As a follow-up to Howie’s post: Different Ways To Go Solo, I wanted to go over the updated options for going into solo practice. As a disclaimer, I have an obvious financial interest with Independent Practice Partners, as well as this blog.
Borrowing from the trite bucket analogy that all financial advisors and whole life insurance salesmen use to bait you, the elements for settling on a career path can also be reduced to pouring a jug of water into various buckets. Instead of cash, bonds, and equity, you will have to allocate your finite resources into risk, compensation, time, and independence buckets. For the most part, in order to gain one factor, you will have to make sacrifices to the other factors. You will never find a job that comes with low risk, low time commitment, high compensation, and high independence. You will always have to pick your poison. Weigh what is most important to you. We often note that new grads seek low risk, but often switch to high independence as their careers progress. In actuality, you should probably seek higher risk early on in your careers when you’re still not yet accustomed to making a high six figure salary, and don’t have as many liabilities in life.
Before I go into the various solo practice options, let me briefly touch upon the traditional associate to partnership track and hospital employment (i.e. Kaiser) option.
As an associate for a group practice, you will have low risk for personal financial loss, but lower job security as well (no partnership offer, being burned and churned, not getting along with your employer, private equity buyout before partnership, etc.) You will be able to spend less time outside of your normal work hours on admin and practice building activities. You will have a guaranteed six-figure salary. Depending on the practice, you might even start with $300,000 (Why a $300,000 junior associate salary may not be as good as it seems), and ultimately make over $500,000 a year (i.e. cataract mills). However, you will be unlikely to call your own shots or make any changes to the way things are done.
If you work for a hospital system, you will have even much lower risk, with perceivably the strongest job security. Your time commitment will basically be 9 to 5, and weekends off. Your starting salary will usually be higher, but your earning potential will have a lower ceiling. Unfortunately, you will have the absolute least amount of clinical and managerial independence. You will be inundated by red tape and protocols that you will have little power to modify.
Going into solo practice, you will take the most risk, including the real, albeit low, possibility of bankruptcy and ruin. You will spend evenings and weekends working on various random tasks for your practice. Your compensation will be nonexistent in the first year or two, and similar to a junior associate for the next few years afterwards. Also, a significant portion of the initial profit you generate will go towards paying down your business loans. Having said that, you will have the highest earning potential when your practice matures in 3 to 5 years. And most importantly, you will have ultimate freedom and independence to practice in any way you see fit. You will have no boss, and no one will have any control over you. You only have to answer to yourself and your patients, and no one else. Plus, you get complete liberty to practice in any location you desire.
Even within the solo practice route, the various paths will involve different levels of sacrifice and gains in the bucket department.
Starting From Scratch
This is the path that both Howie and I chose. In my case, I really didn’t see myself as having any other option. De novo solo practice is clearly the riskiest option because you’re traversing uncharted territory, making the largest number of decisions along the way, of which any one of them can go wrong. The concept of “after hours” will not apply to you. Financial ruin will incessantly loom over your head, and you will become a Pepcid and Prilosec junkie. When you’re not working on your practice, you will constantly be thinking and strategizing about it. In the nascent stages of your practice, you will have significantly reduced revenue, and it will take a year or two to generate any kind of respectable income.
As painful as the beginning will be, the rewards that come after will be even greater. You will eventually smash all the income averages reported on various surveys. Your work hours will resemble a normal 9 to 5 job, with as much vacation as you want. Your practice will eventually run on autopilot. And most importantly, you and your patients will love the practice you built, and all the benefits and glory that comes with it. You will be badass.
