Survival in a changing health care landscape requires adaptation, planning

A savvy ophthalmologist can find opportunity in a world of diminishing reimbursement and higher patient expectations.

Issue: October 1, 2005

ByRichard L. Lindstrom, MD

Increases in health care costs and spending and cuts in reimbursement by Medicare and other third-party payers have changed the practice of ophthalmology in the past 10 years.

More changes will come, some positive and some negative. Those who study and are prepared for these changes can do well by taking advantage of the opportunities that emerge.

Let’s review both the potential positive and negative changes in ophthalmology and the practice of medicine that are to come, starting with the negatives first.

Health care cost, spending

Federal lawmakers have told me that the Medicare crisis is five times that of the Social Security crisis, which we know has been in the news lately.

Government spending on medicine is greatest in the hospital sector, then physicians, followed by drugs, nursing homes and other expenses.

To cut spending, the government started at the top of that list, if you remember, taking funds from the hospital sector. In the 1980s, in Minnesota, we had 12 major hospitals go bankrupt over a period of about 10 years with the introduction of diagnosis related groups and all the resulting reductions in reimbursements. The ones that survived were the ones that were efficient.

The next thing the government did was ratchet down payments to doctors. We all know the impact that has had.

Unfortunately for the pharmaceutical manufacturers, drugs are No. 3 on the list, and I think that is where they are going next. The government is going to do what it can to get the cost of drugs down, and there is going to be significant pressure on reimbursement of drugs.

At $2.2 trillion and 17.9% of the gross domestic product, U.S. health care spending is at an all-time high. The government has been paying about 25% of health care spending. I saw an interesting article recently that suggested that by 2010 the government will be paying 50% of health care dollars.

Cataract per Cadillac

To put things into perspective, some years ago I created an index I call “Cataract per Cadillac” (Table).

In 1980, we were reimbursed by Medicare $2,000 for a routine cataract. At the time, a Cadillac cost about $30,000, so it cost the equivalent of 15 cataracts to buy a Cadillac. Now we are receiving in the range of $660 per cataract, so it costs the equivalent of about 114 cataracts to buy a $75,000 Cadillac. So it is clear that the cuts in Medicare have an impact on the ophthalmologist’s standard of living.

When I talk about this to senators who are active in health care, they say, “We do not know how far we can cut. We are going to know when our constituents start calling us and telling us they cannot find a doctor that will take care of them for that amount of money.”

So until surgeons say they cannot afford to perform surgery and patients start calling their representatives saying that there are no doctors to do the surgery, they will not know they have reached the bottom of the cutting.

Managed care

My personal definition of managed care is “organized interference in the practice of medicine for a profit.” The growth of managed care in some ways has leveled off. But, for example, United Healthcare is not getting any smaller around the country. It is growing in many areas. Of course, as we all know, this varies from state to state.

The managed care system has been difficult to deal with. A lot of managed care companies, at least in our area, seem to tag their reimbursement to Medicare reimbursement. So if Medicare reimbursement is going to go down, probably managed care reimbursement is going to go down. Just as in Medicare reimbursement, it is likely that we have not seen the end of cuts in managed care reimbursement.

Optometry’s impact

In 1995, there were approximately 17,500 ophthalmologists and 29,500 optometrists. Ophthalmology has been holding steady or perhaps declining slightly. Optometry continues to grow because many of the optometry schools are for-profit institutions. Today, there are almost two optometrists for every ophthalmologist. They outnumber us, and they outspend us in lobbying efforts.

Richard L. Lindstrom

Does the kind of care that optometry gives matter to ophthalmology? If we just look at refraction, glaucoma care and medical ophthalmology, that is about two-thirds of what the typical comprehensive ophthalmologist does, according to figures from the American Academy of Ophthalmology. So we are definitely in competition for patients with optometry.

The AAO-sponsored Rand study suggested that there were about 38% too many eye care providers. Although they said at that time that reducing the number of resident slots would not affect this, most residency programs have cut down the number of people they are training.

As I look at the numbers, we are now turning out fewer ophthalmologists per year than we were when I was younger. There is going to be a lot of competition for patients, and some ophthalmologists will not be able to compete. How many cannot compete? An increasing amount.

Some ophthalmologists are not making it. When I was younger they always said, “If you go out and work hard and keep your nose clean, you are going to do fine.”

I am not sure that is true today.

Baby boomers moving on

We are starting to fall off the precipice of the baby boomers’ spending. They have all had refractive surgery. They are too old to care about that anymore. They are waiting for cataract surgery. They are starting to hunker down and save for retirement, which is about 10 years away.

But this is also going to be a tough time for Social Security and for Medicare. How is society going to take care of all of us senior baby boomers until our kids get out there and are productive in society? This is a fact to consider.

There is some good news here. If we look at projections, a future decline in the labor force in conjunction with the consumer price index (CPI) suggests that we are not going to have a lot of inflation in years ahead. That is why people like Alan Greenspan are worried rather about deflation, because actually the CPI, over the long term, has been declining.

Patient care is key

The doctor-patient relationship has been brought to the forefront lately. The AAO’s ethics committee states, “High-quality care requires the establishment of a physician-patient relationship.”

To establish this relationship and carry out his or her duty to the patient, the AAO says, the ophthalmic surgeon must examine the patient preoperatively; formulate a treatment plan based on the patient’s physical, social, emotional and occupational needs; and discuss the treatment plan including appropriate informed consent.

The doctor does not have to do everything, but the doctor must provide and coordinate the provision of the patient’s care, the AAO says.

I believe those doctors who take shortcuts are probably not going to do as well, but they are going to be under a lot of pressure.

The future is bright

Medical treatment must be appropriately planned using evidence-based medicine, payer-friendly, and doctor- and environment-compatible. Our patients want a caring and healing relationship with their physician. It turns out that the highest quality of care cannot be provided without that doctor-patient relationship. Organizations like the AAO are pushing hard for us to stay a profession and provide that value to the patient.

Now on to the positive.

Compared to 10 years ago, doctors are being re-empowered, and third-party control of patient care is diminished. Our patients do not feel perfect about us, but they trust us more than they do the government and third-party payers.

Also, there is a transition to cash pay. In our practice, about 12 to 15 years ago, we were about 95% third-party pay. Now, we are 50% cash because we have added LASIK, an optical dispensary and other things.

It is necessary to focus on customer service to succeed. This is true because our competition continues to grow. There is still an excess of supply vs. demand, although that might change in 10 to 15 years.

The “new economy” eye care practice is going to have to target all ages, not just the senior citizen Medicare cataract patient. It will be more cash-based, which I think is a positive. Visual acuity goals and demands on us are going to increase. Everybody will want super-vision.

From an industry standpoint, I believe that the dominant company and the dominant practice in any market are still up for grabs. During my career I have seen the dominant company in ophthalmology change several times. In my experience, the dominant practice in Minnesota has changed every generation. I am hoping ours will be the first one to survive at the top for two generations, but it has never happened before.

There is a lot of opportunity out there still for those who can read the future and take advantage of the opportunity.

For Your Information:

Richard L. Lindstrom, MD, is the Chief Medical Editor of Ocular Surgery News. He is in private practice at Minnesota Eye Consultants, 710 E. 24th St., Suite 106, Minneapolis, MN 55404-3810; 612-813-3600; fax: 612-813-3660; e-mail: rllindstrom@mneye.com.