Doctors

Letter to Physicians from:

Dr. Larry S Hahn, Private practice primary care
Stoltz and Hahn Medical Associates
Associate Professor of Medicine, University of Pennsylvania
Associate Professor of Medicine, Drexel University PA Program

September 2010

Dear Fellow Physicians:

The recent passage of the healthcare reform bill and its eventual implementation will spur massive change in our health care system. This change and its effects will not be limited to hospitals and patients, but will affect all aspects of healthcare and will have ramifications for all providers of care. The inevitable change may have both positive and negative effects on our businesses, but I believe that we are in a position to take advantage of extraordinary opportunities. Below, I outline these opportunities I see in health care reform. These opportunities will increase our ability to care for patients and create a new system to maximize income for each participating physician.

I have been a primary care physician for 28 years and have seen many changes in medicine over this time most of which have not benefited primary care physicians. I consistently hear of dissatisfaction with reimbursement, increased overhead expenses, cost of referrals, precertifications for our patients, all associated with increased hours and paperwork. Only in medicine, and even more so in primary care, can an individual or practice generate so much additional revenue for others without the ability to turn any of it into profit. Examples of this phenomenon include directing business to specialists, hospitals, labs, diagnostic testing facilities, outpatient surgical centers and more. To add insult to injury, primary care physicians are left with the responsibility of paying support staff to arrange for patients to utilize these services.

If you, like me, continually strive to provide quality care but are incessantly frustrated with the current environment, Stark laws, and hospitals’ pursuit of referrals without any ability to compensate primary care physicians, the time has come to act.

Our practice is a busy primary care center. As a result, several local area hospitals have offered to purchase the practice’s hard assets and give the physicians a nominal raise. If we were all to accept these hospitals’ offers, we’d be acquiescing to a system where physicians are inadequately compensated and the only real beneficiary is the hospitals. And, frankly the hospital doesn’t know how to run your business the way you do.

Many years ago my partner and I invested in a new radiology center with state of the art diagnostics including the then-new technology of MRI. The center did quite well for several years until the adoption of the Stark laws, which led to the dissolution of our and many such physician-owned facilities. Each practice that invested in the center was using separate tax ID numbers. As you know, the Stark laws made this form of business illegal (unless certain safe harbors were met). What happened next was our biggest mistake and is one area where I see great opportunity for business growth and improved patient care.

Like many others in similar situations after the passage of the Stark laws, we simply sold the center and abandoned the extra revenue. This was the mistake. Instead of deserting a promising revenue stream to maintain the status quo at our individual practices, we, (myself and the other investors in the radiology center), should have banded together and legally merged our practices into one group using one tax ID. Think of all the extra income we could have retained over the past 20 years.

We continue to see consolidation within specialty groups with cardiology and GI groups of 20-30 physicians becoming ever more common. This system allows for better contractual rates and the formation of surgicenters, as well as diagnostic testing facilities to enhance each group’s practice.

The new health care law promotes several interesting points. First, it does not allow for development of new physician owned hospitals or the expansion of those already in existence – a nod to the great lobbying effort by your friendly hospital associations. Second, the law allows for the formation of interesting options such as accountable care organizations and patient centered medical homes. These hybrids reimburse providers with additional revenue when certain benchmarks of cost and quality have been met. Meeting these incentives requires an electronic record and significant innovation in the delivery of care, but it can be done. In addition, some of these incentives also require that the provider group have a “critical mass of patients”.

Physicians in general are a difficult bunch, each with their own opinions, and somewhat adverse to financial risk. After all, we have grown up in a system that promoted individual practices and we are, by nature, conservative. Despite this natural inclination towards the status quo, it is imperative that we change along with the system. Drastic, risky action is, and always has been, ill advised. However nimble, creative adaptation in order to take advantage of the system’s new opportunities is essential to our survival and success in the field of primary care.

Now that you understand my perspective on our current predicament, let me describe my plan, what’s in it for you, and the level of risk involved.

I would like to meet with you and discuss merging of our many practices into one, grand primary care group. The utilization of a single tax ID would be of immense financial value. Imagine the economic leverage just 10 combined primary care practices could wield in contract negotiations with insurance companies for better rates not to mention the ability to obtain the critical mass essential to benefiting from new financial incentives. In addition to these initial results, we would develop 1) a new ability to contract with other physicians from a position of extreme strength in forming a multispeciality group; 2) the ability to create diagnostic and outpatient facilities that we all own; and 3) the ability to inter-refer to each other in a legal fashion consistent not only with Stark law, but all current anti-kickback laws that inhibit physician development beyond that of your own office.

Through this new coalition I believe that both primary and specialty physicians can derive added revenue that we all currently give away. The primary physicians can derive revenue from referrals to other providers and facilities, and the specialists can derive revenue from services they refer out or do not perform. Every one of us should expect a significant increase in income as a result of this model. In this new world, I see hospitals only providing inpatient care while physicians both primary and specialty take back what is rightfully ours to begin with.

The cost to get started is small, simply a health care attorney’s fee to form the initial primary care group for the purpose of utilizing one tax ID. Each office’s billing, income and expenses would go back to that office and could be handled by each office in a manner of its own choice. The details can be ironed out at a later date, but our options include maintaining our current in-office billing systems, creating a central administrative office, or hiring a third party company.

Because each office and its physicians would derive direct income from their own revenues generated less their own expenses, each would still have incentives to do what is best for them. The utilization of the single tax ID will soon thereafter make investment and growth opportunities quite stimulating while only costing the price paid to an attorney to form the group.

The second opportunity I would like to briefly address is your potential inclusion in a new concept of care that is being formulated the Lifestyle Healthcare Center. This facility as planned is a large office complex offering a wide array of physician opportunities including cardiology, urology, radiology, radiation oncology chemotherapy, pathology and lab medicine, orthopedics, neurology, pulmonary, gastroenterology, pain management, women’s healthcare and breast center, plastic surgery and spa, as well as multiple operating rooms for outpatient surgical procedures. Plans have been formulated for physician investment and involvement in this facility with income generated and distributed in accord with all current laws. Alice Gossfield Esq. a well renowned healthcare attorney has drawn up these documents. This project is only lacking committed primary care physicians to achieve the critical mass of potential patients to move forward. Please see website Lifestylehc.com for more information. This concept is independent of my single tax ID plan and in fact does not require this at all, but can coincide with a single Tax ID plan as well if we so choose to also follow this path. We are planning a presentation by Fred Rappaport PhD, CEO of Lifestyle to further discuss this unique concept.

In summary, I have two potential ideas that can work in concert or independent of each other to allow us to add revenue in our professional lives while also providing our patients with quality care.

I’m sure that each of you, if your practice is successful, will be approached in the next year or two by many institutions looking to develop outpatient facilities. Let’s for once be at the top of the food chain. The new heath care law will force upon us many of these processes, and the time to take advantage is now.

I would like for each of you if your are interested in legally deriving more income from either of these concepts to e-mail me back your contact information including name, office address, e-mail address, cell and office phone numbers. We are planning our first meeting for Sunday September 12th at my office. (Will try to not conflict with the eagles’ game if possible)

Sincerely,

Dr. Larry S Hahn