Physician Practice Runs Lean to Weather Financial Storm

Christopher Cheney, May 15, 2017

One independent physician practice in Texas has deployed a retrenchment strategy to contain costs in the unsettled atmosphere of federal healthcare policy.

Physician practices are among the weakest links in the healthcare provider sector.

Practices rarely have the deep financial pockets of health systems and hospitals.

James Holly, MD
James "Larry" Holly, MD

Unlike at health systems and hospitals, where resources can generally be marshalled, at physician practices, regulatory compliance, revenue cycle management, and other administrative functions are heavy burdens.

In terms of bargaining power relative to commercial payers, only the largest practices and physician organizations with market edges have an expectation of cutting sweet deals on reimbursement rates.

Now, after enduring several years of financial challenges during the rollout of the Patient Protection and Affordable Care Act, the challenges continue under a cloud of uncertainty as federal healthcare policy teeters on chaos.

  • The ACA could be repealed and replaced, or not.
  • Medicaid expansion under the ACA, which is providing coverage to millions of low-income adults in 31 states and the District of Columbia, could be scrapped entirely, retained in some states, or continue to spread nationwide.
  • Under the Trump administration's leadership, the implementation of value-based payment models at the Centers for Medicare & Medicaid Services could continue, or not.

Financial strains at practices are having record-breaking consequences. Physician groups were the hottest healthcare-industry sector for merger and acquisition deals in the first quarter of this year, according to HealthCareMandA.com.

With 48 transactions in Q1 2017, physician group M&A deals increased 78% over the last quarter of 2016, and posted 109% year-over-year growth compared to Q1 2016.

James "Larry" Holly, MD, has been coping with financial pressures at his practice since the early years of PPACA implementation. Holly is CEO and founder of Southeast Texas Medical Associates (SETMA), a group practice based in Beaumont, TX.

SETMA has had an electronic health record system for nearly two decades, and Holly is confident of success in Medicare's new value-based payment system under the Medicare Access and CHIP Reauthorization Act (MACRA). His practice, however, is in a weakened financial state.


Related Link: Top 10 MACRA Considerations for Providers


"From 2011 to 2017, simultaneously with the deployment of the Affordable Care Act with its taxes on healthcare organizations, Health and Human Services began a seven-year, 4% annual reduction in reimbursement on Medicare Advantage plans," Holly says.

Christopher Cheney

Christopher Cheney is the senior finance editor at HealthLeaders Media.

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