September 2004

In residency and subspecialty fellowship, physicians learn really very little about the economics of medical practice. I believe this is entirely reasonable; we must learn first to practice medicine before we understand how to bill for it. However, this does leave graduating residents and fellows without much of the knowledge they need to choose from available practice opportunities. Often their academic mentors are in no better position to give advice because they also understand little about the business of private practice.

To help you all out, I will describe here the nature of my practice and the terms under which I was recruited. I cannot say how representative this is of other practices in my or other communities. Nevertheless, I hope it will help as a yardstick you can use for comparison with the job offers you receive.

My situation is very special. I was recruited to join a four-person group of pulmonologists practicing inpatient and outpatient internal medicine and pulmonary consultation. The senior member of this group was and is my father, so I know that my recruitment terms were very fair. However, two other non-relatives were previously recruited on the same terms, so I was not given overly special treatment. The economics of the arrangement were as follows and were made explicit at the time I was recruited. For the first two years of practice, I was a salaried employee. The salary was $120,000 per year in 1999. Following two years of working for the practice, I was offered partnership as stipulated at my recruitment. To become a partner, I had to buy a share of the practice. The value of the practice was considered to be the accounts receivable (money yet to be collected by the practice). Therefore, I had to pay an amount of money equivalent to one-fifth of the accounts receivable. I also had to pay the practice any difference between what they had paid me and the amount of money I brought in to the practice over my first two years, an amount that could easily have been anywhere between zero and $50,000. The buy-in was arranged to occur over several years, so that I didn't owe all of this money up front. My brother was later recruited to the practice on the same terms.
After my first two years as an employee, I was paid whatever amount of money I made each month in excess of my overhead. The monthly overhead of my practice varies, but can easily be $8000 to $9000.

The day-to-day mechanics of the practice run as follows: Each member of the practice has his own patients. If one of us is away on vacation or has a day off, the other physicians see those patients if needed. Call is divided evenly among the members of the practice, regardless of seniority. I see patients in the office eight half-days a week. I am on staff at four small and one large hospital. Hospital patients are seen before office hours, over lunch and, if needed, after office hours. Office hours are 9:00 to 12:00 and 2:00 to 5:00, Monday through Thursday. Vacation can be up to four weeks a year. New patients to the practice may choose which one of us they would like to see. We all take the same insurance plans, so that, for example, all of the uninsured patients do not belong to the junior member.

Based upon my experience, I do have some advice regarding job offers:

1. The timing and terms for partnership should be explicit at the time you are hired.
2. Call days should be evenly distributed among the physicians in the practice, though not all practices do this.
3. As in marriage, the point of the partnership is for all members to benefit, not for one set of physicians to take advantage of the others. The benefit to the physicians already in the practice is a reduction in their workload and call schedule. The benefit to you is an opportunity to build your practice with an established group, rather than on your own, which is harder. You can't expect the physicians in the practice to simply give you a portion of what they have, but the terms for partnership should be equitable.
4. Also as in marriage, the hardest and probably most important part is knowing what kind of physicians and people your prospective associates are. You can get a feeling for their competence by looking over their CVs, being sure they have the appropriate credentials. Knowing how they would be to work with is hard, and I don't have any magic recommendations. In my case, I had known my new associates for 20 years, and so I felt comfortable joining them.