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Ownership loses its luster: Physicians less likely to go solo

Higher costs for practice start-ups, lower reimbursement rates and a desire for more work-life balance have driven the trend.

By — Posted Oct. 19, 2009

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When David Loxterkamp, MD, moved to the small waterfront town of Belfast, Maine, in 1984 to establish Seaport Family Practice, he was one of many physicians who owned at least part of their business. Now, he is one of the few.

Most of the doctors practicing in the community when he started have retired. Most of the new physicians are on the hospital payroll or have other employment arrangements.

"It's been a pretty dramatic change," said Dr. Loxterkamp, who wrote an essay on the shift in the May/June Annals of Family Medicine. His is one of several recently published papers asking whether the decline in the number of physicians who own their practices is good for doctors and patients.

"Small practices have been declining for quite some time. I don't think we yet know if it is a problem," said Stephen Isaacs, lead author of a perspective piece on the subject in the Feb. 12 New England Journal of Medicine and a partner in the consulting firm Isaacs/Jellinek.

The percentage of physicians who own their own practices varies depending on the survey, anywhere from 30% to 60%. It is widely accepted that the number is going down. The NEJM paper estimated the number of doctors who owns at least part of a practice has declined about 2% annually for the past 25 years.

Many experts suspect this may follow larger economic trends. But the change is also a reflection of the financial realities of practicing medicine. According to a report issued June 23 by the Medical Group Management Assn., median collections for primary care doctors increased 14.7% from 2004 to 2008 but, when adjusted for inflation, the growth was only 0.6%. Average collections went down 4.3% for specialists. When inflation was taken into account, the decline was 16.3%.

Larger groups have more negotiating power and are better able to counter these trends.

"We have been very successful at getting above-average reimbursements with our contracts. Solo physicians say to me, 'I just take what they give me ... there is no way for me to even negotiate,'" said Curtis Chastain, MD, medical director of a 120-doctor practice, Our Lady of the Lake Physician Group in Baton Rouge, La.

There is also an increasing desire among physicians for a balance between work and home life, which can be much harder to maintain in a small practice.

"My dad was a solo practitioner. He was an ob-gyn, and I think he worked too hard," said Jack Stern, MD, PhD, managing partner of Brain and Spine Surgeons of New York, a seven-physician neurosurgery practice in White Plains. Dr. Stern has been practicing for more than 20 years.

The price of ownership

It takes more money to start a practice these days. When Walker Ray, MD, one of the authors on the NEJM paper and vice president of the Physicians' Foundation, launched his pediatrics practice in Tucker, Ga., 25 years ago, he spent a few thousand dollars on an exam table. He provided his nurse with a phone and a card table.

John Brady, MD, who started his solo family practice 6½ years ago in Newport News, Va., took out a $50,000 bank loan for an electronic medical record and other needs.

Dr. Brady says it is possible to start a practice for as little as $15,000, but that may still be too rich for the current generation of physicians who are likely to have significant debt from medical school.

According to the Assn. of American Medical Colleges, medical students, on average, left a public institution in 2001 with $86,000 in debt. This increased to $120,000 in 2006. Private medical school graduates accumulated $120,000 of debt in 2001. This grew to $160,000 in 2006.

New physicians "want to go into a situation where they will be guaranteed all the resources they need -- the staff, equipment and electronic medical records. They would never be able to afford this on their own," said Pimmie Lopez, network executive with Halley Consulting Group in Westerville, Ohio.

These factors make it more difficult for doctors to start a solo practice or keep one in business. But those who do may find benefits for patients and community, as well as themselves.

For instance, Dr. Loxterkamp's paper cited research indicating that homeowners tend to be more civic-minded and politically active than are renters. He suggested that practice ownership might have similar benefits in part because it allows doctors to make decisions about how to serve the community without needing approval from higher-ups.

In the Annals essay, Dr. Loxterkamp questioned whether his practice would have been able to become a rural health center or take the necessary steps to be able to treat opioid addiction, both of which fulfilled significant community needs, if it had not been so small.

"There are many things we change in our office that would take months or years or would never be done if we were in a larger system," he said. "That autonomy is a very good thing for many of us."

