Competitive Business Models: Medicine vs. Surgery

[Osteoth]

Hey guys,

So I'm a (technically) MS3 taking a year off to get my MBA, and as a result of my business coursework I've been recently thinking about the different practice models in medical specialties. As a kind of catch-all the big difference I have been thinking about is between medicine and surgery, and as someone yet to decide/commit to a specialty, this might possibly sway me.

It seems as though private practice medicine is slowly going the way of the dodo birds, as more and more private groups are bought out by hospitals. In addition, due to the laws against physicians owning hospitals, it seems to me as though going forward physician autonomy/independence on the medicine side of things is going to be severely restricted.

On the other hand, while doctors cannot own hospitals, they can own surgical suites and surgical centers. Combined with the fact that surgeons, from my understanding, "own their patients", this would lead me to believe that private practice surgery is going to have a much stronger framework for continued success going forward. Combined with the fact that surgical sub-specialists are extremely scarce in the population due to unnatural suppression of residency spots, and it produces a situation in which it seems as though surgeons will still be able to call their own shot to an extent going forward, whereas medical physicians will have a harder time doing so due to their reliance on the hospital.

What are your thoughts on this? From a business stand-point which specialty seems to be headed in the right direction? Which one would allow for more physician ownership/autonomy?

Addenum: Two fields that traditionally have been able to operate on a private practice/cash-only basis that I figured should be addressed due to my obviously generalized viewpoint of medicine described above.

Psychiatry: Encroachment/independent practice from mid-levels as well as lack of ability to charge a facility fee leads me to believe this is not as successful as a model going forward. Furthermore, establishing a cash-only practice, from my understanding, can take years, during which physicians must fill their time doing something else (inpatient, working for someone). I personally would prefer to go through the hard surgical residency and have a good shot coming out than have to work for 10 years (residency (3) + early career (~7)) to build it up.

Dermatology: I personally wonder how long dermatology is going to remain the cash-cow it is considering the relative low-acuity of what dermatologists do in my mind could lead to significant mid-level encroachment. I have not read about why has not happened already, but if someone does know if they would please inform me I would be very interested.

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[bashwell]

Hey guys,

So I'm a (technically) MS3 taking a year off to get my MBA, and as a result of my business coursework I've been recently thinking about the different practice models in medical specialties. As a kind of catch-all the big difference I have been thinking about is between medicine and surgery, and as someone yet to decide/commit to a specialty, this might possibly sway me.

It seems as though private practice medicine is slowly going the way of the dodo birds, as more and more private groups are bought out by hospitals. In addition, due to the laws against physicians owning hospitals, it seems to me as though going forward physician autonomy/independence on the medicine side of things is going to be severely restricted.

On the other hand, while doctors cannot own hospitals, they can own surgical suites and surgical centers. Combined with the fact that surgeons, from my understanding, "own their patients", this would lead me to believe that private practice surgery is going to have a much stronger framework for continued success going forward. Combined with the fact that surgical sub-specialists are extremely scarce in the population due to unnatural suppression of residency spots, and it produces a situation in which it seems as though surgeons will still be able to call their own shot to an extent going forward, whereas medical physicians will have a harder time doing so due to their reliance on the hospital.

What are your thoughts on this? From a business stand-point which specialty seems to be headed in the right direction? Which one would allow for more physician ownership/autonomy?

Addenum: Two fields that traditionally have been able to operate on a private practice/cash-only basis that I figured should be addressed due to my obviously generalized viewpoint of medicine described above.

Psychiatry: Encroachment/independent practice from mid-levels as well as lack of ability to charge a facility fee leads me to believe this is not as successful as a model going forward. Furthermore, establishing a cash-only practice, from my understanding, can take years, during which physicians must fill their time doing something else (inpatient, working for someone). I personally would prefer to go through the hard surgical residency and have a good shot coming out than have to work for 10 years (residency (3) + early career (~7)) to build it up.

Dermatology: I personally wonder how long dermatology is going to remain the cash-cow it is considering the relative low-acuity of what dermatologists do in my mind could lead to significant mid-level encroachment. I have not read about why has not happened already, but if someone does know if they would please inform me I would be very interested.

I thought doctors also can't own surgical centers due to the ACA (Obamacare)?

However, if the ACA is ever repealed, then wouldn't doctors be allowed to own hospitals and surgical centers again?

Anyway, so much of healthcare is up in the air right now, and things could change quite drastically depending on what happens in DC. At least that's what it seems to me, but what do I know (I don't have an MBA).

