most of you mentioned medical malpractice
as an issue and the small or solo practice dissolving and
moving into as employees or into a larger physicians' group or
employees of a hospital. But thosecosts do not change. Is it
that just as a function of cash flow, as you got a small practice and
there is a bump in cash flow and you have got this big overhead issue
like paying your premiums on a medical malpractice policy, is that
essentially the problem because I do not see where the costs are
changing. They are very high, obviously, higher than they ought to be,
but I do not see them materially changing from the individual from the
small practice to a larger practice or as to employees of a hospital.
Mr. McIntyre. Well, personally, my malpractice went from
$40,000 a year in 1994 to $110,000 in 2010. We paid that and at
one time, we had 7 orthopedic surgeons, almost a million
dollars in malpractice premiums per year. That was a big
number.
Human resources, obviously, was the single most expensive
item in our budget, but right below that was malpractice and it
really became a burden to pay the malpractice, so much so that
we shifted from doing it in quarterly payments to shifting to
monthly payments. It was really a cash flow burden for us.
Going to the hospital, the hospital assumes that cost. We
do not see that cost at all and many of the hospitals are self-
insured in regards to malpractice.
Chairman Coffman. Okay.
Mr. McIntyre. So, that may affect the rates, but my
personal experience, my hospital now is paying my malpractice
premium for the policy that I have. Now, I would imagine at
some point in time, that is going to be subsumed by their own
malpractice policy.
Chairman Coffman. Okay. Does anybody else have any----
Mr. Smith. Well, just keep in mind that with these
physicians, since Dr. McIntyre joined the hospital-based
practice, the hospital loses money. There is not a true savings
that occurs from him coming over. They typically lose money on
these practices, but the hospital has to have physicians in the
community. They really have no choice but to bear that
potential loss.
Chairman Coffman. But is it cheaper if a larger entity can
be self-insured and manage its own liability or do these
hospitals still carry third party insurance?
Mr. Yasso. Well, Hospital Corporation of America in the
metropolitan area of Kansas City employs over 250 physicians. I
would think they get a bit of the economy of scale----
Chairman Coffman. Okay.
Mr. Yasso [continuing]. To some degree if they stick with
one insurer and probably get a rate break to some degree.
Chairman Coffman. In looking at the new health care law,
the Affordable Care Act, there is a movement I think borne of
that to accountable care organizations. So, there has been a
trend prior certainly to the Health Care Act, a movement away
as you all have tried from the solo practice, the small
physicians' group to larger practices and to employees at
hospitals. How has the current health care law or has it
accelerated by that process?
Mr. Smith. There is no question it has accelerated that
process. It had the fear of the unknown and I think a lot of
wait and see, see what would happen from the Supreme Court's
decision. It has picked up the pace quite a bit. I would say as
ACOs come closer, hospitals realize there is bundle payments
looking for partners. At the same time, you see insurance
companies not wanting to be left out as you have seen with
Highmark in Pennsylvania buying hospital systems. So, there is
a bit of a race for that finish line and physicians might
experience running for cover because of the intensity of the
penalties within the system.
Some information we could provide is there is so much more
regulation and the penalties are so great, I find physicians
very fearful that they will make an honest mistake and being
held accountable financially.
Mr. Kennett. Speaking from my administrative side, I would
say that probably the health care law has accelerated more on
the part of the hospitals probably more so than physicians
because of the fact of the Accountable Care Organizations, the
bundle payments, and measures in there that the hospitals want
to be sure they have enough primary care physicians
particularly as well as specialists that they can have in their
Accountable Care Organizations to beingable to participate. I
think it has brought about some acceleration on the part of physicians
just because of uncertainty, but as you mentioned, so many of these
thing we talked about actually predated the Affordable Care Act.
Chairman Coffman. Sure. I am going to ask one more question
and then defer to Dr. Schrader and but then I will come back
probably and we will go back and forth. Oh, and I am sorry, Ms.
Hahn, as well, from California. And that is that you talked
about the patient-doctor relationship being compromised, if you
will, through the movement of the solo or small group practice
to the larger group practice or to employees of a hospital. I
wonder if you could all elaborate on that and please be
specific in terms of examples of how you think that changes the
patient-doctor relationship, this movement.
Mr. Yasso. I think that one of the ways it change that,
when you become an employed physician for particularly those
physicians that come directly out of residency and become
employed physicians and have never practiced in solo practice
or owned their own business, it is more of a business now and
it is I work for X number of dollars and I work X number of
hours a week and that is all I do. I may not stay a little
longer to say Ms. Jones, let us work her in or see that extra
patient because they want to be seen, they need to be seen that
day and do that. And you hear stories about that all the time
about how physicians tend to cut it off and say well, I used to
see 30 a day. Well, now I see 26 a day or I see 22 a day and
those types of things and it is a problem, I think.
Mr. McIntyre. My practice is two miles from my house, and,
so, I take care of the people that live in my community. My
reputation is predicated upon how I do that. So, not only was I
very concerned about being a good physician, but running a good
small business in my community. And what I said before in the
testimony was that I had great ability to affect the atmosphere
and the business that was there because I ran it. So, if things
were brought to my attention by patients or staff or whatever,
that we were deficient in that area, well, you can be sure that
we changed that. Now, I am really not responsible for the
policies of the practice; the hospital is. So, I am a little
bit hamstrung in my ability to affect those policies.
Yesterday, a patient came in. Supposedly, one of our
doctors was not on the insurance panel because the hospital had
not gotten us all on the various insurance plans yet and the
patient was told well, you cannot see the doctor that you have
seen for 10 years. If I were running the practice we would just
have seen the patient and dealt with the insurance issues
later. So, I think that when you are vested in your practice as
a physician and also as a business man or woman, that lends a
whole different color to the way you approach it.
