29 July 2009

How to Make Money in Primary Care

Cleveland Doc, a surgeon at the Cleveland Clinic, commented on my salary post from yesterday, that there are, as I suspected, productivity-based components in the much-vaunted "salary" models that the Clinic employs.

Cleveland Doc also reminded me of something that may be common to large practices.  The Cleveland Clinic sounds like a large multi-specialty clinic in our town.  The "Big Clinic" has hundreds of docs of all stripes and is nationally recognized as a leader in quality of care and is a model for CMS in their efforts to create the medical home.  Good place, and a lot of good docs.  A couple of years ago, one of our ER docs went to work in one of their urgent cares.  I was astonished at how well they were able to pay him.  Not as well as ER, but way above the national average for primary care.  Apparently their internists do even better.  No way they were able to justify this compensation purely on the pro fees they were generating.

I did a little discreet inquiring into their business model that allowed this level of remuneration.   It seems that large practices like these can view primary care as a sort of "loss leader."

In classical marketing, a merchant may offer a common product at a loss: say, your grocery store may sell milk for less than the wholesale cost of a gallon.  They do this because they know that when you run in "just" for a gallon of milk, you are also likely to make another purchase of something with a higher margin.  So they get you in with the milk knowing that they will make a profit off of the ground beef and candy bars you pick up while you're there.

Similarly, the Big Clinic can afford to "sell" you the product of primary care for less than their actual internal costs of employing that doc.  Because they know that those primary care docs will refer patients to their specialists, and their CT scanners, and their MRIs and their outpatient surgical center, and their lab, etc etc etc.   All of these are profit centers.  So some of the margin generated by these "ancillary" sevices goes back to the primary care providers.

This is a good way to run a business, since the Big Clinic can pay PCPs well and recruit good docs thereby creating a good feeder stream of patients to the profitable elements of their business.  It's also a good way to deliver care.  The system is integrated, facilitating communcation betwixt the specialties.  And it compensates for the failures of the RVU system; the surgeons at the Big Clinic make a little less than they might in private practice, but the primary care docs are not being starved to death by shrinking reimbursement.  In fact, I don't even know that the surgeons make less - it may be that the imaging and surgical centers allow everybody to make more! 

The hardest thing for some to swallow, though, is the loss of independence and autonomy that physicians have so fiercely fought to preserve, historically.  Some docs hate being an employee and can't stand being subject to QA and audits and performance reviews, no matter how much they are making.  They tend to either flame out or self-select back into solo practice.

Barring a fundamental change in the RVRBS, this model may be the future of urban medicine in the US.

4 comments:

  1. Many words to say, in essence, "spread the wealth around." Specialists agree to take home less than what they generate so that primary care can take home more than what they generate. Wait...where have I heard that before? Oh yeah: health care payment reform being discussed in Washington. Don't all the specialists go ballistic when they hear that, though?

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  2. Being a salaried employee opens up another possibility - Forming/Joining a Union.

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  3. It is definitely the future. And, as physicians, I think we should be subject to quality measures in order to improve care. Medicine is becoming more and more complex and we need to be in practice with collegues who will keep us up-to-date and challenged. It is possible to have a small and personal clinic with 3-5 physicians yet still be a part of a large group that can leverage all of the things you talk about in your post. All it takes is some physician leadership and a willingness to sacrfice a little autonomy to gain the advantage of a system that takes better care of physicians AND patients.

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  4. I think I grasp the benefits (to the docs, the clinic, and potentially the patients), but my first instinct was that this arrangement increases the pressure on the pcp to make those referrals and order those diagnostics in the more lucrative wings of the clinic. I doubt that a large percentage of the "over-use" of medical care is from docs gratuitously lining their pockets, but if it exists at all this sounds like it would increase that.

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