Pros/Cons to joining a private practice right out of training

[jbomba]

Unless you have a second life you're eagerly anticipating after FIRE, I would posit that being your own boss and being demonstrably responsible for all the benefit you would bring to your patients, even if on a very reduced hour basis, would be more enjoyable than 95% of the things people would do after early retirement.

This is my dream. Would love to go to culinary school but work 10 hours a week for a half dozen years before drawing from retirement and social security.

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[clausewitz2]

Unless you have a second life you're eagerly anticipating after FIRE, I would posit that being your own boss and being demonstrably responsible for all the benefit you would bring to your patients, even if on a very reduced hour basis, would be more enjoyable than 95% of the things people would do after early retirement.

All y'all are the kind of striving types who made it through med school and residency. What do you think the odds are you're going to be able to stay content very long just laying in the cut?

 

[Sushirolls]

Meat goat farming. Fishing. Hunting. Seat time in a tractor. Fires in the fireplace. Chopping wood. Stacking wood. Falling trees. Range time. Reloading rifle rounds. etc.

I'd definitely be content.

 

[psychacad]

Unless you have a second life you're eagerly anticipating after FIRE, I would posit that being your own boss and being demonstrably responsible for all the benefit you would bring to your patients, even if on a very reduced hour basis, would be more enjoyable than 95% of the things people would do after early retirement.

Even if you have a second passion, it makes more sense to work 10-20 hours a week in psych and pursue that passion right from the start. FIRE never made much sense to me, but I could be missing something. Why waste your youth when you could do whatever you want at your prime working fewer hours? Heck, as someone else mentioned, if you can live overseas and telepsych from there, your dollar will even go 2x or 3x what it does in US (less taxes, better QOL and COL).

 

[Merovinge]

Meat goat farming. Fishing. Hunting. Seat time in a tractor. Fires in the fireplace. Chopping wood. Stacking wood. Falling trees. Range time. Reloading rifle rounds. etc.

I'd definitely be content.

You're a very insightful guy so I imagine it goes without saying that your answers to this are a far cry from the average psychiatrists answer. Part of me wants to just take my dog and family into the woods and live off the land with a mail order subscription of scotch being slowly trickled in. Other parts of me want to sit on rooftop bars overlooking world class cities. In the end, I just work and then do both, and even if I had unlimited money I would still work (just less) and do both.

 

[Stagg737]

Are there any other big fees assoc with medicare. These rates beat cigna and united health care ppo rates for a single doc pp psych in my locality. Also do you always collect these rates when you bill for them?

To be clear, I'm a resident so I'm not actually collecting these rates. From every attending I've talked to, Medicare/caid rates are almost always lower than private insurance, but far, far more consistent with reimbursement both in terms of the dollar amount you can expect to receive as well as actually getting reimbursed.

Also basing your income on billing 99214+90833 every visit is essentially maximum income and a little misleading. Unless you start with a completely full panel you’re not gonna be making that year one. You’d be doing a lot of intakes which will end up billing less overall per hour than follow ups. Every single visit is also not going to qualify as 99214.

I was drastically oversimplifying and just using those numbers as an example that it is very easy in most places to generate $200+/hr and even $250+/hr should be obtainable. Let's switch the numbers up a bit and move to 20 minute appointments for 20 hours per week (to account for intakes and no-shows). In my Mac a 99214 by itself reimburses ~110. So that's still grossing ~$330/hr and at 60 follow-ups per week for 46 weeks that's $303,600 gross. That doesn't include any therapy add-on codes or intakes for gross profit. Also, some visits may be 99213's, but that can vary a lot. Even in my lowest acuity clinic for residency (typical outpt population compared to my med school rotations with private practices), ~95% of my patients hit 99214 criteria.

To be clear, I'm not talking about building up a panel from scratch or even total panels at all. Just pointing out the gross hourly rates that can be achieved, which again is a large oversimplification.

 

[AD04]

Meat goat farming. Fishing. Hunting. Seat time in a tractor. Fires in the fireplace. Chopping wood. Stacking wood. Falling trees. Range time. Reloading rifle rounds. etc.

I'd definitely be content.

