The issue of hospital employment over solo practice has become a major discussion in the medical field. Some doctors are likely considering private practice independence over hospital employment or even private equity ownership. What are the employment trends in healthcare affecting these decisions?
The image of the independent solo medical entrepreneur has taken a hit, in part due to the COVID-19 pandemic. Since 2012, trends were more toward hospital employment, with doctors giving up their independence for the steady regularity of a paycheck without the stressors of business ownership.
By 2019, the migration toward hospital-owned practice stabilized, with independent practices once again making a positive impact with patients who increasingly seek personalized care. At the time, the possibility of independence from a more corporate hospital environment was both alive and well in the United States. But where are we now? Is it still possible to launch a solo career or join an independent practice network?
What Is the Status of the American Independent Medical Practice Today?
If you’re considering going solo as a healthcare entrepreneur or even joining an existing medical practice, these days you are the anomaly and not the rule. For the first time in history, the number of doctors employed by hospitals is higher than those that own their practices.
From 2018 to 2020, independent medical practice ownership dropped by nearly five percentage points. The American Medical Association says it was the “largest two-year change measured since the AMA survey began in 2012.” By 2020, hospital employment encompassed 50.2% of all physicians.
With that said, there are signs that the slow decline in private practice ownership that trended beginning in 2012 is slowing and even beginning to reverse itself.
For the independent practice that can personalize care, provide a high level of patient satisfaction, and use digital marketing to advertise these points of differentiation, the future looks positive. What challenges will the doctor taking the plunge to independence face in the coming years?
What’s It Like to Move from Hospital Employment to Independence?
While new doctors may long for the professional rewards of a solo practice, many opt for employment to lessen their risk. Still others leave hospital employment later on to fulfill their dream of owning their own business.
That was the case with Dr. Jonathan Yerasimides, M.D., board-certified orthopedic surgeon, who was interviewed on the Growing a Successful Orthopedic Practice podcast where he told the story of his decision to move from a successful hospital-owned clinical practice to launch a new independent surgery center, the Louisville Hip & Knee Institute.
In 2015, Dr. Yerasimides saw that the trend in orthopedics was leaning toward less invasive outpatient procedures in an ambulatory setting. His idea was to partner with his hospital employer to create an outpatient surgical experience to capitalize on this trend that made sense from both a patient and bottom-line perspective.
For five or six years, Dr. Yerasimides and his partner tried to get their hospital system to evolve their practice. He says, “We finally just got tired of trying to get this giant corporation to change direction and change vision of what we thought hip and knee replacement was going to be. We decided just to break off and start it on our own.”
Like many doctors first launching a solo practice, Dr. Yerasimides faced big challenges, the first of which was the sheer volume of details and decision making he’d have to conquer every day. He says, “I’d been employed for 12 years and I didn’t know the first thing about starting a business. We’re surgeons, we go to school for sciences and then we go to residency and we learn how to be a surgeon.”
However, Dr. Yerasimides also acknowledges the unique pleasure of business ownership, where every decision, every action, every direction, is uniquely your own. Additionally, having been used to the turnover that happens in a big hospital setting, he says the opportunity to hire a small team and create a “family” has been a unique surprise.
The type of environment is the exact opposite of corporate depersonalization and the trends show it mirrors the latest patient trends. A 2020 study showed 75% of U.S. consumers wish their healthcare encounters were more personalized. If patients want a personalized experience, the independent practice, perhaps inadvertently in some cases, meets this need head on.
Dr. Yerasimides describes the patient environment at his independent practice as fulfilling the patient’s desire for one-on-one care. He says his patients “feel more important rather than going into a hospital that has 20 ORs and you’re sitting in a recovery room next to one person who got their gallbladder taken out and somebody who just had brain surgery.” He continues, “It’s a nice small environment where patients feel cozy. It’s not just a giant machine just churning people out.”
What Are Some Tips for Starting an Independent Practice?
Dr. Yerasimides has three primary tips for any doctor considering private practice:
- Differentiate yourself in the marketplace by offering something your competitors do not
- Add ancillary revenue streams for fiscal redundancy
- Find strategic partnerships that help shore up your weaknesses in what you do not know
Independent healthcare providers compete against larger hospital-owned practice networks by creating a unique service experience in some way that attracts patients. While a healthcare system will almost always have more marketing spend available, online social media marketing, public relations, and patient referrals allow the independent practice some low-cost tools to spread the good word about their great care.
Specializing in hip and knee surgery allows Dr. Yerasimides to carve out a point of differentiation with his practice’s target audience. He says, “It’s a very niche thing…when you come to see me in the office, you know this is all I do and that you’re going to get the best care possible.”
The idea of bottom-line diversification is an old one; most successful businesses seek to create omni-channel revenue streams. Diversifying your revenue streams lessens risk. For an independent medical practice just starting out, this is particularly important for the long-term health of their practice. Dr. Yerasimides says, “I think in order to have a private practice nowadays, you have to have some kind of ancillary income, whether you own an MRI, you own a physical therapy facility.”
This same approach should also apply to developing a strong referral base for your practice if you are a specialty provider. Nurturing referral relationships is particularly critical in the early stages of your practice, but like ancillary revenue, you should not depend on all of your referrals from just one source, but instead, from many.
Fortunately, Dr. Yerasimides was able to find a healthcare managing consulting firm that literally taught him the ropes, from marketing the practice to back-office management. Alice Shade, who owns 4 A Ventures, a management consulting firm, says, “One of the biggest things that kind of tripped them up is: What is the first step? How do you break this down?” She says the best advice for most newly independent doctors is just about taking the mystery out of starting a business. Finding a good financing partner as well as someone who has been through this transitional process can help.
Dr. Yerasimides also partnered with Jennifer Thompson, president and founder of Insight Marketing Group (IMG), who works with independent practices, private equity groups, and medical associations around the country to help them carve out market share in a very competitive and volatile field. In addition to offering full-service marketing and PR for independent practices, IMG launched DrMarketingTips Lab, a website full of free advice for the entrepreneurial physician.
Thompson knows the powerful effect that failing to market a new practice can have on the bottom line. She says, “The challenges of an early-stage independent practice are quite different from an established group. Launching any new practice requires market savvy now. You can’t just build or rent a medical facility and expect patients to just show up.”
Dr. Yerasimides, who is quite confident in his skills as an orthopedic surgeon, recognizes, “There are places where my knowledge that I have from school and residency just doesn’t apply. You have to find somebody you trust, because your best job is being done in the operating room and seeing patients, it’s not taking care of business decisions.”
What’s Next for Your Independent Medical Practice?
For the doctor considering independence, it is a particularly complex and challenging time to strike a blow for freedom. Yet the signs were there before COVID that the entrepreneurial-spirited clinician could carve out a place in the competitive healthcare marketplace.
Customer demand for personalization, the looming doctor shortages, and the desire from the clinicians themselves to embrace pride of ownership will all create a future environment where the independent medical practice offers a lucrative and stable career for both new and existing medical providers.