Mr. Kennett. I might differ slightly because of the fact
that I do not think being employed has changed my physician-
patient relationship. I think I feel the same about my patients
as I always have in the past 30 years. There is a lot of
regulatory and reimbursement issues that have affected
relationships because we cannot provide the services we used to
provide. That is a real concern. And, quite honestly, there is
an evolution in medicine that is going to change physician-
patient relationships in the fact that we now have
intensivists, we have hospitalists, we have an nocturnist, we
have shift medicine, and that is what the younger physicians
like in many instances. And, so, that is changing the
physician-patient relationship.
Mr. Smith. I would add quickly the difference to me, the
patient is access. Today, we have a shortage of physicians in
many parts of the country and surveys I have read had shown
that employed physicians, the risk off the table, they are no
longer business owners, see about 7 percent fewer patients and
this is at a time we already have a shortage and we are looking
to add 30 million people for this process. To me, that is a
great concern.
Chairman Coffman. Dr. Schrader.
Mr. Schrader. Thank you, Mr. Chairman. Well, thank the
panel as I guess retired, small business. Been a practitioner
for 35 years, started my own business from scratch when you
could do that sort of thing. My humble opinion, much as had
been stated here, I mean, that is almost impossible to do. I do
not care what sort of medical practice you are into. I mean,
the tax law has gotten byzantine. I actually did my own tax
returns when I started my practice. It was actually doable and
I felt like I was not committing--and the regulatory burden,
and certainly those in the medical profession, with all the
different regulatory frameworks come out, the SGR has been a
sword of Damocles hanging over every physician's head, I do not
care who you are, for many years. Sometimes we treat it almost
cavalierly here in D.C. because we ``never let it happen,'' but
it is still there and it is still disrespectful, I think, of
the hard work that folks put in. It makes it pretty tough. It
makes it pretty tough.
The debt burden now that youngsters came out with, I mean,
gosh, my tuition, I am embarrassed to say, graduated college a
few years ago, like $700. Students would kill themselves to do
that now. I am a dinosaur, but not that much of a dinosaur.
But the other thing I think the panel has alluded to a
little bit that did not get brought out is there is a change in
attitude among the young people. I do not care, and this is not
just the medical profession, I see this in a lot of my other
business friends and associates where the idea of starting a
risk-based enterprise, well, there are lots of great
entrepreneurs in our great country, thank goodness, and that is
what is going to make and continue to make our country great.
In some professions, they are a little less more risk diverse
for a lot of the reasons you all have just enunciated here. It
seems almost daunting for these people with the debt they come
out with, the regulatory burden that is out there, the
uncertainty, and I will grant that the ACA does create some
uncertainty out there. It is one of many issues I think face
our medical community.
I would like to get some thoughts about potential solutions
going forward here. So, I guess one main question I would ask
the panel here is of the many things you have talked about
today from taxes to debt, SGR to other regulatory burdens, ICD-
10 codes, some of the aspects of the ACA, what is the single
most or one or top two burdens that we should talk about trying
to eliminate or change and make less burdensome for you guys to
get it back to the practice of medicine that we all do so well?
Mr. Kennett. So, Congressman, I think that, to me, without
a doubt, the biggest thing you can do is to eliminate the SGR
and have a stable platform for physician payment that is fair
for the appropriate service that they are providing going
forward so that the physician is on a yearly, monthly sometimes
basis, do not know what the payment is going to be next year
and do not know if their claims are going to be held and they
have to go borrow money to make payroll. So, taking care of the
Medicare physician payment platform going forward would be a
huge step forward.
Debt, I think, is a very big issue for these kids coming
out of school today or residency. If we could find a way to
either help them defer their debt for a while so they have the
opportunity to go into private practice or if we could find a
way, particularly if they go into underserved areas and take
care of people that truly need help, to eliminate their debt so
that they can stay in practice and stay in areas where people
truly need their service.
Mr. Schrader. Very good. Thank you.
Dr. McIntyre.
Mr. McIntyre. I think as a philosophy, we might want to
inject some market principles into the physician-patient
relationship and have providers compete not only on quality
issues, but also on price issues, which we have not done in
decades. I think that might go a long way to decreasing costs
and increasing quality. If we decide we do not want to do that,
then I think to strengthen private practice, we needto allow
private practitioners to band together to negotiate rates without
owners' overhead structures so that they can compete with what is
becoming monopsony. We have the big medicine, big insurance, and the
government, and with consolidation, I do not think we are going to get
the cost containment we need. I think we need more players in the
market to do that and facilitating private practice's ability to
negotiate, I think might go a long way to contain cost and increase
quality.
Secondly, I think malpractice tort reform will go a long
way to decreasing the costs not only of private practice, but
of medicine in general.
And, lastly, especially with the SGR being such a problem
and being so expensive and the problems in trying to eliminate
it as well as deal with Medicare reimbursement cuts that are
supposed to go through the ACA, perhaps, we might want to think
about bringing back balanced billing to the Medicare equation
that was part of the program for the first 20 years of its
existence. And I think it could be done in a way that would not
hurt seniors, but would allow private practice to continue to
serve Medicare patients.
Mr. Schrader. Mr. Smith.
Mr. Smith. Oh, I agree with all three topics mentioned:
SGR, medical debt, something we hear on a daily basis from the
folks that we are talking to, and tort reform. I would add to
tort reform that the impact goes beyond the malpractice. The
cost of defensive medicine is something that has been
calculated in incredible numbers, where physicians are forced,
they feel, to protect themselves by doing additional tests
under normal circumstances they might not do. So, that cost is
significant.
