Physicians as Employees or Employers?

Where and how doctors choose to work has changed dramatically over the years.

A majority of physicians used to also be business owners, but this is no longer the case.

In 1983, 76.1 percent of practicing physicians owned their own practice. By 2012, that number had dropped to 53.2 percent, and by 2016, it dropped for the first time to less than half (47.1 percent), according to data collected by the American Medical Association. The same percentage of physicians were employed, while 5.9 percent were independent contractors.

The number of physicians in solo practice is even lower. A solo practice is one in which the physician practices alone, without partners or other affiliations, usually with limited administrative or clinical staff. The solo practitioner handles all aspects of the practice, from patient care to paperwork, regulatory compliance and financial management. Today, only about one in five residents chooses a solo practice.

“Fifteen years ago, 60 percent of the physicians were in solo practice compared to about 10 percent today,” says Dr. Patrick Waring, founder of the Pain Intervention Center in Metairie, which provides advanced interventional spine pain management therapy through minimally invasive procedures and techniques instead of potentially addictive drugs.

Waring is among the now-minority percentage of physicians in solo practice. He says that while he bears the worries and costs of staff personnel management, facility maintenance, and compliance with government and third-party payor regulations, he also has “the satisfaction of helping to produce a clinical environment that our patients have come to appreciate and expect.

“As a solo physician, I realize that I am only as good as my staff,” he says, adding that he feels fortunate to have kept the same staff for his 15 years in practice. “The consistency and strength of this core group have been the key ingredient to the success and reputation we have enjoyed.”

While he may not share a space with other physicians, Waring says he does enjoy referral relationships with other private-practice physicians, especially neurosurgeons and orthopedic spine surgeons, to whom he refers patients from whom he also receives referrals, even though there is no formal business relationship.

“One advantage of my practice is that I have no obligation to refer to a specific physician or imaging center because of an employment arrangement or other business relationship,” he says. “Outside of my practice, I have no ownership of any imaging center or therapy practice or any other clinical entity.”

The Move to Group Practices

For those looking to be a part of a team of physicians sharing a business, private practices are organized into a corporate model where the physicians are shareholders, or where one or more physicians own the practice and employ other physicians or providers. These practices are almost exclusively for-profit. Physician practices are organized into corporations for the tax benefits, as well as to protect owners from liability judgments.

For many physicians, however, their role is now employee, not employer.

“Traditionally, it was common for physicians to own their own practices,” says Kevin Schneider, president of Paradigm Health System, a boutique practice focused on brain, spine and orthopedic care with offices in Slidell, Lacombe, Mandeville, New Orleans East, and Metairie, as well as Sterling Surgical Hospital. “Over the last 15 years it has become in vogue for hospitals to employ physicians. So now when a physician is out of school, it is my experience that about 75 percent are employed by the larger hospitals versus joining a private practice. This is because it is becoming harder to be financially viable in a solo practice. Also, the external pressure creates a lot of stress.”

Group practices, both single- and multi-specialty, make up the majority of private practice settings. As the name implies, the environment is characterized by the sharing of patient care duties and physical space. Group practice is generally viewed as less volatile than solo practice and more likely to afford a controlled lifestyle.

“Most hospitals take the stance that in order to be profitable they need to see as many patients as possible coming through the door,” Schneider says. “So, they employ the gatekeeper i.e. the doctor and offer all medical service under one umbrella. Paradigm was birthed because our doctors wanted to take on the responsibility and operate the business as they saw fit. They did not want to work in an employed model but rather in a private practice that was set up from the doctor’s viewpoint and they would maintain control of the clinical care.”

Generally speaking, private practice owners take a salary draw, split any receipts after all expenses are paid, and can distribute receipts monthly or quarterly.  This leaves very little at year-end to be taxed through the corporation.

In contrast, hospitals that employ physicians typically guarantee a salary and offer an incentive plan where the physicians earn more for seeing more patients and/or being more productive based on work.

The benefits of managing a private practice include: control over HR, marketing, finance, IT, contract negotiation, facility management, putting your stamp on the practice, a family-style atmosphere, and quicker and more efficient decision-making.

 “Paradigm’s success as a private practice can be credited to better clinical outcomes, more personal one-on-one care, investment in personnel and a great work culture,” says Schneider. “There is an ownership mentality in a private practice as compared to a rent mentality: We take full accountability.”

Did you know?

Hospitals can be for-profit, not-for-profit or government-owned. For-profit hospitals make up less than 20 percent of the total hospitals in the United States.

Hospitals are Drawing Docs

A growing number of U.S. doctors have left private practice for hospital employment and only one in three remained independent by the end of 2016.

Source: Report by global professional service company Accenture.