It may not be skydiving, but the top item on the “bucket list” of Terry Edwards, MD, is a bold leap in an age of ever larger healthcare conglomerates.
This spring, Edwards will launch his own primary care practice in Bozeman, an upscale college and ski town in Montana.
A partner in a practice that sold to a local hospital system back in the early 2000s, Edwards grew disenchanted over time.
One of the last straws came when the hospital made changes to a non-compete agreement to bar him and other employees from working at another rival medical facility in town.
Edwards joins a growing trend of doctors launching their own practices or opting to stay independent after years of acquisitions by hospital groups.
The percentage of medical practices owned by hospitals has dropped over the past 2 years after hitting a high of 32.6%, according to Black Book Market Research, an industry consulting firm.
Some of this shift may be attributable to hospital groups, which had been on an acquisition spree, digesting their new holdings.
But it also reflects countless decisions by doctors across the country to either keep their practices independent, like Edwards, and leave a hospital system to strike out on their own, industry experts and doctors say.
And for larger practices, there can be the added incentive of reaping new insurance incentives tied to broader population health metrics that hospital systems and accountable care organizations have been focusing on.
“It’s in my core to do this,” Edwards said. “I have a bit more business savvy than most physicians.”
A shift in direction
Hospital-owned medical practices dropped to 28% of the market in the third quarter of 2018, down from 32.6% in 2016, noted Douglas Brown, president and founder of Black Book, which has offices in New York and Tampa.
Other stats point in the same direction. The overall number of doctors working for hospitals or medical groups peaked at nearly 58% in 2016 before dropping to just below half in 2018, physician search firm Merritt Hawkins finds.
The shift comes after an epic buying spree in the 2010s as hospital systems around the country snapped up medical practices.
The bulking up came as hospitals tried to build larger networks with which to adapt to a shift in federal healthcare policy from the long-standing fee-for-service system to incentives based on satisfying broader population health metrics.
But the hospital acquisition wave has played itself out, with various non-profit and for-profit healthcare systems having bought enough market share to effectively negotiate with insurers, noted Douglas Brown, president and founder of Black Book.
“Some of the slowdown is that some hospitals have acquired as many practices as they can handle at this point,” Brown said.
But there has also been a jump in the number of doctors striking out on their own, say business consultants who advise independent practices and help launch new ones.
Healthcare business consultant David Zetter has seen an increase in the number of doctors leaving hospital systems to strike out on their own.
In some cases, they didn’t meet the productivity requirements laid out by hospital executives, while in other cases they were simply fed up with “too many generals mandating everything.”
Zetter, founder of Zetter HealthCare in Mechanicsburg, Pennsylvania, said he is now helping six different doctors launch their own practices.
“I am definitely seeing a movement back towards independents,” he said.
The relative ease of launching a medical practice may be another factor in the uptick in doctors staying independent or going out on their own, said Keith Borglum, a medical practice broker and appraiser in Santa Rosa, California.
If you are not having to buy lasers and microscopes, you can probably get your practice started for less than $100,000, Borglum said.
Lining up financing isn’t particularly difficult, with both Bank of America and Wells Fargo both willing to lend the entire amount – or 100% – on medical practices, which they see as good credit risks with good cash flow, he said.
Borglum said he saw a 25 to 35% bump in the number of doctors seeking help starting their own practices, though that trend has fallen off in the last few months.
“These are very control-oriented people,” Borglum said. “When they are not allowed to make decisions, what medicine they can prescribe or whether or not they can fire their own medical assistant, they are not happy.”
“Independence is going to make them happy more than an extra $100,000 will,” he said.
Being your own boss
Doctors who have gone out on their own say the desire to run their practices the way they believe they should be run is a key motivator.
For Robin Dickinson, MD, who launched her medical practice 6 years ago in Englewood, Colorado, the moment of truth came when one of her patients with signs of skin cancer refused to undergo testing.
Her patient pleaded with her not to do the testing. Stuck with a high deductible insurance plan, she argued that the cost of the testing would make the difference of being able to put food on the table for her family.
Dickinson waived the fee for the biopsy, with plans to pay back the medical practice she was working for at the time out of her own pay.
