Private practice vs. salaried employment: A complicated decision

For physicians still adapting to a health care environment in flux, the decision to become a salaried physician with a larger group or hospital can be seen as one way to escape increasing administrative burdens or achieve a more satisfactory lifestyle. The potential benefits of private practice are numerous; however, unseen problems inherent in both options could prove costly in the long run if proper attention is not paid.

John A. Bergfeld, MD, FACSM, works with the Cleveland Clinic in Cleveland, Ohio — one of the foremost models for the salaried employment structure — and told Orthopedics Today he feels the advantages of the large, salaried group structure are many.

“I do not think we are that much different from a small group of 10 surgeons, but there are lots of advantages,” Bergfeld said. “I am paid a salary, which I negotiate every year … that does not mean I am not strictly cost-accounted — I and the clinic know what my contributions are — but I do know what I am going to make, and I can negotiate that.

“If I am not happy with what I am being paid, I can challenge that,” he added. “Often, a challenge that is presented right will result in more money.”

Money and lifestyle are only some of the dynamics to consider when it comes to determining what path to take, Jack M. Bert, MD,explained to Orthopedics Today.

“There are multiple factors that require analysis when a fellow or resident is trying to determine if he wants to go solo, join a small practice, join a larger orthopedic group, join a multispecialty group, become a hospital employee or join an academic practice,” Bert said. “It requires significant personal introspection to decide which type of employment will fulfill the physician’s expectations.”

The shift toward salary

Regardless of the difficulties inherent in making a decision, physicians have noted a definitive trend toward salaried employment. It is a trend being pushed from both sides.

“The fallacy in many cases is that this has been portrayed as an issue where hospitals are out there aggressively looking to purchase practices to gain market share, and in reality in many cases physicians are looking to sell their practices to hospitals to get out from under their administrative burden and their rising overhead,” Kevin J. Bozic, MD, MBA, said.

“It is a complex issue because it depends on the circumstances, but the big picture is that physicians have been feeling squeezed by rising overhead, flat reimbursements and increasing administrative and regulatory burdens — and they really like the thought of being able to outsource their practice management to someone else … and focus on patient care,” he added.

A hospital seeking employed specialist physicians may be looking to stabilize their medical staff and have a consistent number of specialists among varying clinical disciplines, cover emergency room call, provide indigent care (which is a requirement for not-for-profit hospitals), rationalize large capital investments (such as electronic health records), control operating costs and implement quality initiatives through better alignment with their physicians and prepare for anticipated changes related to health reform, including accountable care organizations (ACOs) and bundled payments, Bozic added.

Hospital-physician partnerships are far from the only option, however, as the shift away from small private practice continues to grow and further possibilities are explored.

“There is a definite trend for physicians to be salaried as part of a foundation, large clinic or governmental agency,” said Douglas W. Jackson, MD, chief medical editor of Orthopedics Today. “Currently, the salaried positions are competing against the fee-for-service (FFS) model. If the number in FFS decreases, the amount paid for the salaried positions will decrease. It is simply whatever the supply and demand is for the salaried positions.”

Younger physicians pushing the trend

According to Bergfeld, younger physicians and residents just entering practice are a significant part of the trend toward salaried employment, as many of them are opting into positions where they know they can cater to needs that differ from those of previous generations at similar walks of life.

“I think there is a whole different culture compared to 20 years ago,” Bergfeld said. “Almost all of the residents coming out now are married, almost all of them have children. Lifestyle is very important to them.”

“Their argument is they have to have some family time,” he added. “I think they carry that over when they decide to go into practice. They are looking for a group because the group can allow them to do that.”

Consistency of hours and a lifestyle that is easier to digest are palatable to these younger physicians, Jackson said. Additionally, not having to face the uncertainty or troubles associated with starting one’s own practice can look much better than the alternative.

“My recent experience is that many of the young orthopedic surgeons want a guaranteed income, immediate patient load, less night and weekend work, and they do not want to take on the risks of their own business and the uncertainties of changes in medicine,” Jackson said.

Given recent health care reform and numerous changes to regulations, a physician looking to set out on his or her own could find the situation is more difficult than he or she had envisioned.

“In today’s environment, going solo may be risky unless the physician is the only surgeon in a small town not serviced by any other orthopedists or a hospital-employed model,” Bert said.

