Independent Physician Practices: Sell, Consolidate, or Stay Put?
Jul 05, 2019 09:57AM
● By Alyssa McGinnis
By Richard D. Wagner, CPA - Partner – Eide Bailly, LLP
With more than 40 years of working in the healthcare industry, I have seen health systems buy practices and divest of them over two or three cycles. Private equity firms come in and consolidation happens. This is often touted as the end of the private practice. Currently, these transactions seem to be even more intense due to the high cost of technology, staffing and other general operating costs. There are also concerns about contracting with the payers at acceptable rates if you’re not rolled up into a health system. The pundits might be right, but if they are, then why do we see very successful groups and some individuals faring better than average, and some of them working less?
Let’s examine each option, starting with working as an employee of a health system. You get paid to see patients, with some administrative pay for various activities due to Stark Laws, etc. As a result, the main way to make more money in this system is keep increasing your patient volumes. The benefit is, if you’re a good doctor, the health system might be willing to lose some money on your practice for the greater good. In a private equity group setting the entity must make money, which leaves only two basic options: see more patients or get paid less in anticipation of a big payout when the private equity group potentially flips the business years later.
The successful independent practices are good entrepreneurs who enjoy running a business of their own. They have control over their own schedule, how many patients they want to see and how they want to treat their staff. They often have investments in many different services, and their income is not solely based on how many patients they see per day. As with any good business, they also surround themselves with good staff and outside assistance to be successful. Owning your own business is not for everyone, but it can be very rewarding.
Your fit might be in a health system or private equity roll up, but don’t discount the ability to still own and run your own practice. There are examples in many markets where independent practices are not just surviving but thriving. Often, it comes down to business basics, supply and demand for your specialty and quality of service—why would a patient come to your practice over the other options?