Margin pressures, practice acquisitions, and unstable patient volumes are just three significant threats faced by health care practices today. AMGA's 2019 Medical Group Operations and Finance Survey reported that while profitability is improving, there's still room for growth. On average, health systems weathered a loss of $201,042 per physician in 2018, down from $243,918 in 2017. Independent practices marginally improved their profit per physician—bringing in $2,510 in 2018, up from $2,396 in 2017.
Despite the positive survey results, health care market conditions remain uncertain; therefore, continued improvement in profitability is not guaranteed. One of the key trends that will impact profitability is demographic shifts. Pew reports that by 2029, more than 20% of the population will be 65 years old or older. As baby boomers age, a growing proportion of the population will be covered by Medicare and their reimbursement rates will be set by the government. An analysis by the Congressional Budget Office found that private payers' payment rates were, on average, 89% higher than Medicare payment rates.
Another key trend that will impact profitability is the rise of health care consumerism. Kaiser Family Foundation reports that the typical non-elderly family spends $8,200—the equivalent of 11% of their income—on health care expenses. Within a family of four, if even a single family member's health declines, the portion of income spent on health care rises to 15%. As the financial burden continues to shift onto the patient, patients are demanding price transparency and are price shopping for their health care. As a result, cost and convenience have become top priorities.
How do you gain a competitive edge and influence your practice's profitability?
Focus on activities that can improve efficiency and minimize risk within your practice. Here are four strategic initiatives that can help:
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