Speaker 1 0:00
Inflation is a tax, and what you're really doing is you're imposing a higher and higher tax on independent practices by allowing inflation to erode away kind of their their compensation for the services. You know, basic economics says you know the more you tax something, the less of something that you get.

Austin Littrell 0:32
Welcome to Off the Chart, a business of medicine podcast featuring lively and informative conversations with healthcare experts, opinion leaders, and practicing physicians about the challenges facing doctors and medical practices. My name is Austin Latrell. I'm the associate editor of Medical Economics, and I'd like to thank you for joining us today. In today's episode, I sat down with Wayne Weingarten, senior fellow in business and economics at the Pacific Research Institute, where he also directs the Center for Medical Economics and Innovation. 33 states now restrict the corporate practice of medicine to some degree, and lawmakers in several more are moving to tighten those limits, Weingarten's argument is that that crackdown is aimed at the wrong target. Medicare physician payments rose just 12% between 2000 and 2022, while the cost of running a practice climbed nearly 48% And he says it's that gap, not corporate ownership, that's actually pushing independent practices to sell. So in today's episode, we get into what another proposed pay cut for 2027 does to a practice that's already weighing an offer. How to tell an MSO partnership that preserves independence from an acquisition with a paperwork rearranged. Why he considers California's approach a better model than Oregon's, and whether independent practice survives the next decade. With all that said, Dr. Weingarten, thank you for joining us. Let's get into the episode. Dr. Waymeingarden, thank you so much for joining me today.

Speaker 1 1:48
Thanks so much for having me. Great to be here.

Austin Littrell 1:51
CMS proposed another physician take-up for 2027 while proposing a raise for hospital outpatient departments. What does another year of that gap due to a practice weighing an offer.

Speaker 1 2:04
Yeah, I mean that's just an accumulation of frustration, right? We've been seeing adjusted for inflation, the the payments to physician offices have been going down. They're down what 30, you know, 30% 31% whatever the number is, and it every year makes it harder and harder for independent physician practices to to stay viable. You know, another year is just you know another year of that. There is the actual financial difficulties of managing that, and then there's the kind of psychological element of you know, is this ever going to get better? And so all that you know on on the margin, as we economists like to say, is going to just convince more people that you know what, that's it. I've reached my breaking point, and we're and we're done. You know exactly how many you know that's that that's not knowable per se, but undoubtedly, the the longer this drags out, the more likely more more practices were shut down.

Austin Littrell 3:07
Your brief in in PRI earlier this year, we did cover that back in February when it was released. In there, you argue that that payment distortions and regulatory favoritism, not ownership structures, are pushing independent practices out. If Medicare had tracked inflation since 2001, how much of that consolidation doesn't actually end up happening?

Speaker 1 3:28
You know, I think the exact number is one of those things that's not necessarily knowable. What we do know is that the lack of you know the decline in compensation is a major driving factor, and so if you eliminate a major driving factor, you would imagine that a substantial part of that wouldn't happen, right? You know, there are from a physician's perspective, right? There are different trade-offs of having your own independent practice versus being part of a hospital system. And as people age, and as different you know events happen, people will make different choices, and so who knows what the trend would have been in this counterfactual. But the thing we know for certain is, if you eliminate that driver, you're not going to have that influence on doctors. And I think that may be the most material point: is that if, from a doctor's perspective and a healthcare perspective, consolidating with the hospital is the best way to deliver care. Then we want to see it gravitate toward that kind of point of care, kind of you know facilities. What we don't want is kind of unjust government repayment policies putting a finger on the scale, and that's what we're seeing. And so, if you you know if you adjust that, you would see that kind of ill effect gone, and and and that's where you get a much better policy environment.

Austin Littrell 4:52
You also argue for site neutral payment and physician pay indexed to inflation. One saves money, one spends money. What's the sequence that gets both of those actually through Congress?

