Physician Entrepreneurs

I have been taking a vacation from blogging as I try to get through a very busy academic quarter. But my last blog, “My Son the Electrician” elicited a lot of comments and I have always wanted to follow up. And today I see that the Chicago Sun Times has generously quoted me, in particular noting how I liken physicians to entrepreneurs. Lest anyone get the wrong impression, let me briefly explain what I mean.

Like entrepreneurs, physicians launch their careers by making large investments – up to ten years of post-graduate training. Such investments do not come with a guarantee. Entrepreneurial physicians – those who own their own practices or work in small partnerships, must build their practices and maintain relationships with other physicians. All successful physicians, whether entrepreneurs or employees, enjoy personally and professional satisfying careers and comfortable, sometimes more than comfortable, incomes. But only physicians entrepreneurs have ultimate responsibility for their practices and their patients.

This is what defines entrepreneurs – risk takers who assume full responsibility for their successes and failures. I have no doubt that with that added responsibility comes harder work and greater professional fulfillment.

The era of the physician entrepreneur may be coming to a close. For any number of reasons – the costs of maintaining a practice, uncertainty about future market conditions, or a waning desire for the long hours and administrative tasks that come with entrepreneurship – most new physicians are opting for employment at large hospital systems and multispecialty medical groups. As employees they will continue to care for patients and save lives, but they will no longer have ultimate responsibility for their successes or failures. The physician-patient relationship cannot help but evolve, and not necessarily for the better.

My wife saw the Sun Times article today and reminded me that she has recently experienced just what I have been writing about. After a long search, she had finally found a primary care physician whom she liked very much. Last month, that PCP, who is affiliated with a large local hospital system, informed her patients that she was moving her office to be closer to the parent hospital. I am sure this makes business sense for the hospital system, but it means a 30 minute commute for my wife and for many other patients. The PCP will have to rebuild her practice. Had she owned her own practice, had she been an entrepreneur, I am sure she would put her heart and soul into the effort. But who would blame this PCP/employee if she lets her hospital system build her practice for her? Unfortunately for my wife and many others, the hospital system does not have a heart or soul. That PCPs’ relationships with her patients is bound to change.

So you see, I have nothing but the highest regard for physician-entrepreneurs. After all, the iconic Marcus Welby, MD was an entrepreneur, and no physician, fictional or real, had a bigger heart or more compassionate soul. As our healthcare system moves ahead, let us mark the passing of the physician-entrepreneur as a signal moment, one when the physician-patient relationship that members of my generation came to know and cherish, headed into uncharted waters.

David Dranove, PhD, is the Walter McNerney Distinguished Professor of Health Industry Management at Northwestern University’s Kellogg Graduate School of Management, where he is also Professor of Management and Strategy and Director of the Health Enterprise Management Program. He has published over 80 research articles and book chapters and written five books, including “The Economic Evolution of American Healthcare and Code Red.” This post first appeared at Code Red.

5 replies »

  1. The era of the physician entrepreneur is *changing,* not ending. It is no longer profitable for primary care physicians to start and run small private practices like physician entrepreneurs used to do. Now physician entrepreneurs build new models of healthcare delivery, develop new technologies and drugs, consult with industry, and advise financial institutions in medically-related investment matters. It’s silly for people to whine that the old model isn’t going to be practical as healthcare changes. Successful entrepreneurs are the same kind of people that they ever were – those who are able to adapt to change and to use the turbulence to their advantage.

  2. I found this above article is quite impressive and provide every bit of details about a physician. Most of the physicians are liable to make their career in the hospital industry and serve better health care service to the people but in case of being a entrepreneur I must say that physician must be became a better entrepreneur just because they got the ability to deliver proper medical care and now days hospital industries are makes more and more profit.

  3. Not sure about this, David. As Peter Drucker told us in Innovation and Entrepreneurship (a far better book that the Innovator’s Prescription), not all small businesspeople are entrepreneurs. Even in the heyday of the late 1980’s or 1990’s , in the fifteen or so physician communities I worked in, shopkeepers outnumbered true entrepreneurs perhaps twenty to one.

    Per David, the era of the physician as shopkeeper may be drawing to a close (or not). Certainly if you’re 32, and carrying $250 thousand in debt already, and want to start a family and buy a home, etc., it’s kind of hard to see a clear path thru meaningful use and “accountable” care to a viable future.

    I’d want to pay down those debts before making a lifetime practice choice, and that is precisely what young people are doing (exchanging 35 hrs a week for hospital based salaried employment). Having said this, we have new shops opening weekly, including one chronicled in this site- Dr. Rob Lamberts- in the “direct pay” space.

    Meanwhile, hospitals are losing a fortune absorbing all the young physicians’ operating risk. ($212k a doc in 2010 according to MGMA). Their docs are almost 40% less productive than docs in “real” physician groups (e.g. physician owned group practices without “Dad” around to pay the bills).

    How many of them will have the staying power to create viable physician enterprises out of the collections of solo practices they are operating is anyone’s guess. Some larger wannabe IDN’s are losing nine figures a year doing this, and it remains to be seen how much sustainable leverage they are creating. They are certainly not saving society money; they are charging as much as 80% more for physician services than if their docs were in private (e.g. non-subsidized) practice. These “IDN’s” are really involuntary midwives of a very expensive generational transition in medicine. How many young docs will survive the wave of contract renewals and pay cuts that is looming remains to be seen.

    At the same time, however, I see a significant number of young physician entrepreneurs, who, per Drucker, want to scale up a significant innovation and create a new business. Perhaps a third of the students in Wharton’s remarkable MBA program, where I occasionally lecture, are docs. They don’t want to work for someone else; they want to build businesses they can eventually sell to someone for a lot of money. They crackle with impatience and energy.

    I’ve met some really impressive young physician entrepreneurs and actually invested with one of them. Cruise some websites: http://www.teladoc.com/, http://www.icumedicine.com, http://www.sherpaa.com, http://www.par8o.com. I wouldn’t be playing “Taps” just yet for the physician entrepreneur just yet. There’s a lot more going on out there than most people realize.

  4. As a partner in a single hospital ED group of 31+ years and a partner is a free-standing urgent care clinic for the last 15 years I can virtually guarantee that new physician-owned practices will likely never arise again.

    In the last year the hospital has bought the practices of our urologists and the general surgeons. Rumors are that one of the OB practices is going to the dark side as well as ENT. No one is going to bring their own money to the game. There would be no return either ON the money or OF the money.

    Our strongest internal medicine practices are oncology and nephrology. Cardiology from the system likely to devour my hospital are coming twice a week to do angioplasties that do not require the heart big center.

    Our overhead in both practices has been driven to the moon by the mindless drive towards EHR and centralization of everything, all in the name of insuring everyone. Productivity has been crushed. The hospital is more dangerous than ever before.

    I pray I live to see ObamaCare crush itself under its own weight.