The other thing I would mention is to relax some of the
regulations that are in Stark II as it implies to recruiting
physicians in the community. Being a solo practitioner is near
impossible. If you can get a partner or two partners, you have
a chance. Unfortunately, stipulations in Stark II make it
difficult because you cannot share any of your costs. You have
to bear that burden of the cost that exists to bring a new
associate in and most physicians cannot go through that year
process to wait for that new person to contribute to their
overhead to be able to afford to bring them in. So, that would
be a real benefit.
Mr. Schrader. Very good. Very good.
Dr. Yasso, you talked about medical home, and I thought
about this myself, as maybe being a way to get back to where
the physician is ultimately in control, one of the things that
is in the ACA that maybe needs to be fleshed out more. There
was some loan forgiveness over a period of time for new
students and that we tried to give a little better deal for
primary care docs that actually opted to go into some sort of--
in particular will do that, but primary care.
But I thought that maybe the medical home, and everyone has
alluded to this. I mean, the doctors have to be in charge of
decision-making, not the hospital, not the insurance company,
not the outfit you would hire to run all your books and stuff
and can you elaborate a little bit about what would you be
looking for, how would you be talking to CMS about how to
organize this so the docs are in control?
Mr. Yasso. Well, I think the PCMH is set up in such a
fashion that it is under the control of the physician. It is a
collaborative approach to medicine and a team approach where
everybody is involved in the care of the patient. That includes
the medical assistants in your office, your nursing staff, even
the front office staff for that matter. Everybody is involved
in the care of that patient rather than--an even footing to a
degree and things are done for the patient by everyone, not
just the physician, not just the nurse, but everybody gets
involved in the care. That is the whole idea behind the
patient-centered medical home. And then you develop
relationships as a primary care physician, you develop
relationships with specialists that you know are going to
provide quality care for your patients and you deal with those
people and you discuss the care so that you knowwhat kind of
care that individual is receiving that is the best possible care that
they can get.
If you take that a step further and you look at the
Accountable Care Organizations, I was talking to a physician
yesterday who practices in the Phoenix area and they have been
very successful in setting up an ACO down there that is driven
by primary care. It is not driven by the hospital, it is not
driven by the specialist, it is driven by primary care, which
seems to be very cost effective and providing good, quality
care.
So, I think two things. We need to keep in mind when we
talk about ACOs in particular is they need to be driven by
physicians, not the hospital. My concern when I first started
hearing about ACOs was that they were something akin to the old
PHOs, Physician Hospital Organizations, which for all intents
and purposes was driven by the hospitals and that is what we
really need to avoid because the care, the rubber that meets
the road is where the patient sees the doctor and that is where
the care is delivered. It is not by the hospital per se on a
daily basis. So, the physicians really need to be in control of
that.
Mr. Schrader. Dr. Kennett.
Mr. Kennett. Just would like to make just two additional
comments about medical homes. The first is medical homes, as
Dr. Yasso said, requires some additional resources within your
office. People teaching dieticians. So, we have to be sure that
they are reimbursed adequately that they are going to be able
to provide those additional resources.
And the second is that the medical home needs to be
assigned to whoever actually should be in control of that
patient's care on a regular basis. If that is a patient that is
on dialysis, then really the nephrologist probably ought to be
their medical home, it is the patient that has got chronic
congestive heart failure, then probably a cardiologist. There
is a huge majority that should be in the hands of the primary
care physicians, but it needs to encompass all these other
specialties, as well.
Mr. Schrader. Just a final comment then, Mr. Chairman. I
really appreciate this panel and the topic we are discussing.
It is near and dear to my heart and very concerned about the
future of medicine from all walks of life.
As a little, old, country veterinarian, I enjoy the
opportunity to get to know my patients, see them from birth to
their passing. It is a beautiful thing. But I rely on the
specialists. I think we have got a great relationship in the
veterinary world where we are not afraid to send it out. In the
old days, it used to be keep everything pretty close and the
medicine has changed. Hopefully, physicians, veterinarians, and
other practitioners of all sorts have come to that realization
and we will work through that.
I guess my last point would be that I hope each and every
one of you are active in making sure that whatever comes out of
health care evolution, whether it is related to ACA or anything
else, that some of us are pushing to reform the SGR, this bill
out there I am cosponsoring with Allyson Schwartz and others to
get rid of the SGR and get to a smarter level playing field.
She is actually like a part of the solution and not just a part
of the whipping child that is out there at the end of the day.
But, hopefully, it will be a good process, a better process at
least going forward and I appreciate the Chair bringing this
issue to Small Business' attention. Thank you, sir.
Chairman Coffman. Thank you, Dr. Schrader.
Ms. Hahn from California, and I will relax the five-minute
rule.
Ms. Hahn. Thank you, Chairman Coffman, Ranking Member, Dr.
Schrader.
I want to thank the Chairman for holding this hearing.
Really appreciate the witnesses that are here today, all of you
who are involved in some aspect of health care and getting
folks healthy. We really do appreciate what you are doing.
It is interesting because, I mean, I know the more
Affordable Care Act is implemented and this lifestyle, I think
a lot of the issues as I understand that you brought up today
are actually addressed in this new law.
Loan repayments. There is a lot about helping students
repay their loans or forgive their loans, particularly if they
serve in areas that have seen a shortage, talked about, Mr.
Smith, the shortage of physicians. There is actually a lot in
the health care act about providing incentives and scholarships
to encourage more doctors, physician assistants, folks to go
into this field.
I agree with Dr. Schrader, there are many of us who want to
have a permanent doc fix and I hope we do that in Congress with
the SGR.
