Is Entrepreneurship Still Possible For New Doctors

The word entrepreneur in the past decade has seemed to take on a very different meaning, especially for new doctors. Two to three decades ago, being a doctor who was an entrepreneur often meant having a practice that was physician owned with a focus on growing this practice. Fast forward to today and many new physicians think of medicine and entrepreneurship as something that may no longer be possible for them.  This post will explore some of those reasons and why I hope that entrepreneurship is not dying for doctors.

 

Note: The cover photo is from a village or Batey in Haiti. When I was in medical school a group of friends and I started a group to delivered health care to a third world country. This group raised tens of thousands of dollars, went to Haiti, and subsequently deviled free health care while determining that the village needed clean water. We implemented a clean water filtration system with the storage bin you see above to act as a water tower. This dramatically cut back on the number of parasitic infections in members of the surrounding villages. The water system I’m told is still effective today with the local church helping support funds to purchase replacement filters.

 

Percent Of Doctors Who Are Owners And Not Employees

According to the Physicians Foundation, the number of physicians who are owners or shareholders of their practice has been declining since their group started monitoring these stats. In 2007, 61% of doctors identified as owners of a practice or partners in a group practice. This number dropped by almost half to 33 % in 2016.

There are many reasons for the decline in physician ownership over time. The most notable reasons for a drop in physician owned groups include:

  1. Increased debt load for graduating doctors
  2. Decreasing reimbursements for doctors
  3. Lack of bargaining power as an individual doctor
  4. High cost of upgrading practice hardware/software (For example, electronic medical records-EMR)

What Happened Between 2012 And 2014?

Between 2012 and 2014 there was a large drop in the percent of physicians who were owners or shareholders of their company.

The largest reason may be due to a required change in the way medicine was practiced. In 2010 the Affordable Care Act, also known as Obamacare, was introduced. Many of the mandates became active on January 1, 2014. This gave health care providers about 3 years to implement these required changes. This timeline also coincides with the almost 20% drop in the number of physician owned groups.

The affordable care act required, among many things, that health care providers had to adopt and demonstrate “meaningful use” of electronic medical records (EMR) by January 1, 2014. If health care providers adopted an EMR by this date, then their existing Medicaid and Medicare reimbursement levels were largely not affected. If a practice did not do so after this date, they were subject to penalties.

The cost to transition from paper charts to EMR based charts for many groups was higher than the perceived benefit. This was one of many reasons that helped drive physicians to sell their practice and join large groups. The large groups can more easily take on the costs of implementing a new EMR, including the training necessary to bring work staff up to speed.

What Is Hindering New Doctors From Becoming Entrepreneurs

The largest factor stopping new doctors for becoming entrepreneurs in my opinion is student debt. I’ve touched on this subject a lot on my blog.

Graduating with $200,000 or more in student debt makes it hard for new doctors to obtain a small business loan from a bank due to the high risk of default. The desire to also obtain a job with a secure paycheck is often one of the first things on a new graduates mind. After all, very few people would advise someone deeply in debt to take on even more debt on a venture that has a chance of failing.

 

Groups Are Setting The Bar High To Become A Partner

Supply and demand will always drive the price for any company. One of my friends recently joined a GI practice in the southern United States. He informed me that in order to become partner he has to work like a resident for 3 years. Partners in their group have to take call in the hospital for weekend coverage twice a year, while new graduates such as him do full weekend call once a month for 3 years. Once his three years were up he could apply for partnership. He was informed that the partnership fees have increased in the past 5 years from $30,000 to $100,000. His assumption is that his group is increasing their valuation in an effort to be bought out in the near future. In my anecdotal experience this seems to be a phenomenon that is not uncommon, including the group I am currently involved with.

