Pulse
Hanging Out a Shingle
Only a few young physicians still start out in solo or small practices.
Long before applying to medical school, Keith Peterson, M.D., had envisioned doing primary care in a small town in northern Minnesota, following in the footsteps of his grandfather who practiced obstetrics in Virginia, Minnesota. So when he finished his medicine-pediatrics residency this year at the University of Minnesota, Peterson was excited to head to Ely—population 3,500—to join a six-physician group that serves the town and its outlying areas.
Eager for the rigors of rural medicine but less enthusiastic about the business side—managing finances, staff, and facilities, for example—Peterson was glad to join a practice that falls under the administrative umbrella of SMDC Health System. To him, the challenges of opening a solo office, or even joining a small private practice, seemed formidable. “I can’t think of one of my colleagues or friends who even considered it,” he says. “It wasn’t something we talked about. I don’t know if we ever even sat down and said, ‘Wouldn’t it be fun to open a practice together?’”
Few young physicians these days choose to join small group practices, and even fewer go into business for themselves. The custom of hanging out a shingle has become a rarity. According to Minnesota Medical Association data, of approximately 12,000 physicians licensed and practicing within the state, fewer than 200 younger than 40 work in practices with fewer than five physicians. (There is no official count of solo practices.) About half are primary care practitioners: Roughly a third of those are family physicians, and about a fifth trained in internal medicine or pediatrics.
Costly Endeavor
One significant impediment for most young physicians who dream of being their own boss is the sheer cost of the endeavor, says Mac Baird, M.D., head of the department of family medicine and community health at the University of Minnesota. “The opportunities to set up a solo practice are just about nil,” he says. “It’s so expensive.” Billing and coding for insurance companies can require full-time staff. Electronic medical record systems, quickly becoming standard in medical offices, can exceed $200,000 even for a small practice. And there’s the matter of malpractice insurance, which can cost anywhere from $1,200 for a first-year family physician to $10,799 for a first-year neurosurgeon.
From rent to medical equipment, the expenses associated with starting a practice are no small matter, attests James Dufort, M.D., a seasoned pediatrician who ventured out on his own after practicing with groups for nine years. Dufort opened Eagan Valley Pediatrics in 2000 with the understanding that 90 percent of his earning as the sole physician with three nurse practitioners would go to overhead costs. Of the 10 percent profit, 2 percent is consumed by Minnesota’s provider tax.
Moreover, says Tony Orecchia, M.D., an established pediatrician and allergist who opened Family Allergy and Asthma Specialists in 2006, getting a practice off the ground can mean delaying earning at a time when young physicians need to begin paying off their medical school debt. And it can take time. Even after eight years of being employed by large and small groups, Orecchia found the credentialing process a surprisingly cumbersome ordeal when he branched out on his own. Getting hospital privileges can take up to 90 days, he says. And insurance companies took several months to do background checks and site evaluations. After applying for credentials, several insurers didn’t even get back in touch with him to complete the process. A small clinic isn’t on the radar of the insurance companies: “No CEO from a big company is going to call them to complain if I’m not on their panel,” he says.
On top of the delays, he found in some cases he received less reimbursement for providing the same services as a solo practitioner than he did when he was part of a large practice. Such struggles can be disheartening. “If you go on your own, you have to check your ego at the door,” he says.
Creativity Required
Although the number of solo practitioners may be diminishing, those who are striking out on their own are approaching medicine with entrepreneurial flair. “The [primary care practitioners] I’ve seen do it in the last five years,” Baird says, “have launched … very creative concierge practices.” In these practices, 500 or 600 patients pay a retainer of up to $1,000 to have the physician available around the clock. “They make house calls and have no office [and anticipate] a high degree of self-pay on the part of the patient.” The other solo act emerging involves family physicians and internists, he says, who do “exclusively Medicare house calls, and their office is basically a laptop and a rather well-equipped medical bag.”
For family practitioner Matt Logan, M.D., the decision to pursue the latter model quickly proved to be thinking outside the box. “The first impression from a lot of people [I told] was ‘This can’t work,’ and ‘You can’t make money.’” Logan, however, wasn’t deterred. After finishing his residency at the University of Minnesota in June, he joined established solo practitioner Todd Stivland, M.D., of Bluestone Physician Services, which he learned about from a faculty member in his program. Four days a week, each physician travels to assisted-living and group homes in the St. Paul area, meeting with patients who have contracted with the company. The practice not only has low overhead (there’s no clinic, although it does have an administrator, secretary, and physician assistant; Logan makes the trips in his 12-year-old Volkswagen with stethoscope and PalmPilot), but it also utilizes the resources, nurses, and technology already available in the residences. “There are very few people doing anything like this, and there’s such a demand,” he says.
Doing their Homework
For physicians completing training, there is no “formal curriculum on the specifics of setting up a practice,” acknowledges Bradley Benson, M.D., program director of the University of Minnesota’s medicine-pediatrics residency. Those who are venturing out on their own in more traditional solo practices do considerable research before they set up shop.
When psychiatrist Julie Petersen, M.D., finished residency three years ago, she was eager to control her own schedule and have time for other interests such as biking and traveling. “I asked [every physician] I met, everyone I knew, how they did things, where they worked, what did they like, what did they not like,” she recalls. Psychiatrists, who don’t require much office equipment, are among the most likely to go into private practice (three of the five residents Petersen graduated with set up their own businesses).
As she established her office, Petersen defrayed expenses by moving into a medical building with other independent practitioners and sharing overhead costs for such things as utilities and a billing administrator. She chose a location in Edina, near other physicians, to help attract potential referrals. And she took a part-time contract position with South Metro Human Services, seeing patients two days a week to cover herself until her practice was stable. “It took me six months to get pretty busy [as a solo practitioner],” she says, “but I think it takes years before you have a good referral base, until you’re known in the community.”
Some suggest this shift away from solo or small-group practices ultimately may compromise the physician-patient relationship, as productivity pressures imposed by large groups shorten the time allotted for office visits. It may also mean that remote, underserved communities will have even more trouble recruiting physicians. “It’s difficult to attract one or two people, which is what they need in those small communities, [let alone] four doctors to start a small practice together,” Benson says. Some community hospitals, hoping to attract talent to underserved areas, have offered to pay the overhead costs for young practitioners who are interested in establishing a practice.
But regardless of whether they have help getting started, enterprising physicians who want to open their own practice need a certain kind of personal resolve as well as a Plan B. “I always had a back-up plan,” Petersen says, “but I just didn’t think it wouldn’t work out.”—Kate Ledger