4 disadvantages of owning your practice
Recent trends in the practice of medicine have been shifting from a predominantly private practice model toward an employment model. Many factors are driving this. The popular emphasis on work-life balance has promoted the impression that it’s better as an employee, which is not necessarily true. Skyrocketing debt from training is making doctors reluctant to lay out money to buy into a practice. Healthcare reform has created uncertainty about how the industry will be affected, making a salaried position look more attractive.
I have practiced in both models, and experienced the good and the bad each has to offer. This is the third article of a four part series comparing the differences. Weigh the pros and cons of each before making your final decision.
Startup costs are higher for those who own their practice. Owning something means buying something. If your debt burden is high, this may be unpalatable. Since you are responsible for the cost of improvements, every time the government throws a new regulation at your business, you are responsible for funding the new requirement. When HIPAA was forced on us, our office had to shoulder the cost of some required changes. As electronic medical records were made a requirement, we had to shoulder the cost. Since government mandates are a moving target, continual updates will be in your future.
When you bring on a new partner, it will cost you money initially. You, as the owner, will be paying the new partner’s salary out of your pocket, and the new partner always starts with no patients and no accounts receivable. It takes a while before they are pulling their own load financially.
Practice overhead may prevent the possibility of working part-time. The office doesn’t suddenly become half as expensive to run when you cut your working hours in half. The phone company doesn’t cut their bill in half. The property taxes on your office don’t go down. Your office staff isn’t interested in taking a 50% pay cut. It could be financially impossible to work part-time.
Vacation versus income
Taking vacations may be a difficult choice since overhead continues when you are gone. I often joked about my income going negative when I went on vacation. If this is worrisome to you, it may influence your decision to take the time off you need. You may be so worried about your overhead that you avoid the vacation completely and move closer to burnout.
One doctor I know would send his family on vacation while he stayed home and worked to keep the income stream positive. To combat this, you need to be thinking of your income on an annual basis and not on a daily basis. You will make enough, even with the vacation.
Building a practice
As a physician entering a private practice, you need to build a referral base if you are a specialist. With time, your desire and ability to provide excellent care for your patients will likely make you as busy as you want to be, but this will not occur immediately.
Hiring and firing employees can be stressful as an owner, and this may fall on your shoulders. You can abdicate some of this by having an office manager and making it their job to take care of the staffing issues.
You will be making a lot more decisions as an owner: what 401(k) plan to use, which EMR to buy, do we need to expand the office, and is it time for a new partner are some examples. If decision making is not your strong point, this could be an issue for you. Researching and making the decisions will also take additional time.
These are some of the most important disadvantages of owning your practice. Next week’s blog will cover the disadvantages of being an employee. Learn more in my book The Doctors Guide to Starting Your Practice Right.
Feel free to comment below if you feel I missed an important disadvantage and sign up to receive my blog at DrCorySFawcett.com so you won’t miss out on anything.