Ask a doctor why he or she decided on a career in medicine, and you might hear a mix of reasons: a yearning to help people; a keen interest in science; desire for a role that commands respect. Maybe some will even admit to wanting a potentially lucrative career that is also prestigious.
One thing you probably won’t hear, though, is a longing for a management role in a $3 trillion industry—even though that is another way to describe what being a physician means today in the U.S. health care system.
Lack of appreciation for the business of medicine—and reluctance to develop business skills—can hold new doctors back, making it harder for them to reach their primary goals of providing excellent patient care and achieving enduring career success and financial security.
“It’s a travesty that physicians do not receive a business education,” says Maria Young Chandler, M.D., MBA, associate clinical professor of pediatrics and management, University of California, Irvine and chief medical officer of The Children’s Clinic, a six-site nonprofit health center in Long Beach, Calif. “Medicine is a business. Without business skills, physicians could find themselves swimming upstream.”
After as much as 10 years of post-graduate education, though, getting an MBA may not be appealing or feasible for many young physicians. The good news is, any physician can become more conscious of the business aspects of the health care field.
And that’s the first step to developing critical business skills like decision analysis, negotiating, networking, marketing and operations management that will help them avoid unnecessary career obstacles and thrive.
Business mindset vs. physician mindset
Perhaps the biggest obstacle for new physicians in navigating the business of medicine is their mindset. “Ironically, so many of us went into medicine precisely because we had no interest in business or technology,” observes Mary Ellen TimminsFinnell, M.D., a pediatrician with East Milton Pediatric Associates in Milton, Mass.
“But even salaried physicians need basic business skills.” Doctors also apply assumptions from their medical training to the business world—and can undermine their own goals as a result. “Many doctors assume that everyone they deal with looks at the world the way they do, with an eye on the greater good, and that they’ll always be treated fairly,” says George Garcia, M.D., an anesthesiologist with South Shore Anesthesia Associates, a 50-person anesthesia practice in Massachusetts.
A new physician’s mindset is influenced by years in an academic environment, with progress determined through testing for proficiency; by the code of ethics doctors share; and by analytical processes organized around patterns, homing in on a correct diagnosis. Business, on the other hand, requires a different set of critical-thinking skills, much more tolerance for ambiguity, and recognition that others may by driven by different motives.
Management decision-making 101: Evaluating job offers
With wide-open choices of geographic locations and clinical settings, career planning for new physicians would seem to be exciting and fun—a just reward after a long haul of study and residency work. But choosing a job is also a critical financial decision. And too often, physicians don’t evaluate job opportunities through a business lens, instead making choices based primarily on current creature comforts like location or base salary.
That lack of businesslike planning can undermine physicians’ careers and financial security down the road. “Too many young doctors we interview take a short-term view,” says Garcia. “They focus on a single variable, such as current salary, instead of considering the practice that might be best for them over the long haul.”
Garcia chose his current practice based largely on its culture—a choice he appreciates more fully a decade later. “Our practice is very democratic— all of our doctors are compensated based on workload. We don’t have resentments among overworked new physicians, and our older partners can tailor a schedule that meets their lifestyle preferences.”
Jack Valancy, a practice management consultant who specializes in evaluating physician employment contracts, validates that view. “Older doctors sometimes view new doctors as their retirement plan. While they may offer a high base salary to attract them, the practice’s compensation model may still favor the senior physicians.”
A higher salary may seem all but irresistible to doctors with high student debt loads. But these packages can come with conditions that make them less profitable over the long run than a more straightforward offer with a somewhat lower salary. And taking on more debt to buy into a practice or making a binding, long-term commitment may risk other financial downsides (for example, in the event a move is necessary because of a spouse’s career).
Culture and mindset play out in other ways, too—for example, technology. “If I were looking now for my first job, I would look for a practice that is already up to speed on technology, already using EHR,” says Alexandra Haessler, M.D., FACOG, a urogynecologist in private practice in San Francisco.
“Your practice will work much more effectively with hospitals and other practices, and just be much more efficient. Evaluate the community you’re considering on the same basis—a medical environment that’s pro-technology makes all interactions easier and less frustrating.” A practice that’s using EHR might also be more likely to use social media, email and text to keep in touch with patients—another sign of efficiency. What’s more, starting your career with fluency in technology could expand career options down the road.
Negotiating: Leveling the playing field
Of course, analyzing the content of job offers is just a first step toward getting the best possible offer. Getting the best range of choices also requires negotiating. Post-residency job hunting is many physicians’ first opportunity to try out their negotiating skills—although you wouldn’t know this from the passive approach some new doctors take.
A willingness to accept what’s offered—without negotiating—can be increasingly costly over a physician’s career. Employed physicians may leave money on the table when negotiating job packages, or settle for less favorable conditions. Physicians in private practice may miss numerous opportunities to earn more money or have more satisfactory terms when contracting with payers, employing staff, setting agreements with hospitals or securing major expense items like leases, technology and supplies.
“Physicians tend to want to make everyone happy, often at their own expense,” observes Garcia. “And they don’t assume that the other side is negotiating,” so they’re afraid to rock the boat. For example, many private practice physicians simply accept reimbursement rate schedules from their payers, without attempting to negotiate. While it is true that standard rates are frequently set for all providers in a market, it’s not always the case—and
even a small differential on an important billing code could mean thousands of dollars to a practice over a year’s time.
Similarly, physicians may not realize that data is available to help them negotiate staff compensation that is fair—even generous—but not excessive. By letting employees take the lead in negotiating instead of arming themselves with information, physicians can passively undermine their practices’ profitability.
Networking: An essential skill for career flexibility
Networking is a powerful tool for information gathering and decision-making—and, of course, it’s essential for career planning. But medical training means so many years on a prescribed path that many young doctors never developed the everyday habit of actively managing their personal networks.
