In Practice

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, works with the Cleveland Clinic in Cleveland, Ohio — one of the foremost models for the salaried employment structure. He said in an interview that he feels the advantages of the large, salaried group structure are many.

“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.

John A. Bergfeld, MD
John A. Bergfeld

“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.”

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.

Kevin J. Bozic, MD
Kevin J. Bozic

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 ED 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; 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, an orthopedic surgeon in Long Beach, Calif.

“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 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.”

Douglas W. Jackson, MD
Douglas W. Jackson

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 young 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.

Private practice pros and cons

For those who do not think 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.

On the other hand, 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.”

Jack M. Bert, MD
Jack M. Bert

Future directions

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

“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 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.” – by Robert Press

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, works with the Cleveland Clinic in Cleveland, Ohio — one of the foremost models for the salaried employment structure. He said in an interview that he feels the advantages of the large, salaried group structure are many.

“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.

John A. Bergfeld, MD
John A. Bergfeld

“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.”

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.

Kevin J. Bozic, MD
Kevin J. Bozic

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 ED 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; 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, an orthopedic surgeon in Long Beach, Calif.

“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 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.”

Douglas W. Jackson, MD
Douglas W. Jackson

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 young 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.

Private practice pros and cons

For those who do not think 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.

On the other hand, 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.”

Jack M. Bert, MD
Jack M. Bert

Future directions

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

“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 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.” – by Robert Press