Hospital Employment vs. Private Practice: Pros and Cons

June 2, 2013

A growing number of physicians are choosing employment with hospitals, but it is not right for everyone.

The Medical Group Management Association reports that more than 50 percent of physicians are now employed by organizations affiliated with health systems. In some specialties, like cardiology, that is closer to 75 percent. Given the rapid increase in the number of physicians that have chosen this model does that mean this is the right choice? Are there alternatives? How do you decide?

Like everything else there are both pros and cons associated with employment. Briefly they are:

Pro

The check will clear - The security of knowing that you are not at risk for making payroll may be significant. Both staff and physicians are virtually assured of their incomes.

Administrative headaches disappear - The hospital will worry about issues such as human resources, billing and collecting, rent and overhead, and daily operations.

Incomes are often higher - Many physicians do substantially better in an employment arrangement than they did in private practice.

Con

You aren’t in charge - Regardless of the assurance that "nothing will change," it does. Policies are set by the employer. Staff knows who writes their checks. You may end up seeing patients that would not have normally be part of your practice.

Compensation can be changed - Nearly all hospitals pay physicians on some form of production-based compensation formula but that does not mean that can’t change.

You may be judged by new metrics - Hospitals are aggressively adopting quality and patient satisfaction measures that are part of the overall compensation plan.

There may be new technology - Even though you have an EHR it might not be their EHR. You may need to go through another conversion.

So how do you decide if it is right for you? Use the points below to help make the right decision.

Talk to colleagues - Take time to talk with physicians that are currently employed, especially those that were in private practice. Learn about what works and what doesn’t. Would they make the same decision today?

Does your view of the future agree with the hospital? - The healthcare system is about to undergo a major change in incentives. Are you thinking the same as the hospital and, if not, what impact will that have on your practice style?

Compensation - How secure is their current offer? What will they use to determine compensation if they move away from production? If you derived a significant portion of income from ancillary services what will they do if payers decrease payments for those services?

Can you leave? - What if you decide the arrangement isn’t right for you? They likely own the staff and furniture. Do you have to start over? Can you return to the starting point at some pre-arranged price? Is there a non-compete?

Are you looking at retirement? - If you plan to retire over the next few years this might be a way to get paid for furniture and medical records that might not be possible otherwise. Very few physicians are buying the practice of other physicians.

My experience is that your ability to negotiate is very different if you approached them or they approached you. Regardless, don’t assume any deal is "take it or leave it," especially if you are in primary care. Hospital deals are constrained by "fair market value" rules and most systems will use an outside consultant to craft the offer (I know, because I’ve done this) but remember that the consultant is paid by the hospital and not you. Guess where the loyalty sits?

Many physicians enjoy a hospital association and some simply don’t. The bottom line? Don’t let a big dollar figure make the decision for you.