Is money a factor?

For those who do not think those risks and uncertainties are enough to warrant opting away from private practice, the money typically associated with being in private practice can be a significant benefit.

“If they are highly organized, they are going to make more money,” Bergfeld said. “A doctor working in private practice gets a much higher percentage of his gross income than the group does. With the group, you are paying administrative personnel. The private practitioner does a lot of that work himself, and he does not have to pay anybody to do it.”

Bergfeld added, however, that many of the governmental and insurance regulations coming down the line are forcing private practitioners to hire administrative personnel to shoulder that workload. Furthermore, he said, the gap in earnings between private practice physicians and those working within a group has started to shrink.

“I think that gap is narrowing,” he said. “It used to be my colleagues in private practice made double to three times what I make. I do not think it is that way anymore.”

Bozic said he does not feel money is as big a factor in the decision between private practice and hospital-based employment as some might think, as hospitals often offer large signing bonuses and salary guarantees early on to help them attract physicians.

“For employed physicians, one of the things they like most about being an employee is the income guarantee and stability,” Bozic said.

Private practice pros and cons

For salaried physicians who are comfortable with the lifestyle their pay affords them, Bozic said one of the most challenging aspects of the partnership or employment can be a loss of autonomy.

“In general, physicians tend to be independent, autonomously functioning people who do what they believe is in the best interest of their patients,” he said. “There is a feeling, right or wrong, that somehow being an employee gives you less professional autonomy and therefore less ability to control your own destiny — and that of your patients.”

These physicians, according to Jackson, “are not deterred by starting their own business and taking some risk.” They view the risk and potential increase in work as an acceptable cost for full independence.

That independence can allow physicians to determine their own courses of action regarding the hiring of staff, management of business and development of a successful practice.

“However, there are many difficulties associated with solo or small group employment,” Bert said. “They include secured payor contracts with other groups or HMOs in the area that may exclude [a physician] from seeing a large percentage of patients, significant competition which could decrease patient volumes, and difficulty in taking emergency call and patient coverage when [the physician] is out of town.”

Individual freedoms are one aspect — trust is another. Physicians who remain in private practice may simply not feel comfortable putting together a partnership.

“I think they feel they may not get a fair deal with someone else,” Bergfeld said. “That is what has broken up a lot of groups: The guys are good orthopedic surgeons, they just do not trust each other or feel they are not getting a fair deal. The skeptical ones figure rather than getting into all that, they will just make what they make on their own.”

What to watch for when signing on

Bozic cautioned that hospital-physician partnerships can deteriorate when expectations and accountability on both sides are not well defined up front. A physician may enter into one of these relationships expecting secure compensation and a better lifestyle with more sensible hours while the hospital aims to maintain their volume and/or build their market share with proper control. In order for a hospital-physician partnership to be successful over the long run, there needs to be sustainable value creation that results in higher quality, more cost-efficient care for patients,” Bozic said. He added that paying close attention to the metrics of success for both parties, and appropriate consideration of the legal aspects of the contract, including exit clauses for both parties, is essential for long-term success.

Another potential advantage of hospital-physician partnerships is delivering a more integrated care experience for patients. “Many patients do not realize that doctors and hospitals are often separate business entities,” he said. “They assume that everyone is working together to provide them a seamless care experience. Being more closely aligned with the hospital can allow a physician to do that.”

Access to better technology and the ability to streamline care are both major advantages to a partnership, Bozic added, but “the overall goal has to be to improve quality and reduce costs of care through a more seamless integrated care experience.”

Becoming a hospital employee, Bert said, comes with its own set of issues — and these must be discussed prior to any partnership being set up. These include salary determination, no-compete clauses, termination clauses, terms of buying into the partnership and ancillaries, and more.

“Last year, 62% of sports medicine fellows became hospital employees,” he said. “The terms of employment are attractive initially with high salaries, no apparent business concerns, the potential for an immediate patient referral base and an office with employees. However, one of the major complaints of hospital-employed physicians is a lack of control over the environment.”

