The former ideal work situation for an anesthesiologist was to become a partner in a private group of anesthesiologists with contracts at one or more hospitals or day surgery centers to provide anesthesia services. As anesthesiologists ran the group, partners optimized the clinical practice and business aspects. With higher payments for billing collected by the group directly, income was higher for the anesthesiologist in private groups. Likewise, benefits and time off were better.
However, as medicine has changed over the last two decades, private practice anesthesiologist groups are nearly gone. Those private groups that remain are unlikely to be around much longer. Why did private practice disappear for anesthesiologists? Reimbursement has decreased, and demand-driven compensation for anesthesiologists rose simultaneously. Private groups, which could not afford competitive compensation rates and needed to keep adequate staffing levels, asked hospital systems to give larger stipends to the group. Hospital systems failed to see the value these private groups brought and did not provide enough compensation. The contracts between the private groups and hospitals dissolved. Hospitals turned to the promises of private equity firms, like NAPA or USAP, to provide anesthesia coverage. Other hospitals chose to move to a hospital-employed anesthesiologist model. The corporate medicine model is here, but it doesn't have to be for us.
Hospital systems should have realized the level of value partners in a private group brought to their practice within the hospital. An anesthesiologist partner in a private group had patients and the business in mind, often working extensive hours secondary to the dedication a practicing partner granted. They considered both patient care and costs while sacrificing work-life balance with extreme hours. When these groups asked hospitalizes for a subsidy, hospital administrators vastly underestimated the cost efficiency of the private groups. After the private groups departed, the hospital system's cost of retaining anesthesia staffing skyrocketed.
Oddly, this change may be the best thing for anesthesiologists. If we let go of old expectations and evolve, we can adapt to the situation far better than private practice. First, let go of the need to be employed by anyone but yourself. Most of us think of being an employee as security. While you'll likely have regular work at the same place and generate a predictable income, you will make far less than anesthesiologists who are self-employed doing independent contractor (1099) work. I have spent the last two years as an employed anesthesiologist at a private equity firm surrounded by locum anesthesiologists, making an hourly rate over double my own. Most of our staff of physicians and CRNAs are independent contractors floating between assignments at various locations. The locum's certified nurse anesthetists were making a higher hourly rate than employed physician anesthesiologists at my location. I remained employed out of fear. The more I talked with our independent contractors, the more I realized how much I had to gain for making the exact change they had. The potential for higher pay and tax benefits is significant; the change offers control over my practice, financial security, and motivation.
For new graduates from residency, being employed by a national group or hospital system might make sense as you take a year or two to get on your feet financially and gain confidence in your practice. New graduates should avoid buy-ins or positions with lower salaries in lieu of a buy-in in any private group. The reason is simple. There is no equity in most private practice anesthesia groups outside of their tentative contracts, which the hospital system may opt to terminate. Ultimately, the life span of any surviving private group is likely short, and there is no reason to leave your money on the table. As the number of locums has surged, as has their pay, it's become more challenging for private groups to afford the staff they need, and many have opted to terminate their contracts.
Outside of new graduates, few anesthesiologists will benefit more from being employees than independent contractors (self-employed). The pay rate is far higher for locum anesthesiologists than for employed anesthesiologists. If you structure your business right, you will make even more than the higher hourly rate in tax savings. I'm my boss. I choose when and where I work. I can take a month off for extended vacation and every holiday. I can work far less and break even financially with my former position, work the same and make more, or work more and make even more. If I dislike the work environment, I don't schedule any more shifts at that location. Suppose I go through a locums company for my business contract for my anesthesia services. In that case, the locum's company will likely cover my malpractice with tail and travel expenses, including a local commute. They will also assist with licensing and credentials at various locations. I can combine work and travel opportunities.
I can set my rates for hourly reimbursement, overtime, and call pay. Remember that the locum's company recruiter doesn't necessarily have your best interest in mind, like any recruiter. I have found they often try to talk down my initial offer for rates for an assignment, and so far, when I kept to the higher rates, they have been accepted despite the recruiters' warnings. I have routinely found that I can get more per hour than the job description. Be bold and ask for fair compensation. Yes, another anesthesiologist may offer a lower rate, and the location may choose to pass on you for the assignment.
