Debt crisis…how could this impact your pediatric practice?

March 15, 2012 in Uncategorized by support Team  |  Comments Off on Debt crisis…how could this impact your pediatric practice?

The United States has over $15 trillion dollars in debt with an annual budget deficit over $1 trillion dollars
for 2012. Let’s look at this if this was 30 year mortgage: at a low interest rate, the US would need to
repay $500 billion a year and not incur any debt moving forward to pay off the debt in 30 years. This
would mean that the US would need to double the current taxes on businesses and individuals as well as
cut the budget so we do not continue to spend $1 trillion a year more than the country receives in taxes.

Let’s link the size of the government debt to a Pediatric practice. Imagine if your Pediatric practice had a
debt load of 6-7x the revenue…..this is the level of debt the country has compared to tax revenue
received. If your two provider practice averages $800k in revenue a year, 6-7x would be $4.8M to $5.6 M
in debt. This level of debt would bankrupt the Pediatric group. This level of debt would cause a practice
prior to going bankrupt to make difficult cost cutting choices to avoid going bankrupt.

These numbers show that, more than likely, the US will increase taxes and cut spending. When you look
at the major expenditures on health care (potentially approaching 20% of gross domestic product), the
government leaders are likely to cut costs and will need to identify cost cuts in healthcare.

Where does the country cut costs in healthcare? This is a difficult question. From the pure perspective of
long term tax revenues, it makes sense for the government to invest in healthcare for children and
encourage more children in the country to replace all the aging baby boomers. These children grow up,
obtain jobs and pay taxes. There will likely be much discussion on difficult topics including how much
medical care the government should cover for an aging adult. Since the majority of healthcare is spent in
the last six months of life, is spending on procedures and treatments that initially extend life a good
decision for our future as country since we cannot afford our healthcare bills? About 5% of the country spend 60%
of the healthcare cost while most of the economic burden is placed on the other 95% of the country….will this continue in the future or will changes in policy/structure of our healthcare system bend this curve?

The healthcare system financially rewards physicians for choosing other fields of medicine other than
Pediatrics. Medical students, in many cases need a strong income to repay the student loans. Physicians
have families with financial needs and if the income is not sufficient, physicians might remove themselves
at a higher rate from clinical medicine and move into industry or other areas. How do health plans, the
government and employers align incentives to patients whom take accountability for their health via diet
and exercise? The responsibility of good health is dependent on the patient being compliant to a treatment
and being proactive in their health. A patient, whom smokes, is obese and does not exercise increases the
burden on the healthcare system. A patient whom does not smoke, exercises and controls their weight
provides on average, less of a strain on the Healthcare System. Should patients whom optimize their health see lower co-pays or lower monthly health premiums? Currently, most employer plans charge
the same per employee, some would argue that the system does not optimally align the behavior of patients with incentives. Incentives as well as costs are being evaluated in the Healthcare system. The recent change in Healthcare law decreased the co-pay for well checks for many pediatric patients to $0. This aligns the incentive with preventive care which, in my opinion, is a good change.

So how could this debt crises impact your pediatric practice? The Independent Payment Advisory Board (IPAB) is a new federal entity comprised of 15 unelected individuals with the authority to cut Medicare Spending if the program’s costs exceed specified targets. Although Pediatricians do not receive payment from Medicare, many of the insurance carriers based their reimbursements on Medicare Policies. We are overspending and there will be some difficult choices. Some recommendations to IPAB and other providers of healthcare include they should continue
the no co-pay policy for well visits (this lowers barriers to parents) and look to decrease costs via higher burden on patients for ER visits and hospitalizations. Policy makers might see the need to increase drug co-pays for non-preferred medications to help improve the adherence to a selected formulary.

Using electronic health records that provide the formulary advice will help providers prescribe the best cost
medication option to the patient. Pediatric offices will need to further train and monitor their internal staff
as well as leverage companies that specialize in pediatric medical billing to insure they optimize the
revenue cycle. I believe general Pediatrics to be the best investment in our healthcare dollar. Hopefully
our leaders that shape healthcare policy and determine healthcare cost cuts will come to the same

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