When family physician Lloyd Van Winkle started his practice in 1985, he didn’t think twice about whom he would hire to manage insurance claims and billing. His wife, Joanne, was already a certified coder and biller, having held the same job for the teaching hospitals where he completed his internship and residency. “She’s a professional,” he says. “She’s not doing this just for me. The business is important to both of us and we both work hard.”

A solo practitioner with Medina Valley Family Practice in Castroville, Texas, Van Winkle still relies on his wife to not only post payments to accounts, but also maintain the office software and negotiate reimbursement with payers. He notes, however, that Joanne’s greatest contribution has been helping him manage his practice more like a business. “I’m a doctor so I see things medically,” he says. “When it comes to [patient billing] she’s more business-oriented than I am, which keeps me from getting ridiculous in my approach.”

Van Winkle is not alone. Physicians in small and midsized practices often employ close friends or family members to help perform clerical jobs. In many cases, they use their spouse as an office manager, hire a relative to answer phones, or groom an adult child to take over the practice when they retire. With the cost of doing business on the rise, husband-and-wife physician teams are also cropping up as couples look to capture economies of scale.

Indeed, hiring those you know makes good business sense — at least on paper, says Betsy Nicoletti, a physician practice consultant with Medical Practice Consulting in Springfield, Vt. “Physicians who put their spouse or child on the payroll get to keep their money in the family,” she says. At the same time, physician couples who work together can reduce their office rent by half, share the cost of high-priced equipment, and pay one staff member instead of two.

Perhaps the greatest incentive for putting loved ones on the payroll, however, is the level of trust they bring to the table. “A lot of practices hire family members because they trust them more than anyone else,” Nicoletti says. “They know they’re not going to steal from them and that they are the only ones who will really care if the money comes in, so they’re more likely to make sure that people come in on time and do their job.”

Yet such arrangements are fraught with challenge. Because physicians know that person outside of the office, they may be more likely to excuse errors they commit, be overly critical, or rely on preconceived notions about their professional ability. Any history of conflicts they have can also fan the flames of discontent, creating an unprofessional atmosphere for coworkers and patients. “There are tremendous advantages to having members of the family work for you, but there are also some big disadvantages,” says Thomas Hubler, a former marriage counselor and founder of Hubler Family Business Consultants in Minneapolis, which helps family-owned businesses overcome obstacles. “It all has to do with how well you can manage the boundary between business and your personal relationship.”

At what cost?

Nicoletti agrees. In the case of spouses working together, she says, it can be tough to maintain a sense of independence, which most consider necessary for a healthy marriage. Indeed, couples that wake up together, work together, and come home together often have a difficult time carving out personal space. “I’ve worked with many practices where there’s a husband-and-wife team in the office and while it can work, I frankly don’t think it’s a very good idea,” says Nicoletti. “It becomes too difficult to separate their roles.”

Hiring friends and family, she notes, can also negatively affect office performance. While Lloyd and Joanne Van Winkle are both trained professionals, many spouses and relatives who perform clerical work are significantly less qualified than outside candidates. Worse, physicians may feel obligated to retain that person regardless of productivity — a situation that medical practices today can ill afford. “We’re not running cottage industries anymore,” argues Nicoletti. “It’s getting harder to make a living in medicine and you really need a professional running the [business end of the] practice.”

That goes double for practices looking to expand. According to healthcare executive search firm Cejka Search, having a family member on the payroll automatically makes it tough for smaller practices to recruit top talent. All else held equal, physician candidates aren’t likely to opt for a practice where favoritism or personal baggage looms large. “To attract the best candidates, going from a solo to a multiple-physician practice requires a re-evaluation of all their business practices — including the involvement of family members,” says Mary Barber, vice president of Cejka Search. “Even the most well-meaning practices are placing themselves at a disadvantage when a spouse is involved in the practice. The entitlements and habits are often unconscious, which make them even more difficult to overcome.”

Fueling resentment

Another potential pitfall to hiring friends and family is the feeling of resentment it can evoke in other members of the staff. No matter how qualified your niece or nephew may be, or how prestigious their degree, coworkers will likely view the hiring as nepotism — making it harder for that person to effectively delegate. Worse, some employees may believe that your relative took their place in line for a promotion, which can quickly erode office morale.

There is also the issue of imposing office discipline and enforcing policies. Could you really fire your own spouse? Or even discipline her in the same way that you would any other employee who, say, shows up late or does sloppy work? Even if the answer is yes, can you really expect other staff members to believe that?

“We’ve seen this in several situations and a lot of it stems from differential treatment of employees,” explains Richard Sinaiko, CEO of Sinaiko Healthcare Consulting in Los Angeles. “The physician needs to communicate with coworkers and make clear to their relative what their limits of authority are.”

Because of the many pitfalls to working with someone you know, many consultants recommend physicians avoid such hiring practices altogether. That includes the hiring of close friends and relatives of existing employees. Should issues arise with the new hire, or you’re forced to let them go, it could damage the relationship you have with your current staff members. “I would be careful about hiring siblings, spouses, and children of employees,” says Nicoletti. “If it’s a cousin or friend, however, and you have a good screening process in place for new recruits, you can use your discretion.”