Ironically, even the trend drawing many physicians to start their careers in larger health systems may inhibit doctors’ networking skills. Pouya Shafipour, M.D., a Los Angeles-based family physician who completed his residency at Kaiser Permanente in 2008, explains that “Kaiser was a wonderful place to work partly because of the diversity of events for physicians inside the system to meet and share ideas. But because we did so much networking within Kaiser, we tended to do very little outside the organization.”
Of course, networking with internal colleagues is essential for career development within the system—but it’s not enough. Maintaining ties outside your employer is critical to managing your career over the long term, so that you have flexibility to move geographically and into administration or out of a clinical setting altogether if that becomes a goal.
Marketing: It’s all about building relationships
Business literature these days is awash with advice on “managing your personal brand”—the idea being that, like it or not, every business interaction and every step of your career are a form of marketing.
Businesspeople accept this premise—understanding that your reputation among your peers, bosses and customers plays a huge role in your ability to generate business, complete tough assignments and move up the ladder. What’s more, politics are understood to be part of the equation. All in all, it’s better to be liked.
For physicians, though, the goal of being scientific, neutral and honest when making diagnoses can sometimes spill over unnecessarily (and unhelpfully) into other relationships. Garcia notes that this lack of appreciation for the importance of feelings can surface as far back as medical school. “I notice some med students don’t hesitate to say, ‘I have no interest in pediatrics,’ or ‘I can’t stand psychiatry’ when showing up for their rotations. They’re unintentionally insulting the physician who’s giving them something valuable—their knowledge and their time—instead of appearing grateful.”
The same challenge can carry over into physician referral and even doctor-patient relationships. Simple things like follow-up letters to primary care doctors are amazingly powerful in sustaining relationships—and maintaining referrals that are vital to a specialist practice’s revenue. Marketing your practice depends on these relationships, which in turn are aided by your physical location (proximity to hospitals, for example) and the relative supply of physicians in your specialty compared to the population.
“Our practice is close to Boston’s hospitals and to so many of our referral partners that we have a steady flow of new patients and even sometimes have to close our panels,” says TimminsFinnell. “But I know if we were less ideally situated, we’d need to invest much more time and money in marketing directly to patients—offering newborn classes in local libraries, for example.”
Revenue and expense management: Minding the store
Perhaps more than any other aspect of the business of medicine, the money side of the operation (revenues, expenses, cash flow and profitability) is challenging for most physicians as they start out. Some young physicians hope to avoid business issues altogether by joining a large medical system like
Kaiser or Mayo. These large organizations also often offer more predictable work schedules and shorter hours, attractive benefits like 401(k) plans, and
even sometimes job-sharing.
With their focus on primary care as the hub, a system like Kaiser can be especially rewarding for family practitioners, internists and pediatricians. However, despite the scale and division of labor that permit doctors to spend most of their time on medicine, these organizations are still businesses, and it’s essential that doctors realize that to manage their career progress.
“Taking a position with a large health system has many advantages, especially for young doctors with small children,” says Garcia. “But the flexibility that is so attractive to doctors also makes them more replaceable.” Finding ways to stand out among dozens—maybe hundreds—of doctors doing the same job is important to managing your career, especially in an environment in which doctors are an abundant resource.
Additionally, by avoiding business matters as “not my job,” doctors miss out on the opportunity to learn and advance within a large practice or health system. On the other hand, demonstrating an appreciation for the business side—whether simply by turning in charges on time, being diligent about documentation to support your coding, or appreciating the need to stay on schedule—will be recognized and valued.
For physicians in private practice, the first step to appreciating the business model is to recognize that the only revenue the practice generates is through their billings. In this respect, medical practices are like other professional services firms like advertising agencies, law firms and consultancies, but with a key twist: third party payers.
“Understanding coding and billing may be the single most important thing for new physicians in private practice,” says Haessler. “In large practices, under-coding can be almost invisible to the partners—and cost them thousands of dollars.” Unlike other professional services, where fees are agreed to with the customer upfront, in medicine, insurance companies decide how much they’ll pay for services provided to a patient.
So physicians’ understanding of how to document their services plays a huge role in how much they’re paid. What’s more, insurance companies have also impacted practice revenues inadvertently by shifting more of the responsibility to patients through copays and co-insurance. While theoretically doctors are clearly entitled to these payments, both physicians and staff often have difficulty asking for the money, instead allowing patients to be billed for the balances.
Any business person knows that this habit is tantamount to forgoing revenue because some percentage of balances billed will always need to be written off. Besides maximizing revenue, doctors must be vigilant about expenses, too. Staffing is the single biggest expense for most practices, and investing those compensation and benefits dollars wisely is key.
Cutting corners on staff to save money is a mistake too many physicians make. Every additional administrative task a doctor takes on cuts into time for revenue-generating patient visits. Economists call this concept “opportunity cost”—and businesspeople manage it by delegating non-revenue tasks to lower-cost employees wherever appropriate.
Should you get more training?
This article provides just a taste of some of the most important business skills physicians can develop. Much more can be gleaned by adopting a student mindset on the job and through the variety of useful books, publications and blogs exploring the business side of medicine.
Whether and how to dig deeper into more formal business study or even another degree depends on your longterm goals. Elizabeth Woodcock, MBA, FACMPE, practice management consultant and author of Mastering Patient Flow, says, “Much of the decision to get further training is
dependent on time and money. But it’s also dependent on interest—what do you want to do with the skills? If it’s to manage your business better, then perhaps a few courses at a community college or a preconference business program at your next specialty society meeting might be appropriate.
On the other hand, if it’s to become the CEO of a health system, then a course towards a master’s degree in business from a prestigious institution is in order.”
December 1, 2021
Laurie Morgan
