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James W. Barber, MD

AAOS Now

Published 10/1/2014

Solo Practice: Not Dead Yet

A roundtable discussion with orthopaedists who “go it alone”

The future of the orthopaedic solo practitioner concerns Stuart J. Fischer, MD, a member of the AAOS Now editorial board who is himself in private practice in Summit, N.J. Recently, Dr. Fischer convened a virtual roundtable of the following private practitioners to discuss the issue:

  • James W. Barber, MD, who is in private practice at Southeastern Orthopaedics in Douglas, Ga.
  • Basil R. Besh, MD, a hand specialist in practice at the FORM Hand, Wrist & Elbow Institute in Fremont, Calif.
  • John Cherf, MD, MPH, MBA, current chair of the AAOS Practice Management Committee, who practices at the Chicago Institute of Orthopaedics
  • Thomas J. Grogan, MD, a pediatric orthopaedist and past chair of the AAOS Practice Management Committee, who practices in Los Angeles
  • Douglas Turgeon, MD, PA, who has an orthopaedic sports medicine practice in Dallas

Dr. Fischer: With all the coming changes in the healthcare environment, is solo practice still an option?

Dr. Barber: Yes, currently, and in the future. Of course, it may not be the “easiest” or most lucrative practice option, but as long as there are medically underserved populations, practice size will be variable.

Dr. Besh: Absolutely! There will always be trade-offs, but all in all, I see no scenario on the horizon where solo practice would NOT be an option, so long as the individual physician is willing to accept the trade-offs.

Dr. Grogan: I agree, although the actual application and effectiveness as an orthopaedic surgeon in solo practice will evolve. The key issue is being able to survive in a competitive environment by generating consistent revenue sources and controlling costs. The big advantage of being a solo physician is the ability to control your cost structure, particularly by taking a “lean-and-mean” approach to minimize the cost of seeing patients.

Dr. Cherf: Recent Academy census data indicated that the number of orthopaedic solo practitioners has declined over the past 4 years. I think this trend illustrates the pressure of sustaining a solo practice in the current healthcare environment, particularly with new government mandates and large integrated healthcare systems. However, solo practice continues to be a viable option in many markets—just not as easy as in the past. Solo practices with unique provider attributes can do well.

Dr. Turgeon: Solo practice is definitely still an option, although I think it is challenging, even for an established surgeon. I think it would be extremely difficult for a resident or fellow just coming out of training, especially in a large metropolitan area.

Dr. Fischer: Traditionally, many orthopaedists became solo practitioners when they left large groups, believing they could do better on their own. Do you still foresee this happening?

Dr. Grogan: I do. I often recommend that residents or fellows get into a practice setting—such as hospital employment or a large practice setting—that allows them to quickly gain significant experience. The reimbursement may not be as significant, but the experience will last a lifetime.

From that platform, I think it is very easy to derive a niche practice in solo practice. The question is sustainability and the ability to continue to contract to access patients. As collaboration agreements such as independent physician associations (IPAs) get more sophisticated, they may combine the advantages of being a lean, low-overhead practice with the ability to attract patients with a significant revenue source.

Dr. Barber: I believe that doctors who leave big groups will be less likely to go into solo practice and more likely to move to other groups or employed options.

Dr. Cherf: Once an orthopaedic surgeon becomes established in a market, it becomes easier to separate and go solo. This is often driven by the desire for more independence, autonomy, entrepreneurship, lifestyle issues, avoiding group politics and requirements, and better financial performance. This may continue to occur in the future. However, one of the big trade-offs of moving from a large group to solo practice is the loss of scale to integrate ancillary services into a practice. This is often a key revenue driver for large groups and a limited option for a solo practice.

Dr. Turgeon: I started with a large multispecialty group, went solo for 10 years, and then joined a midsize single-specialty orthopaedic group for 2 years. Now, I have been on my own again for the past 5½ years. I still believe that going solo makes it easier to adapt to changes, keep overhead down, and have the satisfaction of personal success, which is better for my personality.

Dr. Fischer: Right now, 18 percent of all Academy members are in solo practice. Do you think that will change?