Would you be a psychiatrist in a place like that? If so, why not come to work with me? You can do all those here, but more cows than goats. Quite a few generational ranchers. You can do ECTs and practice good medicine and make good money. You will be working a lot though (with call) as the need is great.

 

[AD04]

I was drastically oversimplifying and just using those numbers as an example that it is very easy in most places to generate $200+/hr and even $250+/hr should be obtainable. Let's switch the numbers up a bit and move to 20 minute appointments for 20 hours per week (to account for intakes and no-shows). In my Mac a 99214 by itself reimburses ~110. So that's still grossing ~$330/hr and at 60 follow-ups per week for 46 weeks that's $303,600 gross. That doesn't include any therapy add-on codes or intakes for gross profit. Also, some visits may be 99213's, but that can vary a lot. Even in my lowest acuity clinic for residency (typical outpt population compared to my med school rotations with private practices), ~95% of my patients hit 99214 criteria.

With the 2021 coding changes, I expect there to be even more 99214s.

 

[clausewitz2]

With the 2021 coding changes, I expect there to be even more 99214s.

I am genuinely unsure whether any of my patients might be a 99213 at this point. Even most of my high-functioning ADHD folks are also dealing with social anxiety d/o or are smokers or have issues with sleep. I probably have one or two that are genuinely 99213 but that's out of like 100.

 

[nexus73]

The new 99214 doesn't help most psychiatrists IMO. Most of my patients were already 99214 before the change, now pretty much all will be. The code changes help the other cognitive specialists...like a PCP seeing someone for chronic headaches and HTN, used to be 99213 now 99214. There are going to be a ton more 99214 from primary care and internal medicine subspecialties.

 

[Sushirolls]

Would you be a psychiatrist in a place like that? If so, why not come to work with me? You can do all those here, but more cows than goats. Quite a few generational ranchers. You can do ECTs and practice good medicine and make good money. You will be working a lot though (with call) as the need is great.

Those are my retirement goals, or if the Titantic health care system finally snaps and plunges to the depths, my fall back plan lifeboat.

Thank you for an employment offer/extension/expression. These days I've got a lot of other factors that will keep me locked in with the status quo.

 

[rjs2131]

Can someone give an idea of what it would typically cost to cover your own benefits/malpractice if joining a PP as a 1099 contractor??

 

[calvnandhobbs68]

Can someone give an idea of what it would typically cost to cover your own benefits/malpractice if joining a PP as a 1099 contractor??

There’s way too many variables in there (how much coverage you want, how old are you, how many people you’re covering, what state you’re in, etc). Go get some quotes for marketplace health insurance plans and malpractice insurance. It’s not that hard to do.

 

[rjs2131]

There’s way too many variables in there (how much coverage you want, how old are you, how many people you’re covering, what state you’re in, etc). Go get some quotes for marketplace health insurance plans and malpractice insurance. It’s not that hard to do.

I know, I plan to get specific quotes but just wanted a general idea of what people are spending - malpractice seems more straightforward than health insurance. Really just trying to mentally
budget how much I would have to plan to set aside for covering my own benefits...is 50k reasonable if no dependents? More/less?

 

[Sushirolls]

No dependents, so lets say you and one other for health insurance, full price, no government exchange subsidies could be about $5-600/month for a High Deductible Plan. Then you need to drop in your max for an HSA account, that you set up with your pick of 3rd party HSA banks, which allows stock market investing. So that is $7200. All of this is tax deductible as long as you don't have access to any other employer based insurance even if thru a spouse.

Next you need to pick your retirement plan at minimum. Go to Vanguard.com and either sign up for a SEP-IRA or solo 401K. The money you put into this will be tax deductible. SEP-IRA I am familiar with and essentially is 20% of your Net Income. Far better than almost all Big Box Shop retirement plans.

Go pick an agency like Farmers /Geico / State Farm / etc and get yourself a term life insurance policy for what every dollar value you want. Typically you can get more life insurance than what the Big Box shops will offer. This isn't tax deductible. Talk with them about LTD and STD, others on SDN have strong opinions on the merits (of lack of) for these.

Keep track of your CME expenses, License, DEA costs. These are tax deductible.

Liability insurance depending carrier and if they offer full part time options. Full time is likely $5500/year. Also tax deductible.

