NCPA - National Center for Policy Analysis

Doctors Going Broke

January 11, 2012

American doctors increasingly find themselves in financial trouble, with some even going broke.  This quiet reality is not isolated to a single area of medicine, but rather is affecting a wide range of doctors, including family physicians, cardiologists and oncologists.  Industry watchers say the trend is worrisome.  Because half of all doctors in the nation operate a private practice, financial insolvency can rob a community of a vital health care resource.  Among the most prevalent reasons for doctors' financial woes are the ever-changing government policies and regulations that constantly eat away at traditional revenue sources, says

  • For cardiologists, recent 35 percent to 40 percent cuts in Medicare reimbursements for key cardiovascular services, such as stress tests and echocardiograms, have taken a substantial toll on revenue.
  • In oncology, Medicare revised the reimbursement guidelines for cancer drugs in 2005, lowering reimbursements for many expensive cancer drugs below the actual cost of the drugs.
  • More broadly, the constant threat of the Medicare pay cut to doctors of 27.4 percent, which has been delayed by Congress 13 times, haunts doctors with the threat of bankruptcy.

For some providers, Medicare patients represent only a small fraction of their total clientele.  However, Dr. William Pentz, a cardiologist with a Philadelphia private practice, explains that private insurers tend to follow Medicare rates, and that this tendency multiplies the impact of changes to Medicare rates.

Other experts do not believe that uncertainty about government policies is the primary culprit in the failure of private-practice doctors.  Rather, they posit that a lack of business acumen causes doctors to fail to identify profit seepages and to make improper business decisions.  Marc Lion, CEO of Lion & Company CPAs, LLC, has pointed out that within private practices there is typically a 10 to 15 percent profit leak.

Regardless of the reason, the closing down of private practice facilities nationwide can have drastic effects on aggregate supply and limit health care access for certain populations.

Source: Parija Kavilanz, "Doctors Going Broke,", January 6, 2012.

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