Dr. Barber: I believe it will stabilize in the teens. Opportunities will continue for individuals in underserved areas or alternative practice models where only one orthopaedist is necessary or most cost effective.

Dr. Besh: My sense is that the number will decrease, but slowly, mostly due to the gradual retirement of physicians currently in solo practice and the influx of graduating physicians who tend to be less interested in the administrative and small business aspects of medicine.

Dr. Cherf: I also expect to see a continued slow decrease in the number of solo practitioners. However, recent changes in technology and exemption from government pay-for-performance mandates may actually make solo practice more attractive in the future.

Dr. Grogan: Most likely numbers will continue to decrease. The evolution has been away from solo practice toward either multispecialty groups or employed physicians. Access to patients is still critical to keep the solo practice model as a viable option in the future.

Dr. Fischer: Do solo practitioners tend to be generalists more than specialists as compared to group members?

Dr. Besh: Not necessarily. Certain specialties lend themselves to solo practice. In my case, hand surgery is sufficiently different in day-to-day practice from general orthopaedics that the economies of scale for me in a larger group were not as much as one might have thought.

Dr. Cherf: There are probably more generalists in rural areas. My feeling is that in more metropolitan areas, a solo practitioner often has to have some unique differentiator to make the practice sustainable. This is often specialization or providing care that is unique and not ubiquitous. Another option might be to focus on particular patient populations, such as concierge medicine, new regenerative medicine, workers compensation, or orthopaedic trauma.

Dr. Grogan: I think the key is developing a niche. That suggests that moving from generalist to specialist makes the most economic sense. If a solo practice can offer a product not available in the community, it can generate instant demand. As a pediatric subspecialist, I found that to be a very effective strategy.

Dr. Turgeon: I think it’s more likely for a solo fellow to be practicing general orthopaedics, maybe with a specialty interest. As a generalist, you are more likely to keep patients by handling a variety of their musculoskeletal problems. The scenario at the other end of the spectrum also makes sense—an expert in an extremely specialized field.

Dr. Fischer: What will it take to survive in solo practice in the next 5 years?

Dr. Barber: I think the three keys will be first, collaboration with others (including solo, small groups, IPAs, and organized medicine such as the AAOS or state medical society); second, improved data management of quality metrics (patient satisfaction) and practice finances; and third, availability.

Dr. Turgeon: I think solo practitioners can adapt more easily in a rapidly changing healthcare environment, but will need to develop income sources outside of direct patient care. Running an efficient office with lean overhead and effective, aggressive collection methods, especially up front, will be necessary because cash flow is king in the solo practice

Dr. Cherf: In most markets, the solo practitioner will need some type of a “big brother,” a consolidated enterprise in which the solo practitioner participates, such as a physician-hospital organization, an IPA, or a clinically integrated network. The larger enterprise may serve as a means of outsourcing back office and managerial activities, including credentialing, contracting, group purchasing, and compliance with and participation in government programs.

Solo and small practices may find a virtual model attractive. Cloud-based medical records and information technology that facilitates patient-based scheduling and payment may reduce some of the capital expenses of solo practices.

Dr. Grogan: Practices will need to be adaptable and flexible. The key advantage of solo practice is to keep costs down and minimize the actual cost of seeing patients. That being said, solos need to remain accessible to patients. Whether using a concierge model or contracting through a more collaborative IPA model will be something that only time and local circumstance will define.

Dr. Fischer: Will accountable care organizations and large group contracting make it harder to stay in solo practice?

Dr. Barber: I don’t think so. To survive, solo practices will form alliances or virtual practices and, if they serve a vital community, they will need local and regional advocacy.

Dr. Besh: Market leverage will always be an issue, but as the trend toward greater transparency in healthcare costs continues, those who have the highest reimbursement rates will encounter the greatest downward pricing pressure. We are already witnessing this with narrower networks that shut out high-cost providers.

James W. Barber, MD
Basil R. Besh, MD
John Cherf, MD, MPH, MBA
Stuart J. Fischer, MD
Thomas J. Grogan, MD
Douglas Turgeon, MD, PA

Dr. Cherf: All providers will need to have access to patients, and this may make it harder for the solo practitioner. It is easier to be excluded from large contracting arrangements and narrow networks if you are in solo practice.