This is a small business committee, so, it is really
interesting to hear your views as it relates to being a small
business person. I am wondering how much training did you get,
how much are students in medical school actually getting
business training, would be partnering with business schools
and medical schools. And, again, I am always trying to figure
out what our Small Business Administration is doing to help
small businesses. Is there a better role? Is there any role?
What is Small Business Administration doing as it particularly
relates to physicians who are attempting to run a small
business and what can we do better to help that aspect so
that--it sounds like we would like to ultimately see more
doctors continue to be in the role of being a small business
owner.
Mr. McIntyre. Training would be zero. On-the-job training
would be zero. We learned it on the fly. And many of my
colleagues who I interact with in the regulatory arena have
gone on to get MBAs. I know a boatload of orthopedic surgeons,
MBAs. So, there are a number of people who are doing that. But
in terms of the Joe lunch bucket doctor, I think that the
training is pretty much zero.
Ms. Hahn. So, in medical school, there is no sense that it
could be an important part of your success as a doctor who
wants to be also a small business man?
Mr. Yasso. Some of the schools, my alma mater being one,
offers an MBA degree, but not to everybody. They keep it to a
very small number of students that can get involved in that.
So, there is some, but as far as any kind of formal training
for everybody else or even just basic business courses, no.
There really is not.
As far as what can you all do, promote some of the things
we talked about, I guess, and some of the things that you
mentioned that are in the Affordable Care Act that might be
helpful to make sure that those things come to fruition. If
they are unfunded mandates, they do not do us any good. So,
that is really the key to see that some of those things come
out and really give us what we need to promote people to at
least consider going into solo practice or small practices.
Mr. Kennett. Congresswoman, I would say that certainty
going forward is what these small businesses need and that
relates to what we said. Reimbursement, knowing what you are
going to get paid down the road, and reducing the regulatory
burden, which is huge. If you could help those two, they would
have a lot more businesses staying in practice.
Ms. Hahn. I am going to follow-up because the Affordable
Care law also aims to reduce paperwork and administrative costs
by standardizing billing, and between 2013 and 2016, the rules
will be implemented to standardize health insurance processing
requirements.
Mr. Smith, you worked on this Merritt Hawkins whitepaper
where ``Physician practices should benefit from improved
revenue cycles and save time and money tracking claims.'' So, I
am thinking since these rules are not finalized yet, maybe this
is an opportunity. Your whitepaper suggests that this is a
potential cost savings. So, while we are considering these
rules, what should we be keeping in mind to maximize these
potential cost savings within this particular realm?
Mr. Smith. Well, anything we can do to keep it as simple as
possible would be a plus, which obviously we solve the depth
and the weight of Affordable Care Act to just pay for a loan
and people are just really digesting all the areas and
attempting to refine some of those areas. And to lessen the
penalties in certain areas where things are unknown. There is
an example of which if there is a whistleblower situation, the
Medicare can suspend payment to the physician for that
whistleblower act if verified. So, in essence, you could have a
disgruntled employee who makes a claim, Medicare suspends
payment to the physician, and it's over. And I would bet that
three physicians on this panel, if you had zero Medicare
revenue from guilty to proven innocent could crush any of their
practices and several examples like that, again, unintended
consequences.
Ms. Hahn. Thank you very much.
Mr. McIntyre. I think that to standardize the billing
process as you alluded to in the ACA would go a long way. For
example, Medicare is about 23 percent of our business, but was
our most prompt payer. We could anticipate Medicare
reimbursement within 18 days of the bill being sent out as long
as it was a clean claim.
Managed care companies on the other hand, had an average AR
timeframe of 45 days. And we got much more runaround and hassle
from the managed care companies in regards to them saying a
claim was not clean, them wanting more information.
So, a standardization of that process, I think, would go a
long way to help the private practice.
Mr. Kennett. Congresswoman, I can give you one quick
example of one of the regulatory things that happened to
physicians that make no sense. So, the rack auditors, which I
am sure you are probably familiar with that can go in and take
money back from hospitals for whether the patient inpatient or
outpatient. So, now, a patient can be in the hospital and just
because there are some regulations of you tell them that they
are inpatient or you call it inpatient or outpatient, same
exact service is provided in the hospital, but then the rack
auditor comes in and says no, they should have been called
outpatient. They can take back the physician's reimbursement
any services that are provided during that hospitalization. It
really makes no sense.
Ms. Hahn. Thank you.
Mr. McIntyre. So, there is one additional program, too, the
Medicare Administrative Contractors, which is also
retroactively denying services for lack of paperwork. For
example, in orthopedics, the MAC are denying payment for total
joint replacements unless there is documentation of
unsuccessful treatment with physical therapy for three months
prior to the procedure. Not only is this very costly but there
is nothing in the literature that supports that such treatment
is efficacious. In addition, the rules of these programs are
unknown and they are enacted retroactively, making them
impossible to comply with. This really will affect patient care
negatively.
Chairman Coffman. Thank you, Ms. Hahn.
The Chair recognizes Mr. Tipton of Colorado.
Mr. Tipton. Thank you, Mr. Chairman, and I apologize for
being late. We had a natural resources meeting, as well. So, I
sent your regards to that meeting. I know you could not be
there because of here.
I would like to thank our panel for being here. Incredibly
important issue, particularly for districts like mine, rural
Colorado, 54,000 square miles, and as I have traveled through
those 54,000 square miles, just held a town hall meeting with
senior citizens in Pueblo, Colorado, last week, they are
worried about the president's health care mandate and how it is
going to impact them. I have got senior citizens in Del Norte,
Mono Vista, Alamosa, Cortez, Crawford, Hodgkiss, Edgar, some
towns a lot of people have not even heard of, they cannot find
a doctor that is willing to take Medicare.
