Resource deficit may hinder private pediatric practices
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Regulatory burdens, resource deficits, reimbursement rates and the growing list of day-to-day business responsibilities have catalyzed a trend of private physician practices selling or transitioning to larger hospital settings.
In a 2023 AMA analysis of physician practice benchmark surveys, it was reported that the percentage of physician owners of private practices decreased from 53.2% in 2012 to 44% in 2022, while the rate of employed physicians reached more than 50% for the first time in 2020 at 50.2%.
Source: James J. McCarthy, MD, MHCM
According to James J. McCarthy, MD, MHCM, division director and Alvin Crawford chair of orthopedic surgery at Cincinnati Children’s Hospital, pediatric orthopedics was no exception to this trend.
“A much higher percentage of pediatric orthopedic surgeons are hospital-employed,” McCarthy told Healio | Orthopedics Today. “The private practice world is, by necessity, more financially driven. There is an enormous amount of convenience, when hospital employed, not having to deal with regulatory issues.”
Regulatory burdens
According to Jeffrey R. Sawyer, MD, professor of orthopedic surgery at the University of Tennessee Campbell Clinic and past president of the Pediatric Orthopaedic Society of North America, one of the main concerns for private pediatric orthopedic practices today are regulatory burdens.
“[Regulatory concerns] come from everything from human resource regulations to increasing burden from insurers, increasing costs all through the supply chain and how we manage those,” Sawyer told Healio | Orthopedics Today. “It comes from the work it takes to own a building or an MRI scanner or a [physical therapy] PT practice. It takes a lot more work and energy to run and own a business now — whether it is medicine or a bakery — than it did 15 years ago.”
M. Wade Shrader, MD, Freeman Miller Endowed chair of cerebral palsy at Nemours Children’s Health, Delaware Valley, told Healio | Orthopedics Today that larger hospital systems can alleviate some of the regulatory pressures of private practice.
“Every year that goes by, there is more and more onus on physicians to be completely compliant with a lot of different regulatory issues,” Shrader, president of the American Academy of Cerebral Palsy and Developmental Medicine, said. “There is a cost associated with that, and there are economies of scale associated with that. As a solo practice or even a small group, having to shoulder all that yourself takes a lot of time, takes a lot of expertise.”
He added, “Working for a hospital system, they do it for you because they are doing it for so many other specialties.”
Complex care
Another major reason for the increase in hospital-owned pediatric orthopedic practices is the uniquely complex nature of pediatric orthopedic care, Shrader said.
“A lot of times you go into pediatric orthopedics, you want to take care of some of the more complex things,” Shrader said. “We take care of a lot of kids with different types of congenital issues and disabilities, so it is complex care that we have to provide for them. It is technical from a surgical side of things, but it is also involved from the medical side of things. That takes time, and that is counter to the typical orthopedic practice where you are trying to get people in and out as fast as you can.”
The complex nature of pediatric orthopedic care is easier to coordinate in a larger pediatric hospital compared to a private practice setting, according to Ryan E. Fitzgerald, MD, pediatric orthopedic surgeon at Children’s Orthopaedic & Scoliosis Surgery Associates, LLP.
“Working in those institutions, typically you have the full gamut of support services,” Fitzgerald told Healio | Orthopedics Today. “They have a great ICU and all the subspecialties that more complex patients require.”
Reimbursement
Low reimbursement rates for state-issued insurance can also be an issue for private pediatric orthopedic physicians. In 2022, 36.1% of patients younger than 19 years were covered by state-issued insurance, according to data from the U.S. Census Bureau.
“A tough thing with pediatrics is that a huge portion of those patients are on state insurance,” Fitzgerald said. “If you look at state insurance vs. other insurance providers on average, those have lower reimbursement, which makes it tougher for those practices to work in that space and be able to provide all the services that are needed. That is a place where hospital-owned employees can work within the hospital to help cover those expenses and leave that to the broader institution, making it an easy transition to go from private practice models into the hospital-employed models.”