Dr. Fischer: What are the hardest things a solo practitioner faces compared to a member of a group?

Dr. Besh: I would say camaraderie and coverage. This can be overcome to some degree by continuing to foster professional relationships with surrounding orthopaedic surgeons.

Dr. Cherf: Solo practitioners need to wear a lot of hats, to have multiple skills, and to perform nonclinical duties that can consume a fair amount of clinical time. Keeping up with all the changes and requirements can be overwhelming for the solo practitioner.

Dr. Grogan: Getting away is the biggest challenge. In a niche market, it is more difficult to leave the practice for a vacation or to attempt to slow down as you get older by having other doctors see patients.

Dr. Fischer: Why will it be harder to start a solo practice in the years ahead?

Dr. Barber: Data reporting requirements will make infrastructure more expensive, and most of the current software options are a fixed cost. Contracting may become harder if payers refuse to negotiate with smaller or solo practices

Dr. Besh: There will be more of a learning curve as healthcare delivery continues to become more complex.

Dr. Cherf: Developing a solo practice requires a significant amount of human and financial capital. However, I anticipate that information technology may make it easier for solo and small groups, creating markets for more virtual practices that are less reliant on scale.

Dr. Grogan: It mainly has to do with access to patients. It is easier to access patients on contracts, which in turn are based on cost and contracting ability. Narrow networks will make it harder for physicians to maintain contact with the patient base.

Dr. Turgeon: I think banks are tight these days and would see a loan to a solo practitioner as a poor risk. Costs and contracts would be hard to manage from scratch, unless the practice is in an underserved area, which would help bankroll the start-up costs.

Dr. Fischer: Are a solo practitioner’s yearly practice expenses greater or less than those of a group member?

Dr. Barber: A solo practice can be extremely frugal or lavish or anywhere in between, just as with a group practice. Only one doctor sets the low bar on expenditures. But per capita infrastructure can be higher because so much is fixed cost.

Dr. Besh: It depends on many factors, specialty being one of them. Larger groups can benefit from economies of scale while soloists benefit from potentially increased efficiency.

Dr. Cherf: Most solo practitioners probably have lower practice expenses and lower percent overhead than larger groups. However, larger groups can support ancillary services and many are very dependent on this revenue stream, which is an economic advantage today, but may be a significant risk in the future.

Dr. Grogan: The AAOS Practice Management Committee looked at this question. In groups of five or fewer physicians, the average cost per doctor was $25,000 per month; costs rose to $35,000 per month in groups with between five and 12 physicians, and to $45,000 per month in groups with more than 12 physicians. The larger groups tended to need more employees, which is a significant overhead cost. The cheapest overhead is a single doctor whose practice has just an administrator or an administrator and one other employee.

Dr. Fischer: What can a solo practitioner offer patients that a surgeon in a large group cannot?

Dr. Grogan: Consistency. I have seen more than 41,000 new patients in my practice—out of a local population of about 125,000 people. As patients get to know the practice, they refer other patients. The larger the patient base, the more patient referrals versus physician referrals. That referral base becomes the foundation of most successful solo practices.

Dr. Turgeon: I think one of the main things that my practice offers is a familiarity or intimacy that a reception area filled with hundreds of people can’t begin to match. I deliver individualized care in a more personal setting, with a more hands-on interest in patients.

Dr. Besh: I don’t believe that being in a solo practice has a direct effect on the doctor-patient relationship, but what a solo practitioner may lack in team deliberation, he or she often makes up for in being able to quickly and efficiently make decisions with respect to business and administrative affairs.

Dr. Cherf: I think many solo practitioners have smaller businesses that offer more control over their practice style and often create a less hectic clinical environment. Solo practitioners also tend to have a niche market that includes a narrower patient mix and narrower socioeconomic patient population. A specialized solo practice can be very efficient.

Dr. Fischer: Dr. Grogan, you’ve noted that some solo practitioners in small offices are able to trim their expenses and run a “lean machine.” How is this possible? How low (what percentage) can they bring their expenses?

