PHYSICIANS FACE YET ANOTHER FINANCIAL STORM Let the LSMS Help You
As we enter the second half of 2022, with the COVID-19 pandemic in the rearview mirror, for most, physicians find themselves in yet another precarious financial position. For most of 2020 and 2021, physicians had to deal with difficult financial situations created by shutdowns, quarantines, and medical care being delayed, which created cash flow issues among other problems. However, most anticipated or expected this year to be “back to normal” but it’s not, and physicians are experiencing yet another financial calamity. For most physicians, 2022 has brought near record inflation that many have never experienced in their personal or professional lives. Even our more seasoned folks have probably forgotten what it feels like as it has been almost forty years since things have been this bad. Currently, inflation sits at 9.1% through the middle of August. What does that really mean and how does it impact physicians? First, lets compare 2022 to 2018, well before the pandemic and current financial crisis. In 2018, $1 was equivalent in purchasing power to about $1.18 today, an increase of $0.18 over that four-year period. The dollar had an average inflation rate of 4.31% between 2018 and today, producing a cumulative price increase of 18%. According to the Bureau of Labor Statistics consumer price index or CPI, this means a dollar today only buys 82% of what it could buy just four short years ago. The CPI collects about 94,000 prices per month on approximately 300 commodities and services to calculate the weighted change from last month, i.e., the inflation rate. Physicians in both their personal and professional lives are feeling these financial pressures. From a personal perspective, physicians are impacted because inflation is heterogeneous in that the cost of some items will rise more than others, which impacts everyone differently. For example, as gas prices have spiked, physicians commuting further distances to and from the office have been affected more than physicians who live much closer to their office. Another example is younger physicians with children in the house experience food price increases much more than empty nesters. However, everyone whether in private practice or employed is experiencing the financial impacts of the near record inflation of this year as your dollar only buys 82% of what it did in 2018. This rings true for office and medical supplies, as well as other goods and services.
On the professional side of things, wages generally keep up with inflation, which as an employer means it costs more to support and retain your office staff, nurses, and other personnel. Moreover, employment cost has not only been influenced by inflation but has been exacerbated by staffing shortages and changes in business practices resulting from the COVID-19 pandemic. Quite simply, it costs a lot more today to fully staff a physician office, clinic or hospital and those costs, in many instances, cannot be passed onto the consumer, therefore it can only be absorbed by cutting additional costs. Further compounding this issue for physicians is their reliance of health care spending from government programs. When inflation rises, the group that gets pinched the most is anyone living on fixed income and physicians should consider themselves in this group. That may sound strange but when almost two-thirds of all health care spending in the U.S. comes from government programs such as Medicare, Medicaid, Veterans Administration, and the Children’s Health Insurance Program (CHIP), you are on a fixed income. Reimbursement rates for Medicare have long been outpaced by annual single digit inflation and for 2023 Medicare rates are projected to decrease. Historically, Medicaid in many instances barely covered costs, and those costs are rising. In the old days, physicians could make up for these increased costs by simply increasing their patient volumes. However, today with value-based payment models and physicians already seeing record numbers of patients each day, that is no longer a reality. So, what can you do and how can the LSMS help? Our mission is to be trusted advocate for physicians in the state of Louisiana promote excellence in the practice of medicine. Let us help you! 1. Contact Us. Whether you are an independent or employed physician, our specialty is helping you. If you have an idea or a need to address an administrative burden or reduce hassle factors, let us know. We have relationships with legislators, regulators, administrators, and other stakeholders, who can assist us in realizing positive change. Reducing administrative burdens saves you time and money. Be sure to read the article included in this newsletter on 2023 PCF rates. Its just one example of us working for you.
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