Physician Compensation: Employed vs. Practice Owners

As per the U.S. Physician Employment Report, conducted by Doximity, physician employment opportunities increased by 7% in 2018. In 2017, this employment growth rate was 5.1%. As per another survey conducted by Physicians Foundation in 2017, more that 57% of physicians were employed at hospitals and medical groups, whereas only 32% were independent practice owners.

Results from these surveys are a clear indication that physicians are opting hospital employment over private practices.

Here are some of the major challenges due to which running a private practice has become a cumbersome task for providers:

  1. Inconsistent cash flow. Unlike employed physicians, private practitioners don't have a fixed salary. They also have to deal with unexpected income loss due to billing errors, collection issues or patients not showing up at appointments.
  2. Managing both patients and administrative tasks is another challenge. From looking after patients, to employee management, accounting, supplies, and paper works, everything combined can be very unnerving for physicians in a private practice.
  3. Overhead expenses. There is a fixed monthly expenditure in the form of rent, office supplies, insurances and so on that needs to be paid irrespective of how much profit the practice is making.
  4. Changing policies. Regular changes in reimbursement models and data reporting often results in ineffective management of private practices.
Physician Compensation Comparison
  • According to the 2017 Physicians Practice survey, 75.3% of hospital employed physicians get more than $200k in annual compensation, as compared to 69.5% of independent physicians.
  • As for the minimum compensation, the difference is quite stark. 4.1% of employed physicians bring an annual income of $100 K or less and this share is as high as 8% for private practice owners.
  • Another important take away from the survey was the share of income from inconsistent sources.  Almost 19% of independent physicians attribute their income to non-guaranteed sources, whereas this percentage is as low as 6.8% for employed physicians.
Even though the compensation is higher for hospital employed physicians, there are certain limitations associated to it. The fact that physicians are not the in charge of their practice schedule when employed, is a major concern for them. Even if they are dissatisfied with certain decisions and changes, they don't have much say being an employee.  There is also a looming fear of change in compensation and rise in competition. So to say that hospital employment will make private practice a thing of the past will not be correct.