Last updated on June 22nd, 2023
Every graduating resident or fellow must make the decision whether to join a private practice, open a solo practice, or be employed by a hospital or by a private equity practice. Although these represent four types of medical practice models in which the majority of physicians work, it comes down to whether you want to be your own boss or have a boss.
This clearly oversimplifies the decision-making process. There are many factors to consider when making deciding what type of practice in which to work and, unfortunately, many residents and fellows are not exposed to all relevant factors. Many residents and fellows train in academic hospitals staffed by attendings that have only worked in employed roles. Therefore, their advice is often slanted toward the physician-as-employee model because they haven’t experienced other medical practice models.
Over the past decade, the employment of physicians by hospitals and private equity groups has continued to increase. The American Medical Association (AMA) reported that in 2020, 50.2% of physicians were employed by such entities, up from 47.4% in 2018.1 This trend has steadily increased since 2012, as more physicians move towards hospital-employed positions in place of private or group practices.
Some experts believe the end is nearing for private practices, while others believe a comeback of such practices is in the making. Regardless of where your career interests lie regarding these different practice models, we have compiled a list of various benefits and drawbacks to the types of medical practice models.
Types of Medical Practice
As introduced, there are four main types of medical practices trainees can consider.
The American Medical Association defines private practice as “a practice wholly owned by physicians rather than by a hospital, health system, or other entity.” While this type of medical practice model is ideal for some, especially those who want to be their own boss, it isn’t the right fit for every physician, especially for those who don’t enjoy administrative duties and all the other risks and hassles of running what is in effect a small business.
This type of medical practice employs two or more physicians, often in different specialties, to provide comprehensive medical care in the same facility. This type of medical practice can offer doctors more stability than running a solo practice.
Private Equity Practices
Private equity refers to ‘private money,’ that is, to financial companies that run investment funds and must allocate those funds in ways that earn them a return on investment. These firms take their clients’ money and purchase various businesses and either retain them for their ongoing cash flow or restructure them and, thus, having increased their value, sell them for a profit. Since medical private solo and group practices provide steady profits, private equity finds them attractive, especially since many can be bought at a relative discount due to being sub-optimally managed. Private equity firms have wide networks of medical practice managers and consultants that can quickly improve how a private practice is run, increasing its profitability and thus, bringing in a heady stream of reliable cash flow to the fund’s managers and investors.
Physician practices owned by private equity are increasingly common because private equity firms began buying out struggling private practices a little over a decade ago. Selling a medical practice to an equity firm is often appealing to doctor-owners because it can ease their financial burden and the hassle of dealing with health insurance companies. The drawback, however, is less physician autonomy in making practice decisions and a strong focus on increasing revenue and profit. Such profitability, however, can come at the expense of patient care and clinician well-being.
Hospital-Based Medical Practices
Physicians who work in hospitals, either in the hospital itself or in hospital-owned clinics and practices, usually experience a predictable income, have a steady patient base, and have a regular work schedule. The drawback, however, is less control over patient selection, patient load, and policy decisions.
When considering what type of medical practice setting is right for you, it’s important to examine the differences among these models. Of course, it is important to note that within each category, practices can be more or less well run, supportive of their clinical staff, and conducive to physician well-being.
What to Consider When Choosing a Medical Practice Setting
The ability to make your own decisions is an important issue for many physicians. Working in private practice allows you to develop your own schedule, decide the number of patients you want to see per clinic, and have flexibility with your hours.
When employed at a hospital or within a private equity group practice, you do not get this level of autonomy. However, the trade-off is that when your shift is over, you do not have many additional obligations, except maybe some hospital committee work. Private practice physicians, on the other hand, have to deal with administrative and practice-related issues on their own time. This often leads to longer hours.
Hospital organizations will often offer much larger salaries to new employees, which can be an attractive incentive to many looking to pay off student loans. It offers a guaranteed income while you begin to build your practice, and often times the larger organizations have built-in referral networks to get your practice off the ground faster.
