Take the time to understand the business of medicine

A Catholic nun, who was the administrator of a small hospital once summed up for me the role business plays in patient care: “No money, no mission.”

In order for a practice to be successful, it must be run with healthy business principles in place. But the truth is that few physicians have any training in or knowledge about the business aspects of running a practice. A satisfying and successful career requires good planning, and learning the business and financial aspects of medical practice is a great start.

Practice administration

Several factors play a role in the effective administration of a practice; however, the key is to effective administration comes from a practice that is physician-driven. Meaningful physician-to-physician and physician-to-administrator communication should occur on a regular and scheduled basis, and physicians should be the drivers in governance, financial, and patient care decisions.

Consider these questions to determine what role physicians play in a particular practice: How frequent are practice meetings? What is covered in these meetings? Do all physicians attend and participate? Is there a clear chain of command? Who is the “bottom line”? What clinical, performance, and financial reports are monitored? How are disputes resolved?

A successful practice always manages overhead well. Overhead is the cost of doing business, including the cost of personnel, office space, telephones, information technology, insurance, retirement funding, and malpractice insurance.

Take time to understand how physicians can influence overhead costs, and identify who the key decision-maker is for practice expenses. Physicians should seek an active role in helping to manage overhead; this requires knowledge of fixed and variable costs and how to increase production and profitability


Before entering a practice, be sure you understand how you will be paid and how you will be evaluated in relation to pay. Fee-for-service medicine is still the mainstay of physician compensation, and it will most likely remain that way for the near future. Salary can be based on billings, collections, RVUs, time spent, or several other factors.

If patient satisfaction scores, admissions, re-admissions, length of stay, or other quality measures are used to determine pay, make sure you receive a clear explanation of how these measures are obtained, analyzed, and implemented. To ensure you are complete covered, consider hiring an attorney whose practice revolves around physician contract negotiations.

As a side note, it can also be helpful to meet with established physicians in the practice to discuss the pay structure beforehand. If the established physicians don’t have a good understanding of the structure, that may be an indication of lack of transparency in the practice.

Other considerations

Electronic medical records systems can greatly impact productivity. While there are many different types of these systems in use, resident physicians often have only been exposed to a limited number of them. Some of these systems are not physician friendly, so it’s important to learn about the system in use at the potential practice or hospital. Find out what established physicians like and dislike about the system and how it is used.

The financial climate of the community is often times overlooked. Whether the local economy is robust, stagnant, or in decline is another important aspect of a practice. Look at the growth and stability of all the businesses in a surrounding community. Who are the primary payers in the community? Also consider the insurance breakdown, including what percentage of care is paid for by Medicaid and Medicare. All of these factors can affect a practice.

The malpractice climate of the state also plays a big role in the stability and profitability of a practice. Malpractice costs and climates vary greatly, affecting the practice overhead and physician satisfaction. States with excellent tort reform in place are more attractive practice locations. Learn about particular locations from state medical associations and the American Medical Association.

Looking to the future

Consider your long-term success in a practice — what’s next for you? Advancement occurs in many different ways, depending on whether it’s private practice or employed practice. In private practice, explore opportunities to become a partner, including the costs and responsibilities that would entail. In employed practice look at paths for advancement, such as becoming director of the practice, a medical officer in the system, the director of a distinct business entity within the system or academia, or progression in the department or educational hierarchy.

Physicians are taking on many different roles within healthcare, and it’s beneficial to define a pathway up front, if possible. Taking the time to understand the business of medicine is crucial for building a successful career and providing great patient care.

Sidney Christiansen is an otolaryngologist and founder, Resolve Physician Agency.  He can be reached on Google+.

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  • http://onhealthtech.blogspot.com Margalit Gur-Arie

    Getting away from the business side of medicine, or ignoring it, will make a doctor very easy prey for those who care only about the business side, and it may eventually place a physician in an ethically untenable situation.

  • Ron Smith

    Hi, Robert.

    I cannot agree with Margalit more.

    Trying to carve out just the medical part of your practice and delegating everything else to whoever is pretty much the same as an Ostrich with the head in a pothole. It is guaranteed they will not see the big truck rig plow their little hiney over before or after.

    I have several friends in Family Practice and Pediatrics who abandoned their private practice by being bought out by corporate concerns. Each time now they have been expecting to just practice medicine without having to worry about the business of medicine. Each time they have become so disenchanted that they end up having to leave town altogether because of the non-compete clause they signed with the sale of their practice.

    The patients lost. The physicians lost. The corporate entity has essentially bought their way into the medical community. Sometimes I wonder if that isn’t the whole plan anyway?

    By paying close attention to the business of your medical practice you will give you and your patients the best chance for satisfaction.

    Ignore it and you’ll be another pair of Ostrich boots.

    Warmest regards,

    Ron Smith, MD
    www (adot) ronsmithmd (adot) com

    • Robert Eisinger

      Thank you for the replies. I completely understand your comments. I will be attending Medical School in the Fall and have encountered this question a lot – the balance between being a business person and being a doctor. I’m wondering if in Med School I will learn any of the Business aspects of Medicine. It seems it will be best if I do.

      • Ron Smith

        Hi, Robert.

        Don’t count on it. As a solo practitioner I’m keen on seeing new doctors especially start up solo practice. My practice manager and I decided to start a practice management business to provide the software I designed and which we use and develop in my practice along with the the practice policies and patient office flow which she has developed.

        I’m not trying to hawk our stuff in tell you this. What I want to address is the misunderstanding that as long as you get EMR software from the start, then you should be good to go.

        EMRs will not make your practice successful. The vast majority actually increase the work and decrease your efficiency. They are designed by database developers.

        I have nothing against database developers…I am one…but in my opinion using software for medical practice which is not developed and proven in a real practice is less than likely to give you the results you crave.

        Start smart and start now if you are just matriculating and learn the business of medicine…for yourself. Don’t depend on medical school for a business education. It isn’t going to happen.

        Warmest regards,

        Ron Smith, MD
        www (adot) ronsmithmd (adot) com

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