Why Doctors Stay Employees Rather Than Owners

In 1980, almost 80% of physicians owned their practice or were partners in their practice and effectively co-owners. In 2016, that number dropped to almost 45%. Each year, it seems that another 3-5% of doctors choose to become employees rather than owners in their practice. The trend away from physician ownership in practices is quite disturbing. Without ownership, we are at the mercy of administrators or other physicians telling us how we are going to practice medicine (to a certain degree).

Owning your own practice is not for everyone. I’ve started my own practice, and although it was rewarding, it sure has had its struggles. I do believe those that becoming an owner in a good group is key to financial success later in life.

Almost every doctor should strive to become a partner or owner in their practice. Without having ownership, you are constantly at the mercy of your group with little say in how the group changes over time.

 

Insurance Companies Make It Difficult

Those of you who have been reading my journey about starting up my own practice know I love to complain about Aetna. They took 9 months to get me in their network, and recouped about $30,000 in claims from me.

Insurance companies have made such a huge barrier to join them, that many doctors can not take the financial risk of trying to go all in and get in network on their own. While waiting to be in network, a doctor has to rent a space, and then applying for in network status with insurance companies. All the while, paying rent and overhead for a practice that is not in network with insurance companies.

They make it difficult and that is most likely for a reason. To delay payment in the hope that the doctor will most likely eat some payments as out of network claims that patients will most likely never pay.

I’ve been credentialed at 9 other locations or groups with insurance companies. I have passed numerous exams, I am board certified, yet every time I practice at a new address or open my own practice, I have to start the process all over it seems.

Even when I went from just me practicing medicine to another doctor practicing medicine with me in my practice, my contracts had to change. I was no longer a contract as a solo provider. I had to re-write all my contracts as a medical group. This took time and delayed the start date of the physician joining me.

Insurance companies make it difficult to go out and start a new practice. The headache of hours on the phone with insurance companies is a huge barrier during credentialing to put many doctors off from taking the leap.

Surprisingly, Medicare was the easiest for me to join and easiest for me to add another provider. They also were the only payer that back dated claims to my application date rather than only approving claims after the approval date.

 

Student Debt

The average physician now graduates with around $250k in student loans. Many of my friends have around half of a million dollars in student debt.

For these physicians with student loans, it is a hard sell to tell them to risk everything to start-up a new practice while they still have rent/mortgage to pay, living expenses, and a huge student debt payment.

For students who have student loans, it makes it near impossible to start-up your own practice right out of training. Very few brave individuals will do locums shifts to pay the bills until the business is up and running. However, for many with families it is hard to do to fly to another city or state and work there while also trying to set up a new business.

Student debt will be one of the greatest threats to entrepreneurship or business ownership for physicians.

 

Local Monopolies Around

In some cities, the market for many doctors is saturated. For example, in the city where I currently live, there is one massive GI group, one massive urology group, and one massive orthopedic group. Yes, there are other small groups but they hardly see probably 10% of all the other patients in town.

While other groups do exist, the large group often times will make it very difficult to get hospital call shifts, or break into the market for solo or small practices. Many times these groups have quite a bit of power and much more money to advertise online. They can potentially have the manpower to take all the hospital GI call and leave a small group scrambling for just a few nights of call at the large hospitals. A surgical group may monopolize all the OR time leaving independent surgeons or smaller groups having a harder time getting the time spots they want.

These groups also usually have stiff non competes. When those doctors who were with the large monopolies leave these groups, they find themselves basically unable to practice medicine in the city and forced to move.

Local monopolies make it very difficult to break into new markets and daunting to set up a new practice in one of these saturated cities.

 

Doctors Stay Employees And Give Up Administrative Tasks

 

Doctors are also complicit in this trend away from physician owned practices and not just the victims. In my opinion, the average physician seems to want nothing to do with the administrative side of medicine and wants to only practice medicine. We have given up our seats at the decision table in an effort to provide patient care.

What we did not realize in doing so, was that MBA’s who have never practiced medicine were happy to step in and find ways to increase productivity. Words like “throughput” and “patient satisfaction” have become some of the most important metrics.

We have lost sight on the fact that providing patient care means sitting at the administrator table from time to time to talk about policies that affect patient care or physician well-being.

We need to step back up into these roles and have another say in how medicine is practiced.

 

 

 

One thought on “Why Doctors Stay Employees Rather Than Owners

  • January 6, 2020 at 1:44 PM
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    Great post. I’ve experienced 1st hand the barriers that the insurance companies place on becoming credentialed. I’ve been in independent private practice for 4 months and have been rejected from 8 major insurers with the exception of only Medicare after over 6 months of back and fourths with the insurance companies. I’ve even reached out to my state medical specialty association regarding this who agree that it’s been a major barrier towards physician independence.

    Reply

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