Recently, a friend of mine mentioned that his sister-in-law, who had been in a private pediatric practice in Southern California for a number of years, was giving the practice to a large medical group and would now become an employee making seven times the income she was previously making. She would continue to work in the office that she had built, but now as an employee.
She would no longer have to deal with insurance reimbursements, payroll, cash flow, credentialing, HIPAA, Meaningful Use, managed care capitation, government regulation, etc. She would just be seeing patients, day in and day out, plus she would receive a guaranteed salary, far exceeding her previous income.
Perhaps this scenario sounds particularly appealing to many independent physicians in private practice, especially the guaranteed salary without the headaches of running a practice part.
But the reality this scenario represents is quite different then the perception. The seven times previous salary, in this case, is based on a previous take home income that was less than $30,000 a year.
If an entity is willing to take over a practice and pay the physician a salary, then it is pretty obvious that they see something that the physician is missing. They see receivables not collected, visits not properly billed, contracts not negotiated, employees not needed, appointments not made and books not kept. They see marketing not being done, IT deficiencies, operational inefficiencies and cost overruns. But more importantly, they also see positives such as a good established practice within a target demographic with existing patient, insurance and vendor relationships.
Bottom line, they see a return on their investment.
Before a physician pulls the plug on their practice perhaps they should evaluate their practice with a fresh set of eyes. What are the new investors seeing in their practice that they no longer see? Are the existing problems beyond repair or will a focused effort to attack each and every one of them and to implement change be able to resolve the practice’s current issues? Is giving up the freedom of running a practice worth the risk, specially without knowledge of the culture of the new entity and the direct management?
Many physicians claim that they are great practitioners and love to see patients, but are terrible businessman. That is like a kid saying he loves school but hates doing his homework. The business of seeing patients in the practice and running the practice are part and parcel of the same package. For the independent physician/owner, now is the time to realize that business of medicine is as important as the business of medicine.