The biggest variable out of this is really the retirement money allocation and the rules surrounding that.

 

[rjs2131]

No dependents, so lets say you and one other for health insurance, full price, no government exchange subsidies could be about $5-600/month for a High Deductible Plan. Then you need to drop in your max for an HSA account, that you set up with your pick of 3rd party HSA banks, which allows stock market investing. So that is $7200. All of this is tax deductible as long as you don't have access to any other employer based insurance even if thru a spouse.

Next you need to pick your retirement plan at minimum. Go to Vanguard.com and either sign up for a SEP-IRA or solo 401K. The money you put into this will be tax deductible. SEP-IRA I am familiar with and essentially is 20% of your Net Income. Far better than almost all Big Box Shop retirement plans.

Go pick an agency like Farmers /Geico / State Farm / etc and get yourself a term life insurance policy for what every dollar value you want. Typically you can get more life insurance than what the Big Box shops will offer. This isn't tax deductible. Talk with them about LTD and STD, others on SDN have strong opinions on the merits (of lack of) for these.

Keep track of your CME expenses, License, DEA costs. These are tax deductible.

Liability insurance depending carrier and if they offer full part time options. Full time is likely $5500/year. Also tax deductible.

The biggest variable out of this is really the retirement money allocation and the rules surrounding that.

Thank you! This is very helpful.

So it seems like if I'm covering my own insurance/malpractice and maxing out retirement accounts, somewhere in the realm of ~50-75k would be a reasonable amount to have set aside. Good to know many of these things are tax deductible.

 

[Sushirolls]

There is the benefit of self employed or 1099 to potentially make more money then if employed - in general, but not a rule.

There are other more fancier retirement accounts and things available to get put away so, so much more money than the solo 401K or SEP-IRA. There are self directed pension plans, but they have lots of rules and need a commitment to fund them for the decades required to make them viable - don't jump into them lightly.

This also allows people to splurge and buy the better insurance options for local markets. For instance I choose a better company for my self/family after having learned which are the better ones from my private practice, and I intentionally choose the HDP for the HSA. A local Big Box shop I used to work for that had a better health insurance carrier recently just changed for all their thousands of employees to the worst insurance company. I bet their admin was united in that healthcare decision. Another of the for profit psych hospitals in my local area also uses the worst of the insurance companies, too. Or if the HSA isn't your thing, splurge for a platinum plan with minimal OOP expenses.

It is possible to make less money with what you put in your pocket per year, but yet fund your annual retirement account in far excess of any Big Box Shop.

Ex:
Private Practice Gross 400K -100k for overhead = 300k Net Income in your pocket

-57k for SEP-IRA (IRS max for year?) = 243K in your pocket
-14k for health insurance and HSA = 229K in your pocket
Taxes for Feds and SS/Medicare etc 229K x 0.78 = 178k in your pocket

178K / 12months = 14.8K per month truly in your pocket and the fully funded retirement

 

[rjs2131]

Heard from an insurance-based PP that is offering a 60/40 split (W2, with benefits - health/dental/malpractice) for the first year. Practice is fairly well-established and basically has everything up and running so I'd be doing very little admin work. I've seen others offer a bit more (65-70%) but wondering if there are circumstances where people would consider 60/40 a good deal, or if 60/40 generally seems low.

 

[psychacad]

Any thoughts on PP telepsych? Advantage of telepsych are flexibility with location, minimal overhead. Can one realistically charge similar rates in comparison to a competitive PP in HCOL?

 

[Sushirolls]

Heard from an insurance-based PP that is offering a 60/40 split (W2, with benefits - health/dental/malpractice) for the first year. Practice is fairly well-established and basically has everything up and running so I'd be doing very little admin work. I've seen others offer a bit more (65-70%) but wondering if there are circumstances where people would consider 60/40 a good deal, or if 60/40 generally seems low.

Could be. Devil is in the details. Hours worked, and actual net money in your pocket. Lots of things to consider.

My overhead for year one was 85%, year two is looking like 55%.

I think in coming years I might be able to get mine down to 20-30% range.

