Three Physician-Related Trends Influencing Health Spending

June 8, 2012

A new report points to changes in the way physicians have traditionally practiced as a key source of declining increases in spending.

A new report cites changes in the way physicians have traditionally practiced medicine as a key source of declining increases in healthcare spending.

The report - put forth by PwC's Health Research Institute, and based on interviews with health plan actuaries, industry leaders, surveys, and analyses - projects that medical costs will increase only 7.5 percent in 2013. That continues a four-year streak in which healthcare spending has risen slower than expected.

Though the report cites multiple reasons for the decline, it points to three physician-related trends as key contributors:

1. Employment vs. Private Practice
The number of employed physicians increased 32 percent between 2000 and 2010, according to the 2012 edition of AHA Hospital Statistics.

As more of you become employed, fewer of you control major supply and equipment purchasing decisions. That’s enabling hospitals and administrators to move away from “physician preference” purchasing and negotiate for significant savings, according to the PwC report.

Since medical supplies can account for more than 40 percent of the cost of certain procedures, that savings is having a big influence on overall healthcare costs, according to the report.

2. Retail Health Clinics vs. Medical Practices
One of the slowest areas of spending growth is in physician services, according to the report. It predicts that this trend will continue in 2013, as consumers choose alternatives to the traditional medical practice office visit.

For instance, there has been a rapid increase in the number of patients who visit retail health clinics for services. According to PwC’s 2012 Health Research Institute Consumer Survey, in 2007, 9.7 percent of respondents said they had sought treatment in a retail clinic; in 2010, 16.9 percent said they had; and in 2011, 23.5 percent said they had.

Retail clinics typically charge less for services, the report points out. For instance, a 2009 study appearing in the Annals of Internal Medicine found that retail clinics charged 30 percent to 40 percent less than private practices.

3. Technology vs. Traditional Office Visits
As more physicians use telemedicine and mobile health to treat and monitor patients, healthcare costs will decrease, according to the report.

Since these technologies enable physicians to monitor their patients more closely, physicians will have an easier time keeping their patients healthy and out of the hospital.

We’re “moving toward a consumer-centric or a patient-centric view, which means that business models are being disrupted - not just by integrated information systems - but by personal technologies like mobile health,” said primary-care physician David Levy, global health practice leader at PwC, in a video put forth by the firm. “Faster, better, cheaper is coming to healthcare and it’s going to come with a vengeance.”

The report acknowledges that the downward trend in healthcare costs may be due to the recession. It points out, however, that the recession may actually be triggering a more permanent solution to the healthcare spending problem.

“Stakeholders across the healthcare landscape, forced to do more with less, have begun embracing new strategies and habits that have the potential to be longer lasting,” such as coordinated care models and reimbursement based on quality, the report states. “If these efforts spread widely, the United States may be entering a ‘new normal.’”

Do you think the above trends will influence healthcare spending? Why or why not?