Why Being A Small Medical Practice Is Not Sustainable

Business is tough and the business of medicine is no exception to that rule. As my practice grows, I have come to realize one truth…staying a small traditional medical practice is not sustainable. No, this post is not me announcing that I am selling out. Instead, it is a realization that growth needs to accelerate. The larger my practice gets I get to realize this one truth: You will either need to grow your traditional insurance based practice or shift to a different model if you want your business to stay alive.

Small traditional commercial insurance-based practices are going to have a very hard time long term to stay independent and small. The squeeze is occurring in several ways. Ranging from insurance companies not wanting to pay reasonable rates to increase cost to practice medicine. In an effort to stay small, DPC for many has been the answer for many small primary care practices. While that can have its advantages, DPC is not for everyone.

Finding the right growth rate can be tough for those who take insurance. Figuring out how much to financially extend myself to foster growth is the struggle that occurs monthly when I review business plans going forward.

Here is why I find it tough to stay a small independent clinic.

Staying A Small Medical Practice Is Not Sustainable

When I was subleasing for my independent practice, I actually found it harder to thrive as a business compared to where I am now with several doctors working for me.

The daily grind of me worrying about every task that needed to be done was overwhelming.

When I had one employee, if that employee needed time off, then 100% of my staff was out for the day. This left me to answer phones, check faxes, and treat patients. If my website went down, I would have to trouble shoot why that happened in between patient visits. I also would have to worry about buying supplies, doing inventory, and patient satisfaction.

Exhausting With No Time Off

When I needed time off for my honeymoon, I had to beg another private practice doctor to cover my patients for any emergencies. I also had to pay them a hefty fee to cover my panel while I was off. Now that I have other doctors working for me, taking time off is not as much of a concern.

When you are solo, there is also no negotiating with insurance companies. It truly is a take it or leave it situation with their payment rates. The larger I get, the more leverage I have. Even if that leverage went from none to barely any in terms of negotiating room. See my recent post about getting an insurance rate increase.

It seems that our industry is not alone in providers who may struggle to stay small.

Mars Corporation Buying Into Veterinary Practices

The corporatization of medicine extends beyond humans. It now includes pets.

The candy company, the same one that makes Snickers, is buying up veterinary clinics. In 2020 they bought a British group that has 5 specialty vet clinics for $133 million dollars.

While it might seem strange, Mars corporation started to diversify several years ago by manufacturing pet food. In 2021 their company has almost as many pet food brands as they do candy offerings.

It seems that Mars or other VC companies that are buying up these practices are not interested in the 1-2 practitioner practices. They are simply too small to make any use of out them. They are too small to invest into and there is too much risk of the one doctor simply cutting back on work or stop working.

My friend who is a veterinary doctor tells me that the current cycle is:

  1. Start a vet clinic and have 1-2 veterinary doctors on board.
  2. Team up with other small vet clinics in the same area to create a slightly larger group.
  3. Grow that business and then start looking to get bought out by a large group like Mars
Drone picture of my hometown from the sky

Economy of Scale

Some of my fixed costs can be split amongst other doctors in the group, leading to much bigger profits.

  • Equipment costs (ekg machine is used by all doctors, not just me).
  • Internet, air conditioning, janitorial services.
  • Now that we are a medical group, we get discount purchases from McKesson and Henry Schein as much as 25% lower than when I was solo.
  • Staffing costs. My biller not only does my billing, but the 4 other providers billing too.
  • Other options for patients who are seeing our group. If a patient wants to see a woman rather than a man, we have more options for patients. If someone does not like me for some reason, they can switch to another doctor in the group.

Growth In All Ways

Growth of the clinic has to be on an owner’s mind at all times.

We not only plan on how to grow our patient panel, but plan to grow our cash pay services, plan to expand into new markets, and plan to grow in types of problems that we treat.

Staying small and not growing is a recipe for burn out physically, emotionally, and monetarily.

While the medical industry is seeing a dip in private practices, we are also witnessing a huge dip in cost to start up a medical practice.

It used to cost many thousands of dollars to set up a EMR. Now, this can now be done online via month-to-month contract for less than $200 a month. There are platforms such as Doximity or Doxy.me that even have free video HIPAA compliant services to provide virtual visits.

We are entering a time where technology has made many of these premium services 10 years ago now offered for free at no cost to the doctors office. This should make the barrier to entry lower for doctors and hopefully help spur more private practice growth.

Erosion of Cost To Provide Premium Services

Some of those businesses who revolutionized how we electronically started to practice medicine are stuck a bit in the past (my opinion).

Let’s look at ZocDoc who was arguably one of the first to offer a way for patients to go on the internet and book appointments with doctors from a variety of clinics in a variety of cities.

This was huge 10 years ago when most clinics did not have patient portals or a way to book doctors visits online. Now, every office has a way to book appointments on their website quite easily. This premium service that would cost hundreds of dollars a month, is now free with almost all EMR. Not to mention, I don’t have to have near as many staff members answering the phone since bookings now mainly occur online.