So, I guess, Mr. Smith, I would like to be able to start
with you. With a number of small business and a lot of our
doctors are small business people, solo practices, what effects
will the president's health care mandate have on rural
Americans, rural citizens' access to health care in your
perception?
Mr. Smith. My perception, the impact I look at first is of
the patient. As you mentioned, very difficult as a patient. A
new patient, physician practice, could be seen if you have
Medicare, especially if you have Medicare without any kind of
gap insurance. A physician has to limit the amount of Medicare
that they see in their practice to be financially viable. If
you have pure financial to procure practice, it is not viable.
The reimbursements are too low to be able to do that.
Most physicians that I work with, we conduct about 3,000
searches a year around the country so we have an excellent of
information will tell me that Medicare rates, they generally
break even as a cost of doing business. So, you have to keep
that to one-third of your practice.
Some specialists, such as internal medicine, you might get
it to half, but you cannot have that happen. You see physicians
as they get older, their patients get older, and more and more
Medicare and you can look at their financials and they slowly
dwindle until such a day that the decision is I am working for
free, I have to get out of practice.
So, now, as we look at this, we have patients that could
come onto the system, was going to pay Medicaid rates and we
are elevating them to Medicare, thinking that is going to be a
driver for physicians to see them. One, that is a temporary
rate. Two, it is not a factor and those patients, 30 million
people we are adding to the system, will have a card that gives
them insurance or a version thereof. What they will not have is
access.
The second expense, the legislation does address some areas
of need, attracting people to the system. The shifting of
unfilled primary care spots, that really is resulting in a few
hundred positions, but the issue is we can add as many people
as we want to the medical schools, but we have not added a
single dollar as it comes to residency. And, so, all you will
be doing is shifting foreign positions out of the system and
replacing them with American-trained physicians, but at the end
of the day, there is the same number of physicians coming out
of the machine and in places like Russia and Trinidad and
Serbia will still not be able to find a doctor because there
will be more attractive options in large states.
Mr. Tipton. If we could, Mr. Smith, I would like to explore
that a little bit because you were focusing a little bit on the
economic----
Mr. Smith. Okay.
Mr. Tipton. From the doctor's perspective--the majority of
doctors I know actually went into health care because they
truly care about people. They are going to limit the number of
patients that they can see simply because they want to be able
to provide quality health care. If you are trying to run them
through like an assembly line, is that going to reduce the
quality of health care?
Mr. Smith. Well, there is no doubt. I mean, the physician-
patient relationship is the most critical thing we can talk
about and the colleagues here, I am sure, would completely
agree with that. But the only choice is to do more and I would
bet that each of these physicians here see a few more patients
each year to be able to make their practice viable. Not so much
as just financial reward, but just to make it a viable business
that employees will be able to count on and you want income,
but the patient will be left on the sideline.
Mr. Tipton. You just mentioned doctor-patient relationship.
We should not be getting between that, but if there is going to
be a medical decision that is to be made, let us have the
family patient doctor do that in the doctor's office. Do you
have some concern about the IPAB Board?
Mr. Smith. Well, yes, to answer your question. We have seen
this in other countries. We have seen some of the impact it has
had. I saw recently in Europe where epidural injections were
taken off the list of care to be provided, other decisions that
are being made, but in each of these decisions that you see
along the way, the majority of these decisions are made without
physicians involved. We speak to thousands of physicians on a
monthly basis, and I have yet to find any of the ones that had
the lab coat that were on the front line during these
conversations. But anything we can do, it has to come down to
the physician-patient relationship.
Mr. Tipton. Dr. Yasso, I saw your head nodding. Would you
like to make a comment on that?
Mr. Yasso. I would agree and the American Osteopathic
Association adamantly opposes the IPAB. We think that is just
wrong-headed for no other way to say it.
The other thing that is concerning to me in regards to
Medicare, as Mr. Smith said, you are almost getting to a point
where you are just barely breaking even as far as reimbursement
is concerned. What happens in the next 10 years when they cut
$500 billion out of Medicare because of ACA? Does anybody know?
I mean, obviously, reimbursement is going to take a hit. It has
to take a hit. I do not see how else you are going to reach
that number.
Mr. Tipton. Excellent point, and Dr. McIntyre, maybe you
would like to jump in a little bit on this because I think Mr.
Smith said it very well. We can insure everyone in the country,
but there is a quantitative difference between insure and
health care. Two completely different things. And if we are
wanting to be able to get at health care, are you seeing a real
problem with the president's health care mandate when it gets
down to actual delivery of health care?
And I am speaking primarily for rural America, rural
Colorado. I know some of our metropolitan areas have
anabundance of doctors and specialties, but let us talk about rural
America.
Mr. McIntyre. I do not know that a mandate in itself
creates an access issue. I think the access issue is really
driven more by reimbursement level. So, if your reimbursement
level falls below the level of your ability to deliver the
care----
Mr. Tipton. But the reimbursement level is actually via the
mandate. That is part of the program.
Mr. McIntyre. Well, my understanding of the ACA is that it
does cut $500 billion out of Medicare----
Mr. Tipton. Five hundred seventy-five billion.
Mr. McIntyre. Over 10 years and does fail to correct the
SGR, which is another $300 billion. So, I think that is the
access issue. I think I certainly have a philosophical and
constitutional issue with the mandate myself personally, but,
perhaps, I am not sophisticated enough to realize how it will
impact access other than the issues we spoke of. It is possible
to provide someone with insurance, but if that insurance does
not pay costs, then you are basically uninsured.
