Medical Practice Owner or Hospital-Employed Physician?

The business of medicine is always changing. 

Once again we are going through the cycle of hospitals acquiring physician practices.  I have personally been through this process and have some opinions about the challenges of being "owned" by a large entity such as a hospital or a health system.

I moved to Virginia in 1993 and joined a private practice owned by a single physician.  In the mid-90's, HMOs were growing rapidly and hospitals were looking to solidify their patient base.  Our local independent hospital approached the owner of my practice and he decided to sell to the hospital.  Thus I became a hospital employee in 1996.  Over the next few years many practices followed suit and soon there were around 40 physicians in various specialties that were part of the hospital outpatient practice. All of the practices purchased by the hospital were profitable and well established in the community.

At the time we changed, I was a very productive and highly popular pediatrician in the community with a large patient base. Thus I was very shocked when at my annual review with hospital management, the salary increase was paltry. The hospital administrator with whom I had this review was very difficult to work with and didn't seem to understand what working in primary care involved.  I felt devalued and unappreciated and strongly believed that he was only interested in the bottom line for the hospital (which of course, he was).

Part of the problem was that while hospitals were experts in negotiating contracts with third-party payers for inpatient care, they were poorly equipped to negotiate rates for outpatient care. The result? All of the formally profitable practices were now mired in red ink. The hospital took out a loan against our accounts receivable (and didn't need to inform us since the practices officially belonged to the hospital).

You can probably guess the next part of the story. After less than four years of attempting to have primary care under the hospital umbrella, the administration decided to not renew our contracts, so we were free to resume private practice on our own. And we needed to buy back the $1.2 million loan against the accounts receivable.

Thirty of us decided to stay together as a physician-owned medical group, along with the administrators that had been hired to manage us. It was an interesting mix of practices, both primary care and specialists. None of us had any guarantee that this would work or fail.

Now after 16 years, the group is still together and has grown monumentally. I feel very fortunate to have been part of this successful experiment.

I directed and grew my pediatric practice from our initial three physicians and one midlevel provider to a practice of 15 providers and three locations. It was a terrific learning experience. Unfortunately, burnout took its toll on me, so it was clearly time for a change. Now I am off on a new adventure.  I have decided to stay within the larger medical group but take a new approach to pediatrics, and I am on a steep learning curve with my new endeavor.

In my experience, being employed by a large hospital includes several negative aspects.

1:  You are no longer in charge of your own practice.  This can include hiring and firing decisions, schedules, supplies, and even medical practice protocols.  There certainly can be headaches with having to deal with these issues but I must say that being in control is much easier than being told what to do and how to do it.

2:  You are now just a cog in the wheel.  You may be required to refer to other physicians within your system (even if you think another specialist is better for the patient).  You might be expected to see many more patients in a workday than might make you comfortable.

3: The ability to branch out into new medical interests may be difficult due to the need to stay profitable for the hospital.

What is good about being a hospital-based physician? There are positives.

1: You will not need to take out large loans to cover practice expenses until you become profitable. And you will likely have a very good benefit package due to the large number of employees in a hospital setting.

2: Management will be provided and you can concentrate on your patients rather than the daily details of managing personnel.

3: Your salary will be paid. As an owner, everyone else gets paid before you do, especially if your practice experiences lean times.

Make sure you know the positives and negatives associated with being independent or part of a large organizations. And remember, you can always change how you practice medicine.