If you’re familiar with the data suggesting that physicians are flocking to hospital jobs, you might think that the once-common self-employed physician is a dying breed. But as physician job openings continue to dry up and managed care exerts more and more pressure on how employed doctors practice medicine, the flood of doctors moving into employment has turned out to be little more than a trickle. More than half of physicians (53%) are currently self-employed. Whether you’re contemplating self-employment or evaluating the relative merits of seeking an employee position, you need a keen awareness of market pressures on self-employed physicians.
A few years ago, it looked like the self-employed doctor might become a dying breed. Rapidly increasing malpractice insurance costs, the demands of self-employment, and an increasingly competitive marketplace all conspired to push this historically independent profession into supervised employment. A 2013 American Medical Association study, though, found that trend is reversing itself. Some other notable data points from that study include:
- 60% of physicians still work for practices wholly owned by other physicians. Only 29% work for practices owned in whole or in part by a hospital.
- The percentage of physicians who owned a practice decreased eight points between 2007 and 2008.
- 18% of physicians were in solo practices, a figure that marks a 6% decline over five years.
- The most common type of private practices were single-specialty practices, accounting for 45% of the total.
Expenses of Self-Employment
Self-employment remains a challenging feat for many physicians, who must plan carefully to manage the additional expenses commonly associated with self-employment. If you’re considering opening your own practice or going into a partnership with another physician, it’s of paramount importance to weigh the relative expenses against the very real costs of self-employment. Just a few of the financial hurdles self-employed physicians must cross include:
- Self-employment tax. The self-employment tax for 2014 is 15.3% – a figure above and beyond your usual taxes that covers your share of Social Security and Medicare taxes.
- Employee expenses. Not only will you need to cover expenses for your employees; you’ll also have to pay the employer’s share of payroll taxes, offer reasonably competitive benefits, and – in some cases – cover malpractice insurance for your employees. The physician compensation you offer to doctors you employ can mean the difference between a well-run and well-respected practice and one that’s just scraping to get by.
- Malpractice insurance. A 2011 study found that 75% of physicians in low-risk specialties had faced a malpractice claim, compared to 99% in high-risk specialties. Your insurance premiums can eat up a healthy share of your profits.
- Office expenses. It’s not just pens and paper you’ll be shelling out for. From practice management software to equipment such as copiers and scanners, you can easily spend tens of thousands of dollars on office supplies, furniture, and technological devices.
- Marketing. If you want to make up for some of the expenses associated with self-employment, you’ll need an aggressive and effective marketing plan.
The feasibility and expensive of self-employment often depends on the market where you’re located. In a relatively unsaturated market, you have the ability to recruit from a wide patient base. If the market in your area is heavily saturated, though, your new patients could be few and far between.
When you opt to become self-employed, you’ll also need to manage a variety of legal issues, including:
- Contract issues. A good contract review attorney can mean the difference between a successful practice and one that quickly tanks. You’ll need airtight employment contracts, as well as clear and reasonable contracts with vendors, suppliers, and insurers. It’s easy to ignore contracts when yo first start out, but physicians who neglect this important area of practice management render themselves vulnerable to lawsuits, fines, financial trouble, and a host of other issues.
- Liability. Depending on how you structure your practice, you’ll have some liability not only for any malpractice you commit, but potentially for the malpractice of your partners or employees. The proper business structure can help reduce liability. But if you don’t incorporate, you could easily become personally liable for your business’s mistakes, leading to economic catastrophe.
- Employment law. Employment law is a complex sea of rules about what you have to pay, when and how you can require employees to work, what records you must keep, how you must treat your employees, and so much more. Breaking these laws can easily subject you to hundreds of thousands of dollars in lawsuits. If you don’t properly compensate employees for overtime, for example, you could be stuck paying fines and penalties, back pay, and attorney’s fees. A consultation with an employment attorney or compliance management consultant can help you ensure you don’t break employment laws.
- Patient privacy, consent, and legal rights. Patients have a complex array of legal rights, from the right to informed consent to the privacy rules protected by HIPPA and other legislation. There’s little room for error here, since even a minor violation could cost you dearly. Even worse, if you mistakenly violate a patient’s rights, you could be subject to an online smear campaign that has the capacity to ruin your reputation.
Self-employment can seem scary at first, and there’s no denying that self-employment is frequently more costly than working for someone else. But anything worth doing is challenging. Self-employment also carries important benefits. You’ll have freedom over how you practice medicine, the hours you work, which patients you see, and what treatments you offer. You can create your own office culture, cultivate a loyal slate of employees, and singlehandedly build a medical practice that feels like family. Resolve can help you prepare for the challenges while setting realistic goals to build a practice you love.