 

[Osteoth]

I thought doctors also can't own surgical centers due to the ACA (Obamacare)?

However, if the ACA is ever repealed, then wouldn't doctors be allowed to own hospitals and surgical centers again?

Anyway, so much of healthcare is up in the air right now, and things could change quite drastically depending on what happens in DC. At least that's what it seems to me, but what do I know (I don't have an MBA).

The regulations vary, but from what I've seen the "relative" regulations pan out like this in terms of abilities of doctors to own: Acute Surgical Center (ACS) > Free-Standing Emergency Department (FSED) > Hospitals (not at all as far as I understand).

If I'm wrong please someone correct me.

http://reimbursementprinciples.com/wp-content/uploads/ASC-State-Regulations-2013.pdf
Benefits of Physician Ownership - Advancing Surgical Care
Establishing an Ambulatory Surgery Center: A Primer from A to Z

 

[bashwell]

My guess is a lot of doctors are going to get increasingly fed up dealing with both the government (Medicare, Medical) and insurance companies. I don't know if this will be enough to effect change. But movements like Direct Primary Care seem to be in part a reflection of all this frustration. Maybe if something like DPC picks up momentum, then things will change including in other specialties too. Currently, I hear DPC can be lucrative for PCPs, but it probably depends on the market.

It seems like it's going to be especially difficult for the specialties that are mainly hospital-based. If a specialty is almost entirely dependent on hospitals or hospital systems (e.g., anesthesia, EM despite it being very hot right now), then there might be some rough waters to navigate in the future. But I think there are likely ways to become indispensable even in a hospital-based specialty.

Maybe it'd be best to find a specialty that can still set up their own shop, but also have a foot in the hospital (e.g., several surgical subspecialties, gastroenterology, cardiology). That way you can play both sides of the fence, so to speak, depending on which way things end up going? I feel like we're in very tumultuous times with health care.

I think some of the currently less competitive IM subspecialties may have a bright future (e.g., rheum, endo). At the very worst, even if the entire healthcare system is f***ed, they'll still have a great lifestyle!

It's a very interesting and important topic though. Thanks for bringing it up, OP!

 

[Osteoth]

My guess is a lot of doctors are going to get increasingly fed up dealing with both the government (Medicare, Medical) and insurance companies. I don't know if this will be enough to effect change. But movements like Direct Primary Care seem to be in part a reflection of all this frustration. Maybe if something like DPC picks up momentum, then things will change including in other specialties too. Currently, I hear DPC can be lucrative for PCPs, but it probably depends on the market.

It seems like it's going to be especially difficult for the specialties that are mainly hospital-based. If a specialty is almost entirely dependent on hospitals or hospital systems (e.g., anesthesia, EM despite it being very hot right now), then there might be some rough waters to navigate in the future. But I think there are likely ways to become indispensable even in a hospital-based specialty.

Maybe it'd be best to find a specialty that can still set up their own shop, but also have a foot in the hospital (e.g., several surgical subspecialties, gastroenterology, cardiology). That way you can play both sides of the fence, so to speak, depending on which way things end up going? I feel like we're in very tumultuous times with health care.

I think some of the currently less competitive IM subspecialties may have a bright future (e.g., rheum, endo). At the very worst, even if the entire healthcare system is f***ed, they'll still have a great lifestyle!

It's a very interesting and important topic though. Thanks for bringing it up, OP!

Fed up doesn't matter if you're $300k in loans with a mortgage and two kids.

I've seen models like Direct Primary Care, but my question is can you make up the volume you lose by not taking medicare/medicaid without taking a pay cut? I know PCPs are already having a hard enough time paying back their loans.

And if you can't, whats the worse of two evils, taking 70 cents on the dollar from the government or losing 1/3 of your salary due to lost volume? I doubt there are all that many physicians who generate 100% of their income from these models due to the volume necessary. Furthermore, the patient who are more likely to pay for a Direct Primary Care or equivalent service I would have to imagine are either very sick and wealthy or very healthy and wealthy. One of those is not like the other in terms of repeat visitations.

Indispensable, sure, but compensated at a fair level with autonomy consummate to your professional level of training? Questionable. Both Anesthesia (mid-levels) and EM (regulation, corporatization, unfunded mandate) have serious problems with the structure of their fields going forward.

