Finances driving physicians out of solo practice

The business of medicine has doctors moving into large groups or employed situations, studies find.

By Bob Cook — Posted Sept. 10, 2007

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The "herding cats" metaphor long used to describe the difficulty of organizing physicians into large groups appears to be on its way out.

A survey released in August by the Center for Studying Health System Change found a marked increase in the percentage of doctors joining large, single-specialty groups, as well as entering employed situations. The survey, covering 1996 to 2005, also found a marked decrease in the percentage of physicians in solo or two-doctor practices, as well as a large drop in the percentage of doctors who have an ownership stake in their practices. The finding was especially apparent among older physicians.

The CSHSC did not ask physicians why they worked where they did. But the center and other observers say financial pressures and the desire for work-life balance is driving physicians to the relative security of an employed or large-group situation. That way, they can keep semi-regular hours, have less responsibility for the business side of medicine, and possibly gain greater leverage in contract talks with health plans.

Observers say this trend is not going away anytime soon and might well reflect a growing cultural change among physicians.

As further evidence, the national physician search firm Merritt, Hawkins & Associates revealed in July a large increase between 2006 and 2007 in the number of hospitals retaining the firm to find physicians to employ, while also showing a large decrease in solo practice spots to fill.

"Physicians are like anybody else -- they like their individual freedom, but they also like to feed their family," said William Jessee, MD, president and CEO of the Medical Group Management Assn. It released its own report in August showing physicians in most specialties had salaries that were not keeping up with inflation, even though productivity increased.

Family physician Eric Holmberg, MD, left an employed position in public health to open his own solo practice in Petaluma, Calif., 3½ years ago. Since then, five internists have shut down their practices, with no one replacing them. Dr. Holmberg, 56, says he might have to follow their lead.

He has tried for two years to hire a second physician, with no takers. The high cost of living and the low reimbursement in northern California, as well as the long hours and constant call, make solo practice difficult to maintain, he said. He said he might have to close shop and go back to being an employee or join a large group, even though he prefers staying in practice for himself and his patients.

"How long do I see this going? I'm not sure I can answer that easily," Dr. Holmberg said. "I go through declines in energy periodically when the workload gets to be excessive. I feel at those times that I will wait until my lease expires and call it quits. And then, two weeks later things may feel less weighty.

"I made a commitment to my family that something would be different by the end of this year. I'm not sure I have the confidence I might have felt earlier in the year."

The CSHSC found the proportion of one- and two-physician practices declined from 40.7% in 1996-97 to 32.5% in 2004-05. While the primary care rate of 36% was stable, the proportion of specialists in such practices fell to 26.1% from 38.1%. Meanwhile, the percentage of doctors in single-specialty groups of six to 50 doctors increased to 17.6% in 2004-05 from 13.1% in 1996-97. The center said those numbers reflect consolidation among specialists. Dermatology was the only specialty in which a majority (61.6%) remained in solo or two-doctor practices.

Financial pressure is driving these trends, said Joy H. Grossman, PhD, a CSHSC senior researcher and co-author of the report. In informal conversations with the doctors, many had the perception that a bigger practice could absolve them of the everyday business pressures and possibly help with reimbursement negotiations.

Dr. Grossman said the desire for greater work-life balance also has been brought up as a factor for fewer doctors in solo practice -- and not just younger doctors. During the period studied, physicians were less likely to have an ownership stake in their practices, down to 54.4% in 2004-05 from 61.6% in 1996-97. Physicians 40 and younger experienced a 3.5 percentage point decrease (28.3% to 24.8%). But doctors 51 and older represent the steepest decline: down 12.7 percentage points, from 51.5% in 1996-97 to 38.8% in 2004-05.

Daniel Wild, MD, 58, a Buffalo, N.Y., orthopedic surgeon, isn't reflected in those numbers. It was only in July he started working under the banner of the multispecialty Buffalo Medical Group after selling his solo practice.

Dr. Wild said his practice was financially sound. But he's planning to retire in about 10 years, so he was reluctant to make a major investment in electronic medical records. Also, he sold the building in which his practice was located, which left him facing relocation costs.

Most orthopedic surgeons in Buffalo have merged in large single-specialty groups, Dr. Wild said. But he opted for the multispecialty group, which hadn't had an orthopedic surgeon in about a decade. He said the structure allows the independence he had as a solo physician but without the business headaches.

"I'm glad not to be a landlord," he said. "I'm glad to not have to worry if the electricity goes out on my sign, or if the snowplow guy doesn't come."

Multispecialty practices actually declined (30.9% to 27.5%) over the period the center studied, which Dr. Grossman attributed to changing financial incentives.

In 1996-97, it was thought the multispecialty model might win out because of the HMO gatekeeper model. But the model waned as patients moved to more open PPO networks, and many of the groups formed during that time broke up.

Many of the primary care physicians in those groups moved to solo or small practices and stayed there, as reflected in the overall lack of decline in those numbers, the center said.

However, there are signs primary care doctors are increasingly having to question their future in solo practice. Merritt Hawkins' survey of its clients' job-search requests found the number of positions based in hospitals nearly doubled from 2006 to 2007, from 654 to 1,297. Meanwhile, the number of requests to fill solo slots and partnerships were nearly halved.

Merritt Hawkins spokesman Phil Miller said these numbers also reflect physicians' preferences.

"The first wave [in the mid-1990s] was selling the doctors on being employees. You remember the whole herding cats thing," Miller said.

"Today, you have a lot of doctors, a lot of them specialists, who actually are coming to the hospital and saying, 'I'm sick of dealing with malpractice, I'm sick of fighting for reimbursement, I'm sick of dealing with a fractious staff -- just hire me.' "

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Hospital recruitment soaring

[download pdf]

A survey released in July by the national search firm Merritt, Hawkins & Associates finds a marked increase in recruiting by hospitals, much of it at the expense of smaller groups. The firm says it's not just places that employ physicians looking for doctors -- it's also doctors seeking work at places that employ physicians. The findings show trends highlighted in a Center for Studying Health System Change survey covering 1996-2005 are not abating.

Source: Merritt, Hawkins & Associates 14th annual review of search and consulting assignments conducted on behalf of its own clients

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Where physicians are heading

More physicians are joining larger, single-specialty groups or other salaried settings.


Practice setting 1996-97 2004-05
1-2 physicians 40.7% 32.5%
3-5 physicians 12.2% 9.8%
6-50 physicians 15.9% 21.8%
Single-specialty, 6-50 physicians 13.1% 17.6%
Multispecialty 30.9% 27.5%
Other* 31.2% 36.0%

* Includes physicians employed by medical schools, HMOs, hospitals (including office-based practices), community health centers, freestanding clinics and other settings, and independent contractors.

Source: Center for Studying Health System ChangeTelephone survey of 6,600 physicians (2004-05) and 12,000 physicians (1996-97). The sample was drawn from the American Medical Association and the American Osteopathic Assns. master files and included active, nonfederal, office- and hospital-based physicians who spent at least 20 hours a week in direct patient care.

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External links

Center for Studying Health System Change report on physician practice patterns (link)

"2007 Review of Physician and CRNA Recruiting Incentives," Merritt, Hawkins & Associate, in pdf (link)

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