Ophthalmologists show a growing interest in private, independent practice
Click Here to Manage Email Alerts
“The most dangerous thing for an entrepreneur to do is to actually go into a business that he does not understand fully.”
– Aliko Dangote
“If you’re an entrepreneur, there is no bad time to start a company.”
– Guy Kawasaki
Something interesting seems to be happening. Amid the disruptions and professional burnout of COVID-19, the deepening incursion of corporate buyouts in the eye care space, and a 20+ year presumption that private practice is moribund, we are observing a countercurrent.
In the last year, I have logged more calls than ever before (in my last 43 years as an industry adviser) from both new graduates and mid-career surgeons exploring the possibility of becoming an entrepreneur and either hanging a shingle or taking over a small practice.
It is too early to call it an enduring trend, but this rising interest in the freedom of private practice is a fascinating and perhaps predictable countercurrent in a profession in which rising institutional employment has been the trend.
According to a 2020 AMA analysis, 49.1% of patient care physicians worked in a private practice, which was a decrease of almost 5 percentage points from 2018. The AMA conducted similar surveys in the 1980s, when physician practice ownership was the dominant arrangement. For example, in 1983, 76% of physicians were practice owners.
I seriously doubt we are returning to the 1980s, but at least in ophthalmology, despite the march of consolidation, I believe that the private practice model will endure. And not just in the form of lingering, old-line legacy practices that are resisting Wall Street and health system overtures, but also in the form of young physicians going out on their own.
The motivations they express are those you might expect (and perhaps even align with your current career frustrations):
- “I’m tired of my hospital’s mismanagement and penny pinching.”
- “This is my third institutional job in 3 years. It’s time to control my career.”
- “I didn’t train all these years to answer to a boss for the rest of my life.”
- “After 8 years as an employee, I’ve learned enough and saved up enough to hang a shingle.”
- “At 52, it’s now or never. I’m going for it.”
- “I’ve been a junior partner in my practice for years, and that’s never going to change.”
Interestingly, some of this drive for self-agency, independence and control is in line with recent changes in the wider labor market. Business formation surged during the pandemic and remains strong.
Two generations ago, it was easy to contemplate launching or taking over a practice. Competition was lower. School loans were minimal. Profit margins were higher. Regulatory burdens were lower. Because eye care was still low tech, start-up costs were modest. And best of all, one was surrounded by colleagues who had hung their own shingles and were often generous in showing the way for younger docs.
Barriers to entry as an MD-entrepreneur are now much higher, particularly so for start-ups. But some of the “ladders” over these barriers are getting taller. Financing, at least for the moment, has never been easier. The demand for care in underserved markets helps to assure a faster ramp-up. And my observation is that the current generation of young doctors, raised in (and inspired by) an era of tech start-ups, already embraces a lot of what it takes to run a company.
Here, in no particular order of importance, are some issues you should consider if you contemplate an entrepreneurial swim against the tide of permanent employment as an associate.
1. Practice ownership can be a hard, scary grind at the outset. But in time, typically after the first 2 to 3 years, private, independent practice can be the most professionally and financially rewarding path. When you work for someone else as an employee, a part of the profits you generate are held back to reward the owner or institution. By way of example, a well-run private practice has a 40% profit margin, but associate MDs are paid only about 30% to 35% of their collections. The house keeps the 5% to 10% spread, not the employee doctor.
2. How much does it cost to open a practice? As much as you have to spend. Seriously. It can be done on the cheap by being a roving guest surgeon in several practices for a few years until you can afford to open your own office. At the other end of the scale, in one current project, a confident client is budgeting more than $1 million in start-up funds for a beautiful suite, top-flight equipment and abundant marketing out of the gate. The more typical figure is between these extremes, or about $500,000, from a combination of savings and loans.
3. Opportunities are abundant and growing. Senior ophthalmologists in noncoastal, nonurban secondary markets are begging for a successor. A winning formula is to go where there are many patients but few doctors. In America today, we have about 20,000 people for every practicing ophthalmologist. The odds of private practice success go up sharply if you choose to practice in a market with a higher population-to-provider ratio. (Note: The age distribution of existing eye surgeons is also key. Seek a market where local colleagues are clustered near retirement.)
