Texas a Last Bastion for Independent Physicians

Texas may be the Alamo for independent physicians.

About 60 percent of Texas physicians are independent practitioners, compared with fewer than half nationally. According to the 2012 Physicians Foundation survey, Texas physicians worked 55 hours a week, compared with 53 hours for their colleagues nationally.

Lou Goodman, vice president and CEO of the Texas Medical Association and president of the Physicians Foundation, described the state’s physicians as “fiercely independent.” He said healthcare industry changes tend to originate on both coasts and gradually fold onto the rest of the nation. The state’s location in the middle means trends tend to show up locally at the end—or die before they get here.

Texas physicians also are more hostile to health reform, also likely a reflection of the percentage of independent physicians. Nearly three out of four Texas physicians said passage of the Affordable Care Act made them more pessimistic about the future of U.S. healthcare, compared with fewer than 60 percent of U.S. physicians.

Travis Singleton, senior vice president at Irving-based Merritt Hawkins & Associates, said the survey results reflected the state’s “independent DNA. Texas is the last bastion of fee-for-service (because of independent practices).”

However, the state is not immune to the steady erosion of solo and independent physicians.


  • The percentage of U.S. physicians who practice outside a hospital, clinic or large group fell to 39 percent in 2012, down from 57 percent in 2000. Of those who abandoned their independent practice, 87 percent cited the cost of doing business, 61 percent blamed managed care and more than half mentioned electronic health records. Of those who expect to remain independent, 1 out of 3 said they plan to turn to a subscription-based care model, such as concierge and direct-pay practices. Accenture, which conducted the survey, predicted that subscription-based models would double annually for the next three years.
  • According to a poll by Sermo, a website for physicians, more than 1 out of 4 physicians admitted they had been forced to close, or were considering closing, their solo practices. They cited high overhead costs, high malpractice-insurance costs and low reimbursement rates.
  • According to QuantiaMD, another website for physicians, more than 1 out of 4 primary-care physicians reported poor financial health. Among those feeling financial pressure, 81 percent saw profits fall in 2011 and nearly half had trouble covering costs. Like Jordan, most cited falling reimbursement and the rising costs of practice.
  • One out of three physicians say they plan to quit their practice in the next decade, according to a survey by Atlanta-based physician recruiter Jackson Healthcare. Of those who said they plan to quit, a majority cited economic factors and health reform as major reasons.
  • More than 75 percent of newly hired physicians will be hospital employees within two years, compared with 11 percent eight years ago, according to Merritt Hawkins. Of its 2,700 searches in 2011 and early 2012, only 2 percent were to fill positions in solo practices, compared with 42 percent in 2004.
  • The share of physicians who own their firms dropped from 57 percent in 2000 to 43 percent in 2009, and was expected to fall to 33 percent by 2013, according to Accenture.

An outlier survey by the American Medical Association found that more than half of U.S. physicians were self-employed and 60 percent worked in practices wholly owned by physicians.

The survey results reflect how AMA defines an independent physician. However, that survey also confirmed increasing hospital employment of physicians. The small, private physician practice is quietly disappearing from the American landscape. Granted, more than 80 percent of physician visits are still at offices with five or fewer physicians.

However, there are inexorable trends nibbling away at that piece of Americana.

The percentage of physicians in independent practice has been declining by 2 percentage points annually, a reduction that was expected to accelerate to 5 percentage points annually by 2013, according to the AMA. In a 2011 survey of healthcare organization executives, two of three said they were receiving more employment requests from physicians and they planned to increase their physician hiring over the next three years.

Moreover, third-year medical residents are increasingly bypassing independent physician practices to work as salaried employees in hospitals and larger medical organizations. About half said they were ill- prepared to handle the business side of medicine because they received no formal instruction in medical school on how to negotiate contracts or manage reimbursement.

It is especially disheartening that three out of 10 third-year medical residents said they would choose another career if they had the opportunity, compared with about one out of 10 in 2008.