Thats kind of my feel with the surgical sub-specialties, but from my knowledge the real money is being able to collect on facilities fees from owning your own shop. If you're a GI/Cards guy and you have to go into the hospital for anything, they're collecting on you, and thats inherently lost income.

And yeah some of the fields you mentioned may have good "lifestyles" now, but if you decrease pay by 1/3 due to decreasing reimbursement rates, I have to imagine more docs will have to pick up extra shifts in order to survive. Obviously depending on lifestyle, but $200k in loans is no joke when you have to buy a house, send your kids to college and get married at the same time.

 

[VA Hopeful Dr]

Fed up doesn't matter if you're $300k in loans with a mortgage and two kids.

I've seen models like Direct Primary Care, but my question is can you make up the volume you lose by not taking medicare/medicaid without taking a pay cut? I know PCPs are already having a hard enough time paying back their loans.

And if you can't, whats the worse of two evils, taking 70 cents on the dollar from the government or losing 1/3 of your salary due to lost volume? I doubt there are all that many physicians who generate 100% of their income from these models due to the volume necessary. Furthermore, the patient who are more likely to pay for a Direct Primary Care or equivalent service I would have to imagine are either very sick and wealthy or very healthy and wealthy. One of those is not like the other in terms of repeat visitations.

Indispensable, sure, but compensated at a fair level with autonomy consummate to your professional level of training? Questionable. Both Anesthesia (mid-levels) and EM (regulation, corporatization, unfunded mandate) have serious problems with the structure of their fields going forward.

Thats kind of my feel with the surgical sub-specialties, but from my knowledge the real money is being able to collect on facilities fees from owning your own shop. If you're a GI/Cards guy and you have to go into the hospital for anything, they're collecting on you, and thats inherently lost income.

And yeah some of the fields you mentioned may have good "lifestyles" now, but if you decrease pay by 1/3 due to decreasing reimbursement rates, I have to imagine more docs will have to pick up extra shifts in order to survive. Obviously depending on lifestyle, but $200k in loans is no joke when you have to buy a house, send your kids to college and get married at the same time.

Your assumptions about Direct Primary Care are incorrect.

The majority of my patients are blue collar folks who want a doctor but don't want to pay $200 for every visit (and who knows how much in labs/imaging/meds). Roughly 60% of my patients are uninsured (with another 20% who have insurance but very very high deductibles) and reasonably healthy - meaning they may have high blood pressure but its controlled, or diabetes but doing well on Metformin kinda thing.

They money is pretty good. I'm making roughly 168k right now at 75% capacity. Once I hit 100%, I'll be pulling in around 230-240k/year.

Can PCPs make more than that in regular practice? Absolutely. Can they do it seeing 6-8 patients/day/ Not hardly.

 

[libertyyne]

Your assumptions about Direct Primary Care are incorrect.

The majority of my patients are blue collar folks who want a doctor but don't want to pay $200 for every visit (and who knows how much in labs/imaging/meds). Roughly 60% of my patients are uninsured (with another 20% who have insurance but very very high deductibles) and reasonably healthy - meaning they may have high blood pressure but its controlled, or diabetes but doing well on Metformin kinda thing.

They money is pretty good. I'm making roughly 168k right now at 75% capacity. Once I hit 100%, I'll be pulling in around 230-240k/year.

Can PCPs make more than that in regular practice? Absolutely. Can they do it seeing 6-8 patients/day/ Not hardly.

Are you in a saturated market? Another employed PCP claimed 300K, although in a midwestern state.

 

[Osteoth]

Your assumptions about Direct Primary Care are incorrect.

The majority of my patients are blue collar folks who want a doctor but don't want to pay $200 for every visit (and who knows how much in labs/imaging/meds). Roughly 60% of my patients are uninsured (with another 20% who have insurance but very very high deductibles) and reasonably healthy - meaning they may have high blood pressure but its controlled, or diabetes but doing well on Metformin kinda thing.

They money is pretty good. I'm making roughly 168k right now at 75% capacity. Once I hit 100%, I'll be pulling in around 230-240k/year.

Can PCPs make more than that in regular practice? Absolutely. Can they do it seeing 6-8 patients/day/ Not hardly.

Thank you for the correction. I fully admit I am no expert.

If you wouldn't mind, a few questions:
How long did it take you to build your practice?
What is your benefit structure like? Tiered or one flat payment?
What is the maximum possible earning you think you could generate via this model?
Do you charge facility fees for office-visits? What is the fee structure like? (what is covered, what is not)
How many patients do you see per day? How much time do you allot per patient?

