This is the grim reality of starting a private primary care practice

She was the first Michigan Wolverine I met who taught me their college fight song “Hail to the Victors,”and demonstrated their rabid pride anytime football or basketball season rolled around. (If you know people from the University of Michigan, you know what I mean). She was also one of the smartest and hardest working doctors in our family medicine residency program and one of our two chief residents.

So this past hot Labor Day weekend in Los Angeles, I was thrilled to catch up with my former chief resident. We hadn’t seen much of each other since completing our residency many years ago. She dropped by with her 3-year-old and apologized that her 8-year-old daughter would be unable to attend since she was taking tennis lessons with her father.

How was life treating her? Challenges in being a parent? I heard she had started up a practice and wanted to learn more. Wasn’t it difficult? How did she have the audacity to do such a thing?

When we graduated in the summer of 2000, neither one of us could appreciate or understand how our professional lives diverged significantly until now.

She started her own practice in October 2011 because simply, she had no choice.

She was tired of being “screwed” by other doctors who were her bosses/employers. With the first group, a two male physician practice, her boss had taken her billed revenues to cover her portion of the overhead (a third), when she was not in the office and on maternity leave. In her second group of 10 doctors, doctors performed sinus x-rays on every patient with sinusitis because it was billable. (They had their own x-ray department). Even though the practice was always busy with lots of patients being seen, her boss bounced multiple paychecks his employees. Always focused on doing the right thing, these did not resonate well with her.

She and another like-minded doctor decided to quit working for that group and start their own practice.  However, no bank would loan two doctors who had been employees their entire career any money to start a practice.  Even though there were empty suites in the medical buildings across the street from the hospital advertised for rent, for some strange (maybe political) reason, there was no space available to the two of them to rent.

Their only option was to go with a management company affiliated with the hospital. It would find office space, install an IT system, and help set up a new office.

Unfortunately being part of a very large organization, it wasn’t very responsive. If one of their laptops went down, it took months to replace.  Fortunately, the majority of their patients found them in their new location two buildings over.  After hiring a part-time third doctor to cover, she was able to take 6 weeks off to have her second child.

After their two-year contract with the management company expired, she and her partner set up their own independent family medicine practice with a total panel size of 6300. Now if a computer goes down, she simply can purchase a new one that day and be up and running.

Nevertheless, it has had significant challenges, one being very personal.

Around the time, she was starting her independent practice, her oldest daughter, then a first grader, wrote the following on a fill in the blanks Mother’s Day card made at school:

“My Mom likes to work.”

“My Mom can do many things!  I think she is best at seeing patients.”

Her daughter could see the tremendous amount of energy and time her mother spent away from home to start-up the new practice. Both children were in either school or day care from 7 am to 6 pm. She vowed that she would do what she could to make that better and has committed to leaving early on Monday afternoons to be the rehearsal pianist for her daughter’s choir.

Besides that decision, running a business meant many more decisions, which had to be made by her and/or her partner.

She was also now the human resources person. Since starting her practice, she has had to fire multiple employees including half her staff. They were texting at work, fighting with each other, and doing other nonproductive things. She could not afford that. We certainly never learned how to fire people in residency. Where did she learn how to handle these difficult issues?

She learned from experience, talked with other doctors who ran their own practices, asked questions to the attorney assigned through their business liability policy and her sister, a business owner with a MBA degree. She and her partner now have perfected a routine where they can have staff being let go packing by the end of the day. No longer will she accept candidates in their 20s. She wants proven staff in their 30s or older who have demonstrated they know how to work hard.

She was also now their recruiter since the part time third doctor got pregnant and left the group. With over 3000 patients per doctor, they needed to hire another. It wasn’t because they wanted to expand. Other doctors choose to hire PAs or NPs to do that. She found them an unhelpful layer that didn’t decrease work. Often many of the issues needed to have a doctor-doctor conversation.

No, the addition of a doctor was to make the practice manageable. New patients and physicals booked out three months in advance. Urgent care visits double booked onto their schedules. But who should they choose? A new residency graduate or someone else?

She called our former residency program attendings for potential candidates as she was desperate. Though sharp, these candidates’ desires of having work-life balance seemed to be their key demand. They wanted more vacation time, less call, and more pay.  This was obviously something she wanted as well but wasn’t yet there. She had worked extraordinarily hard to get here.  It irked her that newly out of training doctors were demanding this. In addition, the learning curve of someone just out of training would be a liability. They were very busy. There wasn’t time to handhold someone as he or she ramped up.   In private practice, you have to pay for your own malpractice insurance premium in addition to other fees (license, DEA, associations, hospital privileges, etc). Already she was paying $1400 a month for health insurance for her husband and two kids. That coverage had a $40 copay per doctor visit and a co-insurance, where they would be on the hook for 40 percent of the cost of any charges incurred.