Appointment Reminders

The same can be said for appointment reminders. When I started my clinic, there was a huge plethora of companies providing ways to integrate with your EMR to have reminders. One company, Updox, was charging hundreds of dollars a month to do this. It made sense back then. Patients who do not show up cost your clinic money.

Now, pretty much every EMR has it built in for free text or email reminders at no extra cost to you. It is now free in our EMR.

While it seems like everything is moving towards a monthly subscription, we are seeing some erosion of the pay for previous premium services in the medical industry. This is excellent news for smaller practices who cannot afford a developer to code an app just for their clinic.

Why I Did Not Choose DPC

DPC, or direct patient care, is an enticing alternative to small insurance based traditional practices.

I chose not to venture into DPC territory. The reasons for this are as follows:

  • I have no desire to be on call for my patients 24/7. I also want partners to split the call schedule. It is hard to grow a DPC large enough to have numerous physicians to split the call schedule. This would take years.
  • I personally am not interested in the slow growth that accompanies DPC practices. It is not uncommon for us to see 400+ new patients a month at this point.
  • The benefits of DPC for patients are arguably eroding. Now that insurance companies reimburse video visits and phone visits…it is harder to claim this as a huge advantage of DPC types of practices for improved access to your physician.
  • With billing changes in 2021, it has made it so that essentially almost all visits will be a level 4 visit or higher, leading to more reimbursement and less time documenting in order to get paid. Again a huge benefit previous to DPC was not having to have the bloat that came with insurance documentation.
  • Due to cost decreases in the industry, we can offer texting, video chats with our patients for free to them at no extra charge. This has become the normal for almost all big clinics with pretty much every doctors office now having a portal where the doctor can be reached electronically.

DPC Will Always Have A Place

There will always be a place for DPC for certain individuals. There are a ton of DPC practices that are thriving, with physicians who love what they do and do a great job at it. I am not trying to knock DPC as a service that is not worth it. I am simply saying that DPC does not fit into my business model of what I want our practice to be. The benefits of DPC are mainly lifestyle for the physician and more one on one time with your doctor. It is hard to beat that and that is a huge reason why DPC will be here to stay for select practices.

Starting The Process To Open A Third Location

Next week I meet with a developer to talk about opening a third location. I have begun talking to other doctors and physician assistants in an effort to plan to staff this new location.

We must keep growing, keep learning, and keep kick ass by making patients as healthy and happy as possible.

This past week marks a milestone. Three years since I first opened my office doors.**Keep in mind that I may have opened Summer 2018 but went full time January 2019**

We had our first greater than $20,000 insurance payment day. We are now seeing over a thousand patients a month. Our practice continues to grow week over week and I could not be more excited about what the future holds.

8 thoughts on “Why Being A Small Medical Practice Is Not Sustainable

  • July 12, 2021 at 8:36 AM

    Congrats on your 3rd location! You are 100% correct. I have been trying to grow my solo MD medical practice for 1-2 yrs (during a pandemic) and it has been a struggle. The long and short of it is that insurance companies refuse to contract with us and those that do barely pay enough to cover overhead. We are now exploring a direct to cash aesthetics model (Botox, fillers, laser hair removal etc). In a world where good PCP physicians are needed it’s sad to say that the big insurance corporations have made it almost impossible to exist independently.

    • July 12, 2021 at 3:52 PM

      Totally agree that commercial insurance has made it almost impossible to thrive as a solo primary care practice. Small insurance based practices will have to adapt and I love to hear that you are looking to adapt to broaden the way you can bring in revenue for your business.

      Growing a practice during the pandemic has been tough. No one wanted to be in a doctors office during a pandemic and be at risk being around other sick people. Many practices have seen a drop in patient visits as a result.

  • July 12, 2021 at 8:51 AM

    If you don’t mind sharing, what kind of employment structure do you have with the docs you hire? Are there talks of partnership or more along the lines of base salary + incentive bonus?

    • July 12, 2021 at 3:49 PM

      I offer production base vs lower salary plus production base. I lay it out for how if they take production based contract that I’m willing to put more in their pocket since they take risk of my hands with a buy in potential discount. So far, everyone has taken that option over guaranteed salary plus production. Win-win for both of us since my financial obligations then are much lower and takes a lot of the risk off my plate.

  • July 12, 2021 at 7:39 PM

    May I ask what EMR system you use? We are part of the group that were revolutionaries and now paying through the nose now.

    • July 13, 2021 at 8:19 AM

      We are using practice fusion and PM aspect is with Kareo. PF is $150 a month and Kareo is $330.

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  • July 28, 2021 at 3:57 AM

    This post is really inspiring for me. As a medical student, I’m a bit confused because I’m ready to prepare to find job next year. Thanks!


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