Private practice vs. employment: 12 lessons learned

Dr. JumperNational Report-The pressure is on for many U.S. urologists to take a hard look at whether to practice privately or as part of a hospital system.  

We asked two urologists to weigh in about the lessons they learned in transitioning from one practice type to another. They tackled six topics important to all urologists, ranging from administrative woes to the impact on patients of choosing one model over the other.

Our experts spoke on the topic at the 2015 American Association of Clinical Urologists’ Annual State Advocacy Conference.

Brian Jumper, MD, is employed by Maine Medical Partners Urology, which is part of Maine Medical Center in Portland and part of the state-wide Maine Health hospital system. Dr. Jumper has been in hospital-based practice as a full-time faculty member in Maine Medical Center’s urology residency program for 7 years.

Before that, he was in private practice for 19 years.

Dr. FabrizioMichael Fabrizio, MD, CEO of the 30-urologist group Urology of Virginia, joined a health system in Virginia in 2008 amid what he calls an acquisition war between rival hospitals. Dr. Fabrizio said becoming employed seemed logical at the time, given his concerns about the complex and costly administrative aspects of remaining in private practice, such as electronic medical records (EMRs), meaningful use, value-modifier systems, and more.

The employment relationship lasted 3 years and 10 months. He has since re-established his former urology group. While Dr. Fabrizio can’t talk personally about his experiences, he offers a broad view of the differences between being in a hospital-based and private practice.

Lesson 1: Hospital employment removes some administrative burdens, but there are drawbacks in giving them up.

Dr. Jumper has multiple administrative duties as a hospital employee. These include responsibilities as academic faculty, as director of pediatric urology, and as chair of the system-wide Clinical Safety and Outcomes Committee. However, unlike his peers in private practice, Dr. Jumper wasn’t responsible for designing, purchasing, and educating staff to use the EMR. The hospital did that. And Maine Health helps the urologists in measuring and monitoring outcomes.

“As an employed urologist, it’s less on your shoulders because it’s the responsibility of the entire hospital system to come up with monitoring and requirements to get the data. If we were in private practice, we would have to figure all of that out on our own computers,” he said.

It’s not all smooth sailing, however.

“Although the hospital paid for all of the computers and all the training, [the EMR] was very inadequate. It’s one-size-fits-all, by a hospital’s standards. So, it’s cumbersome,” Dr. Jumper said. “A subspecialty group needs a more nimble system.”

By getting involved in some administrative activities, Dr. Jumper said, he puts himself and his group at the middle of what’s going on at the system level. It’s important to be involved and a good citizen in the corporate structure. But urologists should be sure to work these duties into contracts, so that they’re not docked for the downtime or the unproductive periods when they’re doing administrative work.

“We took administrative issues head on when we first wrote our contract. We made sure that administrative time was protected and these expectations were not subjected to RVU [relative value unit] requirements,” Dr. Jumper said.

Lesson 2: A decrease in administrative duties may not mean a decrease in cost.

Dr. Fabrizio said some of the typical administrative headaches urologists face in private practice are alleviated when they become employed.

“You don’t have to worry about benefits, human resources, compliance issues-those types of things-because they’re done on a central basis,” he said. “And you do get incorporated into the electronic medical record, so that’s done for you at the practice level. But the costs that are attributed to the EMR are also assigned to you at the practice level in many ways.”

Take-home: Typical administrative burdens, including practice-related human resource and compliance issues, are taken off the employed urologists’ shoulders. But there’s no free lunch. Costs assigned to practice administration, including EMR-associated expenses, often are part of contract negotiations.

Lesson 3: “Losing my autonomy was the most difficult thing to swallow,” Dr. Jumper said.

The process, or red tape, in a hospital system can result in even small practice changes taking a year or more, or not happening at all, according to Dr. Jumper.

Lesson 4: Health systems’ and specialty practices’ strategies don’t always mesh.

“You do lose some autonomy when you go into a health system,” Dr. Fabrizio said. “When you lose autonomy, unless your contract allows you to specifically do so, you lose control of the ability to add staff or maybe even expand certain business lines because of cost constraints.