Buying An Existing Solo Practice
Howie wrote a post about this, but to summarize: this option is not as risky as starting from scratch. However, nothing’s for free. In exchanged for pared risk, be prepared for a higher sticker price, accelerated timeline for learning how to run a mature practice, and a need to renovate and restructure the practice. The retiring/selling doctor will usually stick around for some time to help you transition into practice ownership. Most of the time, they will eventually quietly ride into the sunset, but I have heard that some need to be dragged out. Because you’re walking into a mature practice with a full schedule, you should expect a steady income stream right away. Just like starting from scratch, a significant portion of your income will still go toward paying down your practice purchase. You will also be expected to learn how to run the practice with that same full schedule. Hence, you will most likely spend a good amount of after hours time trying to figure things out. Since you’re the boss now, you would think that you get all the independence in the world. However, you are succeeding a former boss, and some employees (and maybe even the former boss) might resist or disagree with the way the new captain runs the ship. Be prepared to deal with old bad habits, and you will need to walk a fine line between running the show and avoiding mutiny.
But just like a scratch startup, once you get the hang of things, it will be no one else’s show but yours. You will reap the benefits of all your successes, and you will suffer the consequences of all your failures. But in the end, you will most likely make more money, have more independence, and experience higher career satisfaction than your associate-turned-partner or hospital employee counterpart.
Independent Practice Partners
The newest option for going into solo practice. I have partnered up with four solo practice colleagues, and created a hybrid solo practice/associate position model. (www.ipracticepartners.com) Our company will fully fund, build, and manage a brand new ophthalmology practice for those that are interested in going into solo practice, but do not wish to start from scratch or buy an existing practice. Through our direct funding and our proven models of success, IPP will certainly reduce much of the risks of going into solo practice. In addition, since we will be doing much of the legwork behind the scenes, you would also save on time. However, in exchange for fuller risk and time buckets, your compensation bucket will be a little bit lower for the first few years of practice. Having said that, when you ultimately take ownership of your practice, and we cut the cord, you should expect your income potential to be just as good, if not better, than the scratch startup/buying an existing practice route.
Most importantly, you will still have 100% clinical autonomy to build your practice in any way you envision it, and in any location you desire. IPP would just help guide you toward achieving that goal.
Having drank the Kool Aid, solo practice is clearly the best way to practice medicine no matter how you get there. IPP is just another option that can help guide those that seek career independence and satisfaction toward their desired destination.
“You will have no boss, and no one will have any control over you. You only have to answer to yourself and your patients, and no one else.”
Unless you’re a purely cosmetic/cash pay physician, you work for the federal government (indirectly). Whenever Medicare reimbursements are cut and every insurance company follows suit, there isn’t a whole lot that can be done about that. This is one huge difference between doctors and other business owners.
This is a topic that deserves a whole separate post. Let me first preface everything by saying that I’m a libertarian and die hard capitalist. We have to be careful what we wish for. If the government price controls of healthcare are lifted and true price discovery occurs, I anticipate there will be few winners and many losers. Quality of care and customer service will become huge in determining your fee schedule. No one will pay $300 out of pocket for an office visit if the patient has to wait 2 hours to see a cranky, indifferent doctor for 5 minutes. Even for the best doctors, volume will certainly dry up, and I’m not sure how many practices are equipped with the infrastructure to adapt to these changes. In addition, we will be more at the mercy of “the customer is always right” philosophy. Currently, although I have a responsibility to patients, I absolutely do not have to bend over backwards for their business. Who’s ever heard of a McDonald’s permanently dismissing a customer for any reason, especially in this day with twitter and social media backlash? Look at that Chipotle manager who recently appropriately kicked out a customer trying to get food without paying for it.
Having said all that, the luxury of my practice is that I can go either way. Because my margins are way higher than everyone else, I can survive government mandated price cuts without really taking too much of a hit in my income (in terms of percentage). My practice is already “concierge” enough that I can most likely hike my prices significantly if Medicare disappears, and patients will still come to see me. This is the beauty of a low over head, lower volume solo practice. I’m super nimble. At this point though, I’d rather keep fixed pricing and have the freedom to cherry pick my patients with rather minimal consequence. (although social media has taken some of that liberty away).
The problem with government puts is that it rewards and keeps afloat inferior care, and does not incentivize those who are capable of superior care.