Dr. Grogan: Each year, I develop an Excel spreadsheet for my practice based on the work Relative Value Unit (wRVU) for each procedure. This can be easily driven from the Academy’s CodeX product. From this spreadsheet, I can bring my overhead down to approximately 30 percent on an ongoing basis in terms of what it costs me for patients to provide patient care.

For larger groups, this is more difficult because they require more employees to control the group’s infrastructure. But some solo surgeons can have overhead expense ranging from 25 percent to 29 percent. I think that’s probably the lowest it can go, especially considering malpractice and base employee expenses.

However, I think that the cost per patient seen or cost per wRVU is even more important. In my practice, for example, taking my total overhead and dividing it by 7,500 patients a year shows that my cost to see a patient hovers around $70 a visit, regardless of the type of visit (preoperative, postoperative, or general). For every new patient, I generate $583. Those are the kinds of numbers that orthopaedic surgeons need to determine how efficient they can be to increase W-2 income and provide high quality service for patients.

Dr. Fischer: Dr. Barber, as a solo practitioner in a small community away from the resources of a big city, do you face problems in referring problem cases? Does it force you to become more adept at doing a wide range of trauma?

Dr. Barber: Yes and Yes. The geographic “healthcare gap” makes it harder for patients to see super-specialists. I don’t think it has much to do with solo vs. group practice, though; it’s more a question of patient resources, especially transportation. In rural south Georgia where I practice, I am be surrounded by colleagues in urban areas who are willing to take on tough cases. I only wish that my specialist colleagues were adequately reimbursed to provide telemedicine doctor-to-doctor consultations on problem cases. It would make a huge impact on rural health care if we could consult in this way more frequently.

Dr. Fischer: Dr. Besh, as a hand surgeon, you are one of those super-specialists. As such, are there advantages to being a solo practitioner?

Dr. Besh: Absolutely, specifically as it relates to efficiency and overhead. For example, something as simple as office space requirements can vary dramatically, particularly if in-office therapy in included in the mix. Same holds true for equipment and inventory requirements.

Dr. Fischer: Dr. Cherf, you practice in a large metropolitan area. Is it harder for a single practitioner to compete against big groups in that setting?

Dr. Cherf: Chicago is one of the most challenging orthopaedic markets in the country. With five academic medical centers and six orthopaedic training programs, Chicago is a training site for 4 percent of all physician orthopaedic residents and 4 percent of all osteopathic residents. There is no shortage of orthopaedic surgeons and it is an “uber”-competitive environment, which makes it particularly difficult for a solo practitioner.

I owe my survival as a solo practitioner to the following four opportunities:

  1. Initially being part of private specialty hospital. I was part of an orthopaedic neurologic specialty hospital that had a virtual orthopaedic department, similar to the Hospital for Special Surgery model. The specialty hospital attracted a unique segment of patients and made a solo practice a realistic option.
  2. Being involved in a large musculoskeletal independent physicians association (IPA). This IPA includes 146 musculoskeletal providers and is probably the largest musculoskeletal IPA in the country. This has offered tremendous support in terms of fellowship with other orthopaedic surgeons, sharing best practices (both clinically and operationally), and providing significant back-office operations such as credentialing, contracting, and group purchasing.
  3. Being a member of a hospital medical staff and its physician-hospital organization. This system has 12 hospitals, an advanced system of clinical integration, and an excellent population health management system. It is also very friendly to private practitioners.
  4. Good luck—sometimes you just happen to be in the right place at the right time.

Overall, orthopaedic surgeons who want to pursue a solo practice need to be aware of local healthcare trends, develop good relationships with other providers and systems, and be flexible and creative. A small practice can be nimble and adopt to change readily.

Bottom Line

  • Solo practice will remain an option for orthopaedic surgeons, although the number of solo practitioners may continue to decrease.
  • Challenges facing solo practitioners include the rapidly changing healthcare environment, capital costs, and data reporting requirements.
  • Rural and underserved populations may attract solo practitioners who are generalists; more urban areas may attract specialists with a unique market niche.
  • Although solo practices may not be able to take advantage of the economies of scale or the ancillary services that benefit larger groups, their overall expenses may be lower due to the need for fewer support staff.