When lightning strikes private practices
Today there are far fewer private cardiology practices in the U.S. Why – health reform? No, much simpler; the vulnerability of the independent medical practice business model to “lightning strikes”; especially those with “high voltage” financial effects.
Interviews of physician leaders of private cardiology practices revealed a business model vulnerability that is not reserved to cardiology alone. A number of the practices that decided for sell and integrate demonstrated common business model characteristics, such as:
- a high percentage of W-2 income available to the physician, derivative of office-based imaging diagnostics (e.g. nuclear imaging). One cardiology practice reported that 23% of physicians’ take-home pay was from the margins on these services.
- a high percentage of operating revenue to cardiology practices come from Medicare. When CMS and other payers reduced utilization and revenues for office-based imaging, cardiology practices reported high five-figure reductions in physician income, all at a time when hospitals were accelerating upward the compensation rate for employed cardiologists; especially the interventional subspecialists. Result, sale of practices to hospitals in exchange for higher, more secure incomes; at least for a while.