Returning to Private Practice after Hospital Employment: Culture and Fit in a Group Practice

Sometimes choosing whom to practice with is an easy decision. Bonds often exist with colleagues from previous groups, and while the group may be employed by the hospital, all of the providers still practice in the same location and appear to the public as a group practice. But sometimes it isn’t quite that easy.

More commonly, there has been turnover since the original sale of the practice. Older physicians may have retired or are slowing down. Younger physicians may have been added. Physicians nearing retirement age may not be interested in investing time and risking capital in starting a practice they will be involved with for a relatively short time. Conversely, younger physicians are often risk-averse when it comes to business. Often they have not been in private practice and lack an understanding of and interest in what is involved.

Both the older and younger physicians may overtly or covertly seek to remain employees of the hospital, which, depending on your specialty and the specifics of the situation (number of physicians involved, competing practices, call coverage issues, etc.), can make returning to private practice difficult and, in some cases, virtually impossible.

Hospitals are adept at ferreting out these situations fairly quickly, and you can expect them to use them to their advantage as the negotiations unfold. That said, it is also important to recognize the hospital’s motivation. Again, depending on your specialty, group size, competition in your specialty, and many other factors, it could be that the hospital prefers you stay together as a group.

It’s equally important to recognize that in forming a new group practice, you are no longer bound to the legacy organization structure of the group you originally sold to the hospital. That group is gone, and it is likely that the legal entity that it operated under is gone, too. And even if that entity still is in legal existence, you are not required to use it. When starting a new group, you can begin with a blank page, and that means you can violate some of the old-standing “rules” of group practice that date back to the 1960s, when practices first started to organize as corporations.

For example, everyone does not have to be an owner or partner. You can explore structures that allow younger physicians to be employees into perpetuity, if that better suits your situation. Older physicians approaching retirement or already in slow-down mode likewise can be employees. Obviously, the trick with these models is rewarding those who are willing to take the business risk while still meeting the compensation expectations of those who are not.

Meeting Everyone’s Needs

When starting a new group, meeting the needs of older physicians nearing retirement is generally much easier. For example, whatever arrangement is in place has a limited term that can be established in advance based on a future retirement date.

Younger physicians can be more of a challenge, and the pitfalls can be huge. Combining risk-averseness on the business side with salary expectations that may not reflect the underlying economic reality of private practice can lead to irreconcilable differences.

While it may be possible to work through the lack of ownership and financial risk, compensation expectations need to follow, and generally, they don’t. Part of the problem is that salaries paid by the hospitals don’t reflect economic reality. In private practice, physician compensation is typically what is left after paying overhead, which is a true reflection of the financial earnings of that physician.

The survey data that many employed physicians have come to rely on as indicative of what they are worth in terms of salary is distorted. As more physicians have become employees of hospitals, survey responses are increasingly dominated with physicians employed by hospital systems. Hospitals generate significant losses on employed physicians and the salaries reported in the surveys are artificially subsidized.

Here again, the specifics of your situation come into play. Many physicians seeking to leave hospital employment do so in the face of compensation “restructuring”— a code word for a reduction in compensation. If that is the case, the reality of those cuts affects everyone, which may help lower the compensation expectations of younger physicians.

However, younger physicians are more mobile, and high levels of school debt and other financial pressures tend to make it easier for them to search for a higher guaranteed salary, absent the potential financial risk of private practice, by relocating to a different part of the country. Practice autonomy and cultural considerations are inclined to be more important to older physicians than compensation. The converse is true for younger physicians.

Freedom of Choice

As you work through these issues, don’t ignore the most important facet: the cultural fit of your potential colleagues. The common bond that can be formed among a group of physicians who decide to separate from hospital employment can sometimes be akin to a shotgun wedding. This common desire to be out from under the hospital, for whatever reason, can mask the need to critically examine the cultural fit of the physicians involved.

Ask yourself whether this group of individuals is the group you would choose to go into practice with if you had complete freedom of choice. Listen carefully in your discussions with them, consider their business acumen and business behavior, and take an objective look at the likely cultural fit. Imagine yourself in partner meetings or board meetings with these individuals and consider their willingness and ability to engage in the complex decision-making and related financial risk that may follow some of those decisions.

Don’t ignore clinical considerations either. The overarching question above bears repeating: Is this the group of individuals I would go into practice with if I had total freedom of choice?

In the 1990s, when my company was merging as many as 15 or 20 small independent groups into large single-specialty and multispecialty group practices, one of my former partners had an effective — and disarming — comment for those who didn’t seem to fit into the culture the new group was trying to create. He’d say, “Doctor, this may not be for you,” and leave it at that.

Making concessions to get 100% consensus or to meet the lowest common denominator is not in your best interest nor in the best interest of the group you are trying to create. It is better to leave some people behind than to compromise principles that risk the business’s long-term success.

Excerpted from Choosing Autonomy: The Physician’s Guide to Returning to Private Practice by Randy Bauman.