If you are either the full owner of a private practice or a partner with partial ownership, you are now in the minority. A rapid decline in private practice has led to more doctors being employed than having an ownership interest. It is worth stepping back and try to understand why this is so. While there may be no need to change things, we at least need to understand the paradigm shift so that we can respond accordingly.
According to the American Medical Association, just over 47% of America’s doctors owned an interest in a private practice in 2016. Four years ago, that number was more than six percentage points higher at 53.2%. Coincidental with the decline was an increase in physician employment from 41.8% in 2012 to 47.1% in 2016.
All indications suggest that private practice will continue its decline for the foreseeable future. From a systemic perspective, the decline is largely due to older doctors retiring from private practice and not enough new doctors coming in behind them. This disparity is due to three factors listed below.
1. Increasing Complexity
The medical industry, as a whole, is growing more complex by the day. Nowhere is this complexity felt more than in private practice. Between the changing insurance industry, federal and state regulations, and an evolving marketplace that demands better quality and higher profits, family practice owners are often the forgotten clinicians left to figure it out on their own.
Future doctors still in medical school are not oblivious to all of this. They read; they hear stories; they talk to practicing doctors. Our future doctors are getting a good glimpse of what private practice looks like and want nothing to do with it. They are to take another route.
2. Changing Payment Models
One goal of the Affordable Care Act was to transition healthcare delivery from fee-for-service to quality of outcome. The primary mechanism for doing so is changing payment models. Unfortunately, new payment models like MACRA make it far more lucrative for young physicians to join group practices as employed physicians. Private practice owners suffer under the new payment models they do not have access to.
It makes complete sense that new doctors would choose an employment model that is best for them financially. Why struggle as a private practice owner when life would be much easier as an employee? That doesn’t seem complicated.
3. The Slow Death of Self-Employment
Third is the general consensus among young people that self-employment is too risky to delve into. By the way, the slow death of self-employment is not just a medical industry problem. It is not limited only to private practice. Across the spectrum we are seeing less willingness among young people to strike out on their own as entrepreneurs. They have learned to rely on others throughout their young lives; relying on employment as a new doctor seems completely natural.
The Locum Tenens Exception
There is one exception that does not play into the current norms for physician jobs. That exception is locum tenens work. While it is true that fewer new doctors are electing for private practice, growing numbers of them are forgoing traditional employment in favor of a career in locum tenens.
It may be that new doctors find locum tenens attractive because it offers the best of both worlds. The new doctor still enjoys some of the freedom of self-employment without having to take on all the responsibilities of running a business. Maybe in the end, locum tenens will be the eventual replacement for private practice.