Physician Career Options: Private Practice vs. Health Systems

By: Jackson Physician Search
August 17, 2023 by
MedGeo Ventures, Lindsay Thomas
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The past decade has seen a significant shift in the percentage of physicians in private practice versus those employed by a health system. According to data from Avalere and reported by the Primary Care Collaborative, 74% of physicians were employed by a hospital or health system in 2022. This figure was up from 69% the previous year, largely due to the accelerating trend of hospitals and health systems acquiring private practices. So what does this trend mean for physicians? Which scenario provides the better physician career option? 

For residents evaluating their physician career choices, it’s important to understand the differences and weigh the pros and cons of both against their specific needs. Many times, candidates apply to a specific job already knowing his or her preference for a private practice or health system. However, the candidate is sometimes open to both, and after a series of questions, it becomes clear that he or she may be better suited for one over the other. 

Below are some of the questions you should ask yourself to find the best fit. 

Are you business-minded? Do you see yourself as an entrepreneur?

If the idea of running a business feels like an exciting challenge, you will likely enjoy the partnership track at a private practice. Physician partners in private practice are involved in every aspect of the business. In addition to providing patient care, they must consider budgets, staffing, marketing, and more. As partners, physicians have a say in how the business is run, so if something isn’t working well or they have an idea to increase profitability, they have the potential authority to make a change and reap the benefits. That said, if the change does not have the desired effect, they will directly feel that impact as well. 

While it behooves every physician to have an understanding of the business of healthcare if the idea of running a business is an intimidating prospect and/or you would prefer to focus exclusively on patient care, hospital or health system employment may be a better fit for you. 

What are your immediate physician compensation needs? How important is loan repayment?

Physician compensation models can be complex, and it is important to look at the complete package in order to evaluate different offers fairly. When looking solely at starting salaries, hospitals and health systems typically come in higher, as they often have more capital than private practices. Whichever the setting, however, physicians are expected to offset their salaries with their own productivity. If a new physician fails to offset his or her expenses fully, the organization may expect payment for the difference. This is more common in a private practice setting, but it can happen in hospitals and health systems as well. 

Indeed, income in the early years may be higher with a hospital or health system, but earning potential is greater in the long term with a private practice. This is because, as a partner, your income is based on the group’s profits, and you (and your partners) have the power to grow the business in ways limited only by your own imagination. 

In the 2023 compensation report from Medscape, self-employed physicians reported an average income of approximately 30 thousand dollars higher than that reported by employed physicians. Still, hospitals and health systems may be more attractive to newer physicians due to higher starting salaries and bigger recruitment incentives. Hospitals also typically have more options for loan repayment, especially if the organization has non-profit status.

What kind of work-life balance do you want — now and in the future?

Some physicians feel work-life balance is more attainable in a hospital or health system setting where they can focus on clinical care and have fewer administrative responsibilities. There are also typically more physicians and other providers available to share call duty and provide coverage when taking time off. In a private practice, where physicians’ incomes are directly tied to revenue, physicians may be more motivated and incentivized to work as much as possible to increase revenue, which can have a negative impact on work-life balance

On the other hand, physicians working at a private practice may eventually have more flexibility than their employed peers. As they gain seniority, partners will have the freedom to set their own schedules and take as much time off as they desire — as long as they understand it will directly impact how much they earn.

How important is physician autonomy? 

Past research suggests physicians prioritize autonomy in their work. For example, in a 2022 Rural Physician Recruitment survey, autonomy was the aspect of an employer’s culture that physicians (both urban and rural) cared about most. Other studies on physician burnout suggest a lack of autonomy is one of the primary causes of rising burnout. 

As partners in private practices, physicians have more of a say over all aspects of how the business is run, whereas in a hospital or health system, physicians will always have another entity making policy decisions that may directly impact their compensation and/or how they deliver patient care. For physicians seeking their first jobs, the idea of someone else making those decisions can provide security, but this may change once they’ve gained some experience and industry knowledge. 

Certainly, there are pros and cons to consider in both private practice and health system employment. The security that comes with hospital employment is often attractive to physicians starting out in their careers. Still, it is not unusual for them to seek a change — typically after three to five years of employment. 

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