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The professional pleasures and succession perils of rural practice
While a career may start off well for a small-town ophthalmologist, there could be problems when retirement nears.
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“I think the extent to which I have any balance at all, any mental balance, is because of being a farm kid and being raised in those isolated rural areas.” – James Earl Jones
“Country things are the necessary root of our life — and that remains true even of a rootless and tragically urban civilization. To live permanently away from the country is a form of slow death.” – Esther Meynell
Of the 7,000 or so private, independent ophthalmology practices in America, a significant number are operated as solo or two-surgeon outfits, located in what we politely call in the consulting field “secondary markets” or that others, who are less polite, call the “flyover states.”
The average eye surgeon operating in small-town America today enjoys a privileged career environment that is much kinder than his urban colleague’s environment for the first 25 or 30 years.
- Folks are grateful and trusting: Big-city ophthalmologists often lose patients to second opinions, including the opinion of Dr. Google. Rural patients tell their daughters, “Doc says I need cataract surgery. Can you drive me next Thursday?”
- Demand is higher: Where there can be only 8,000 people per ophthalmologist in urban centers, there are often 50,000 or more people per MD in secondary markets, and rural patients are often older and in poorer general health, creating a higher demand for your services.
- Competition is benign: Managed care penetration is negligible, health systems have less interest in buying up medical practices, and because there is so much work to go around, fellow eye surgeons are more likely to be friendly colleagues than jealous competitors.
- Business costs are lower: Staff accept lower wages because their living costs are lower and jobs are scarcer, office facilities are inexpensive, and marketing costs are more than halved because of an abundance of patients.
- Profit per MD-hour is higher: Even in states with lower allowable professional fees, lower operating costs and high patient volumes more than offset this.
- Personal living costs are lower: You can either enjoy a better lifestyle (bigger house, better vacations, etc) or reach financial freedom at an earlier age.
However, when it comes time, in the last few years of a 30+ year career, to develop a succession plan and cue up retirement, solo and small group surgeons in secondary markets find themselves in a progressively more difficult position compared with their urban colleagues.
- They probably do not have a busy enough practice to bring on a full-time partner-track doctor at today’s ballooning base salaries without taking a sharp personal pay cut (often, just as they need to top-up retirement savings).
- With so much demand for their services in attractive urban/coastal markets, fewer young surgeons are willing to move to the hinterland, which shrinks the candidate pool and obliges rural practices to pay premiums for a new hire and wait longer than ever for a match. It can now take a year, two years — or forever — to find a suitable successor in secondary markets.
- The current generation of young providers is less risk tolerant and uncertain of their ability to both develop a professional standing and run a labyrinthine business — very understandable in today’s oppressive regulatory environment.
As residency training slots and new graduate rolls have tapered, and baby boomer doctors increasingly retire, there has been a rising demand across the nation for ophthalmologist job candidates. Recruiting firms are riding high, and starting salaries in competitive markets for generalists are approaching twice the $175,000 or so figure of just a decade ago.
So what is a senior, peri-retirement surgeon in a secondary market to do? There are three chief options, listed here in approximate order from most to least financially effective:
1. Join forces with a professionally compatible, larger regional practice. Your practice is probably most valuable to a leading “eye institute” than to any other outside party. Such a practice likely has the financial clout to pay a reasonable value for what you have built and the administrative infrastructure to relieve you of business management chores for your last few emeritus years. And if you are concerned about losing control, you do not have to sell immediately; for now, you can align strategically and execute a simple, future-dated purchase or purchase option agreement.
2. Ride it out, and turn out the lights. I believe we are going to be seeing more of this. For some, this will feel like an unhappy retreat: Where will my staff and patients go? What about my legacy? Remember that your legacy is not the building on Elm Street or the slit lamp in room two, but your decades of patient-by-patient service to the community.
3. Bring in a partner-track associate to take over. In most small/rural settings, this option comes in last place. Not only could it take years to find a willing candidate, and be costly to bring them on board, but only about 50% of such associates ever make it to partner, and meanwhile your income has been cannibalized. If, for sentimental reasons or out of a sense of professional obligation, you are strongly inclined to take this path, it is important to start early (in your 50s, not your 60s or 70s) and to set aside enough capital to act as a business shock absorber for any transient drop in income or, worse, having to go through two or three hiring cycles to find someone who sticks.
- For more information:
- John B. Pinto is president of J. Pinto & Associates Inc., an ophthalmic practice management consulting firm established in 1979. John is the country’s most-published author on ophthalmology management topics. He is the author of John Pinto’s Little Green Book of Ophthalmology, Turnaround: 21 Weeks to Ophthalmic Practice Survival and Permanent Improvement, Cashflow: The Practical Art of Earning More From Your Ophthalmology Practice, The Efficient Ophthalmologist, The Women of Ophthalmology, Legal Issues in Ophthalmology, Ophthalmic Leadership: A Practical Guide for Physicians, Administrators and Teams and a new book, Simple: The Inner Game of Ophthalmic Practice Success. He can be reached at 619-223-2233; email: pintoinc@aol.com; website: www.pintoinc.com.