The Plight of our Private Practices by Dr. Hemant Kalia, President MCMS

Wednesday, January 17, 2024 1:21 PM | Jennifer Casasanta (Administrator)

American Medical Association (AMA) recently conducted a study which validated the trend of disappearing private practitioners across the country. According to the study, between 2012 and 2022, the percentage of physicians working in private practices witnessed a remarkable decline, falling from 60.1 percent to 46.7 percent. Concurrently, the percentage of physicians directly employed by or contracting with hospitals grew, reaching 9.6 percent.

Our Rochester community has gone through an even more drastic transformation.  Area private practices are being decimated by site-of-service differential payments and cost increases shuffled by insurance companies under the guise of the “post-pandemic cost of doing business”. This is causing serious damage to Rochester’s healthcare community, including significant strain, and possible closure, of multiple independent healthcare facilities, effectively decreasing the diversity and availability of quality healthcare for members of our community.  

While the insurance companies are still able to get approval from the Department of Financial Services to raise their premiums, our community private practices are struggling to see any corresponding meaningful change in their reimbursements.  Since 2001, the cost of operating a medical practice has increased 47%, while economy-wide inflation has risen 73%.  During this time, Medicare hospital and nursing facility updates have increased by roughly 70%, significantly outpacing physician reimbursement.  When adjusted for inflation, Medicare's rates--on which insurance company’s rates are based--have actually dropped 26 percent over the past 22 years.  Exacerbating this reimbursement gap are ballooning pandemic and post-pandemic costs of providing healthcare services, particularly soaring supply costs and labor costs: wages are up nearly 20%.  On average, private practice payroll has increased by 50% over the past 5 years in our region, and these practices are continuously losing team members to the publicly supported entities surrounding us which have access to state and federal grants and tax exemption as they are able to charge twice as much for the same care provided due to their facility fees (site-of-service differential payment system).

The consolidation of healthcare in our region has also created a duopolistic delivery system which is not conducive to innovative, patient-centered, private practice model.

MCMS supports preservation of patient access to cost-effective, personalized health care and independent private practices play an integral part of healthcare delivery infrastructure in our region. We need legislative action through advocacy and policy reform to support this dying art of personalized, cost-effective healthcare delivery model.

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