I remember the joy and excitement that I felt when I got accepted to medical school. As a naive medical student, not once did I think of medicine as a business. I was clouded by the pure nature of providing medical care to those that need it. It was not until the third year of medical school that I started learning about the business of medicine.
Dr. Smith, my OB/GYN preceptor, was in the process of opening her second clinic and hiring her second provider, a new grad out of residency. I remember her looking at her office blueprints and having conversations daily with the contractors. I learned a lot about business ownership during that time and her goal of being her own boss. We also spoke many times about needing to build and improve the practice continually. Admittedly, she did not start the practice. She had joined out of residency and eventually became a partner. When her partner retired, she bought the other half, making her the full owner of the practice.
Dr. Smith is a physician, businesswoman, and leader in her community. At the time, she was taking an executive physician leadership course meant to provide physicians with management skills, training, and the knowledge required to learn how to run a successful practice and become better leaders. When asked what the purpose of this was, she replied that it was the closest to an MBA that she could get without going back to school for it. We further went on to discuss the lack of business skills taught in medical school and residency and the fact that she had to learn everything on her own through trial and error to have the successful practice that she is running today.
Medicine is a business. Whether you work as a solo practitioner or for a group or hospital system, physicians should learn the essentials and the ins and outs of the company as they are a crucial part of the system. Whether you choose to be a solo practitioner, work for a group or the hospital system, there are risks and benefits.
The Relic Solo Practitioner
The landscape of medicine has changed since Dr. Smith bought the practice. Many of her colleagues do not own their practices. Many work for the local hospital systems and other large groups. The solo practitioner has slowly become a relic of medicine. Today it is all about the large hedge fund owned groups and behemoth hospital systems.
Many doctors coming out of residency today have such an enormous burden of debt that it’s almost impossible to envision owning their practice. Yes, it might be the ultimate goal. However, that will take time. Many focus on the security of the first job as an attending physician. With that security, those who desire to own their practice can pay off debt and gain more experience and save some cash reserves before venturing out on their own. However, this can be a trap as many will settle into that lifestyle and constant paycheck and may not want to risk trying to open a new practice…and yes, there will be a risk.
Potential pitfalls that keep today’s physicians from venturing out on their own:
- The security of an established paycheck
- Upfront expenses needed to start a practice
- The unknown of whether your practice will be successful
- Lack of business skills
Limiting Factors
- Medical School Debt: With so much debt coming out of residency, it’s almost impossible to get a business loan.
- Practice Location: Most residents don’t know where they want to be physically practicing 5-10 years out of residency, so locking down a practice location and tethering yourself to a specific community can be disastrous.
- Completing the insurance credentialing & contracting process takes time: This process is not taught in medical school or residency. Therefore, it will take time to learn.
- Practice administration: Overhead cost will be a significant part of the practice. What kind of structure do you want to have in place?
- EHR: There are over 1,000 EHR’s to choose from. The upfront cost is not cheap, and choosing the right one for your practice can take time.
- BIlling: This is probably the most crucial aspect of setting up a medical practice. If you are providing services and are not collecting, then your business won’t be around long. Establishing a reliable billing process is a make-or-break for many practices.
- Vendors: Who are you going to get your medical supplies from? Choosing a reliable company that will meet your needs at a fair price- It will take time.
- Marketing: A business without clientele won’t last long. Who is your target population? Do you plan on running a direct pay model, concierge service, pro-Bono?
- Branding: Another DrX.MDPA? Designing your brand takes time.
- Website: You don’t need a fancy website, but you should have one.
COVID-19 & Today’s Practitioners
COVID-19 has exposed many flaws in the many layers of the large hospital systems as physicians realize they are another cog in the wheel. With fewer patients coming in, many physicians are at the mercy of the hospital system. Individuals are being furloughed, forced to take PTO, forced to take pay cuts, or are being reallocated. Meanwhile, many hospital administrators are working from home and maintaining their multimillion-dollar salaries. These are some of the consequences of working for others as a physician. You give up a lot of control for paycheck security. As a frontline worker, physicians and other providers are the ones that make the hospital money. Based on procedures, diagnosis, workups, and ICD 10 codes, this is what hospitals get paid off of. Therefore does it make sense that you make $200K and the CEO of the hospital makes $20 Million? (Will explore in another post)
Yes, the solo-practitioner is being affected. Their revenue at this time is being cut due to the low patient volume. However, how they pivot in these rough times is up to them. They are not at the mercy of hospital administrators. They decide whether they close their doors and take this time to spend with their family. Or do they find new ways such as telemedicine to continue providing services to their patients and to keep their employees employed? As a solo practitioner or partner in a group, you can decide your hours and how much you work. You are young and hungry and want to work 80 hours a week, sure. If you are older and close to retirement and just want to work 30 hours a week to maintain your skills, you can pivot. This control can be vital, as seen in these rough times.
Looking to the Future
With many future medical students lacking the understanding of the business of medicine, I fear the trend of the large hospital systems and hedge fund groups will continue. I see a day where there will no longer be solo practitioners. The multi-specialist groups seem to be the wave of the future. Physicians must understand they are the heartbeat of the system. They hold a lot of power, but many will not exercise it as the field of medicine appears pure with its altruistic nature. Physicians are part of the front line workers of medicine, yet many are burnt out, the suicide rate remains high, and the salary does not compare with administrators making multi-million dollars. It’s essential that the principles of medicine as a business are taught as early as pre-med so that physicians have a thorough view of the field that they will be dedicating their life to.
