Healthcare Practice Strategies – Summer 2012 - Physician Compensation: Five New Rules for Success

August 01, 2012

Physicians are at the epicenter of one of the most dramatic periods of change in America’s healthcare system.

With the focus now on clinical effectiveness, healthcare reform represents a wholesale shift by the federal government from paying for procedures and volume to paying for outcomes and value. Providers will increasingly be incentivized to track outcomes and metrics and, at some point, will be penalized for not participating in quality reporting programs.


The first step for survival in the brave new world of healthcare is to understand the “new rules” of success:

New Rule #1: A lack of business sense will kill you. For a long time, just practicing good medicine was enough to ensure a good living for most physicians. The business side of the practice could be an afterthought — or left in the hands of an office manager. Now, physicians who don’t run their practice utilizing sound business management tools run the risk of being absorbed by those who do.

Impact: Physicians will need to increasingly take a cue from corporate America’s playbook. This means paying attention to revenue management, including the use of automated cash flow solutions such as remote deposit and medical lockboxes to automate and speed receivables collection.

New Rule #2: You’ll need real administrative talent. With some 4,000 new regulations created each year impacting physicians, managing a medical practice has become incredibly complex. Successful practices can no longer be managed by one or two staffers with general administrative skills.

Impact: Physicians will need to seek out administrative staff with highly specialized skills. For example, to avoid the very real threat of identity theft and un-intentional billing fraud, physicians must ensure that their billing is performed professionally by certified coders. Out-sourcing to specialized firms may become an increasingly attractive option.

New Rule #3: You’ll need to capture more of your patients’ healthcare dollars. There was a time when providers could make a good living simply by offering a basic menu of professional services and referring ancillary products and services to others. However, that has resulted in many physicians today referring out more revenue than they make.

Impact: Savvy physicians will position themselves to capture more of their patients’ healthcare dollars by developing a “retail medicine” mindset. That includes tapping into lucrative ancillaries and offering everything from durable medical equipment and lab services to nutritional supplements and alternative treatments.

New Rule #4: Going it alone may be lonely. For a long time, the third-party reimbursement model allowed physicians to go it alone and earn decent income from insurance carriers and government paid health care. Under healthcare reform, however, bundled payments may increasingly become the norm, divvying up payment among a group of providers who are incentivized to coordinate care (e.g., Accountable Care Organizations).

Impact: Success in the world of third-party reimbursement may very well depend on participation in an integrated delivery system — allying yourself with a total-care team of hospitals, specialists, primary care providers, pharmacists and even home care services.

New Rule #5: You can’t get away with being “low-tech” any longer. Increasingly, physicians are expected to be high-tech. But the medical office is, surprisingly, one of the last bastions of paper. Even with generous incentives on the table, many physicians have been slow to implement adoption of Electronic Health Records (EHR) and related technologies.

Impact: The federal government and private payers will increasingly require physicians to track and report quality metrics. Of course, much more sophisticated health information technology is required to tie it all together — IT that goes from managing the claims payment system to analyzing epidemiological gaps and disease prevalence, all the way through EHR, e-prescribing and clinical registries.


Make no mistake: There are challenges ahead, and physicians who insist on playing under the old rules of “reimbursement medicine” are likely to face declining income.

Yet, savvy physicians will find opportunities in the change. They will understand that no matter what happens, good service will mean more than ever. As costs continue to be shifted to the patient, more healthcare dollars will flow to the “higher-touch” (and lower-cost) providers … the ones playing by the new rules. 

Healthcare Practice Strategies – Summer 2012 Issue

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