The business dynamics of the Urology practice continue to undergo unprecedented change; change that will occur with or with out you. The past few years bear witness to the obvious: the business management complexities of successful medical practices require leaders with proven business acumen. No longer a small cottage industry many Urology practices have multi million dollar revenue levels and costly infrastructure. Today’s successful profitable urology practice demands experienced operational and financial leadership skills more aligned with those of corporate America. With out strong focused leadership and astute business skills maintaining a comfortable living and practice survival are no longer a given. A few real issues:
-Urologist are facing more flat and declining reimbursements and rising overhead expense.
– Increasing capital expense requirements for technology and supporting infrastructure. Capital costs are usually expensed directly from group physicians who have little cash reserves.
– Availability of experienced practice leaders with financial and operational business skills.
Some good news: Rapidly growing patient demographics, an aging urologist population moving to retirement and little increase in the physician pipeline will place pressure on both patient access and physician payments. These changes will necessitate finding incentives for those available urologists.
2007 scheduled Medicare reimbursement reductions averaging 5% for urology were resided and the 2006 rates remain (with variations). Be assured this is not a raise! While Congressional action appears to have temporarily averted reductions for 2007 it is a 0 gain. Also, looming on the near horizon for 2008 is a scheduled 10% cut in physician Medicare reimbursements. Declining physician reimbursements and net revenues remain fixed on the financial radar scope.
Not so good news: Despite the reimbursement reprieve from Medicare the reimbursement environment remains far from physician friendly. Urologists can expect continuing declining reimbursements for the same services with increasing overhead expense; not a favorable scenario. Multi-year government payer mandated physician reimbursement reductions and growing operating expense will place continuing pressure on physician incomes.
Real reimbursement rates have not increased since 2003 placing downward pressure on practice profits. For a quick comparison urologists are being paid in 2007 with real rates from 2000. Yes, no increase is in fact a reduction and far more insidious when viewed strategically: Medicare cuts can adversely affect other payer reimbursements schedules. Most non-government payer fee agreements are tied to Medicare allowable rates (RBRVU scale) and overall reimbursements will also move down. Medicare reductions are very real and highlight the aggressive assault on physician reimbursements.
For example: A non government payer Fee Schedule set at 140% of CY2002 Medicare rates (multi year schedules for large national payers are the norm) and a fee Schedule 140% of 2006 Medicare rates results in average reimbursement levels little changed. Absorbing increased operating expenses along with declining reimbursements dilutes profits and reduces available capital for practice operations and expansion. Unfortunately for urologists this situation is projected to continue.
Future Medicare reimbursements will, by design, further reduce physician incomes. Increasing fees in this environment becomes problematic necessitating urologists embrace and implement a new business plan. While not new, the cumulative affects of multi year reductions are, for many urologists, becoming real time financial dilemmas. Physician medical group consolidation, mergers, retirements, growing patient demographics and increasing demand for care and services, and declining incomes are no longer discussion topics but are now a reality. The concept of working more to offset the ongoing revenue loss is not a sustainable option: More of less is still less, and besides what do you do next year?
What are urologists to do? For many still reeling from 2005 drug reimbursement reductions and tight profit margins, are now confronted with a proliferation of mergers, joining larger groups, employment with hospitals or government agencies, or simply halting their practice. That said rest assured opportunities abound for those who look! For many the concept of change is not comforting but for those that embrace change will see rewards.
The foundation of the successful urology practice remains the same: quality patient care and service, good access, and adhering to good business fundamentals. Keys to Success: The basics.