4. Small is beautiful. Small-scale practice can be more profitable per MD-hour than larger practices. Being in a larger group practice may feel safer. But experience shows that solo and small group practices typically drive higher MD incomes per hour worked. As an added bonus, decisions can be made faster, and the fruits of any given promotional effort do not have to be divided up among many providers.
5. How many hours will I have to work each week in private practice? The glib answer is, “just as many as you can.” We advise doctors launching new practices or taking over existing practices to plan their personal lives around a 50- to 60-hour workweek for the first 2 years. Unless you have abundant start-up funding and can afford slow growth and thin initial profits, the first 2 years in private practice will oblige a measure of focus and workaholism approaching that of your toughest training years.
6. How about making the leap from the safety of a paycheck to the risk of self-employment? Except for young doctors with family backing or mid-career doctors with substantial personal savings, financial insecurity is the biggest inhibitor for entrepreneurial MDs. But here is something to consider that may make you more comfortable. In today’s red-hot job market, if you try to launch a practice and fail, you will immediately be able to land back on your feet in a conventional, lucrative associate position.
7. Why do some MD-entrepreneurs fail? Happily, the survival rate for new medical practices is much higher than other fragile businesses such as restaurants. But ophthalmology practices do go out of business from time to time. The most common reason we see is owners not understanding or attending to the maddening minutia of coding and billing. Make sure you have a firm grasp on revenue cycle management before you hang a shingle or take over a practice. The second biggest reason that ophthalmology practices fail is insufficient marketing, especially scant referral outreach. Most eye surgeons are pretty phenomenal doctors. Unfortunately, most eye surgeons are inexpert or shy when it comes to reaching out to referring doctors. Subspecialists contemplating a new practice launch should ask, “Am I going to be willing to spend 5+ hours a week reaching out to fellow doctors for referrals?” If not, it is better to either join a practice where referral traffic is well established or hire a lay staffer to handle outreach for your young practice.
8. Owning a practice means you have to hold down two important jobs at once. Obviously, there is the physician job. But as importantly, practice owners are concurrently executives of a profoundly complex enterprise. Years of formal training prepared you to be an eye doctor. But even the most rigorous MBA program just skims the surface of the skill set needed to effectively run a medical practice. Practice management (unlike medicine, law, engineering and the like) is not a so-called “learned profession.” Instead, great practice owners and their administrators achieve business skills one success or failure at a time, over a period of many years. If you are new to business, it is vital that you compensate with a star administrator and then lean on them to be your guru in your first critical years as an owner.
9. Control is happiness. Practice owners are free to control where and how they practice, which technology they adopt or abandon, which people they work with and how much time they take off. In contrast, even the most generous employer can oblige that you work in a distant satellite, see routine patients instead of surgical consults or work Saturday mornings. Practice owners seem to be generally happier than employed doctors.
10. And finally, do not underestimate the intense satisfaction of being your own boss, which for most practice owners more than outweighs the intense pressures of running the show. A rising portion of ophthalmologists today have spent their entire lives in relative subservience under the control of others. First parents. Then teachers and professors and chief residents. Then employers. Practice owners break free of this, at least in relative terms — at least until one understands that you still have to obey government authorities, third-party payers and, of course, each individual patient.
- References:
- Haltiwanger JC. Entrepreneurship during the COVID-19 pandemic: Evidence from the business formation statistics. https://www.nber.org/papers/w28912. Published June 2021.
- Physician practice benchmark survey. https://www.ama-assn.org/about/research/physician-practice-benchmark-survey.
- For more information:
- John B. Pinto is the author of several books on ophthalmic practice management, including John Pinto’s Little Green Book of Ophthalmology: Strategies, Tips, and Pearls to Help You Grow and Manage a Practice of Distinction, UP: Taking Ophthalmic Administrators and Their Management Teams to the Next Level of Skill, Performance, and Career Satisfaction (with Corinne Wohl), Simple: The Inner Game of Ophthalmic Practice Success, and Ophthalmic Leadership: A Practical Guide for Physicians, Administrators, and Teams. Available now for purchase at slackbooks.com. Receive 20% off with promo code PINTO20. He can be reached at 619-223-2233; email: pintoinc@aol.com; website: www.pintoinc.com.
Collapse
Read more about
Click Here to Manage Email Alerts