Twice in the past year I have warned that Obamacare may become the worst nightmare for owners of medical office and now the day is here. Insurance companies have to recoup the cost of all the excess coverage they are being forced to provide in policies, regardless of whether it is needed or wanted by customers. In addition, it is clear the new insured population is not going to skewed the way they predicted and the insured population is going to be unbalanced. The result is the insurance companies and the plans need to recoup this excess cost from someone and it is going to be the doctors and hospitals. The hospitals have already begun a massive cost reduction program in many of the well run operations. Doctor groups have to do the same. They are not going to be in a place to pay high rents if they have any alternatives. In New York the letters to doctors have begun to arrive. The basic insurance program under Obamacare is networks like HMO's. That means a doctor is in network or out. If in, then the new rates of reimbursement are cut. Now, for example, an oncologist is paid just $20 to read a mammogram. I pay my housekeeper more per hour, and the guy who cuts my lawn gets 20% more. Just as is happening in Medicare in Manhattan, doctors are starting to opt out of these networks with nil reimbursement.

The other part of Obamacare is the move of millions to Medicaid to cover the cost of the policies. Reimbursements under Medicaid is paltry and usually it is the lesser quality doctors who do that work. Middle class families who are forced into Medicaid by Obamacare –and that is happening involuntarily- are not going to be pleased by the clinic style low quality care they will get from doctors they don't like. They will then possibly be forced to go out of network and out of pocket. That means doctors will not get their former levels of fees because patients will not be able to pay it.

Many doctor groups are just a tiny business of doctors who as a group are lousy businessmen. Incomes for almost all doctors is well below what you may think and the profits are not there any longer for the profession. In talking to several doctors lately, it is clear the profession is quickly moving to the older successful doctors retiring sooner than they expected, and the new doctor pool is substantially populated by foreign born doctors who came here to get a degree, but may be willing to work for less and who may not be able to afford the rents you projected in your medical office property.