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What is the future of private practice anesthesiology?
First off, let’s define “private practice.” The Merriam-Webster online dictionary defines private practice as: “a professional business (such as that of a lawyer or doctor) that is not controlled or paid for by the government or a larger company (such as a hospital).”
In my community the dentists are all in private practice, as are most of the accountants, psychologists, and attorneys. Why should anesthesiologists be any different? Let’s look at the issues.
A private practice single-specialty anesthesia group will usually provide anesthesia for similarly self-employed surgeons who are in private practice. How does the business work? When a single-specialty anesthesia group provides a service, the group decides the cost of that service, and the group sends a bill to the patient’s insurance company or to Medicare or Medicaid for that amount. How much will they get paid? It depends. Medicare and Medicaid cap their payments at a small fraction of an anesthesiologist’s typical fee. For insured patients, the anesthesia group collects whatever the insurance company pays, along with the deductible or co-pay the patient owes through their insurance plan. The collected amount, minus the group’s overhead (office employee salaries, office rent, office supplies, malpractice insurance, and health insurance for their own families) equals the anesthesia group’s profit.
A private practice anesthesia group needn’t be a physician-only group. In many private practice anesthesia groups, physician anesthesiologists supervise multiple nurse anesthetists in multiple operating rooms. These groups are still single specialty anesthesia groups. Physician anesthesiologists pay their nurse anesthetists as employees as well as their other expenses, and then divide the profit.
In recent years the prevalence of the private practice model is decreasing. The model is being replaced by jobs where the anesthesiologists are employees. Employees of whom?
One employee model is the multispecialty group model, in which all medical specialties work in parallel under one umbrella organization. Examples of this are the Permanente Medical Group (of Kaiser Permanente), Sutter Health in California, Mayo Clinic, and university groups such as Stanford Health Care in my neighborhood. The essence of this model is physicians are salaried, and income is divided amongst the different specialties. Surgical specialties such as anesthesiology and all surgeons earn less than they would in a self-employed private practice model, with some of the income from their services going to primary care specialists like family practitioners, internists, and pediatricians. It’s a symbiotic system since the referrals to the surgical specialists commonly originate from the primary care doctors in the first place. In this model an anesthesiologist will earn less money per case, but may increase his or her income by doing more cases.
A second employee model is the for-profit national physician corporation. The national corporation may purchase anesthesia private practice groups to gain access to their hospital and/or surgery center contracts. The corporation pays an up-front payment to the current anesthesiologists of each smaller group at the time of purchase. The parent corporation collects all future anesthesia bills, and pays out a decreased fee to the anesthesiologists who are now employees. The difference between the collected fee and the anesthesia pay-out equals the profit bottom line of the purchasing corporation, which may be a publically traded company.
A third employee model occurs when a single anesthesiologist or a smaller company attains an exclusive contract for a hospital or a surgery center. This solitary anesthesiologist or smaller company then employs other anesthesiologists at a lower set rate or salary, then contracts to have all billing and collecting done, and keeps the difference between the collected rate and the rate paid to the employees as profit.
One of the reason employee models are increasing in frequency is that the private practice of primary care medicine and the private practice of surgery are both shrinking. If more and more primary care doctors join large multispecialty groups or a national company, and if more and more surgeons join large multispecialty groups or a national company, there will be a paucity of patients for a freestanding anesthesia group to attend to. These trends are not going away.
As a result, today’s graduates from anesthesia residencies and fellowships are finding decreasing opportunities in true private practices, and increased offers to become someone’s employee. This means some of the anesthesia income will be shared with or siphoned off by other people.
Can young anesthesiologists do anything to reverse this trend? It depends. Private practice opportunities still exist in many geographic areas of the United States, if a new anesthesiologist is flexible about where he or she is willing to live. If you’re determined to stay in an overcrowded, underpaying marketplace, you may find nothing better than a salaried job at a modest income.
What is a modest income? Is $250,000 a year a modest income? That number sounds like a large income to most Americans. However if the doctor worked 60 hours per week and was awake all night performing anesthetics every fifth night, and if the collected fees for that individual’s anesthesia work that year totaled $750,000, then that individual was being paid significantly less than they earned.
How can you tell if your employer is paying you less than you earned? Find out what they are collecting per anesthesia unit of time, and do the math. Compare that number to what they are paying you. See my article on anesthesia billing as a reference for this.
Many private practice groups will survive. In the words of Charles Darwin, it will be survival of the fittest. Private practice groups will have to change and adapt to maximize their chances for survival. They will have to provide a higher level of service, and become more involved outside the operating room, in perioperative leadership, and in their local hospital politics and economics.
The anesthesia job market is part of the free marketplace in America, and Adam Smith’s invisible hand will drive individuals toward the best and highest paying opportunities. If you’re a young anesthesiologist, can you do anything to avoid the trend toward low salaried jobs? You can refuse to settle for poorly-paying jobs. Move to a marketplace that pays you well for your time. You may choose to not settle for a salary which is a mere fraction of what you are earning, especially if you are keeping patients alive at 3 a.m. while healthcare businessmen and stockholders are sleeping.
Medscape lists the best states for doctors to practice in. Flexibility in geography may yield a superior opportunity for you.
Medscape recently reported the average yearly income for anesthesiologists in the United States as $364,000. If your yearly income is $250,000 (this would be $114,000 under the average), then somewhere in the United States there are anesthesiologists with an income of $364,000 + $114,000 = $478,000, to maintain the average yearly income that Medscape reported.
When you input “private practice anesthesiologist” into Indeed.com, you’ll find multiple job offers. The private practice of anesthesia may be shrinking, but it’s far from gone.
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