A physician’s decision of whether to hang out a shingle and open a private practice or go to work for a health care system or medical practice group as an employed physician is not unlike the decision faced by talented and well-educated professionals in many other fields. Often, these individuals must decide between joining an established corporation and enjoying the security of a steady salary and fringe benefits — or striking out on their own as a self-employed consultant or entrepreneur.
If you currently own a private medical practice, you don’t need anyone tell you about the difficulties of operating a practice in today’s post-healthcare reform world. On top of the ordinary challenges and expenses involved in operating a private practice, there are long hours, soaring malpractice insurance premiums, high office overhead, expensive equipment, dealing with insurance companies … the list goes on and on.
So you’d certainly be forgiven if, every now and then, you start wondering if the grass might be a little greener on the employed physician side of the fence. There has been a 75 percent increase in the number of physicians employed by health care systems and medical practice groups since 2000, according to theMedical Group Management Association (MGMA) — so if you’re considering a change, you’re certainly not alone.
Weigh the Pros and Cons
But such an important decision is not one to be made in haste. There are benefits and drawbacks to both options, so take the time to carefully think through these and other factors as you weigh the private practice vs. employed physician decision for yourself.
- Financial security - In the Employed Doctors Report 2014 compiled by Medscape, “greater financial security/less risk” was the top reason listed by physicians who left private practice to work for an employer. While employed physicians usually do have the security of a steady paycheck and benefits, this security isn’t always as solid as it seems. Many employment contracts allow either the physician or employer to terminate the agreement with six months’ notice.
According to Mercer’s 2012 Highly Compensated Physicians Survey, the following employed physician specialties currently offer the highest income potential:
- Non-invasive cardiology
- General orthopedic surgery
- Neonatal medicine pediatrics
- Compensation - Just like any business owner or entrepreneur, your income potential as the owner of a medical practice is virtually unlimited, at least in theory. This is one of the main appeals of private practice to many physicians, especially those who are entrepreneurially minded. But the flip side, of course, is that during lean times, your income will likely take a hit.
Some experts are predicting a shift at health care systems in the future, away from guaranteed salaries toward incentive-based comp that’s tied to productivity and clinical behavior. Such systems would feature lower base salaries but the opportunity to potentially earn more via bonuses and incentives. In the Medscape report, an equal percentage (46 percent) of employed physicians is paid a straight salary and a salary plus productivity targets.
- Control - If you like being in control of all aspects of running a practice, making decisions yourself, and not having a “boss” looking over your shoulder and telling you what to do, then being an employed physician might not be right for you. In the Medscape report, “limited influence in decision making,” “too many rules” and “being bossed around” were three of the top five things former practice owners most disliked about not being self-employed.
You have to decide how important having the final say on all aspects of practice management and patient care is to you. Acquiring a seat on a governing board as part of an employment contract could give you back a degree of control you’d be giving up as an employee.
- Workload and schedule - If you have owned a private practice for any length of time, you know how unpredictable and crazy your workload and schedule can get. As an employed physician, you will likely have a schedule that’s at least somewhat predictable and a workload you can somewhat control.
Working more regular hours and having no (or limited) night call duties were among the factors that employed physicians in the Medscape survey said they liked most about being employed. Many younger physicians, in particular, place a high value on maintaining a healthy work-life balance.
But Who’s Happier?
Interestingly, in the Medscape report, virtually the same percentage of employed physicians and physicians who own private practices said they are satisfied with their job: 73 percent and 74 percent, respectively. A slightly higher percentage of physicians who own private practices (65 percent) said they are satisfied with their current practices situation than physicians who are employed (59 percent).
Perhaps most tellingly, only 49 percent of physicians who left private practice for employment said they are happier now. But 70 percent of physicians who left employment to open a private practice say they are happier now.
In the end, only you can weigh these and other factors to decide which employment option is best for you.
City National Bank has strong experience serving the healthcare industry. No matter the size of your medical practice, we offer a range of financing, collection, payment and cash management solutions to meet your needs. Let us suggest new ways to help manage and grow your practice.
City National Bank's Healthcare Services Team provides specialized lending, account and treasury management solutions to meet the unique needs of the healthcare industry. Give us a call at (800) 773-7100 or contact us and request that a Relationship Manager contact you.