 

[TexasPhysician]

Heard from an insurance-based PP that is offering a 60/40 split (W2, with benefits - health/dental/malpractice) for the first year. Practice is fairly well-established and basically has everything up and running so I'd be doing very little admin work. I've seen others offer a bit more (65-70%) but wondering if there are circumstances where people would consider 60/40 a good deal, or if 60/40 generally seems low.

60-70% is normal without benefits.

 

[rjs2131]

Any thoughts on PP telepsych? Advantage of telepsych are flexibility with location, minimal overhead. Can one realistically charge similar rates in comparison to a competitive PP in HCOL?

Definitely seen/heard of folks with full telepsych PP's and doing just fine. The one I'm thinking of is fee-for-service with rates similar to brick and mortar PP - personally, I think the rates should be the same as we're still providing the same service and medical decision making.

 

[rjs2131]

60-70% is normal without benefits.

70% without benefits would make sense but 60% seems low if you're paying for your own insurance, malpractice, etc. At that point I don't really see the advantage of joining if you're making less than average working full-time, but I guess the flexibility/control is worth it for some folks.

 

[calvnandhobbs68]

70% without benefits would make sense but 60% seems low if you're paying for your own insurance, malpractice, etc. At that point I don't really see the advantage of joining if you're making less than average working full-time, but I guess the flexibility/control is worth it for some folks.

Agree 60/40 even up to 70/30 I’d be expecting benefits. Once you get above 70/30 then you typically start falling into the 1099 range but that split can vary widely (I’ve seen splits up to close to 90/10 with large practices that already cover all their overhead and you’re basically taking up an already empty office). Smaller practices have more overhead to cover per person so you can expect the split to be lower generally.

 

[TexasPhysician]

70% without benefits would make sense but 60% seems low if you're paying for your own insurance, malpractice, etc. At that point I don't really see the advantage of joining if you're making less than average working full-time, but I guess the flexibility/control is worth it for some folks.

Id rather have 60% of $350 than 70% of $275. You need to do the math. Advertising to bring in higher rate patients can be a lot more than low rate practices. Numbers vary by a lot. You need to do your math.

 

[rjs2131]

Agree 60/40 even up to 70/30 I’d be expecting benefits. Once you get above 70/30 then you typically start falling into the 1099 range but that split can vary widely (I’ve seen splits up to close to 90/10 with large practices that already cover all their overhead and you’re basically taking up an already empty office). Smaller practices have more overhead to cover per person so you can expect the split to be lower generally.

That makes sense - the 60/40 was particularly odd when similar, much smaller PP's in the area were offering 65-70%...seems I'll just need to negotiate and see what can be offered.

Id rather have 60% of $350 than 70% of $275. You need to do the math. Advertising to bring in higher rate patients can be a lot more than low rate practices. Numbers vary by a lot. You need to do your math.

Fair point - should have mentioned that the total revenue for each new/follow-up isn't much different from practice to practice in this area. I've been told that on average, insurance reimburses $250-275 for 99205's and somewhere around $150-$200 for 99214+90833, so by those numbers I wouldn't expect more than $150-160 for a new and $180-$240 for a follow-up which could be fine depending on how quickly I filled.

My goal is to break 200k my first year if I'm joining a PP and then make more in the 250-300k range second year and beyond which doesn't seem particularly hard to do if I'm working 30-32 clinical hours/week.

 

[dl2dp2]

My goal is to break 200k my first year if I'm joining a PP and then make more in the 250-300k range second year and beyond which doesn't seem particularly hard to do if I'm working 30-32 clinical hours/week.

You should discuss with the hiring partner re: partnership track timeline if you decide to join the 60/40 practice. That's really where it matters. Again, information might change/be inaccurate but you want to get a sense of the overall culture and vision of the practice. Get a gestalt impression that suggests the partners are fair, nurturing, and logical with a sense of long-term growth, and that the practice itself is prosperous. You don't need exact numbers, but if available can be helpful (i.e. how fast do I expect to fill, can I see some sample data, etc?) It's also often helpful to request to talk to several current staff/partners.