Dan Varga, Texas Health Resources’ chief clinical officer, said barely more than 10 percent of THR affiliated physicians are employed by the system, and they account for about 35 percent of its net revenue. He contrasted that with Norton Healthcare in Louisville, Ky., where he was senior vice president. He said Norton Health Community Medical Associates, of which he was a founder, accounted for 75-80 percent of the health system’s revenue.

Varga called DFW “a fairly unique physician marketplace.” He said independents thrive because of population growth and a strong economy that fuels the private insurance.

He said the state’s lack of a certificate-of-need law allows physicians to supplement their incomes with ancillary income. He contrasted that with Kentucky where the commercial insurance is highly consolidated and there is a rigid CON law.

“More (physician) revenue (in Kentucky) means seeing more patients, and that is subsidized by hospitals,” he said.

Varga said the biggest difference in having such a high percentage of independent affiliated physicians is the lack of ability to create compensation incentives to reward performance goals. He also said it is easier to control patient volume with employed physicians.

“We may approach a group and say, ‘We’d like to see more total joint replacements (in our hospitals).’ And they might say, ‘We’re not interested in growing more doctors. We’re doing enough business.’ Unless we employ our own surgeons and ultimately compete with them, we are stuck with the volume they bring you,” he said.

David Ballard, M.D., chief quality officer at Baylor Scott & White (BS&W), said Texas historically has not had many traditional academic medical centers or large physician group practices compared with the rest of the nation. He said the state’s physicians have exhibited an entrepreneurial streak by coming together around service lines.

Eighty-two percent of Texas physicians reported last year that there were doctor-owned specialty hospitals, surgical centers or imaging centers in their area, according to a biannual survey conducted by the Texas Medical Association. Physician Hospitals of America has around 75 member hospitals in Texas, which is the most of any state. Of those, more than two-dozen are in Dallas-Fort Worth.

Medicare pays separately for professional and technical services. Owning the technology allows physicians to bill for both, he said.

Ballard said he has seen no difference between employed and affiliated physicians in participating in quality initiatives. For example, he said Baylor found in early 2012 that about two out of three of its lumbar spine MRIs were inappropriate, based on national guidelines. He said the system was able to drive that inappropriate percentage down to 4 to 5 percent in 18 months.

“In my experience, it is best to engage physicians on delivering the best possible care to patients. That kind of commitment is not unique to employed physicians,” he said.

Rick Watson, Cigna senior medical director for North Texas, said he believes economic and regulatory factors foster independent physician practices. He said the corporate practice of medicine laws bar for-profit hospital systems from buying practices.

And the fact that there are significant physician shortages in Texas means there are ample numbers of patients to maintain busy practices. He also said the state’s relatively low cost of living and the 2003 medical malpractice reform that tamps down the cost of liability insurance lessen the pressure for physicians to drive up their incomes.

Watson said Cigna has discovered that working with independent physicians helps keep healthcare costs lower. He noted a recent New York Times article that pointed out that when physician practices are bought by hospitals, they are able to tack on hospital facility fees, resulting in higher costs for the same procedures.

Cigna is creating Collaborative Accountable Care agreements with physician practices. CACs are similar to accountable care organizations. Physician groups are required to accept responsibility and accountability for improving patient health, costs and patient experience.

Practices are paid incentives for reaching agreed-upon targets. Practices use care coordinators who work with Cigna case managers to manage patients with chronic conditions. Some DFW CAC-Cigna partnerships include Baylor-owned HealthTexas Provider Network; Medical Clinic of North Texas, now a subsidiary of Arlington-USMD; and Patient Physician Network and Village Health Partners, both in Plano

Watson said Cigna has a pilot program that works with seven independent solo physicians to provide patient-level information on hospitalizations, emergency-department visits and medication compliance, especially for those with chronic conditions. The physicians will receive bonus payments for improving patient care and costs.

Steve Jacob is founding editor of D Healthcare Daily and author of the book Health Care in 2020: Where Uncertain Reform, Bad Habits, Too Few Doctors and Skyrocketing Costs Are Taking Us. He can be reached at steve.jacob@dmagazine.com.

Posted in Hospitals, News, Physicians.