 

[VA Hopeful Dr]

Are you in a saturated market? Another employed PCP claimed 300K, although in a midwestern state.

I'm direct primary care, self employed.

I would say the market locally is pretty saturated as a new patient appointment with most family doctors in my area even with good insurance is four to six weeks.

 

[VA Hopeful Dr]

Thank you for the correction. I fully admit I am no expert.

If you wouldn't mind, a few questions:
How long did it take you to build your practice?
What is your benefit structure like? Tiered or one flat payment?
What is the maximum possible earning you think you could generate via this model?
Do you charge facility fees for office-visits? What is the fee structure like? (what is covered, what is not)
How many patients do you see per day? How much time do you allot per patient?

I'm right at the 2 year mark.

Tiered based on age with a maximum price of $80/month for over 65.

Maximum depends on a huge number of factors. A single doctor doing direct Primary Care with the average industry rates, could probably do high 200s if they have a good lease and don't include any benefits. If you are the sole owner and bring on employed Physicians then that could easily be beaten, since overhead doesn't really increase that much for each additional physician but obviously the income does.

All office visits and in office procedures are included in the membership fee, as is any in office lab work like rapid strep or urinalysis as well as injectable medications like Phenergan Toradol and Depo-Medrol. The only things that cost extra are send out labs and any medications that I dispense.

Patients per day varies. Industry-wide you expect about 1% of your patient population to need your services on any given day. During the summer things are good bit slower and I've had days that were no hitters. The busiest I've been was during the winter where I saw 14 patients. I have 30 minutes per patient for existing patients new patients are one hour.

 

[Mad Jack]

Hey guys,

So I'm a (technically) MS3 taking a year off to get my MBA, and as a result of my business coursework I've been recently thinking about the different practice models in medical specialties. As a kind of catch-all the big difference I have been thinking about is between medicine and surgery, and as someone yet to decide/commit to a specialty, this might possibly sway me.

It seems as though private practice medicine is slowly going the way of the dodo birds, as more and more private groups are bought out by hospitals. In addition, due to the laws against physicians owning hospitals, it seems to me as though going forward physician autonomy/independence on the medicine side of things is going to be severely restricted.

On the other hand, while doctors cannot own hospitals, they can own surgical suites and surgical centers. Combined with the fact that surgeons, from my understanding, "own their patients", this would lead me to believe that private practice surgery is going to have a much stronger framework for continued success going forward. Combined with the fact that surgical sub-specialists are extremely scarce in the population due to unnatural suppression of residency spots, and it produces a situation in which it seems as though surgeons will still be able to call their own shot to an extent going forward, whereas medical physicians will have a harder time doing so due to their reliance on the hospital.

What are your thoughts on this? From a business stand-point which specialty seems to be headed in the right direction? Which one would allow for more physician ownership/autonomy?

Addenum: Two fields that traditionally have been able to operate on a private practice/cash-only basis that I figured should be addressed due to my obviously generalized viewpoint of medicine described above.

Psychiatry: Encroachment/independent practice from mid-levels as well as lack of ability to charge a facility fee leads me to believe this is not as successful as a model going forward. Furthermore, establishing a cash-only practice, from my understanding, can take years, during which physicians must fill their time doing something else (inpatient, working for someone). I personally would prefer to go through the hard surgical residency and have a good shot coming out than have to work for 10 years (residency (3) + early career (~7)) to build it up.

Dermatology: I personally wonder how long dermatology is going to remain the cash-cow it is considering the relative low-acuity of what dermatologists do in my mind could lead to significant mid-level encroachment. I have not read about why has not happened already, but if someone does know if they would please inform me I would be very interested.

You've got some serious misconceptions about psychiatry, but I don't want to correct them until I match

 

[Stagg737]

Are you in a saturated market? Another employed PCP claimed 300K, although in a midwestern state.

I've had the privilege of hearing an AtlasMD physician (from Wichita) speak at my school and he said each of the guys at their practice were pulling in over 300k. 4-5 guys in the practice each carrying a total patient load between 1,000-1,200 I believe (can't remember that exactly, but I do remember him saying their total load was 1/2 to 1/3 of FMs practicing in models not using DPC). From everything I've heard it's a pretty fantastic model once you can get the practice off the ground and running and a lot cheaper for most patients in the long run as well. I'm honestly not sure why more FMs don't use it, I'm guessing largely because of the start-up issue (like any private practice) as well as lack of business acumen.