Shrader said low reimbursement rates may also force private practitioners to make difficult ethical decisions in order to remain afloat.
“We go into pediatrics because we like to take care of the kids and we like to take care of their families, regardless of their ability to pay or their insurance status,” Shrader said. “But I do think that probably puts a bit of a controversial ethical pressure on that person who is out in private practice by themselves, knowing that what they see and what they do directly affects their cash flow, which directly affects their employees.”
Resources
Larger hospitals also provide better access to necessary resources, according to Suken A. Shah, MD, Shands/MacEwen Endowed chair of orthopedics and chair of the department of orthopedic surgery at Nemours Children’s Health, Delaware Valley.
“If you want to get navigation, if you want to get a robot, if you want to get a gait lab or a physical therapy pool, you cannot possibly do that with a small person group,” Shah, vice president of the Scoliosis Research Society, told Healio | Orthopedics Today. “You have to team up with a large enterprise with lots of resources who want to give these services to the patient.”
Physicians in a smaller physician-owned practice may also find it difficult to market their business and put money toward communications efforts as “they have to be laser focused on something and cannot spend a lot of money,” Shah added.
“But [larger hospitals] can combine with multiple departments across the whole enterprise and do radio, TV, billboards [and] directed digital media campaigns, whereas a private practice cannot possibly do that,” he said.
Coinciding with the resource disparity between larger hospitals and smaller private practices, Sawyer said it becomes easier to both do research and have your research published when employed by a larger hospital.
“The standard for research has gotten so much higher over the past 2 decades that I have been a surgeon that it does favor larger institutions because you need things like research coordinators, statisticians and [institutional review board] IRB people,” Sawyer said. “In private practice, that is either going to come from your time or your expense.”
He added, “The person that comes from private practice is becoming more disadvantaged than someone that comes from a large institution with all these resources.”
Organizational help
However, according to Sawyer, pediatric orthopedic organizations and societies are working on ways to account for the resource disparity between larger hospitals and smaller private practices.
“Organizations, like POSNA, are aware of this [disparity] and are actively trying to engage people in private practice because diverse groups make better decisions,” Sawyer said.
One potential solution is more widespread implementation of collaborative study groups, which Sawyer said is a way for physicians in private practice to stay engaged with large centers.
Kane CK, Emmons DW. New data on physician practice arrangements: Private practice remains strong despite shifts toward hospital employment. Chicago (IL): American Medical Association; 2013. Policy Research Perspective. https://www.ama-assn.org/sites/ama-assn.org/files/corp/media-browser/premium/health-policy/prp-physician-practice-arrangements_0.pdf. Published 2013. Accessed April 22, 2024.
Kane CK. Recent changes in physician practice arrangements: Shifts away from private practice and towards larger practice size continue through 2022. Chicago (IL): American Medical Association; 2023. Policy Research Perspective. https://www.ama-assn.org/system/files/2022-prp-practice-arrangement.pdf. Published 2023. Accessed April 22, 2024.
“A study group is a group of centers or investigators that will collaborate on some condition,” Sawyer said. “It is helpful for some things in pediatric orthopedics that are relatively rare, but if we pool data, we have much more powerful information.”
Market changes
Despite the challenges pediatric orthopedic private practices face, Fitzgerald said there are some advantages that working in private practice affords compared with larger hospital settings.
“You can identify areas in the market where you think there are needs, and you can bring in providers that maybe could not be as successful with a larger hospital,” Fitzgerald said.
Sawyer said the ability to forego a multilevel approval process when working in private practice can also make negotiating contracts smoother.
“Sometimes we can negotiate better contracts because we are a little nimbler and we may fill the niche,” Sawyer said. “We have to run a smarter, more efficient business. It may be things like physician extenders or [electronic medical records] EMR or highly efficient clinics so that our margins still allow us to do these things.”
He said, “If we see a new opportunity somewhere, we do not have to wait for the whole university to get on board. We can explore an opportunity a little quicker.”