“Health systems and specialty surgical practices often have misaligned strategies. Health systems are typically focused on cost constraints, and that may limit your ability to grow.”

Take-home: Urologists transitioning or going into hospital employment have to relinquish their ability to make many decisions about practice hiring, expansion, spending, and more.

Lesson 5: When negotiating contracts with hospital systems, consider ways to hedge against economic downturns.

There are advantages to hospital employment when it comes to reimbursement, according to Dr. Jumper.

“Certainly, in our neck of the woods, we could not be making this kind of money in private practice because the hospital gets more money for what we do. We make money for them, and they can guarantee us more money,” Dr. Jumper said.

While a part of Dr. Jumper’s income is guaranteed, some of his pay is tied to meeting predetermined RVU production quotas. His contract stipulates that if he exceeds the quota, he gets a bonus. But if Dr. Jumper doesn’t meet the goal, he risks losing a portion of his pay.

The problem is, production isn’t always in urologists’ control.

Dr. Jumper didn’t meet RVU quota for the year last year, he said, because of factors that were not related to performance. The hospital decided not to diminish his pay, because, Dr. Jumper said, he has a good relationship with hospital administrators.

“They realize everything else that I’m doing, including the quality metrics, [matters more]. And they realized the fact that we took on a new pediatric urologist, which siphoned off some of my referral base. They can also understand that I have a 17% no-show rate. We live in a rural state, with a large number of Medicaid patients,” he said.

On the income front, Dr. Jumper recommends urologists negotiating contracts with hospital systems find ways to hedge against economic dips and reimbursement challenges. Dr. Jumper, who started contract negotiations with Maine Health in 2008, in the middle of the Great Recession, said his group built a 2.5% annual pay increase into its 5-year contract.

Lesson 6: Reimbursement may increase, but so may expenses.

Typically, everything the urologist does in a health system is two- to threefold more expensive than in private practice, according to Dr. Fabrizio.

“Health systems enjoy a significant reimbursement pop for services provided. Likewise, expenses are higher in health systems. So, you become part of that equation,” Dr. Fabrizio said. “While reimbursements go up, expenses go up. And if your contract is tied to either of those, on the expense side of the equation, you could be adversely affected.”

Health systems cannot reimburse urologists based on the actual revenue they bring into the health system, Dr. Fabrizio said.

“You may bring two-, three-, or fourfold the revenue now that you’re a hospital employee, but you don’t get to share in that service line revenue stream,” he said. “In general, health systems have trouble recognizing that service line revenue stream, meaning all the ancillaries you bring into the health system. Contracts have to be ‘fair market’ valued. So, there is some misalignment in the strategies contractually between the private group and the health system.”

And health systems might be basing proposed urologist salaries on benchmarks that aren’t in urologists’ favor. Hospital contracts typically are based on market analysis or fair market valuations, according to Dr. Fabrizio. But fair market is a very broad term that’s defined as the benchmark they utilize for full-time equivalents and support staff. Urologists’ salaries can be affected, depending on the benchmarks a health system uses, he said.

Urologists should also keep in mind that while salaries might be higher in health systems, job security after the contract ends is up in the air. And starting a private practice after a few years in a hospital setting is no easy task, according to Dr. Fabrizio.

Take-homes. Urologists’ salaries tend to be higher in health systems than in private practice, but those salaries might disappear when contracts end.

Urologists negotiating hospital-system contracts need to know their RVUs and how those relate to national averages, as well as how much money and income they’ll bring into the hospital. Remember, the national benchmarks hospitals use might not be the benchmarks urologists should use when conducting negotiations with hospitals.

“You don’t realize how valuable you are until push comes to shove. And the hospital is not going to give you that data,” Dr. Jumper said. “You should realize that urology is the number one user of pathology services in all hospital systems.”

Finally, employed urologists should try to be a good citizen and build relationships with their employers. Those relationships could come in handy when contractual issues affecting pay come up.

Lesson 7: Recruiting new physicians can be nearly impossible in private practice.

