Small medical practices are facing significant financial and administrative burdens including staffing costs, negotiations with insurance companies, and increasing costs of practicing medicine. Local physicians have said these factors are contributing to doctors in the Austin area—and throughout the county—leaving private practices.

Pay cuts, inflation, and delays in insurance companies offering credentials to physicians are additional difficulties, with inflation impacting physicians’ ability to find qualified staff, said Dr. Brad Venghaus, owner of Thrive Medical Clinic and local primary care physician.

Medicare is the federal health insurance used by people with permanent disabilities and the elderly population. Since the federal government oversees it, Congress has to pass funding to support different branches of Medicare services. One of the biggest payouts is paying physicians to care for Medicare patients—a reimbursement that has been decreasing compared to inflation every year, said Brent Annear, associate vice president of media relations and leadership advancement for the Texas Medical Association.

Adjusted for inflation, Medicare physician payment declined 29% from 2001 to 2024, while the overhead cost associated with running a medical practice has increased year over year, according to data from the TMA.

“Last year, and this year, Medicare gave pay cuts, and in the setting of record inflation that's made it extremely difficult for many practices to stay financially viable,” Venghaus said. “While the cost of care has gone up, our average salary for employees–we'll call it support staff, for medical assistants and nurses and everything–has probably gone up somewhere between 20 and 25%.”

Zooming in

Due to the “Baby Boomers” generation aging into Medicare, an influx of the population is using the insurance option. An increase in the average life expectancy also equates to more patients utilizing Medicare, according to TMA officials.

The current funding mechanism used to calculate Medicare reimbursement to physicians does not take into account how much it costs physicians to provide care, Annear said.

“I think what you're seeing is a lot of these doctors that were in private practice, they're choosing to potentially either retire or leave the field or join a larger organization because of the burden of arguing with insurance companies [for proper] reimbursement and higher staffing costs,” ​​Venghaus said.

The Southern region of the United States led in the trend of corporate businesses taking over private practices with over 40% of growth in corporate-employed physicians and a nearly 59% increase in corporate-owned practices between 2019 and 2020, according to a report from the Physicians Advocacy Institute.

“You're seeing many, many physicians’ practices either being bought out by private equity or being bought out by hospitals, and you're losing the private practice physicians not only in Texas, but the United States,” TMA President and anesthesiologist Dr. G. Ray Callas said. “Until we have an increase in Medicare, this should be one of the biggest things that we focus on. I will tell you, [at the] Texas Medical Association, this is our number one problem.”

The context

Obstetrician Gynecologist Dr. ​​Nancy Binford owned her own private practice in Austin for over 16 years before retiring early in 2023 to dedicate her time toward advocacy efforts with the Travis County Medical Society and TMA alongside working at the People’s Community Clinic in Austin.

Binford said she made the hard decision to close her practice after the operating costs of her clinic increased by nearly 20% between 2020 and 2022. Patients choosing to skip their annual check-ups during COVID-19 also compounded the issue.

“If you are a Medicare provider, not only do you have inflationary pressures, but your actual percentage is going down every year,” Binford said. “Then eventually it's like, well, I need to get patients with better plans in the office, and if I have a lot of Medicare patients there's no room for the better-paying patients, putting patients in competition with each other, and doctors in a terrible predicament.”

As a result of the lack of medicare reimbursement to physicians, doctors are having to turn away Medicare patients in order to keep up with the rising cost of operation, Callas said.

Venghaus said he is one of the few remaining primary care physicians operating from a small practice in the Austin area and has grown his business by recently opening a new practice in Leander with plans to open another location in Pflugerville this summer.

Venghaus said he has tried to automate the check-in and appointment sign-up process alongside offering cost transparency to try and keep costs low and provide exceptional service to patients.

If this trend continues, Callas said he thinks it will impact every field of medicine, but hurt the small rural practices the most.

“I'm scared that you're not going to have any physicians that will even see Medicare patients,” Callas said. “That's what scares me. We're seeing the trend now. People are taking less and less Medicare.”

Looking ahead

Callas describes the Medicare payment system as “completely flawed” and is working with the TMA to advocate for Congress to pass two bills in order to end annual physician payment cuts.

If passed, HR 6683 will increase payments under the Medicare physician fee schedule for 2024 by 4.62%–current law provides for a 1.25% increase. Additionally, if passed, HR 2474 bill would modify certain adjustments to payment amounts under the Medicare physician fee schedule, according to

“The federal government knows it's a problem,” Callas said. “It's not about physicians wining about money. It's about being paid fairly for a job that we do so we can keep our doors open so patients have access to great health care like they deserve. Medicare–people paid into it their whole lives–they deserve to have physicians that can take care of them.”