In any normal business, if your costs go up, you can raise your prices so you don’t go out of business.

In Medicine, if you contract with insurance companies, you can’t do this. If your costs go up because let’s say that your rent doubled, you can’t charge a penny more.

Well, you can charge more, but no one will pay you that. It would be like a pizza place being forced to stick to 2004 prices.

The situation is actually worse than this.

In most businesses, if you can’t raise prices, you can try and cut your overhead.

Insurance companies make this extremely difficult as the average practice needs to hire about 5 people per doctor just to take care of billing, prior authorizations, resubmission, etc.

Even if you outsource this, there are still many expensive insurance related services you need to buy, such as an electronic medical records system.

Over time, this overhead number tends to increase as insurance companies are incentivized to make it difficult for a medical practice to get paid, or treatments to get approved.

So physicians are stuck owning businesses where they can’t raise their prices

and also can’t control one of their main overhead expenses.

This leads to insolvency, and is happening right now. It’s rare to see a small private practice, and a solo practitioner is almost a unicorn. 70% of physicians are employed by large healthcare conglomerates and that number is anticipated to grow. Those that are still in private practice usually either work for a giant private practice conglomerate or private equity (yuck).

The solution out of all of this mess to stop contracting with insurance companies. You can set your prices and control your overhead… like every other business out there. This leads to greater sustainability and success long term. Not to mention provider happiness and greater quality of medical care. Or you can stay in Shawshank forever and count the days until retirement.