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Types of Practices

by Patrick C. Alguire, MD, FACP
Director, Education and Career Development, ACP

Practice Types

When investigating practice opportunities, you may first wish to decide what type of practice situation will best meet your career goals. However, many graduating residents and fellows do not have a clear idea of the various types of practices available and their distinguishing characteristics, let alone whether it will help them achieve long-term career satisfaction. The following few paragraphs briefly describe and summarize the relative advantages and disadvantages of the most common types of practice opportunities currently available, including solo practice, group practice, hospital-owned, staff-model HMO, and locum tenens.

Solo Practice

Solo practice is exactly as advertised, practicing without partners or employment affiliations with other practice organizations. This traditional type of practice is becoming less common on the medical scene, attracting fewer than 20% of new physicians, but still has some strong advocates. The solo practice is characterized by a small staff and often by the use of family members as part of the staff. The patient base is typically limited, and the office is often not computerized.

The single most important advantage of the solo practice is autonomy; you are the boss and make all the decisions. Your input will never be ignored or assigned a low priority and the decisions you make are usually implemented quickly. On the other hand, the entire burden of running the practice, and that means all aspects of the practice, rests entirely in your hands. Solo practices are at risk of suffering financial setbacks due to lack of referrals, a small patient base, shifting patient allegiances because of a change in insurance carriers, and lost income caused by illness or vacation.

A very important consideration of whether you can risk a solo practice is the extent of your educational debt: the more debt, the greater the risk. Solo practices often have higher percentage overhead expenses compared to group practices. The full force of complying with insurance and government regulations will fall entirely on you and your small office staff. Finally, the burden of taking call or having your practice covered by someone else when you need time off are factors that could affect the quality of your life. The locale in which you wish to practice will sometimes determine the success of the solo practice. Rural areas are some of best locations because of lack of competition and lower penetration of managed care.

Group Practices

Group practices are typically divided into single-specialty and multispecialty practices. The defining characteristic of single-specialty practice is the presence of two or more physicians providing patients with one specific type of care (i.e., primary care or a specific subspecialty practice). The advantages of single-specialty group practices are increased financial security and controlled life-style. Group practices are better able to accept and manage financial risk than solo practices. Of course, compared to a solo practice, decision making is usually shared, which is a source of potential conflict. Small groups, as opposed to large groups, may not be able to offer competitive compensation arrangements and benefits for new physicians.

Multispecialty group practices are defined as offering various types of medical specialty care in one organization. Multispecialty practices may be located in one or several facilities. Typically, the overhead is higher than a single specialty practice because of necessary acquisition of specialized supplies for subspecialty members of the group.

The advantages in multispecialty groups include providing multiple patient services at one location and the potential to effectively negotiate favorable managed care contracts. Large multispecialty practices may be better able to offer attractive compensation packages than single-specialty groups. However, while the total compensation package (salary, benefits, vacation, and CME time) might be more attractive, it is not unusual to find the salary to be a bit lower than in single-specialty practices. The lower salaries usually reflect fewer working hours as compared to single-specialty practices.

As expected, autonomy and decision-making ability decrease with the size of any group. The larger practices will become more bureaucratic and policy driven. Clashes between physicians over referrals, the ability to deliver certain types of care, performance of procedures, and relative compensation are potential disadvantages.

Hospital-owned Practices

Hospital-owned practices are becoming a more common option for established as well as new practices. In this type of arrangement, the practice is at least partially owned by the hospital, and the participating physicians are on some type of compensation plan provided by the hospital.

The advantages of this practice option is the ability to assume more risk, more effective managed-care negotiations, and a large referral network of practices. As in large multispecialty practices, physician autonomy is diminished, policies and procedures are developed by groups that you as in individual can seldom influence, and bonus rewards relating to productivity are often not available. Care must be taken when contemplating such an arrangement by carefully investigating the hospital's financial status and marketing strategy. You need to make sure that the hospital is financially sound and unlikely to go bankrupt or be acquired by another entity. You must be comfortable with the marketing strategy used by the hospital and make sure it is compatible with your personal and professional goals and that you can live up to the patient-care obligations promised by the hospital to the public.

Finally, a physician in a hospital-owned practice may have to devote a considerable amount of time to committee and, occasionally, teaching duties. You may wish have a limit to the number of extra hours devoted to these duties or arrange for extra compensation if they exceed a given threshold.

Health Maintenance Organizations (HMOs)

Staff model Health Maintenance Organizations (HMOs) are similar to large, multispecialty group practices. They may be partially owned by the physician employees, with the physicians typically functioning as employees of either the physician group owning the practice or the insurer. Most physicians in this type of organization are paid a salary, and bonuses based upon productivity or health resource utilization are common. Financial risk is minimal, as is the paperwork burden typical of so many physician-owned groups. The largest disadvantage is loss of autonomy in running the practice, compliance to rules and regulations created by other individuals, and usually small productivity incentives.

Other Types of Practice

In independent contractor relationships, the practice is your own and your income is not shared with others, but you do share an office and office expenses with other physicians who will usually assist you with coverage. Obviously, it is important that the sharing of office expenses be fairly worked out and spelled out in detail. The disadvantage to independent contracting is loss of a degree of decision making as compared to solo practice.

A locum tenens is an alternative to more permanent employment. Locum tenens offers physicians the opportunity to work in a practice or an area for a short period of time, from a few weeks up to a year. Not infrequently, the pay rate is higher than what the permanent position would offer and it gives the physician the opportunity to "try out" a practice type or location.

The information presented in this paper was drawn in part from "Making the Right Practice Decisions in a Rapidly Changing Environment" published by ACP.

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