Speaker 1 5:04
Well, I think the site neutral payment-that sequence-is going to be different for the exact reasons you just said. Site neutral gets through because it saves money, right? I mean, the the idea that we're paying significantly more money for a service because it was the exact same service was provided in in the in the hospital setting by essentially what is a physician's practice that a it doesn't make sense it's excessive you know so on the cost savings alone it seems like we can get that passed when you're talking about physician reimbursement you you are talking about potentially you know spending more money but the way I look at it is, inflation is a tax, and what you're really doing is you're imposing a higher and higher tax on independent practices by allowing inflation to erode away kind of their their the compensation for the services. You know, basic economics says you know the more you tax something, the less of something that you get. Kind of going back to the last question, we've been allowing this inflation tax to consistently, you know, impose a higher and higher burden on physicians. We're getting less of it, and so kind of removing that distortion. That that is what's happening now. I'm I'm an economist, not a kind of politician, not a you know legislative person. So you know, how do you turn that into the talking points? How do you get the coalition? How do you get that through? I think that's a much more difficult question, and makes it much harder than what you've seen in terms of site neutral payments. But I think where it starts is where doctors are saying, "Look, we're losing this independent family practice. Patients seem to want that, and so kind of leveraging off of that and leveraging off the trends. Hopefully, you can kind of change the kind of the dynamics. The other thing to remember in terms of cost is costs. You know, the whole idea of penny wise, pound foolish types of issues. How do things work out dynamically? And that becomes, I think, a little less uncertain. Again, hospital settings are typically more expensive. If you're spending more but keeping more independent practices open, even with site neutral payments, how how do things net out? And when we think things dynamically, probably still costs more, but I'm not sure it's not a bit less than what you would get from kind of just that basic static analysis.

Austin Littrell 7:30
Kind of a simple one, but also sort of a loaded one. How do you define an independent practice?

Speaker 1 7:37
Yeah, no, you know, it's a loaded one, but it's an important one, right? Especially in light of kind of the the research we've been doing, right? In independent practice, I think if you go into traditional definition, you're talking about a doctor-owned or controlled practice, right? And that's kind of the very tight, and I think most physicians, and that is the the common definition. So when you now have management service organizations or other types of corporate practice coming in. That is a bit of a hybrid, right? That's not you're not in a hospital setting, but you're not necessarily a clean, independent practice. But I think in some ways that's the beauty of it, right? Because you know society evolves, our needs evolve, medical technology evolves, kind of the cost, the capital required, all of these things evolve over time. And so now, what is the most efficient way to provide these services so we get the best care at the lowest possible price? And one of the things I think we need to be open to is we don't necessarily know we need experimentation. And so, having different forms of delivery, different structures, you know, perhaps they, you know, won't work out. But perhaps we're going to discover a better way of delivering care. And I think, broadly speaking, we talk about overall healthcare costs and quality. We need to allow kind of more of those dynamics to occur, so that we're not saying, "Oh, just a few 100 people in D.C. or just a few think tank, you know, economists coming up with schemes. We don't know the answers, but if we empower the millions of doctors and other types of health professionals to be able to provide different ways of structuring the delivery of care or different ways of delivering care. That's how we're going to get healthcare costs better under control and increase quality. So I think the kind of the MSOs, whether or not they're exactly an independent practice, that's you know again we're kind of getting into kind of some of the the details and some of you know, but we don't want to get lost, you know, lose the forest for the trees, and so having different structures is a really important way to see how can we deliver better care, and you know, over time we'll see what works, what doesn't, keep adapting, and hopefully keep improving. I mean, that's the ultimate goal.

Austin Littrell 9:58
What separates and. So deal that preserves independence from an acquisition with the paperwork rearranged.

Speaker 1 10:05
Oh, that's an interesting question. I mean, I think part of what you're talking about is kind of who has the control over decision making, and I think right separate from preserved independence, yeah, and there's there's going to be different structures, and you know you're seeing more and more laws, and I think some of these laws at the state level, you know, we've looked at California's as more favorably than something like Oregon, where you want to have the physician in control of the decision making, and that's kind of one of the kind of the more important issues I think most patients are going to be kind of more comfortable with, right? You don't want some bean counter in some desk somewhere in Pennsylvania going up with a a rule when they're kind of being treated in Oregon, California, Minnesota, whatever. So, you know, those become kind of very important. But you know, also you would imagine that because that's what patients want, that's where a lot of, especially independent practices, that's going to be a bit of a requirement for them. You know, you don't people don't go into medicine because they they want to deal with insurance forms, and they don't go into independent practice because they want to adhere to these kind of corporate structures. They they want to practice medicine. I mean that's you know it's as much of a calling as it is a career, and so I think you're going to see that having that type of independence is going to be kind of an a you know important kind of aspect to them. You know, otherwise, why not just go to a hospital system? It's easier. So, you know, from that perspective, I think you're going to see people more driving toward that physician control over decision making, and and I think from the MSO perspective, that is where they're going to find that's how they get value out of it, so that you have kind of you saying where the MSO can provide the capital, it can provide infrastructure, it can deal with a lot of the administrative burden, freeing the doctors up to a have a better cost structure and b spend time on medicine. And that for right now, again, things will evolve. We'll see where they go, but that seems to be kind of the right balance.

