Editor’s Note: Here is a valuable “must read” for anyone in orthopaedic practice.
“I was a member of the perfect private practice.” The partners meshed nicely, the support staff was stable, we had a strong hold on the community and a valued mentor of mine had endorsed the group.
After 5-6 years, similar private practice groups began to band together in networks and “supergroups” were formed. This collaboration allowed more leverage in negotiating contracts with insurance companies and access to enhanced ancillary services including various therapies and outpatient surgery centers. We were each allowed to keep our practice name and felt we had maintained our identity despite the organizational change.
The leadership of the supergroup may have been “shady” in his dealings and not fully transparent about the agreements he was making on our behalf. Our unique practice name was later removed, and all groups were branded under the same title. Eventually, we were told that to make it financially, we “needed another partner.” Our network was, therefore, “placed on the market.”
Then came the pandemic which made the economic conditions worse for all medical practices. We were approached by a private equity firm from another part of the country known for purchasing orthopaedic practices. They presented us with “the best smoke and mirrors show around.” Each partner was to be paid a sum up front with the understanding that management fees, also called “scrapes” would be assessed each month. 25% would be taken off the top of our salaries for 5 years. We were collectively expected to meet a “floor” of production monthly. Despite this, were told to expect that we would have “income repair” within two years, meaning that our old salaries would be restored. If we left the group prior to three years, we would be penalized financially. What we hadn’t all realized was that we had just signed up for “indentured servitude.” The leader of our old network of practices was promoted and we never saw him again.
We slowly experienced loss of control in our practice life. Calls from patients were sent to a central call center, a new EMR was introduced, and patient visits were limited to 10 minutes.
To our credit, my group’s strong work ethic remained the same, but the effort was not uniform among all the others. And yet, we were all held to a collective “floor” of production each month. If we did not meet this goal, we were all penalized financially. Our hard work was helping to subsidize some of the other less ambitious surgeons. We started “cranking more” and worked 10 – 12-hour days. Our support staff did the same and stayed on in allegiance to us.
Eventually, we started to lose patients to other groups because it was so difficult to get in to see us. We started giving out our personal cell phone numbers to special patients. We found it difficult to pay our vendors for injectables and other needs unique to our practice. We even had insufficient funds for the annual holiday party for our staff. Eventually, we asked the parent company if they could help us? They said “No.”
To date, four of the seven original surgeons in our private practice have resigned, me included. In response, we received no acknowledgement from the management. I have been destroyed financially and am still determining my next move. I would like to work 10 more years doing some form of orthopaedics.
So, here is what I have learned from these experiences:
- Diversify your financial plan and use a financial planner. Don’t assume your physician’s salary will be enough to weather unanticipated storms.
- Research and learn the business end of orthopaedic practice: overhead, reimbursement, billings versus collections, etc.
- DO NOT MAKE A DEAL WITH A PRIVATE EQUITY FIRM UNDER ANY CIRCUMSTANCES!
- Advocate for yourself. Make a change if necessary. Don’t live like a hamster on a wheel.
- My orthopaedic skill set is still useful inside and outside of the OR.