 

My Dive Into Entrepreneurship

As many of you may know, I’ve been working with locum agencies in the past several months. I’ve started to realize that this type of work is not the cash cow it seemed. By the time I take into account costs of medical license in various states (yes companies will reimburse me but only after 30 shifts), time spent looking for work, state income tax, and travel, my payout is not as large as I thought. Especially when many of these jobs can be terminated with several weeks notice. They may be offering a lot of money per hour but I’m not getting paid for the time spent waiting at the airport and while flying to the location.

This had me re-examine my non compete and current contract. I realized that I can open up other health care businesses, or practices without violating my non compete.  I have started to explore opening up other health care related businesses in addition to the job that I currently have. My schedule is quite free in that I often have up to 15 days a month off. Many of these days up until now have been spent picking up extra shifts.

The idea for me to start up my own business was a combination of factors. First, I’ve always had the entrepreneurial drive to start my own business. Secondly, the idea somewhat arose after I realized that many of the older more experienced doctors in my group also have side businesses in medicine. Most revolve around nursing home, expert witnesses for court cases, or hospice agencies. These doctors continue to inform me that they are making a decent living with their side jobs. Sever of the doctors even see it as an exit strategy in event that the primary job doesn’t work out.

I have started the process to start-up a medicine based business that does not interfere with my non compete. This business is still in the early stages and will most likely take months if not a year to complete. I’m finding out first hand how slow lawyers and paperwork can move.

I’ll do my best to document the path along the way, even if its a failure or success. The way I look at it is that maybe someone can learn something by my experience and I will have gained some knowledge for future endeavors. The proposed business encompasses outpatient work. More info will be delivered in future posts.

 

Frequent Physician Entrepreneur endeavors

Outside of the medical profession, there are numerous opportunities for physicians to fulfill those entrepreneur dreams. The most commonly discussed methods among doctors involve passive investing. These mainly revolve around real estate or stock market investing. However, the best way that physicians make money beyond their primary practice is by sticking to an industry they know a lot about. One of my colleagues is a fitness fanatic and owns 4 gyms/vitamin stores in my area. He turned his passion into a business and is ending up making money doing so.

 

The American Dream

My family immigrated here, like many others, many years ago. They started their own businesses, created their own niche, and have done very well for themselves. I hope that the dream of entrepreneurship stays alive in those who have the desire to do so in medicine. It’s for sure not for everyone and slightly sad to see the downtrend in ownership among physicians. However, I think being an entrepreneur or shareholder has the potential to be very rewarding in the long run and I’m excited about the new journey along the way. I expect a long road ahead, but will look forward to the experience. As one of my teachers used to say, life happens on the way to the circus.

 

 

 

 

11 thoughts on “Is Entrepreneurship Still Possible For New Doctors

  • May 12, 2017 at 9:18 AM
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    This is a really interesting article. I wonder if some of the trends also relate to other trends in medicine. For example, more people are choosing lifestyle friendly fields with shift work hospitalists and emergency medicine instead of surgery. Also, like you mentioned, a lot of physicians are working in multiple fields while practicing medicine.

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    • May 12, 2017 at 10:16 AM
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      Thanks. While researching the subject I was a little surprised at the abrupt drop in physicians who are owners or shareholders of a medical practice. The survey does note that surgery based fields have a much higher rate of ownership compared to hospitalist, primary care, or pediatrics. I think you may be correct that more people may be choosing lifestyle friendly fields which tend to have a lower percent of doctors who are owners.

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  • May 13, 2017 at 1:02 PM
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    I love the idea of docs pursuing entrepreneurship. Doing it in medicine is quite a commitment and that’s what to me is a big obstacle to overcome. Though a 1-person practice likely will make decent money, it might not offer much more income beyond what larger medical groups offer. Opening a solo urgent care might make me $150-200k if I bust my butt and see a ton of patients. But then it’s not really an entrepreneurial endeavor unless I can either scale it up a little or replace my contribution with someone else’s and still earn a good wage. I look at my friends who are doing the solopreneur practices and even when they find replacement docs, I don’t think they can fully pull away because of all the fires they have to put out.
    I do like the idea of doing something outside of clinical medicine, though possibly related to healthcare. The advantage there is that one can start slow and if it gains traction, put more resources into it. I’m excited to read about your journey.
    Too many of us are indentured slaves in large medical groups, having spent 60-80 hours a week for 3-5 years just to get a piece of the pie later. I did it and don’t see any real value in it. Going the entrepreneur route is the way to go, but learning it takes a little time unless you’re blessed with those skills already. The following areas intrigue me:
    -language center
    -auto mechanic shop
    -hostels
    -micro studio apartments
    -niche telemedicine
    -aesthetic practice