It’s much easier to recruit nurses, nonphysician providers, and urologists in a hospital-based employment structure, according to Dr. Jumper.

“The hospital can offer better money and better benefits than a private practice,” he said.

In fact, recruitment was one of the big reasons Dr. Jumper left private practice in Maine. Urologists coming out of residency are demanding salaries that rival their more experienced peers, he said. Yet, it takes new doctors about 2 to 3 years to generate a profit. That’s hard for a private practice to absorb, unless it’s a large, established group, according to Dr. Jumper.

Lesson 8: Hiring is out of your control in a health system.

While recruiting might be easier in a health system, the growth of a department and ability to hire is out of many employed urologists’ control, according to Dr. Fabrizio.

“A potential problem with a health system is they may see your particular service line as not being a priority for the system. Certainly, your practice is your priority,” Dr. Fabrizio said. “With your own practice, you can always control your own destiny.”

Take-homes. Recruiting urologists and non-physician providers often is easier in a health system than it is in a private practice-unless that practice is large enough to absorb expenses related to the time it takes to get a provider’s production up to par. Expanding service lines and hiring preferences are not as easy in a health system as in a private practice because urologists tend not to be the decision makers.

Lesson 9: Quality of life at a hospital is different than it is in private practice-not better or worse.

“I actually enjoyed it 10 years ago when I saw twice as many patients as I do now. And I had a stenographer that would type up all the reports at the end of the day, and I made 20% to 30% less than I do now. It was satisfying,” Dr. Jumper said.

Now, he’s a spoke in a wheel. He sees fewer patients but has more deskwork. For example, he has to type his EMR reports, and, by his own admission, he’s not a good typist. He offered to pay out of pocket for an assistant to type the reports, but was told he couldn’t because then everybody would want to do it. That, he said, goes back to the loss of autonomy.

“Of course, with the residency program, I spend more time teaching. On another level, I can take pride in producing urologists,” Dr. Jumper said. “So, it’s a tradeoff. It’s a totally different mindset.”

Lesson 10: Quality of life doesn’t necessarily change in the transition from one type of practice to another.

“You still have your call responsibilities,” Dr. Fabrizio said. “But quality of life could deteriorate if you’re not allowed to make decisions, if you want to expand the service line, or get more FTEs for your office. It goes both ways.”

Take-homes. There are quality of life tradeoffs in both working situations. Urologists who enjoy seeing patients and the relationships they’ve built with their patients might not get as much satisfaction as employed physicians. On the other hand, employed physicians might find such things as having less responsibility for practice administration to be a quality of life boost.

Lesson 11: Employment improves patient access but that access comes at a price.

Since the hospital has been able to recruit more urologists, patients who used to wait 6 months to see Dr. Jumper in private practice have much shorter wait times.

“The downside is, everything costs more because we’re part of a hospital. The private practice does not get paid as much as the hospital for the same services,” he said.

Lesson 12: You stand to lose long-time patients if you join a health system from private practice.

In a closed health system, for example, if referring doctors aren’t part of the system, chances are urologists who used to get the doctors’ referrals won’t continue to see those patients, according to Dr. Fabrizio.

Another roadblock for patients seeing urologists and others employed by health systems is the increased cost.

“What most health systems are doing around the country is something called provider-based billing for Medicare patients,” Dr. Fabrizio said. “So, I’ve been seeing Mr. Smith for 20 years in my practice, and I’ve been billing a professional fee for Mr. Smith’s annual office visit. Now, Medicare patients get two bills when physicians join a health system. They get a bill to see the doctor but then they also get a facility fee, and that facility fee is between $150 and $200. If Medicare patients don’t have secondary insurance, they are responsible for a 20% deductible for that facility fee.”

Take-homes. While a hospital’s ability to recruit urologists and non-physician providers might increase patient access to the specialty, patients’ wallets take a hit when urologists join hospital systems.

In the end, these are generalizations. The decision about whether to become employed or have a private practice is not one to base on a single issue. Other factors often come into play, such as the urologist’s local market and how much power hospitals have in any given community, Dr. Jumper said.

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