Eight months after the third doctor left, they found their replacement third doctor, a colleague, who she had worked with before. In his 50s, married but without children, he would be the perfect fit. Seasoned and reliable, he agreed to share the same office space but in essence be an independent contractor (and therefore not a liability on her payroll), and also share overhead. This was a relief. The billing service in town she employed was eating up 8 percent of her billed revenues. That was as good as she could get. Overall, overhead accounted for 60 percent of her total revenues.

She is a finance person and negotiator. Finding people you can trust is very hard. She has heard that having an office manager can help, assuming that she doesn’t embezzle your money. A sad but true reality experienced by other busy private practice doctors.  As a result, she and her partner every week work do paperwork and pay bills. She is thinking about doing a class on QuickBooks to be more proficient in accounting bookkeeping.

As part of her job, she needed to contract with insurance companies on reimbursement. As a small practice with only two doctors, insurance companies have not been kind offering lower rates than to larger groups with more doctors. When she threatened to terminate a contract with an insurer which had insured a significant percentage of her practice, it wasn’t clear what their response would be.

Would you have been able to walk away and still survived? Did the insurance company know how little leverage you had? She didn’t know the answer to either question. The good news was that the insurance company relented. For now.

She needs to be a nurse. Her electronic medical record does not have a secure web portal. Lab results cannot be released online. In other words, there is no way a patient can get their labs quickly as well as have patient friendly information explaining it. She cannot hand off to staff, because she has no nurses in her office. Nurses are too expensive. She cannot hand off to her MA staff because often they have more questions and she would have to do the work anyway. So for about 2 hours a day she is on the phone talking about lab results and answering questions, often for the same issue (high cholesterol).

She is the office’s diabetes care expert. She cannot afford to have a care manager, either a pharmacist or nurse, available to help her manage patients with diabetes and get them to goal.

She is also a hospitalist. Anytime her patients get admitted, she sees them daily in the hospital and coordinates their care. Her patients are always relieved when they see her walk through the door: “Thank goodness you are here! Someone who really knows me!”

She is on call every other week and every other weekend.  Her patients can reach her 24/7.

She was now the IT chief for her office.  When the computer goes down, who does she hire? For $1000 a month maintenance fee, she has 24/7 access to an IT expert. Paying as you go with hourly fees was too expensive and not reliable enough to ensure her network services and computer problems were handled quickly. As we were talking, her IT guru was working on fixing part of the system that had crashed. They recently installed electronic prescribing a year and a half ago, which has helped immensely. It continues to get better as more patients have their outside pharmacy information uploaded to their database. Though they do not yet have a secure web portal where patients can book appointments online, email questions, or look at lab results on line, she also noted that providing medical care over the phone or email could harm her financial situation even more.

Did she have time to collaborate with other doctors or those in the community about the challenges they faced or how to make their practice better? Did she have time to get CME?

She would learn more about making her practice better if she had time. Since starting, it was mainly learn as you go. There wasn’t time necessarily to look too far ahead. The focus was just keeping the business going. CME registration was too expensive. She does not have the time (going on vacation means no revenue or income) or the money (hundreds of dollars and no CME “allocation”). She relies on the very inexpensive Pri-Med conference that has only a $35 registration fee and which is a local drive to Anaheim. The addition of the new doctor, however, means that she finally might have some more time.

It now became obvious why she felt compelled to start a new practice in October 2011, despite a stagnant economy coming off the worst economic crisis since the Great Depression.

It was never about the money. It was not as much about the lifestyle. It was about the patients she had built a relationship over the years. These patients followed her to the different practices she had participated with over the years. If she closed up, who would take good care of them? She had already witnessed how people got unnecessary tests that benefited the doctors financially, but provided no value to the patient. Through extremely hard work, her practice has “made it” and “survived.” Walking away from that would be very difficult.

It was getting late.  She had to get back home to attend a birthday party. I needed to get back to my mother-in-law’s home, shower the kids, and then leave them with Grandma, so my wife and I could finally have time alone to have a nice dinner.

Despite the challenges, she enjoyed being a business owner. It was the best decision she made in her medical career so far. She encouraged me to consider it as well or look her up if the family ever returned to Los Angeles. She reflected, “You’ve got a really good business sense and would do great. Think about it.”

As she drove off in her minivan with daughter, tired but comfortably nestled in her car seat, the only thing running in my head was:

Hail! to the victors valiant

Hail! to the conqu’ring heroes

Hail! Hail! to Michigan

The leaders and best!

Hail! to the victors valiant

Hail! to the conqu’ring heroes

Hail! Hail! to Michigan,

The champions of the West!

And I wondered, what will the next 10 years bring?

Davis Liu is a family physician who blogs at Saving Money and Surviving the Healthcare Crisis and is the author of The Thrifty Patient – Vital Insider Tips for Saving Money and Staying Healthy and Stay Healthy, Live Longer, Spend Wisely.