    Reply
  • May 14, 2017 at 1:46 AM
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    And this varies from country to country. Here in Australia, I think 80-90% of family doctors (they call ’em “GP’s”) work in a clinic/shared office. Whereas back home in Canada, I think more than half have their own office.

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  • May 14, 2017 at 8:30 AM
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    Amen partner! Entrepreneurship is not dead. It will never die in medicine as long as there are people who want “more.” More pay, more control, more flexibility, more you name it. Whatever it is, people with the drive will find a way to rise above the crowd. Great post and good luck with your own entrepreneurial endeavors!

    Reply
    • May 14, 2017 at 5:25 PM
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      Thanks Future Proof! I’ll be sure to keep updates coming. I’m looking forward to the journey ahead.

      Reply
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  • May 21, 2017 at 10:19 AM
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    My cousin had a private psychiatry practice and recently shuttered her doors. The need to go to an EMR system and the cutting Medicare reimbursement due to not going with EMR made the costs too high. Now she is employeed and making more money then ever.

    I am okay with partial ownership. My salary is not dependent on my day to day revenue generation and I am part owner of our practice. So as it does well, my shares are worth more.

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  • May 21, 2017 at 11:03 AM
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    When you started out discussing physicians in hospital employment, group practices and ACA, I was hoping you’d delve more into solo private practice. While the other entrepreneurial options sound viable to me, I’ve grown increasingly interested with the idea of going old school solo private. I’ve always thought I’d want to do hospital employment or large group practice, I never thought of myself as business savvy and my specialty lends itself more to larger practices. However, I’ve also seen the negatives of not being your own boss, and some of it can be pretty awful, and while I understand the challenges of solo private, sometimes it seems like it might be worth it.

    Reply
  • May 21, 2017 at 5:04 PM
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    Great article. I strugle with the private practice structure of my profession ophthalmology. It is a very competitive residency in the US, however when we come out of residency we make very little on average $150,000. After 1-3 yrs you can make partner, but for that privledge you likely need to come up with $100,000-150,000. Not to mention most people graduate with $200,000 student loan debt. On top of this if senior partner decides to retire you have to buy him/her out. This can make for a cash flow nightmare, and tons of debt. It just seems this model is less appealing than taking a structured base pay, with less ceiling than private practice but less risk and overhead.

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    • May 21, 2017 at 5:40 PM
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      Thanks! I completely agree with you. In internal medicine, hospitalist is the newer field that a lot of graduates tend to enter into. Many of these jobs can pay as high as $300,000 or more per year. Some hospitalist jobs have new graduates work one week on and another week off. The weeks on are brutal, but the weeks off make up for it in some cases.

      Choosing to enter into a field with guaranteed pay right after graduation is great for paying down debt and helping ensure new graduates have quick cash flow. However, burn out is high and buy in’s are very high with few choosing to do so in my area.

      The trend for physician owned groups decreasing is upsetting. When physicians leave the head table that also means that many of the decisions that affect day to day practice are not made by the physicians, but the owners. These owners could be anyone, including individuals who do not have an MD or know what its like to actually practice medicine. If we (physicians) want a say, we have to take ownership of our own groups. Like you discussed above, its hard to do with $200,000 in student loans and a 6 figure buy in. I know its a little idealistic, but I choose to explore this field by becoming an owner while taking a risk on a new career in the future.

      Reply

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