For example, if you put people on Medicaid, I think it is
something like 40 percent of all physicians will not accept the
Medicaid patient because the reimbursement is so low and I
believe my understanding of the ACA is that by 2019, Medicare
rates will be around what Medicaid reimbursements are now. So,
I think that is a huge issue and a potentially devastating one
for access to care for Medicare patients going forward.
Mr. Tipton. So, effectively, our senior citizens, people
who have run the race are walking in the door with their
Medicaid card, putting it on the table, it is insurance and
they are not able to get a doctor.
Mr. McIntyre. I think you could definitely see that
problem.
Mr. Tipton. That is a real challenge.
Mr. Smith.
Mr. Smith. To add to it, one of the things that my firm
does, we do studies on wait times. How long does it take to get
to see a physician? An unintended outcome that we discovered
was the greatest increase in wait times of any metropolitan
market was Boston and the difference between what occurred
between our first wait time survey and our second was the
implementation of universal health care.
So, a place that I think any of our colleagues would
probably have the most physicians, the most training programs,
the environment you would not expect to have that issue are
having that issue. So, if that is happening in Boston, what is
going to happen? I do not think that is a difficult question to
ask.
Mr. Tipton. Right.
Dr. McIntyre, maybe if you would like to, we have got to be
able to address some of the accessibility. Every American, I
think that we can all agree, we want affordability,
accessibility. The president's health care mandate fails on
both accounts.
What can we do? What should be done to be able to increase
the number of physicians that are going to be able to get into
some of these rural areas to be able to provide that access to
health care?
Mr. McIntyre. In answering a similar question, I thought
perhaps injecting a market-based solution to this problem would
go a long way to improving quality, decreasing costs, and
improving access. I think if the patients have some skin in the
game, then they are more likely to seek health care that is of
quality to them. If somebody is paying for their health care,
especially if it is first dollar coverage, they are less likely
to become shoppers, they are less likely to search for quality.
They are much more likely to search for volume.
So, I think in the current situation, we have a volume-
driven process that is going to be exacerbated by the health
care law instead of one where we will be looking for quality.
The health care law does attempt to impose quality on the
system through comparative effectiveness research and on other
things, but that is sort of a top-down approach.
Mr. Tipton. Ultimately, and I would just kind of like to
get your thoughts on this, original CBO estimates on the
president's health care mandate stated it was going to cost
$900 billion. In the White House, there was dancing in the
hallways over that number. I am a small business guy and I know
$1 billion is a lot of money. CBO just rescored this. It is
going to be $1 trillion and $787 billion. With administrative
costs, we are going over $2 trillion.
Is there a better way to be able to spend $2 trillion?
Mr. Kennett. Congressman, if I could, I would like to just
comment a little bit on before and then this question, as well,
and that is that if we are going to increase access, we have to
be able to pay for it. And, so, that is a concern. We have to
appropriately pay physicians for the services they perform. So,
if we are going to reduce costs within the system, I think if
you get any larger number of physicians in a room and talk
about how we are going to reduce costs, that you will come to
the issue of utilization.
And, so, the American College of Cardiology for years has
been working on the perfect use criteria and our registries and
I think that we as a profession are going to have to look at
the appropriate utilization and cut out the utilization that is
inappropriate and that could save possibly as much as one-third
of what we are spending right now on health care.
Mr. Tipton. Would tort reform be a good idea?
Mr. Yasso. Absolutely, and I was going to just mention
that. The patient comes in with back pain, let us say, and you
may send them for X-rays of their back, let us say low back
pain. They come back and they say well, doc, you gave me some
medicine, it really did not help, I still have the back pain.
And the next thing you know, you are ordering an MRI. Why do
you do that? Is it because it is really a necessary test or is
it because you are worried about the liability of the
situation? Am I missing something? Is there something else
going on here that I will pick up with the MRI? And you are
thinking about the legality of the situation more than you
are--is this really appropriate care for the patient? And
medical liability is what is perceived a lot of times and I
think that is really true in the ER setting. You wonder how
much money is spent needlessly in the emergency room on CTs of
the head, stress tests for chest pain, all those kinds of
things where they may not necessarily be needed.
Mr. Tipton. I mean, I thought it was curious that the
administration and the 111th Congress, we are in the 112th,
would not even consider tort reform because I have actually
held meetings with physicians. I just met with about 24
physicians over in Brentwood, Colorado. Tort reform came up as
one of the number one cost drivers and it is fear factor that
if the patient is not totally forthcoming and you did not catch
it, you can be sued. We have got to be able to bring some
common sense into that portion of the equation, as well. So,
certainly thank our panel for taking the time to be able to be
here. We would love to be able to hear more from you. This is
about affordability, it is about accessibility, and as I travel
through rural Colorado in my district, I am talking senior
citizens right now who are frightened about what the
consequences are going to be to their health care going forward
as we continue to see the president's health care mandate put
into place and I think maybe we should have started with you at
the very beginning, talk to the physicians before they started
writing a 2,000-plus-page bill that many of them did not read,
yet passed, and Minority Leader Pelosi was correct. She said we
will find out what is in it once it has passed, and,
unfortunately, that discovery is still continuing. We are
seeing increased costs, increased control, and reduced access
to health care in this country. Thank you for coming in today.
I yield back, Mr. Chairman.
Chairman Coffman. Thank you, Mr. Tipton. I have got a few
other questions. I want to make sure that we have everything
done on record.
Dr. Yasso and Dr. Kennett, in your written testimony, you
both mentioned a burden of complying with statutory and
regulatory requirements, particularly electronic health
records, electronic prescribing, and physician quality of
reporting, which will carry significant penalties for non-
compliance in future years.
