This article briefly discusses three core subjects. First, we outline six types of spine practice. Second, we examine threats and headwinds to spine practices. Third, we offer 11 pieces of advice on operating a successful spine practice going forward.
I. Summary Thoughts.
Before discussing the core of this article, please note the following as it relates to spine practice and healthcare providers.
1. Healthcare inflation is overall slowing, but not slowing as much as expected. The medical care inflation rate was 1.97 percent in 2018, compared to 2.51 percent in 2017 and 3.79 percent in 2016, according to the U.S. Bureau of Labor Statistics Consumer Price Index.
2. Even though healthcare inflation is overall slowing there are certain parts of the market where the market area receives increased revenues above inflation; these market areas generally include insurance and pharmaceutical companies, and to a lesser extent medical device companies.
3. While there are certain market areas seeing rises above inflation, practices and providers are not seeing rises in excess of inflation. However, providers are seeing costs increase, often above inflation.
4. Physicians and spine practices seem to be doing fine but it doesn't seem to get easier to run a spine practice.
5. In running a spine practice, we think it is incumbent that practices focus on several core concepts, which include:
- Know where your revenues and profits come from.
- Even though there are so many different distractions in the spine practice today, double down and spend 80 percent of your time on where your revenues and profits come from.
- Work hard to keep costs rational. We call this being anti-fragile, which means keeping relatively rational costs in the practice and being careful not to over build.
- Three concepts that always tend to work are: a) it is helpful to be market dominant; b) be absolutely great at something in your practice; and c) keep costs rational.
II. Types of Practices.
There are six types of spine practices that can often be large or small:
1. Single-specialty spine practice.
2. Spine practices with orthopedics, or more often orthopedic practices with some spine specialists.
3. Multispecialty group practices.
4. Hospital-owned or related practices.
5. Private equity funded practices.
6. Payer- or insurer-owned practices.
III. Threats and Headwinds.
1. Payers still seem to make a great deal of money and have more and more control over markets; they seem to be trying to depend less on hospitals, and to an extent practices. However, practices remain less commoditized than payers may prefer.
2. Hospital and surgery center profits have softened. This means, to an extent, that spine practices have less opportunity for ancillary revenue.
3. Reimbursement is softening.
4. Reimbursement is shifting more to Medicare and Medicaid, due to in part to an increased aging population, and more and more narrow networks. As a higher percentage of reimbursement shifts to Medicare and Medicaid, there will be a negative impact on spine average reimbursement per patient.
5. Spine practices are seeing slower pay, slower approvals and more challenges to approvals.
6. Out of network is tightening and becoming tougher.
7. There is more bundling. The benefits or negatives of bundling depends a lot on whether you are upstream or downstream.
8. Physician-owned distributors are more and more problematic and physicians should be weary of them.
9. Similarly, certain ancillaries are becoming tougher to profit from.
10. We see an increasing amount of burnout and a shortening of careers in many surgical specialties.
11. We caution parties not to over build practice sites, that they need to take great care of themselves, and while overall inflation in the practice is slowing there are still cost increases in labor, IT and other areas.
IV. Thriving in the Next Five to 10 Years.
When we look at practices thriving in the next five to 10 years, we think the following is good advice.
1. Aim in any market to be the dominant spine practice and/or be so great at what you do that payers and providers have a hard time going around you.
2. Keep costs rational. This means paying your staff very well but employing no more staff than needed.
3. It will be more important than ever that surgeons deliver a great customer experience and keep improving their skills to become and stay a great surgeon and great provider.
4. Many practices really thrive by narrowing what they do rather than broadening what they do. This means being very great at what you do and really marketing areas of greatness.
5. We think it is more important than ever given the short careers surgeons have — like NFL players, although not that short — that they really take care of themselves.
6. Physicians should keep cultivating payer and hospital relationships. While they ought to spend 80 percent of their time on what brings revenues and income, they should spend a certain period of their time really working to develop those kinds of relationships.
7. It is ideal to build such an elite position with your practice that it is hard for people to go around you because patients really want you.
8. It has always made sense and continues to make sense to keep referring physicians happy and to maintain those relationships.
9. We encourage physicians to work hard at focusing on their real strengths and niche.
10. Physicians should experiment with bundles. It doesn't mean you have to be all in with bundles but you should start to learn about them and consider whether you can work with bundles or not.
11. Physicians should be very aggressive about remaining legally compliant; this means being very cautious of PODs, and avoid being the surgeon accused of over prescribing or over performing surgery.
12. Finally, given the world we live in and the unexpected changes that happen, we encourage surgeons to save as early and often as they can.
We hope that you find this article helpful and interesting.