But Dickinson received a rude awakening. The practice’s billing manager accused her of committing insurance fraud by not submitting the biopsy bill to the patient’s insurance company.
“That happened 6 years ago,” noted Dickinson. “She was right – it was insurance fraud. I was completely blown away. I couldn’t use my own time to help someone and pay back the practice.”
Fresh out of residency and a short stint at a medical practice, P.J. Parmar, MD, launched a walk-in clinic in Aurora, Colorado, to provide medical care for refugees. Seven years later, the practice has grown to three doctors and three physician assistants.
“It’s probably mostly a personality thing,” Parmar said of his decision to strike out on his own. “I wanted to do underserved medicine and I wanted to do it in a very special way and I could not find that anywhere else.”
Carmela Mancini, MD, left a local community hospital on the North Shore of Boston in 2015 to join a direct primary care practice, Gold Direct Care.
Mancini said she grew fed up with the amount of time she had to spend on medical coding and billing, as well as the heavy patient loads.
“When you are seeing 25 hospital patients a day, someone has to be patient No. 20,” she said. “You want to be able to give the patients and their families the time they need. I didn’t go to medical school to basically be a scribe.”
Making the finances work
Still, many doctors may lack the business skills or mindset needed to run a successful practice. They need either to bone up on these skills or team up with a more business-minded doctor, industry consultants say.
Ralph McKibben, MD, chose the latter route. McKibben launched his gastroenterology practice three decades ago with a mission to save lives in his community by making screenings for colon cancer far more common in Western Pennsylvania.
But McKibben, who just stepped down as president of the state’s gastrointestinal association, has also developed an ongoing interest in the business of medicine.
McKibben’s practice has grown to 100 employees in three locations, including 22 practitioners, even as many independent practices have been swallowed up by larger healthcare organizations. When he launched his practice in 1990, he had four employees.
McKibben’s practice is large enough now that he can pursue efficiency and patient-care-based incentives that hospital systems often seek to capitalize on.
In the case of a colonoscopy, the savings might come through heading off extremely costly emergency room visits by patients after the procedure. That can be as simple as agreeing to meet the patient back in the office in order to deal with a minor complaint, such as excessive gas, instead of sending her to the ER, he noted.
“We negotiate on a case-by-case basis,” McKibben said. “We have quality markers to show we do quality care and we try and negotiate savings by looking at efficiency.”
But the incentives are far from a panacea, especially for primary care physicians like himself, said Zuhdi Jasser, MD, chair of the AMA’s Private Practice Physician Congress, who launched his practice 2 decades ago in Phoenix.
The primary care market is far more fragmented than in the various medical subspecialties, giving it far less leverage when dealing with insurers and hospitals, he noted.
Still, Jasser has no plans to give up his practice and go work for someone else.
“At the end of the day, if someone wanted to buy me out, I would say no,” Jasser said. “I still love my practice. My patients are coming to me and not some institution that is cold and branded.”
Still, for smaller, start-up practices, tapping into population health incentives, which require large patient bases, isn’t even an option.
After several years on her own, Dickinson is back to roughly what she made working at the local hospital. She recently raised her fees to $40 each for the first two members of the household, with another $15 for each member beyond that. In return, her patients get everything from routine checkups to house calls.
She spends anywhere from 30 to 60 minutes with each patent, freed up in part by the fact that most of her patients pay directly, with a smaller number covered under Medicare.
“I have streamlined all of the administrative stuff,” Dickinson said. “There is no waste. I get to spend the vast majority of my time on patient care.”
Parmar says his practice, which relies heavily on Medicaid payments, is spinning off so much cash he is now putting money into other ventures.
A major cost saving has been his policy of no appointments – patients walk in and are seen as quickly as possible. That eliminates the need for staff to do scheduling.
Visits, in turn, range anywhere from four minutes to an hour depending on the issue at hand.
“It meets the patients’ needs so much better, and it meets an efficiency need. Your providers just see one patient after another,” Parmar said.
“When you come down to it, there is no single magic thing – it’s a bunch of small things that add up,” Parmar said.
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