A myriad of reasons. Undercoding and not charging a retainer are two of them.
As an aside, here’s an interesting tidbit the doctor shares about not wanting bad publicity for her fledgling practice:
One patient, whom I suspected of faking, even asked me to help her complete her disability paperwork. When I hesitated, her husband threatened to tell all her friends what a bad doctor I was. Fearful of that kind of unfounded publicity, I reluctantly and regretfully complied.
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She lasted 5 years and found a buyer for her practice. I’d call that a success. Congratulations.
“Not only must patients value your service, but you must realize your own worth as a physician and act accordingly.”
I agree with this part of the article 100%.
She lasted 5 years with spousal support. So the practice was an expensive hobby.
Did she pay back her “low-interest family loan” in that time?
It sounds as if she didn’t price well, discounting unnecessarily. Also, a retainer practice is different from a fee-admission practice. You bill against the retainer. This wasn’t meant to be a capitation plan was it? The writer didn’t say so. And if it was a retainer practice, you actually do want patients to utilize your services, in fact early and often.
Something about this makes me wonder whether the story is entirely true. After all, if it took awhile to earn enough to pay bonuses, that could be due to the decision to pay off loans early and to accelerate purchase of capital equipment. I would like to know what they chose to pay themselves as a draw, before any bonuses. If that figure is zero, why did they go on for five years? I wouldn’t go on beyond a few months if I couldn’t see a trend toward being topside on expenses and profitable within the first year (paying debt in installments, not early).
I just can’t believe someone would go five years without really trying a different approach to charges, retainers and the like.
Selling the practice is not necessarily an indication of its profitability. The hospital might just have wanted another staff internist and the community is the first and easiest place to look. And it is easy for the hospital to justify the purchase of even a money-losing practice, especially if you are a “non-profit” and have to burn some money anyway.
The market speaks here. Primary care is valued as long as it is free or cheap. If primary care is priced according to what the physician thinks it is valued, the waiting room is empty. What is the traditional doctor-patient relationship worth? The public will answer with their wallets. Until there is a crisis, not much.
I can’t see anyone weak enough to let themselves get bullied like that surviving long in the marketplace.
As a guy who has started and run a solo cash only practice as well as run a department in a multispecialty clinic, I will indulge in a little post-game armchair analysis:
1. Mistake to start with a partner. 1000 patients is a good start for one person but nothing between two. Make the model work, then expand.
2. She says she had sound financing. Not really. Her ultimate financial backing were he paying patients but it appears that they were intent on getting more than they paid for and she cooperated with that. Perhaps her efforts to save them money encouraged the attraction of patients unwilling to actually pay for their care. Saving patients money is a good thing–but not by giving away the store.
3. She was too eager to please everyone. A certain percentage of the population feels that only elective medical care should be paid for–that necessary medical care should always be nothing out of pocket. This sort of practice must accept that it can never satisfy everyone, and be happy to let those who feel that way go somewhere else.
4. I wonder what collections were. “Requested” they pay at time of service? “Require” would be the start of an effective time of service collection policy.
5. It was a mistake to discount fees to Walmart levels of insurance reimbursement. This is not a Walmart high volume practice. It is a boutique practice and must charge full retail to provide boutique service. In doing so she underpriced and more importantly undervalued herself encouraging the attraction of a highly price/cost sensitive patient base who, as noted above, wanted a lot more service than they were paying for. It doesn’t sound like she took a clear position for herself at the outset as a physician practicing top quality individualized medicine for those willing to pay.
It is like the burger business. You can’t compete with McDonalds on price so you compete on quality–but then you have to charge 5-8$ for the burger. If you try to do both, you don’t make it. A cash only practice can beat a standard high expense practice on quality every day because time=quality and high overhead prevents that.
Physicians being notoriously bad businesspeople as a group, obviously with some exceptions, any of you who are thinking of striking out on your own should definitely make sure you’ve gone over your business plan with someone who has done it.
Collecting money is the hardest part of any professional’s practice. But the most important.
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