Keith A. Reynolds 12:32
Hey there, Keith Reynolds here, and welcome to the P2 Management Minute. In just 60 seconds, we deliver proven, real-world tactics you can plug into your practice today. Whether that means speeding up check-in, lifting staff morale, or nudging patient satisfaction north, no theory, no fluff, just the kind of guidance that fits between appointments and moves the needle before lunch. But the best ideas don't all come from our newsroom; they come from you. Got a clever workflow hack, an employee engagement win, or a lesson learned the hard way? I want to feature it. Shoot me an email at kreynolds@mjhlifesciences.com with your topic, a quick outline, or even a smartphone clip. We'll handle the rest and get your insights in front of your peers nationwide. Let's make every minute count together. Thanks for watching, and I'll see you in the next P2 Management Minute.

Austin Littrell 13:24
We know a fair amount about what happens to prices when hospitals buy practices. What do we know about what happens when practices affiliate with MSOs?

Speaker 1 13:34
Well, you you see better collections, right? So you're going to see more revenues, and that is part of kind of what's happening is you want to see the finances of the practice firmed up, and you you start to see that you still see prices lower than the prices in the hospital. Some may be higher than what they were as an independent practice. Some may be because they're able to actually collect on you know payments that the independent practice had trouble getting, and so that's that's that's part of the efficiencies. But what you are still seeing, which is really important, is it's another competitive avenue, and so competition in and of itself, you know, that dynamic process over time, we haven't had enough time to see really where things lead to, and that I think will be the really exciting part, is to see kind of as these things, organizations kind of start to get kind of the competition starts to get down. They start really getting into the operations. You're moving into kind of more the medium and long term. We'll start to see all sorts of innovations, but I think what we know for right now is, at least in initial term, they're still priced below where hospitals are. You see some increase in prices from you know where they were in independent practice, but a lot of that is coming from kind of more efficient billing and other types of collection, which is pretty much. You know, part of the justification for for being part of that organization.

Austin Littrell 15:05
So you mentioned Oregon briefly earlier. Oregon's law got its its first real test this spring, and an independent and an independent group used it to fight off an out of state staffing firm. I believe that's that was Eugene's emergency physicians. Yeah. Does that complicate your case against these laws at all?

Speaker 1 15:26
I don't think so. I mean, I think there's a lot of unique factors in that case, and and I think that's part of kind of the the process isn't going to be smooth. We probably don't want it to be smooth, and there's probably issues that we're not thinking through, and this type of conflict brings that to the fore, and we can kind of think through the implications and come up with something better. It and it is complicated. I mean, I think that's important to recognize that this is not simple, and it shouldn't be because health is important, and health is complicated, and there's a lot of factors. So no, I mean, I think these are the types of things that we expect to see. Having said that, Oregon has an overly restrictive law, and so I think part of the complications that come into play is because of the over over strict overly strict nature. Got that word out of their law compared to kind of some others. Again, mentioned California earlier, where it's more focused on who's controlling the practice, not kind of or the decision making. That that is the way to put it. California is is focusing on who's making the decision, not who's controlling the practice per se. And I think Oregon kind of goes too far on that, which is one reason why you may see more complications with the Oregon than you would see elsewhere, and again, that becomes a lesson for other states if they're going to pass such laws that they should look more towards California, not Oregon, as the example.

Austin Littrell 16:53
Corporate practice bans typically exempt hospitals. Why loosen the rules on MSOs rather than extend them to hospital-employed physicians,

Speaker 1 17:02
we want to see more competition. We want to see more innovations in in in how care is delivered. If you extend these rules to hospitals, we're actually reducing competition, right? I mean, we've been talking about hospitals as kind of the big bad competitor, but in actuality, they're an important kind of deliverer of care, not just emergency and out and inpatient, but also outpatient. And they may have some ideas or ways of delivering care, ways of organizing care. And so perhaps the the future of healthcare is going to be much more centered on a hospital because you can get more holistic care there. And so we we want that incentive for for the hospitals to be very entrepreneurial as well. Then, if we move more of these regulations and expand them to hospitals, well, now we're just kind of you know binding them with the same rules. And what what we want to be able to do is we want to empower more ideas, not fewer. And that's why we want to remove them off of MSOs, not expand them to hospitals.