There is no research documenting the impact of medical practice size on the community, but there is some indicating that practice size has an effect on patients and physicians. A study published in the September 2003 Journal of the American Board of Family Medicine found that as the size of the physician group increased, collegiality, quality emphasis and organizational trust went down. Being owned by a large system also decreased autonomy.

"There is the potential for the patient experience to really suffer," said David Howes, MD, who once owned a small medical practice but is now president and CEO of Martin's Point Health Care in Portland, Maine. To prevent this, his 60-physician group has taken steps to ensure the practice is governed by doctors and works to maintain the autonomy of practices that join.

"We are responsible for making wise decisions for our patients, and ... patients feel that they have consistency in their patient-physician relationships," he said.

Other papers have indicated that patients tend to trust solo practice physicians more, and that independent doctors provide more charity care.

According to a Sept. 3 report from the Center for Studying Health System Change, 69.4% of doctors who owned their practices provided charity care, but only 45.9% of those who were employed did so. In addition 71.5% of physicians in one- or two-doctor practices provided charity care, compared with 51.1% of physicians in groups or more than 50 doctors.

Physicians working in larger groups counter that all of the positive aspects of small practice ownership, such as autonomy and contributing to the community, are still possible. A larger institution, because it is more financially stable, may be able to give usually time-crunched doctors more elbow room.

"Our physicians have a quality of life and more time to be involved in the community," said Lopez. "These are things a private practitioner would probably struggle with."

Medical care may be improved because physicians are able to interact more easily. There can also be workplace benefits for physicians, such as retirement plans, disability coverage and health insurance. Vacations may be easier to arrange. Larger practices also are more likely to allow set hours and have few of the risks inherent to running a small business.

"There are very few individuals who are willing to put in the kind of all-out effort and take the kinds of risks that starting solo-practice physicians need to take," said Dr. Howes.

And there has been some research indicating that patients can benefit from receiving care from physicians working in a large group. For example, a paper in the January/February 2007, Health Affairs found that Medicare patients with myocardial infarction treated by solo physicians were more likely to die than were those cared for in other settings. A study in the July 27, 2005, Journal of the American Medical Association, found Medicare beneficiaries were less likely to receive recommended preventive services from solo or two-physician practices.

"Being with a group of colleagues, sharing care responsibility, and having curbside consults does raise the quality," said Dr. Howes.

Those who work in solo and small practices argue, however, that it is possible to offer high-quality care and establish a business that offers many of the benefits of being employed or working in a larger group, although it is not for everybody.

"If you have a huge amount of debt, if you have medical issues in a family member and you need health insurance, if you are completely not interested in paying bills, you should not" go solo, said Dr. Brady. "If you like the idea of doing your own thing, this is the way of practicing medicine."

Those on both sides acknowledge that both models offer advantages, for physicians as well as patients, so having the choice is important.

"There are many good physicians who are practicing good medicine by being employed by a large corporation. I do see the value," said Dr. Loxterkamp, "but I think it should be one option.

"We all have to make the right choices for ourselves."

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ADDITIONAL INFORMATION

Fewer physicians flying solo

[download pdf]

The percentage of physicians working alone or with a partner has declined significantly, with a growing number working in large groups, hospitals or other medical settings.

Here's how the numbers break down:

Solo or two
doctor practice
Large group,
hospital or
other setting
1996-9740.7%59.3%
1998-9937.4%62.6%
2000-0135.2%64.8%
2004-0532.5%67.5%

Note: No data were gathered for 2002-03.

Source: Center for Studying Health System Change, August 2007

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The high cost of medical education

Experts suspect that one factor playing a role in the decline of physicians owning solo or small practices is the growing burden of medical school debt.

Here is how tuition and student debt has increased:

PublicPrivate
Annual tuition
and fees
Total debtAnnual tuition
and fees
Total debt
2001$12,411$86,000$31,296$120,000
2002$13,873$92,000$32,649$127,000
2003$16,332$100,000$34,247$135,000
2004$19,043$105,000$37,269$140,000
2005$20,370$115,000$39,024$150,000
2006$20,978$120,000$39,413$160,000

Source: Assn. of American Medical Colleges, August 2007

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External links

"The Dream of Home Ownership," abstract, Annals of Family Medicine, May/June (link)

"The Independent Physician -- Going, Going...," extract, New England Journal of Medicine, Feb. 12 (link)

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