Would you elaborate on how these burdens disproportionately
impact a small or solo practice physician's time and revenue?
Mr. Yasso. I have a friend that practices in Kansas City
and has a predominately Medicaid practice. She has chosen to
date not to implement the electronic health record because of
the expense. I mean, she is barely breaking even paying her
help, taking a salary, and those types of things and she is a
very altruistic person and she wants to take care of her
patient population, but she cannot afford--and even though the
government says well, we will reimburse you if you put in a
system that is compatible or I forget what the terminology is
for that, but, anyway, she has made the decision that in 2014,
she is going to retire. And the community is going to lose one
darn good doctor because of that. And it is those types of
things. It is just a heavy burden in situations like that and
it takes good people out of the practice of medicine.
Mr. Kennett. With our group of physicians, there were only
11 at the time, we spent about $700,000 on electronic health
record and you do not recoup very much. On an ongoing basis,
you had that expense of maintaining it on a regular basis and
the other bad part of that, when you first institute an
electronic health record, actually it reduces your productivity
pretty dramatically for the first six months or so and then you
come back, but you are never going to get back to where you
were before.
So, you are going to have to have electronic health record
to demonstrate meaningful use, and if you do not, you get
penalized for all your Medicare, funds will be cut--you are not
participating in meaningful use and you are not e-prescribing,
and it goes on and on. So, that is one of the drivers to
hospitals is because the hospital can better afford--they still
had to lower costs involved, yet they can better afford to
absorb those costs in the small physician practices.
Chairman Coffman. Mr. Smith, your testimony mentioned the
high cost of malpractice insurance. Do you think malpractice
reform will help a small practice physician to shoulder the
burden and how so?
Mr. Smith. Well, I think if tort reform would be part of
the legislation, you would have seen a much greater acceptance
of the physicians of this legislation, of the changes that were
coming, but we have seen in states that apply tort reform, that
it is a significant cost savings to the physicians and, of
course, what I mentioned before, the cost of defensive
medicine, which is an intangible cost that is significant,
would be impacted, as well.
Chairman Coffman. Dr. McIntyre, some health care mandates,
such as the reporting requirements for health information
technology and establishing Accountable Care Organizations are
first instituting with ``incentive payments,'' but involved
penalties later.
Do you think that the inability to comply with mandates may
be contributing to the disappearance of small medical practice?
Mr. McIntyre. The short answer is yes. We implemented an
electronic medical record in 2002. So, we were early adopters.
Totally, we spent $500,000, which was about $100,000 per
doctor. We initially saw some savings because we were able to
get rid of file clerks and paper costs and transcription costs,
but going forward with upgrades and having to hire new staff to
enter data, those cost savings went away. So, basically, it's a
huge cost for a small business. The HITECH Act leaves
physicians $44,000 over 5 years to implement a record as long
as they comply with meaningful use. So, that would not even
cover half of our investment per doctor.
In addition, the quality reporting in much of the act is
very difficult to comply with because the quality reporting
criteria have been developed by National Quality Forum and
places like that of the I think it is 44 quality measures, only
3 of them apply to orthopedics at all. So, we were trying to
fish around for what we are going to start reporting on to
comply with the mandate. Asking people about looking at things
sometimes had nothing to do with what they were seeing us for.
We have to report those things, even though they are not in the
scope of our practice, just because of the reporting
regulations.
Chairman Coffman. Dr. Kennett.
Mr. Kennett. Chairman Coffman, I will just give you a quick
personal anecdote about tort reforms. Missouri has a tort
reform law with a cap on non-income damages of $350,000. So, my
insurance says an interventional cardiologist dropped from
$35,000 to $14,000.
Chairman Coffman. Right, okay.
Mr. Tipton.
Mr. Tipton. Thank you, Mr. Chairman. I just did have one
follow-up question.
Dr. McIntyre, you had brought it to mind and it is not in
regards to the electronic medical records, but going back to
Medicare, being able to fill out compliance forms to be able to
get paid.
Has it been your experience many in all of your
professions--I talked to a good family practice doc in my
hometown, finally just pretty much quit simply out of
frustration from the standpoint that they had moving bars when
it came to being able to fill out the forms, make sure they
filled in the right dots, and it was constantly changing.
Have you written any analysis in terms of the costs, how
much you were spending rather than spending time with patients,
you are paying people to be filling out more records when it
comes to Medicare?
Mr. McIntyre. Well, certainly, our costs in general
increased significantly to the point where they were about 80
percent of revenue for our clinical practice. We had other
portions of the practice that had a lower overhead figure but
even with those figured in, our total overhead cost was about
63 percent, but that had increased hugely since the earlier
part of the 1990s. We never culled out Medicare specifically to
analyze the cost just for Medicare patients, but overall, it
increased tremendously. When I started, we had one billing
person. When I left, we had six. When I started, we had one
person to do pre-certifications and things like that. When we
sold the practice, we had one person per physician. So, all
these things added up over time.
Mr. Tipton. I am sorry, I apologize for interrupting, but
just so that I am clear on that, you did not mean you were
seeing more patients, that you were putting out more bills, it
was just compliance?
Mr. McIntyre. Right, just compliance, correct.
Mr. Tipton. Just strictly compliance.
Mr. McIntyre. We did have to ramp up volume, too, because
we could not----
Mr. Tipton. Pay for it.
Mr. McIntyre. Since we were getting a set fee, the only way
for--there are two ways for a private practice to increase
income in a set-fee market and that is to see more volume or to
add ancillary services. You can decrease costs, but the quality
of your service suffers to the point where you are not worth
going to see.