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  • Steven Reznick

    Very accurate article about being a small mom and pop medical practice. There are banks that do finance physcians. Usually you can get to them through your county or state medical society.The business side of medicine is not pretty especially if you are ethical and your first concern is the patients health and welfare.Being able to make clinical decisions and recommendations based on the patients needs solely is really extremely rewarding and being your own boss is the only way to really do that. The non monetary rewards are worth the trials and tribulations of learning how to set up and run a business

    • NPPCP

      I know I’m an NP – please don’t throw anything at me. I can very much relate to this article. Opening my practice was not nearly that much of a burden. I outsourced billing and credentialing to a person several other NPs use, got a loan from the local bank, and proceeded to raid my 401K. I hired a CPA and they do all the taxes, payroll, managing, etc. It has really not been that stressful and the rewards and freedom are as Dr. Reznick says they are.

      • NPPCP

        Agree with the down vote! I hate firing people and hate unemployment even more!!!! Thank you!

        • Disqus_37216b4O

          I’m guessing that the down-vote had nothing to do with the content of your comment, but was instead a knee-jerk reaction to your opening admission “I’m an NP…”

          There could be a heart-warming account of someone saving three children and a fluffy puppy from a burning building but if it mentioned that said hero happened to be an NP, there’d be someone out there who would down-vote it. Word.

          • NPPCP

            Ohhhhh. Never even thought about that! I don’t know if it is right though. No one would besmirch an individual for taking the risk of using their own money, without taking any government assistance in the form of grants to open a legal business. If an individual follows all regulatory rules, takes ALL of the risk, and provides an invaluable service, people would only applaud this – no matter who they are. This down vote could only come from someone wanting a single payer system. They probably don’t despise me – it is obvious they despise anyone who is able to become successful on their own. That has to be it. Right?

          • kjindal

            yes, we are a culture embracing the concept of disguising ENVY of the successful with contempt that “you didn’t build that” or “it’s not fair that you make money and I don’t” or “you’re in the 1% so you’re the problem”.

      • kjindal

        I don’t know why anyone would down-vote this. Firing people is part of the reality of business, and ALL successful small business owners know this.
        Dr.Liu’s article is absolutely accurate. My wife and I both individually and together have gone this route, and it is TOUGH. Then when you tell someone else your story their response is typically of the “well, that’s no different than anyone else’s job -every job has its hassles” variety. This is partly true, but I doubt any other job has as lengthy & expensive training, as stringent entry requirements & tough screening processes, and as burdensome a regulatory environment. Add onto that the reality that private practice medicine does not participate in a free market environment (yes I realize that this is potentially a plus as well as a minus), leading to unpredictable financial forecasts for a practice.
        All of this makes it really tough compared to other businesses. But I wouldn’t do it any other way – working for a practice group or hospital is generally worse (they generate fees the same way, thru patient encounters, then just keep an inordinate % and leave the worker bees w/all the stress). Being your own business owner leaves you w/all the risk and all the reward. And the freedom every day to give up a little income for time on other activities e.g. birthday parties w/your kids, etc. Still I think this is much better than being employed. Of course if you are of the mindset where you MUST have a predictable biweekly check coming in and are okay punching a time clock, then those options are definitely out there.

  • macbook

    Wow, thank you for writing this article!!
    Incredibly helpful.

    I am exhausted for your friend, just reading about her experiences. Obviously it is great that she has a lot more control over her practice and work life being the business owner, but I’m wondering from all of her various responsibilities, does she truly feel it is worth it to have gone this route – is she making significantly more income than before? Because it certainly sounds like she is working a lot more than before, being the doctor, head of finance, human resources, etc etc.

  • Noni

    Any time anyone mentions a deathbed I am reminded of the great Michael Scott quote in his last episode on the Office:

    They say, on your deathbed, you never wish you spent more time at the office. But I will. Gotta be a lot better than a deathbed. I actually don’t understand deathbeds. I mean, who would buy that?

  • lissmth

    How much easier life would be for physicians if people paid cash and then billed their own insurance as they choose. That’s how it was in the 1980s.

  • naggohead

    I wonder about the hiring practices. Not hiring someone solely because they’re in their 20s sounds an awful lot like age discrimination to me. What would people think if this sentence referred to a woman: “In his 50s, married but without children, he would be the perfect fit.”

    • Michael Rack

      It is perfectly legal to discriminate against someone for being too young. I believe the cut-off for age discrimination lawsuits is age 40 (you can only sue if you are discriminated against because you are age 40 or older)

      • naggohead

        Absolutely right, I stand corrected, thanks. I’m in Connecticut where there is no limit under state law, but California tracks the federal statute with its age 40 limit.

  • http://www.davisliumd.blogspot.com Davis Liu, MD

    thanks for the feedback