Autonomy
The main advantage of private practice is that it offers a level of control and autonomy that some larger hospitals may not, according to Sawyer.
“You are starting to see some people be more disenchanted with the lack of autonomy in the employed setting, and you are also seeing physician burnout has gone up dramatically,” Sawyer said. “One of the big causes of burnout is loss of control. When we have these big hospitals mandating how many patients you see and how many hours you work, there is a loss of control and burnout.”
However, Shah said the idea that there is a lack of autonomy in larger hospital settings is a misconception.
“You think working for a big organization, you are going to lose your autonomy and it is going to affect your income adversely,” Shah said. “But I think as more practices go into this hospital-based environment, they are realizing that, although there is some loss of autonomy, it is not on the how you practice medicine side. We still have tremendous autonomy on decision-making, surgical procedures and innovation.”
He added, “If we take care of the patient first and then we take care of our partners and our colleagues, the rest of this stuff works out because we are happy in the environment we are in and that translates into an efficient work ethic, a lot of patient throughput and good financial stewardship.”
Future of pediatric orthopedics
Although some factors may change the tide in the growing number of pediatric orthopedic private practices moving to larger hospital settings, McCarthy said the desire for hospitals to buy more practices may decrease if there is less opportunity to buy and bill more for the same services.
“If they cannot create additional revenue or if it affects the cost of buying a practice, they may not be doing that or they may not be as generous with their offers,” McCarthy said.
Consolidation may also place some smaller private practices in danger, according to Fitzgerald. As larger systems buy and obtain satellite campuses, “it may be tougher for some of the private practices to stay under that roof unless they are already well-established in the area,” he said.
“I worry that if hospitals that have private practices do get bought by these larger systems, depending on the system, the private practice may not be as favored upon,” Fitzgerald added.
Sawyer said the size of the pediatric orthopedic group may impact its ability to survive, with a four-to-six-person pediatric orthopedic group having less resources than a university or a multispecialty group.
“These are those people that you worry about — the ones that run great businesses (practices) but do not do research, so they are not going to be published on a lot of scientific papers and you are not going to see them on the podium. But they take great care of patients, and they run great businesses,” Sawyer said.
- References:
- Eckhoff M, et al. J Ortho Business. 2022;doi:10.55576/job.v2i1.10.
- Kane CK, Emmons DW. New data on physician practice arrangements: Private practice remains strong despite shifts toward hospital employment. Chicago (IL): American Medical Association; 2013. Policy Research Perspective. https://www.ama-assn.org/sites/ama-assn.org/files/corp/media-browser/premium/health-policy/prp-physician-practice-arrangements_0.pdf. Published 2013. Accessed April 22, 2024.
- Kane CK. Recent changes in physician practice arrangements: Shifts away from private practice and towards larger practice size continue through 2022. Chicago (IL): American Medical Association; 2023. Policy Research Perspective. https://www.ama-assn.org/system/files/2022-prp-practice-arrangement.pdf. Published 2023. Accessed April 22, 2024.
- Keiser-Starkey K, et al. US Census Bureau. Health Insurance Coverage in the United States: 2022. https://www.census.gov/content/dam/Census/library/publications/2023/demo/p60-281.pdf.
- Nguyen J, et al. Glob Pediatr Health. 2019;doi:10.1177/2333794X19831299.
- For more information:
- Ryan E. Fitzgerald, MD, of Children’s Orthopaedic & Scoliosis Surgery Associates, LLP, can be reached at rfitzgerald@chortho.com.
- James J. McCarthy, MD, MHCM, of Cincinnati Children’s Hospital, can be reached at james.mccarthy@cchmc.org.
- Jeffrey R. Sawyer, MD, of the University of Tennessee Campbell Clinic, can be reached at jsawyer@campbellclinic.com.
- Suken A. Shah, MD, of Nemours Children’s Health Delaware Valley, can be reached at jennifer.reardon@nemours.org.
- M. Wade Shrader, MD, of Nemours Children’s Health Delaware Valley, can be reached at jennifer.reardon@nemours.org.
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