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. Over the next four weeks I will discuss the differences between these two models beginning with the advantages of owning you practice. Weigh the pros and cons of each before making your final decision.
The number one most important reason for being the owner is control. When you own the business, you are the one in control. You shape your destiny and make the crucial decisions. If your nurse is not performing, get a new one. If your nurse is doing a great job, provide a reward. Don’t like your electronic medical records program? Get a new one. Want Mondays off? Then take Mondays off. For many, control is an important factor.
Another very important advantage is the upside of profit potential. The practice of medicine is a business. If you don’t make a profit, the doors will close. If you make a great profit by providing a great service, you get to keep the profit. The more you work, the more you make.
I experienced this directly when I was beginning my practice. I knew an internist who did colonoscopies and was a hospital employee. If he was having a busy day and someone called for an urgent colonoscopy in the hospital, he would pass it on to me. His pay didn’t increase if he added the case into his schedule, but mine did. I always took the case. A short time later, the hospital realized they were not making any profit off these primary care doctors and dumped them all. Suddenly, these doctors were in private practice and getting paid based on the services they provided. This doctor never called me again to do a colonoscopy when he was busy. When he got paid extra to work it in, he found a way.
As the owner, you can also create profit by providing ancillary services. You can offer imaging services in your office, like ultrasounds and x-rays. Additional businesses can come under your wing like the ENT surgeon with an audiologist service, or the pulmonologist who also provides a sleep center, or a vascular surgeon with a vascular studies lab, or an orthopedic surgeon offering physical therapy. Most specialties have some sort of ancillary service to offer.
When you own a practice, you will have something of value when you leave. You will have some accounts receivable yet to be collected. You may own part of a building—and since you have something to sell or rent, it will be a boost to your retirement income. I know one dentist who sold his practice, but the new dentist didn’t want to assume more debt to buy the building. The retiring dentist was able to rent the building to the new dentist for a substantial boost in income during his retirement.
Business owners have greater tax advantages. Several tax write-offs are available to business owners that are not available to employees. The costs of traveling to conferences, purchasing a camera, covering your healthcare expenses, and having a home office are some of the deductions offered to business owners. The tax laws are tilted in the favor of owners. The bottom line: on the same salary, a business owner will have more spendable money than an employee.
You can put more money into your retirement plan when you own a business. As a business owner, you have several options for how to structure your retirement plans, and you can choose the one to best suit your needs.
You choose your vacation and time-off terms with almost unlimited flexibility. You are only limited by income. If you take more time off, your production will be lower but your well-being will be improved.
If there are certain cases in your specialty you do not want to see, then don’t. There is no reason to do the things you don’t like. As the owner, you can choose what you want to do with your practice.
The more partners you have, the less you will be responsible for when it comes to running the business. Your portion of the overhead is lower. Your share of the workload is lower.
Immediate referral base
In a partnership, your partners already have a referral base for you to plug into. They want you to succeed and be busy, so they will begin to feed you cases right out of the gate.
These are some of the most important advantages of owning your practice. Next week’s blog will cover the advantages 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 advantage that is important to you.