 

[rjs2131]

You should discuss with the hiring partner re: partnership track timeline if you decide to join the 60/40 practice. That's really where it matters. Again, information might change/be inaccurate but you want to get a sense of the overall culture and vision of the practice. Get a gestalt impression that suggests the partners are fair, nurturing, and logical with a sense of long-term growth, and that the practice itself is prosperous. You don't need exact numbers, but if available can be helpful (i.e. how fast do I expect to fill, can I see some sample data, etc?) It's also often helpful to request to talk to several current staff/partners.

Sounds like this is an option after 12 months at the practice, current partners would 'vote' on it but essentially every MD who stays for more than a year becomes a partner (and it seems like no one really leaves after that point).

What would it cost for an established practice to hire an MD? Obviously there are non-monetary costs that could occur, but it seems like the major costs at the individual level would include covering benefits/malpractice and possibly professional/licensing fees. Rent/office space, utilities, admin staff and EMR would be split between everyone. What am I missing? Trying to make sense of how much of the "40%" the practice is taking will cover costs vs how much is profit for the practice.

 

[Sushirolls]

Time is a cost. Lawyer contract review/prep. Time spent getting the enrollments with insurance. Time spent looking over your shoulder to see that you know how to bill codes appropriately and charting isn't going to set up for an audit.

Business structure may need to keep money in the business and not be a partner dividendend pay our or salary. For instance the business may need to sock away X amount of money in anticipation of resurfacing the parking lot and applying new paint to the lines, or saving for the new roof, or the death of the furnace, etc, etc.

 

[rjs2131]

Time is a cost. Lawyer contract review/prep. Time spent getting the enrollments with insurance. Time spent looking over your shoulder to see that you know how to bill codes appropriately and charting isn't going to set up for an audit.

Business structure may need to keep money in the business and not be a partner dividendend pay our or salary. For instance the business may need to sock away X amount of money in anticipation of resurfacing the parking lot and applying new paint to the lines, or saving for the new roof, or the death of the furnace, etc, etc.

Thanks for the input.

Seems like the time piece is mostly on me? I'd be doing most of the above (hiring a contract lawyer, getting paneled with insurance) in the months before I'd actually start working at the practice...I guess the practice would help with credentialing/paneling but I'd think much of the actual work of filling out forms etc would be my responsibility.

 

[Sushirolls]

Thanks for the input.

Seems like the time piece is mostly on me? I'd be doing most of the above (hiring a contract lawyer, getting paneled with insurance) in the months before I'd actually start working at the practice...I guess the practice would help with credentialing/paneling but I'd think much of the actual work of filling out forms etc would be my responsibility.

I haven't yet brought any one on to my practice, but the logistics of it I'm dreading. I can't give specifics as a result, but if I do it'll be a pain.

 

[rjs2131]

Fair enough! Definitely seems a thorough risk/benefit analysis is needed for both parties.

 

[dl2dp2]

What am I missing? Trying to make sense of how much of the "40%" the practice is taking will cover costs vs how much is profit for the practice.

Maybe all of it is profit. Would that change whether you'd work for this practice? When you are partner the portion of your billing that is profit goes back to you. OTOH, at that point you'll be responsible for hiring a new associate, and you'll be wondering whether the 40% you skim off his billing is worth your time, since you'll divide it up, even though the senior partner didn't contribute at all to the hiring process.

The difference between this job and starting your practice from scratch is the "cost".

 

[Sushirolls]

And the cost can be substantial.
My little solo practice, year one I pocketed 10k, year two pocketing 70k.
It can take time to build one up. Or as others alluded to, could be full and robust for practice growth in less than a year.

 

[rjs2131]

Maybe all of it is profit. Would that change whether you'd work for this practice? When you are partner the portion of your billing that is profit goes back to you. OTOH, at that point you'll be responsible for hiring a new associate, and you'll be wondering whether the 40% you skim off his billing is worth your time, since you'll divide it up, even though the senior partner didn't contribute at all to the hiring process.

The difference between this job and starting your practice from scratch is the "cost".

I think the decision right now is more about "is it worth it to forego the hospital/big-box offer" and join a group PP, and if I'm able to make greater headway that first year by joining a PP (i.e. negotiate a 65-70% cut rather than 60%) then by year 2 I'd likely be making a similar overall income while also having control over my schedule. Obviously with opening your own PP there's a higher income ceiling a few years down the road, but I've done a lot of soul searching and don't think I'll really need more than 250-300k/year. Seems like there is some degree of delayed gratification with joining a group PP as well in terms of partnership, profit-sharing, etc.