Austin Littrell 18:07
So, a small primary care practice is getting calls from the local health system and an MSO. What should they ask before signing? And is staying fully independent ever still the right answer?

Speaker 1 18:19
Yeah, I mean, I'm a in a policy economist, and you know, work in health economics, and not necessarily running practices. So I think I'd be, I'd want to put that caveat out there. You know, have not run practice, and so if you're running practice, you probably know much better than me. I think you know, but you're talking about basic decisions in terms of kind of what your your quality of life, kind of where you want to go with your patients, your value judgments. I think those are the types of questions. You know, I think when you look at kind of surveys of physicians, there's a lot of different factors that are kind of impacting them. Do they want to stay independent? And a lot of that deals with quality of life, compensation, how they spend their time, kind of the the risks and that they're bearing, and so in in these types of restructures, I think those would be the the primary issues that they would need to consider whether staying fully independent ever the right answer absolutely. I mean, right now there's no evidence that a fully independent kind of physician's office is not a preferred way of care. Whether it's for some all you know that's what we're trying to discover. But there's there's no evidence out there that this is an inefficient way. That's you know like a blacksmith of old. We just don't need it. I mean, there's just no evidence of that. So so now we're coming to kind of in the delivery of medicine. Then we really need to get into healthcare professionals. You know, doctors and nurse practitioners. You know, people who are actually you know on the ground to try. Of determining how how do we deliver care best because they're the ones that are going to know that.

Austin Littrell 20:06
I guess so. Kind of building off that, taking a look forward, independent practice over the next let's say decade, does it survive the next decade? And if it does, you know what does it look like? Who's left? I

Speaker 1 20:18
don't think within the next decade independent practices ends. I think if it does end, it's because of these government kind of practice. You know the the Medicare reimbursement, the regulations. I mean, those are the things that are squeezing independent practices. When you when you talk to them, those are things they worry about. Insurance, kind of dealing with you know all of those factors, the costs involved with that, the lack of scale, right? That's where you know corporate organizations can help because you can provide that scale to get through all these burdens. So if it doesn't survive, it's going to be caused the accumulation of those burdens. And I say that because that's exactly what independent doctors say when they're you know when they either complain or or why they sold their practices, but right now we look at patients. They there are many patients who prefer independent practices. I think we'd want to stay in that, and so we we don't have the evidence that that's something that you know patients don't want. So if that's the case, you would think, well, okay, so that from from a demand perspective, right, that that is something people want. So now it's just a question: Will will the bureaucracy overwhelm them? All of them, it's hard to see all of them being overwhelmed by within the next decade. But I think there is this very loud warning siren that's going off-that we need to adjust all of these factors that are just overburdening the medical practices. Again, if independent practices are supposed to go away, we want them to go away because it's a better way of delivering care, not because the insurance bureaucracy and the government bureaucracy has overwhelmed them, and so we need to focus on those other factors. How do we bring those costs down so that we can let practices, independent practices, compete and see kind of where it all where it all falls out?

Austin Littrell 22:19
Dr. Wayne Mygarden, thank you again so much for taking the time today.

Speaker 1 22:22
Thanks so much for having me.

Austin Littrell 22:36
Once again, that was a conversation I had with Wayne Weingarten, senior fellow in business and economics at the Pacific Research Institute and director of the Institute's Center for Medical Economics and Innovation, you can find a link to his policy brief, "How Government Policy Is Consolidating the Practice of Medicine, in the show notes below. My name is Austin Latrell, and on behalf of the whole Medical Economics and Physicians Practice Teams, I'd like to thank you for listening to the show and ask that you subscribe so you don't miss the next episode. As always, be sure to check back on Monday and Thursday mornings for the latest conversations with experts, sharing strategies, stories, and solutions for your practice. You can find us by searching "Off the Chart" wherever you get your podcasts. Also, if you like the best stories that Medical Economics and Physicians Practice publish, delivered straight to your email six days of the week, subscribe to our newsletters at medicaleconomics.com and physicianspractice.com. Off the Chart, a business of medicine podcast, is executive produced by Chris Masolini and Keith Reynolds, and produced by Austin Latrell. Medical economics and physicians practice are both members of the MJH Life Sciences family. Thank you.

Transcribed by https://otter.ai