 

[libertyyne]

I'm right at the 2 year mark.

Tiered based on age with a maximum price of $80/month for over 65.

Maximum depends on a huge number of factors. A single doctor doing direct Primary Care with the average industry rates, could probably do high 200s if they have a good lease and don't include any benefits. If you are the sole owner and bring on employed Physicians then that could easily be beaten, since overhead doesn't really increase that much for each additional physician but obviously the income does.

All office visits and in office procedures are included in the membership fee, as is any in office lab work like rapid strep or urinalysis as well as injectable medications like Phenergan Toradol and Depo-Medrol. The only things that cost extra are send out labs and any medications that I dispense.

Patients per day varies. Industry-wide you expect about 1% of your patient population to need your services on any given day. During the summer things are good bit slower and I've had days that were no hitters. The busiest I've been was during the winter where I saw 14 patients. I have 30 minutes per patient for existing patients new patients are one hour.

Do sicker patients without insurance use your service? Cancer, TBI, End stage CHF , COPD... I just thought of senarios where they couldnt afford hospital/ specialist care so they would visit DPC offices more frequently . Would you end up terminating agreements in cases like that ?

 

[VA Hopeful Dr]

Do sicker patients without insurance use your service? Cancer, TBI, End stage CHF , COPD... I just thought of senarios where they couldnt afford hospital/ specialist care so they would visit DPC offices more frequently . Would you end up terminating agreements in cases like that ?

Decent bit of COPD, one CHF'er. I've diagnosed a few cancers but then send them to surgery/oncology.

Honestly, sicker patients would do great with DPC. Say you've got a COPD patient. Stable on inhalers. Wakes up on a Saturday having a hard time breathing. You call in antibiotics and prednisone, have them start using their albuterol q2. If they get worse overnight, they go to the ER. If not, continue q2 albuterol and f/u on Monday. You've just saved them a visit to urgent care/ER (hopefully). Takes maybe 5 minutes of time.

Same thing with CHF. Have them weigh themselves every morning. If weight is up from baseline more than 1 pound, they call you. Either call in Lasix or have them increase their dose. Recheck in the AM. All without an office visit.

Cancer is trickier as I can't really do hard-core chemo, but managing symptoms or even end-of-life care, well DPC is perfect for that.

 

[VA Hopeful Dr]

I've had the privilege of hearing an AtlasMD physician (from Wichita) speak at my school and he said each of the guys at their practice were pulling in over 300k. 4-5 guys in the practice each carrying a total patient load between 1,000-1,200 I believe (can't remember that exactly, but I do remember him saying their total load was 1/2 to 1/3 of FMs practicing in models not using DPC). From everything I've heard it's a pretty fantastic model once you can get the practice off the ground and running and a lot cheaper for most patients in the long run as well. I'm honestly not sure why more FMs don't use it, I'm guessing largely because of the start-up issue (like any private practice) as well as lack of business acumen.

They carry 600 each. That's roughly the industry standard - some do more, some less but most are pretty close to that number.

And you're exactly right as to why more of us don't do it. ITs much easier to just join a hospital practice getting 200k+ your first day out of residency.

 

[Osteoth]

I'm right at the 2 year mark.

Tiered based on age with a maximum price of $80/month for over 65.

Maximum depends on a huge number of factors. A single doctor doing direct Primary Care with the average industry rates, could probably do high 200s if they have a good lease and don't include any benefits. If you are the sole owner and bring on employed Physicians then that could easily be beaten, since overhead doesn't really increase that much for each additional physician but obviously the income does.

All office visits and in office procedures are included in the membership fee, as is any in office lab work like rapid strep or urinalysis as well as injectable medications like Phenergan Toradol and Depo-Medrol. The only things that cost extra are send out labs and any medications that I dispense.

Patients per day varies. Industry-wide you expect about 1% of your patient population to need your services on any given day. During the summer things are good bit slower and I've had days that were no hitters. The busiest I've been was during the winter where I saw 14 patients. I have 30 minutes per patient for existing patients new patients are one hour.

How long did it take you to build your patient base to 75%?

 

[VA Hopeful Dr]

How long did it take you to build your patient base to 75%?

2 years, like my first sentence stated in the post you quoted

 

[Osteoth]

2 years, like my first sentence stated in the post you quoted

Lol sorry, wasn't sure if you started in the hospital or working for someone else and then decided to start your practice, moving your patients with you.