Self-employed physicians, over time, can end up making more than their hospital-employed counterparts. According to a 2018 report by Medical Economics, private physicians make, on average $301,000 per year, whereas hospital-employed physicians bring in $278,000 a year.
Private practice physicians have access to ancillary income by owning surgery centers, physical/occupational therapy centers, radiology services, etc. This additional passive income can help increase the take-home pay without increasing the amount of work needed.
Health Insurance Reimbursement
In today’s healthcare environment, reimbursement is a hot topic, especially in the realm of medical practices.
Smaller private groups have difficulty negotiating adequate reimbursement rates with large insurance companies, making it harder to cover overhead and pay employees competitive wages. Whereas large hospital systems can typically negotiate higher reimbursements and receive facility fees which further increases the pay for particular services allowing them to pay physicians more money.
However, despite this, there are still many private practices that are financially successful, even in the climate of reduced reimbursement. If you are considering joining a private group practice, it is critical to evaluate its financial performance and long-term viability.
Physicians’ Personality and Lifestyle Considerations
If you cringe at the business aspects and administrative tasks associated with running a business, then an employed position is likely a better fit for you versus running your own practice. Additionally, work-life balance is easier to maintain as there are fewer non-clinical duties associated with an employed position.
If you are not averse to risk-taking and enjoy the business aspects of healthcare, starting or joining a group practice may be an attractive option for you. Private practices offer a dynamic atmosphere in which changes to the clinic’s policies and procedures can be quickly accomplished. Savvy physicians with an entrepreneurial streak can quickly grow a practice and benefit financially from doing so. When you own or partly own a practice, you not only get compensated through the clinical work you do but also 1) keep or share in the profit of that practice and 2) have an increasingly valuable equity stake in that practice. Once the practice is sold or your equity position is bought from you, you receive what is often a handsome payout, one that can fund your retirement.
Private, Group, or Hospital-Based Practice: Choose the Right Medical Practice Setting for You
The choice between private practice and employed positions is a big decision, but it does not have to be made on your own. Reach out to colleagues or mentors for advice and opinions, but be careful of biased opinions.
Since as a resident and fellow, you likely do rotations in different settings, including perhaps in solo and group private practices, you have many opportunities to see how those entities work .. and don’t work. Pay attention to how happy or stressed and burnt out the clinicians are, how well or poorly patients are treated, and how that setting jibes with your personality, values, and preferred practice style. You can additionally make a point of speaking to practitioners in those settings about their experiences and recommendations and to get your questions answered. You can approach these clinicians and ask to speak privately, so they are more able to share their unvarnished thoughts with you.
By the time you are nearing the end of your medical training and beginning your job search, you can (and should) already have an overall understanding of the different practice models and some clarity in your preferred career direction. Then when evaluating each job opportunity, it is important to do your due diligence on those specific practices because, even within a category of practice, those practices and the positions they offer are not created equal. Each job option has its own advantages and drawbacks.
In a Medscape survey, 72% of employed physicians reported being satisfied with their careers compared to 73% of self-employed physicians.3 This indicates that a sense of accomplishment and career satisfaction can be achieved in either employment model. Thus, when choosing your path, remember there is no right answer but rather an answer that is right for your situation. Be honest about your career aspirations and choose which job puts you in the best position to accomplish them. Remember also that switching jobs within a practice category or switching to a different practice category happens all the time. Once you make an informed decision, you are likely to be happy with it. But if you aren’t, then you can certainly change your mind and explore different opportunities.
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- American Medical Association. (May 5, 2021). AMA analysis shows most physicians work outside of private practice. AMA. https://www.ama-assn.org/press-center/press-releases/ama-analysis-shows-most-physicians-work-outside-private-practice
- Page, L. (June 14, 2016). Employed vs Self-employed Physicians: Who’s Happier? These Are the Tradeoffs. Medscape. https://www.medscape.com/viewarticle/863852_2
- almer, W. (Febuary 3, 2020). Working at a hospital vs. private practice: What’s right for you? Wolters Kluwer. https://www.wolterskluwer.com/en/expert-insights/working-at-a-hospital-vs-private-practice-whats-right-for-you