“Keep this in mind when negotiating salaries and block times at the hospital,” Bert said. “Similar questions need to be asked when joining a multispecialty group or HMO. Do not be afraid to involve a health care attorney to review your contract prior to a final agreement.” – by Robert Press

• John A. Bergfeld, MD, FACSM, senior surgeon of the Cleveland Clinic Sports Medicine Program can be reached at Cleveland Clinic Sports Health, 9500 Euclid Ave., E-21, Cleveland OH 44195; 216-445-4836; e-mail:bergfej@ccf.org.
• Jack M. Bert, MD, can be reached at Summit Orthopedics Ltd., 17 West Exchange St., Suite 307, St. Paul, MN 55102; 651-842-5220; e-mail:bertx001@tc.umn.edu.
• Kevin J. Bozic, MD, MBA, can be reached at University of California, San Francisco, 500 Parnassus, MU-320 W, San Francisco, CA 94143; 415-476-3320; e-mail: bozick@orthosurg.ucsf.edu.
• Douglas W. Jackson, MD, can be reached at Orthopedics Today, 6900 Grove Road, Thorofare, NJ 08086; 856-848-1000; e-mail: OT@slackinc.com.

What are the advantages and disadvantages of starting or maintaining private practice in the modern environment?

Craig Tifford

Benefits of being an employee

There are many advantages to working in the hospital setting. You lose the overhead issues – all of the administrative ups and downs that come with running a private practice. There is a salary guarantee. What is really driving people out of private practice, though, is the uncertainty and the payment. I believe that payment in the future is going to be directly linked in some fashion to being part of an integrated network. With most private practices, there is none of that.

This whole thing with health care reform means nobody knows what is coming, but I think what people do know is that private practice as it exists today is going to become increasingly difficult to sustain – if at all – 8 to 10 years from now.

In some states there are already bundle payments for several orthopedic procedures where the institution is getting a lump sum of money that then needs to be doled out between the provider, the hospital, the radiology services, the lab – everything. The far spectrum of this would be the accountable care organization (ACO) realm, where it would be absolutely necessary for providers to be a member of the ACO to be paid at all. Whether or not that is going to become a reality, nobody really knows, I know but our hospital is trying to position and jockey itself so it can be as nimble and mobile as possible because of all the uncertainty.

Craig Tifford, MD, is a board member of Stamford Health Integrated Practices.

Mark A. Rosen

Private practice offers control

The decision about where to practice should involve a lot of input from your spouse and consideration about where your family will be happy. Once the geographic place to practice has been determined then there are considerations about the style of practice.

Private practice in a large orthopedic group gives one more control over how one practices. This includes control over the physical set up, the computer system, employees, which patients are seen and how they are treated. There are challenges of nurturing referral sources and partnering with hospitals for mutually beneficial outcome.

Physical control over the office is definitely easier in private practice. A friend of mine, who worked for a hospital, wanted a new chair. He had to fill out requisition forms and justify the new chair. It took months and he got turned down the first time through the process. In private practice if you want a new chair you can usually get it that afternoon.

Another physician who worked for a multispecialty group wanted two medical assistants to improve his productivity. The powers that be told him “no” even though he made a convincing case for an additional employee. This also applies to such items as injections, bracing, and casting materials. Generally, in private practice you can tailor the practice to optimize your efficiency and fill your desires to practice medicine.

When you are in charge you may decide that it isn’t advantageous to participate with certain insurances, but as an employee you may be told who you will see. That decision may be based on the economic benefit to whole hospital system which is a disadvantage to you. It may be compounded when the next year your salary is decreased because your practice is being filled with certain patients by your employer. In private practice you can make decisions based your interests and not those of an entire health care system.

In private practice you may have an office manager with an MBA who can gather information that can be valuable in negotiating with hospitals and insurance companies. If you are employed by a hospital group the practice administrator’s loyalty may be much more to the hospital administrator than to you.

If you don’t like the way things are running you can generally look in the mirror for the culprit. You will have to work with your partners and learn to compromise, but that process is often easier than working with employer who has a multitude of other concerns Choosing your partners can be like a marriage, so you better choose wisely.

Finally, if you are more entrepreneurial and enjoy the business of medicine including being a team player, taking risks, having vision of the future and the marketplace, and negotiating with others, you will enjoy private practice. It isn’t easy but some of us find it rewarding.

Mark A. Rosen, MD, is in private practice in Murray, Utah.