Medical Malpractice News

Private Medical Practices – Why are Doctors “Selling Out?”

Tags: | Comments: 0 | June 13th, 2011

Lately a great deal of individual physicians and groups are being “bought up” or employed by hospitals.  In fact, it’s happening so often these days that it has many of us in the healthcare world scratching our heads wondering what these people are thinking.  Physicians must have short memories because it wasn’t too many years ago that this same trend occurred and only lasted a few years.

This topic raises a lot of questions:  Why would a doctor give up a private practice that took years to build?  Doesn’t the loss of independence bother these doctors?  What are the hidden costs that nobody seems to talk about?

A Successful Private Practice in Medicine Doesn’t Just Happen

It takes planning, taking on risk, raising or borrowing capital, hiring and maintaining a competent staff, networking, advertising and marketing, and caring for patients in a manner that ensures lasting relationships and referrals.  In most cases the first few years are slow and physicians and their families make significant sacrifices to make it work.  Why would you then turn around and sell it?  The hospitals and healthcare systems are getting off pretty easy in this scenario.  The hard work has been done and the financial investment has already been made for them.  It’s like building your dream house with your own hands, enjoying it for a few years, and then selling it to a neighbor down the street, but you continue to live in it and pay rent to the new owner who now owns all the equity.  And that’s just the beginning of the problem.

One of the big trade-offs when a doctor sells out to a hospital is the loss of independence.  When the hospital dictates office hours, on-call hours, weekend shifts in the ER, and endless hours at staff meetings, physicians tend to squirm.  In most cases the hospital can replace office staff and change benefits anytime they want.  The physicians lose control of decision making and often find their fate in the hands of some hospital administrator.  The loss of autonomy is what usually drives physicians out of the systems and back into private practice.  Giving up your freedom is an intangible that doesn’t have a price tag, but there are some very real costs associated with going employed that many docs don’t find out about until much later.

The Missing Truth – What Doctors Aren’t Told

Doctors aren’t always told about some of the hidden costs associated with selling a private practice and becoming an employee.  I recently spoke with a general surgeon that sold his practice to the local hospital.  He was told that his medical malpractice insurance would be covered by the hospital’s self-insured trust, which was true.  But what they failed to mention was that the trust would not cover his prior acts.  So he was forced to buy a tail from his previous insurance company for over $40,000.  The kicker is that he had been with the company for almost 10 years and had already qualified for a free tail upon his retirement. He’s 62 years old and only wants to work a few more years.  If he had negotiated with the hospital to keep his own separate medical malpractice insurance policy it would have saved him thousands of dollars and a lot of headaches.

In another case, a physician left a group practice and became an employee of a large healthcare system that promised to pay for her tail coverage as part of the employment contract.  What she found out later was the maximum they would pay was $25,000 toward a tail, and she had to pay $5,000 out of her own pocket on a $30,000 tail.  In both cases the employers held all the cards because the doctors had already signed a contract without reading the fine print.  That’s a pretty rough way to start out a relationship with a new employer!


Obviously, doctors are smart people and have reasons for wanting to give up their own private practices to become employees.  Many face lower reimbursements and higher costs making it difficult to achieve the profits they once enjoyed, and the time and sacrifices involved in running the practice often hardly seem worth the energy.  Others are simply afraid of the unknown.  Nobody can predict what changes will come in healthcare in the US, and so it appears that, to many physicians, the security of working for someone else looks better than taking the risk of staying in private practice.  This is a very short-sighted view; physicians and groups should think twice before they hand over their hard work, equity, and independence to a hospital or healthcare system.