That said, joining a group PP would mean no sign-on bonus, no guaranteed median salary the first year (for some places this looks to be around 300k). Trying to figure out what percentage of take-home would justify choosing group PP > big box as a new grad has been tough.

 

[Sushirolls]

On your pros/cons list, changing jobs is a pain. So knowing you will likely drop a Big Box shop job in coming years, you could save yourself the headache up front. Some Big Box shops can be down right savage in how you are treated once you drop a resignation letter, like gutting your clinic but then saying you are still on productivity, and for the remaining 60-120 days your income level plummets while waiting to run down the clock. The other aspect I've discovered is it is draining and a pain to 'build up' a new panel of patients. Some people might like doing new intake/consults frequently, but there is something to be said for having your core of patients that are well established. You do Big Box then to PP, you'll have to repeat the build up all over again.
If you decide to make the leap in the future to a PP, there is no guarantee that job will be available or a similar one in your area of choice - which means you will have to open your own or move. That has its own costs, that could be avoided up front with picking the PP first.

Some people are meant for Big Box shops though. I know one doc I've tried to convince into PP, that could actually take most of their current panel with them, without any contract violations, (guaranteed starting income!), but just won't take the leap. Perhaps you are culturally destined for Big Box shop employment?

 

[AD04]

I think the decision right now is more about "is it worth it to forego the hospital/big-box offer" and join a group PP, and if I'm able to make greater headway that first year by joining a PP (i.e. negotiate a 65-70% cut rather than 60%) then by year 2 I'd likely be making a similar overall income while also having control over my schedule. Obviously with opening your own PP there's a higher income ceiling a few years down the road, but I've done a lot of soul searching and don't think I'll really need more than 250-300k/year. Seems like there is some degree of delayed gratification with joining a group PP as well in terms of partnership, profit-sharing, etc.

That said, joining a group PP would mean no sign-on bonus, no guaranteed median salary the first year (for some places this looks to be around 300k). Trying to figure out what percentage of take-home would justify choosing group PP > big box as a new grad has been tough.

Do both simultaneously. Keeps people on their toes when they know you have other options. And you'll learn twice as much which will make you more adaptable.

 

[rjs2131]

On your pros/cons list, changing jobs is a pain. So knowing you will likely drop a Big Box shop job in coming years, you could save yourself the headache up front. Some Big Box shops can be down right savage in how you are treated once you drop a resignation letter, like gutting your clinic but then saying you are still on productivity, and for the remaining 60-120 days your income level plummets while waiting to run down the clock. The other aspect I've discovered is it is draining and a pain to 'build up' a new panel of patients. Some people might like doing new intake/consults frequently, but there is something to be said for having your core of patients that are well established. You do Big Box then to PP, you'll have to repeat the build up all over again.
If you decide to make the leap in the future to a PP, there is no guarantee that job will be available or a similar one in your area of choice - which means you will have to open your own or move. That has its own costs, that could be avoided up front with picking the PP first.

Some people are meant for Big Box shops though. I know one doc I've tried to convince into PP, that could actually take most of their current panel with them, without any contract violations, (guaranteed starting income!), but just won't take the leap. Perhaps you are culturally destined for Big Box shop employment?

I definitely don’t see myself at a big box shop long-term unless it’s a really sweet gig...I think I value autonomy and control too much but we’ll see.

Do both simultaneously. Keeps people on their toes when they know you have other options. And you'll learn twice as much which will make you more adaptable.

Don’t think this is an option currently - no one wants me to double dip! I guess I could fight the non-competes but at that point I’d be better off joining the PP as there wouldn’t be much of a sign-on/guarantee for the big box shop.

 

[dl2dp2]

Don’t think this is an option currently - no one wants me to double dip! I guess I could fight the noncompetes but at that point I’d be better off joining the PP as there wouldn’t be much of a sign-on/guarantee for the big box shop.

This is not a bad idea. You might ask the PP to do a very small part-time thing w/o benefits to get your feet wet and understand how PP works better.