Ownership Offers Control and Earning Potential – and Risk

Healthcare professionals who are entering the profession often face a tough question: Do I want to be an employee or an owner? For a newly minted healthcare professional just out of school, the choice may be to accept a position within a sizeable group or to buy an existing practice.

Research shows that young physicians out of medical school more frequently opt to become employees rather than owners, and nationwide only 15% of physicians own their practices as solo practitioners.

As with many decisions, there are pros and cons on both sides.

Benefits of Owning a Practice

Getting to be your own boss may be the biggest advantage of owning your own healthcare practice. You could provide the kind of patient care you believe is best, and you would have the opportunity to hire individuals who have goals and working styles that align with yours.

Moreover, it can be rewarding to be a business owner as well as a doctor. You should have an interest in running a business and know some basics, but working with trusted advisors such as accountants, financial advisors, lawyers and bankers will help you keep the business side of your practice on track.

As an owner, your earning potential also may be significantly higher than it would be if you were locked into a contract as an employee. Depending on your entity structure, your income may be derived from W-2 earnings or a share of the business income, or both.

From a business standpoint, you would have a choice of entity structures such as sole proprietorship, limited liability corporation (LLC) or S-Corporation.

Disadvantages of Practice Ownership

Just as it is a benefit of practice ownership, being your own boss can be a disadvantage. As an owner, you make all the decisions about hiring, financial management, office and administrative management and even marketing. That’s a lot of responsibility on top of patient care.

Moreover, if you own a practice, don’t look forward to a lot of time off. Work-life balance is a challenge for many business owners, particularly for owners of healthcare practices.

In making the employee vs. owner decision, one of the things you’ll want to consider is your healthcare specialty. If you are a primary practice physician – for which there is great demand in almost all markets – you can make the decision based on your personal goals and financial capacity. However, if you are specializing in a medical field such as hematology, dermatology or other specialties, there may not be the demand for your services in a small town or rural area that there would be in a larger city. Such opportunities in cities usually occur in larger group practices in which you would be an employee.

Like all business owners, you would need to buy equipment – some of it expensive. Of course, it is tax deductible, but it’s still an expense requiring capital investment.

Owning a business can be risky, and the fact that you are a physician does not excuse you from being a good business manager. You would still have responsibility for cash flow to pay bills, pay employees, buy equipment, supplies, and pay taxes, on top of handling the patient load. In addition, managing the insurance relationships and day-to-day claim submissions is a major factor in any healthcare practice.

It’s easy to understand why more than half of physicians nationwide say they prefer to be employed by a medical group or hospital, rather than own practices. But the rewards of owning a small healthcare practice can be great, and if you connect with the right trusted advisors who can help you make good decisions along the way, you could have a rewarding career as a solo practitioner.

If you would like to discuss the pros and cons of healthcare practice ownership, contact your Adams Brown advisor today.