Large practices more competitive in marketplace

March 15, 2005

As healthcare continues to grow more complex, large medical practices might be better equipped than smaller ones to cope with an ever-increasing set of government regulations, decreasing sums paid by insurance companies, and rising numbers of uninsured patients.

As healthcare continues to grow more complex, large medical practices might be better equipped than smaller ones to cope with an ever-increasing set of government regulations, decreasing sums paid by insurance companies, and rising numbers of uninsured patients.

But, Michael R. Redmond, MD, is quick to note-larger is not necessarily better.

If large organizations do not do things correctly and properly like some small organizations do, they will fail too, Dr. Redmond said, but perhaps at a somewhat slower pace than the smaller organizations.

Ability to negotiate However, a large medical practice with multiple physicians and specialties managed by a practice administrator can be in a better position to handle contract negotiations, human resources, disaster planning, real estate purchases, optical shops, ambulatory surgical centers, and other non-physician revenue sources. Such options allow practices to maximize revenue and minimize expenses while continuing to deliver "down-home, quality health care," he said, during the American Academy of Ophthalmology (AAO) annual meeting.

Dr. Redmond, the AAO's immediate past president, is chief executive officer of Medical Center Clinic, a group of 80 physicians based in Pensacola, FL. Founded in 1938, the clinic encompasses a host of specialties ranging from allergies and immunology to urology, and includes a cancer institute, an eye institute, and an ambulatory surgical center.

He had planned to discuss what lessons from a large organization can be translated to smaller practices, but decided there are not many techniques that can make that transition. Instead, he focused on the advantages large practices have in dealing with common issues.

"We can share equipment and space. We can keep it more productive, and get a higher rate of return and profitability. We can more easily afford to keep shared equipment up to date, we can share employees, and begin to see some administrative sophistication," Dr. Redmond said. "[A larger group] can establish satellite centers, extend the reach of the group, and increase patient satisfaction."

These advantages are critical when confronted with the changing realities of healthcare, he said.

The practice of medicine is moving away from its cottage-industry model and toward a more competitive industry in which patients are paying a greater percentage of costs themselves. Fewer employers are providing health insurance, and insurance companies are squeezing the amounts they are willing to pay.

All of this competition will cause prices to drop, reflecting what happened with air travel, cell phones, and LASIK, Dr. Redmond noted.

"Minute clinics" are being opened in retail stores, and cost-conscious consumers are willing to sacrifice a little quality when they're paying the bills. Such merchandising will work to unravel the traditional healthcare delivery system over time, he warned, adding that it already is happening as ambulatory surgical centers compete with hospitals that once owned a given market.

The number of uninsured patients is rising dramatically-from about 40 million Americans in 1999 to about 45 million in 2004, which is putting "tremendous strain" on practice profits, he said.

One hospital in Oregon, for example, saw hospital admissions rise 2% while the number of uninsured patients jumped 39% in the same span. In Dallas, 50% of Hispanics and 33% of African-Americans are uninsured. And in Louisiana, 27% of the entire adult population is uninsured.

"The economy is changing from a highly unionized, manufacturing-based economy to a service-based economy, to an economy where the newest jobs are likely to be in small businesses where benefits are least likely to be offered," Dr. Redmond said. "This is a potential sea change in healthcare delivery and financing."

Although he had hoped to offer solutions to these problems, he noted that they are hard to find. The free marketplace and government-regulated healthcare can be "cold and brutal" systems in which to operate, Dr. Redmond said.

An increasing population is leading to increasing demand and unrelenting income pressures on physicians. For example, between 1994 and 2001 physician overhead costs outpaced inflation by 11%.