Chairman Coffman. Dr. Kennett.
Mr. Kennett. Congressman, I would just say that I hope CMS
is not listening or the Department of Justice, but if on a
regular basis a physician actually read all the documents which
you are supposed to sign every day, it would add hours to your
day. There is no way. You have reams of documents that you go
through every day you sign your signature on, whether it is
home health or hospice or Medicare documentation, it is huge;
there is just no way you can actually read it all.
Mr. Yasso. When I first started in private practice in
1980, there were three of us, three physicians, and we had four
people working for us, two in the front office, two in the
back, and that was it and we did just fine. Today, with four
providers, three physicians, one nurse practitioner, we have an
office manager, four people working in the front office, and
four people working in the back office. So, I mean, realizing
we have got one more provider than we did 30 years ago, but,
still, all this regulation and all the things that we need to
do, the precertification of everything, you just have to have
more bodies. You cannot get by without them.
Mr. Tipton. It is no consolation, but in this country,
businesses are paying $1 trillion 750 billion per year on just
regulatory compliance. Small businesses are paying $10,685 per
employee in regulatory compliance. We all know there needs to
be some regulations, but I think we have certainly seen an
overreach in the complexity that is inhibiting the very
important work that I know you physicians in particular want to
do, and that is to be able to provide quality health care at an
affordable price. So, thank you.
Thank you, Mr. Chairman. I yield back.
Chairman Coffman. Thank you.
Dr. Yasso, I have got a question. Do you think small or
solo practices may survive, but only if they fill a particular
niche such as concierge care?
Mr. Yasso. I think that could be the way that this goes. I
have a friend of mine that has started a concierge practice, at
least part of what he does. He does not do 100 percent of that
yet, although, he may very well move into that direction at
some point in time.
It is my understanding that you see a lot of that and Mr.
Smith could speak to that, I am sure, on the east and the west
coast and I am sure that eventually, that is going to move
towards us. It only makes sense from the private practitioner
if he wants to stay private that he does something like that
because now he controls his income. It is not controlled by the
government, it is not controlled by any regulator, he controls
his income and that makes sense.
Mr. Smith. I would like to just simply with that, because
concierge medicine, people think of it as the billionaire's
medicine, the doctor follows them around, and that does exist,
but if you were a primary care provider in solo practice, you
are going to have three to four employees, you are going to
have 50 to 70 percent overhead costs, and you are questioning
what do you do? Do I join a hospital? If you can today become a
concierge physician, you can take that panel, which could be as
low as 2,500, 4,000 patients and if you had 500 of them agree
to pay you $50 a month and you would see them just in their
office and take care of all their needs, you would make about
20 percent more money than you made the other way. So, you can
survive, but from a small business perspective, you would trim
your staff one or two people. So, very lean and those are good-
paying jobs, jobs that we hear talk about our health insurance,
a big part of the opportunity, but these are smart individuals,
they will find a way to adapt and coming off the grid and doing
that is one way.
And the second thing I would keep in mind is what if you
are not one of the 2,500 that can afford the $50 a month? So,
we have taken that FTE from a full position down to about 15 to
20 percent of an FTE and in environment we already have a
supply challenge.
Chairman Coffman. My final question involves seniors,
seniors on Medicare, seniors in my district and across the
country. And seniors on basic Medicare had a very challenging
time, an increasingly difficult time finding physicians that
will see them and with the Independent Payment Advisory Board
that will be fully online I think in 2015 according to the
Affordable Care Act, is that not going to make this situation
all that much worse when the new way of controlling spending is
to have this 15-member board control spending through
restricting reimbursement levels. It seems essential, that is
how we are controlling spending in the Medicare system. And,
so, I wondered if any of you have any comments on where you see
senior care going under Medicare.
Mr. McIntyre. In addition, I believe that the IPAB not only
is tasked with cutting costs significantly, but also with
maintaining access at the same time. So, I do not know how they
can do that. And I do not know how central planning is going to
be able to affect a fair reduction or program, especially
without any input from anyone. I believe there is no input from
physicians, there is no input from the Congress, they basically
just give Congress a report and Congress can accept it or not.
Currently, at least now, we have some input to our
reimbursement via some certain committees of the AMA. That will
go away with the IPAB.
Mr. Kennett. Certainly, the environment we are in where
there is uncertainty on Medicare reimbursement, seniors are
going to have increasing difficulty getting access, you are
exactly right. I think we all here could agree that the IPAB is
not a good thing and it is really not a good thing and that the
only people that they are going to cut between now and 2019 are
providers.
And, so, the good news is I think that the current
congressional environment, it seems very unlikely you are going
to get 15 people to approve by the Senate to be on the board,
so, it is not going to be implemented.
Mr. Smith. And I would argue that they are regulating and
controlling prices for services in large--because they cannot
get access.
Chairman Coffman. Did anyone have any further comments?
Well, thank you, all, for participating today. I ask
unanimous consent that the following articles be admitted to
the hearing record. A New York Times article dated March 25,
2012, entitled ``More Doctors Giving Up Private Practices,'' a
CNNMoney article dated July 11, 2012, entitled ``The Mind of a
Solo Doctor,'' a Wall Street op-ed dated July 5, 2012, entitled
``Obama Care's Lost Tribe: Doctors,'' a Forbes article dated
July 2, 2012, entitled ``So Long Marcus Welby: Obama Care,
Market Kill the Solo Private Practice.''
Without objection, so ordered. I ask unanimous consent that
members submit statements and supporting materials for the
record. Without objection, so ordered.
This hearing is now adjourned. Thank you very much for your
testimony.
[Whereupon, at 11:33 a.m., the Subcommittee was adjourned.]
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