Why physician practices are poor business models

This economist hits the nail on the head: “Most businesses are based on a scaleable model of sales. However the product of a doctors office can only be created by the doctor and delivered by the doctor. In essence, it is a one employee enterprise and everyone else in the office is ancillary staff. In fact, it could be argued that the doctor actually works for the employees and not the other way around. He has to see patients and do surgeries to pay his staff’s salaries. Thus the incentive of the doctor is to actually hire underqualified staff to pay lower salaries and cut costs.”

Not only are physicians poor at business to begin with, they are saddled with a DOA business model.

This is why the private practice model of medicine is dying. More practices are being bought by hospitals where the physicians are salaried. This relieves the burden of administrative tasks and supervising ancillary staff, so that the doctor can focus on medicine.

Comments

Anonymous
Actually, as far as the model goes, that’s no different than a practicing lawyer or architect. The difference is that those two groups, and others similar, don’t always choose to enter into the reimbursement model that physicians do. Lawyers have a similar model in insurance defense firms, where you will always make a good, steady living and be paid by companies you can pretty much guarantee will be solvent, just like physicians.
Now, not all attorneys or architects are good enough businesspeople to go on their own, it’s certainly not easy, and you do get paid last, after the suppliers and employees. And you have to be willing to live with the stress that comes with being responsible for others’ livelihoods, on top of the normal professional responsibilities. Not everyone wants to do that, and there are many days those that do would much rather not worry about where the next paycheck is coming from and how much it will be.
But in and of itself, the model the original post describes doesn’t have to be a money loser, and can be quite profitable.
Anonymous
“Thus the incentive of the doctor is to actually hire underqualified staff to pay lower salaries and cut costs.”
One more thing, with respect to this quote. If you are utilizing a reimbursement model that does not allow you to charge more for your better skills, this may well be true. If you get paid the same as the worst practitioner in your field, and you’re the best, no harm done. However, if you can charge more for your quality, then you’re going to want top notch staff that reflects the quality service you’re providing.
I know you physicians stick together almost like cops, but doesn’t it annoy you at all that you’re all pretty much paid the same for the same work, even though some of you have to believe you’re doing better work than others.
Anonymous
The commenter above, and not the economist author, nails it.
The economist is assuming the old fixed third party model. That model is dying rapidly and will soon only exist in clinics directly subsidized by the government or indirectly subsidized by hospitals which divert profits from labs or procedures to maintain a loss leader clinic. Within that model, it makes sense to hire cheaper, less skilled employees as patients are not shopping based on quality.
As many physicians transition to a model with more cash, more HSAs, fewer (if any) commercial third party prepaid plans and no Medicare nor Medicaid, then the more common business model employed by other professionals applies. These practices benefit from more skilled, more costly staff who will help the practice earn more by providing higher quality service for which patients are willing to pay.
Anonymous
The private practice model goes back to the days when doctors practiced out of their black bags and hardly needed an office or any staff. A reasonable fee for service was collected directly by the doctor at the time of service. These were simple times where complex business models were not necessary. Times have changed, and the private practice is the true dinosaur of medicine.
Anonymous
But is it a dinosaur that works better for the physician than the “complex business model” that the physician has now. Judging by the complaining, it seems it might be.
Anonymous
An architect can refuse a client, can negotiate compensation terms on a case-by case basis depending on workload and interest and no one expects him to get up in the middle of the night to work up a new set of drawings for a client for free. Same goes for the lawyer. And the accountant. No one makes a lawyer take a client pro bono. And I never hear anyone complaining that the architect’s compensation scheme is archaic. Or the lawyer’s.
Medicine is expected to be different. Doctors are supposed to have a kind, accommodating and unhurried manner, but always be on time, to have a nice office and ample and helpful staff, but not be too expensive.
Anonymous
“Doctors are supposed to have a kind, accommodating and unhurried manner, but always be on time, to have a nice office and ample and helpful staff, but not be too expensive.”
And lawyers aren’t? Maybe not those tall building lawyers, but the ones who represent the public are.
If medicine is expected to be different it’s because medicine’s practitioners agreed to be paid differently than those other groups.

Why physician practices are poor business models

Related Stories

More in Uncategorized

Comments

Site

Channels

Subscribe

Related Stories

More in Uncategorized

Comments

Site

Channels