Private Practice: The Pros & Cons of Self-Employment
Published on: Oct 18, 2018
Working in a hospital can be very attractive to many physicians: the regular guaranteed salary, the pension contributions, the holiday and sick pay all add up to a compelling package. However, a recent Medscape report found that self-employed physicians are more satisfied than employed physicians (63 percent vs 55 percent). It suggests that employed physicians dislike the lack of autonomy, the limited income potential and limited influence in decision-making.
By contrast, their self-employed counterparts in private practice, enjoy the flexibility and greater autonomy in decision-making, particularly concerning income potential. “Being a solo practitioner and trying to run an efficient practice allows me to not have to see the large numbers of patients on a daily basis that my employed colleagues are faced with,” says J. Scott Litton Jr, MD, a private practitioner. “Patients are scheduled for 15- and 20-minute slots and gaps are purposely left in my schedule to accommodate the same-day call-ins. While this can be a very stressful day-to-day workflow, it is nonetheless very rewarding at the end of the day.”
Greater Satisfaction in Private Practice
Physicians working in private practice will typically draw a salary on a monthly or quarterly basis based on the practice income after all expenses – such as rent, staff and administrative costs – are paid. This gives a self-employed physician greater control over their income; they can choose to work longer hours to provide an evening or weekend service to their patients, for example. Writing for the American Academy of Family Physicians (AAFP), Peter Rippey, MD, makes the case that, “In private practice, I also get to decide what hours I work, what procedural services I provide, what my scope of practice is, when I take vacation and who I have assist me.” He also points out that private practice can help to plug holes in medical provision and provide an important service for patients. “Private practices are a vital means for health care access, especially in rural areas (where) the next closest option may be more than an hour away,” he says.
However, Rippey also recognizes that “the uncertainty of the health care landscape as the Patient Protection and Affordable Care Act continues to be implemented – along with the challenges related to payment, electronic health records (EHRs), meaningful use and ICD-10 looming on the horizon – seems to have spurred a mass exodus from private practice to employed positions.” In fact, the AAFP states that more than 85 percent of new physicians are employed.
The significant capital required to set up in private practice and the lack of financial certainty, especially in the first few years, do act as considerable barriers to new physicians who would like the autonomy and flexibility private practice can deliver. Some experts estimate that set-up costs alone can total somewhere in the region of $70,000 to $100,000. The American Small Business Administration estimates that 50 percent of new businesses fold within the first five years, this represents a serious financial risk for the would-be self-employed physician.
The costs of private practice
Any physician that is considering investing in a private practice would be well advised to seek expert financial and legal advice at an early stage.
The costs associated with setting up a private practice must include:
- Malpractice insurance
- Rent or mortgage for premises, as well as any redecorating costs
- Computer, records and accounting systems
- Basic office equipment and furnishings
- Sales and marketing costs, including signage and advertising
- Medical equipment and supplies, although the cost of this can be reduced by opting for “gently used” equipment until the practice is clearing a profit and it can be replaced for new
- Staffing costs
- External consultancy costs, e.g. tax and legal advisors
- Tax liabilities
- Professional development and other professional and medical credentialing costs
By assessing and planning for these complex costs a physician running their own private practice needs to be well versed in finance, human resources and business administration – as well as their own medical specialty.
Being your own boss
If HR, marketing, finance, facility management, and revenue cycle management don’t hold much appeal to you as a physician, then private practice is probably not for you – unless you find yourself to be an experienced office manager.
However, Mark A Rosen, MD, argues that, “if you are entrepreneurial and enjoy the business of medicine, including being a team player, taking risks, having a 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.”
Not only do self-employed physicians have greater decision-making freedom, they can swiftly respond to events, office dynamics, medical treatments and trends because they are less hampered by bureaucracy than large healthcare groups.
This freedom might be realized in many ways: from sponsoring local sports teams, through to offering a sliding fee scale based on a patient’s ability to pay. Building up a strong relationship with the local community in this way then enables the physician to enjoy a high patient retention rate, boosting profits and morale. You are free to decide which direction you want to take your practice because you are the boss.
The Pros and Cons of Private Practice, J. Scott Litton Jr, MD, Physicians Practice; January 27, 2012 - physicianspractice.com
Employed vs Self-employed Physicians: Who's Happier? These Are the Tradeoffs, Leigh Page; Medscape Business of Medicine; June 14, 2016 - medscape.com
Private Practice Has Its Rewards, Challenges, Peter Rippey MD, American Academy of Family Physicians; March 3, 2014 - aafp.org
Going solo: Start-up basics, Ken Terry, Medical Economics; May 09, 2003 - medicaleconomics.modernmedicine.com
Private practice vs. salaried employment: A complicated decision, Orthopedics Today; January 2011 - healio.com Many employed physicians dislike the lack of autonomy, the limited income potential and limited influence in decision-making.