I don't sweat this. If another provider wants to work for less money, let them. You can only control what you set your rates to. Set base rates of pay for yourself for each practice environment based on how complicated and heavy the workloads may be. For example, you may set your base pay rate for a busy hospital environment to $400/h with $450 for overtime and in-house calls. At the same time, you make your base pay rate for a more manageable assignment at a day surgery center at $350/h. Remember to get minimum secured hours of pay per day. You don't want to be short on pay because they don't have enough work for you. You might ask for a guaranteed 10 hours at a hospital and 6-8 hours for a day surgery center.
As for the anesthesiologists trying to get an assignment over another by taking a lower pay rate, they should realize they are decreasing our compensation. Collectively, we set the expectation for our rates of pay. We do this with the rates we offer and accept. If positions for lower compensation, like $300-350 in a hospital environment, are passed up, those rates will increase. Attempting to lock in an assignment with a low pay rate is short-sided. The hospital system in need wants to pay you as little as possible for as much time as they can. The recruiter wants to make as much as possible by having you paid less while the hospital pays them more. Interestingly, several hospital systems I contacted would not hire me directly but insisted I go through a locums company. I was surprised as going through a locums company costs the system more. The hospital pays more, and I make less - a loose loss. The hassle of hiring and onboarding may be worth the extra cost to the system. The benefit to me has been having malpractice with tail insurance covered and assistance with licensing and credentialing from the locum's company.
Like setting our collective pay, we control the need for locum anesthesiologists. One of the fears I hear about transitioning to locum work is that the market will dry up. The more we accept lower-paying employed positions, the smaller the locum market will become, driving down our reimbursement. The more we pass on employed positions favoring an independent practice, the larger our market becomes, driving rates up. If our collective fear dominates, we will make the practice environment worse for ourselves.
What about my benefits? Yes, you'll have to pay for your benefits. Your business can pay for the premiums, which are a tax write-off. As everyone's benefit situation is different, I can only speak to some of them, but I will give you my specifics as an example. For my family of 4 with my former employer, I paid $1600 monthly for health insurance with a small offshoot company that offered poor coverage. I will now pay around $2300 monthly for a top PPO with much better coverage. Will I realize $700 more monthly to cover the additional cost? Yes, in the first 4 hours of work each month. If I consider the difference in the quality of health coverage, the difference is more negligible. I ran all the numbers through my typical type-A spreadsheets with every possible difference in cost versus income. I always came out ahead. As I don't fully know how to add the tax benefits, I didn't include them. So, I underestimated the benefit to myself and my family. But rest assured, I did include the additional cost of a CPA and tax planner in my estimates. As I hope to gain more time for myself and my family, I plan on outsourcing some of the work.
Won't I have to pay the employer's share of taxes? While I don't intend to delve into tax strategy, I want to clarify a few things as it scares physicians away from independent practice. The employer pays half of the social security tax, which is 6.2% up to a limit of the first $168,600 ($10,453 annually). The medicare tax rate is 2.9%, with an added 0.9% for income over $200,000 annually. If you're making over $200,000, the rate comes to 3.8%, so the employer half would be 1.9%. Employers pay state and federal unemployment taxes as well. These vary by state and business size. In addition, the federal amount depends on state contribution as well. While this is too complicated to be specific, let's give a generic example of the state of Illinois. The federal rate is 6% on the first $7,000 earned yearly ($42 annually). The highest rate in Illinois is 8.65% on the first $13,590 earned each year ($1,176 a year). If I make over $200,000 in Illinois as an employee of my business, I will pay a max of $11,671 plus 1.9% of my earnings more as the employer. If I weren't going to exceed this loss, I wouldn't be writing this. Remember, I noted my hourly rate would double (+50%). This increase covers the difference, but I didn't mention that my effective tax rate would also drop. As locum companies and private equity firms charge more for your work and pay you less, your company can do the same. Company expenses are tax deductible. Your effective tax rate decreases as you won't pay taxes on these deductions and only the W2 salary you generate for yourself, which will be less. I'm not a tax professional, and I recommend hiring one. Not only to help with yearly taxes but also with business tax planning.
What about the patients? We are not denying patient care by any means. We are offering to serve patients unchanged. When the hospital system or private equity firms took over the practice, they became responsible for staffing levels meeting patient needs within their system. Again, the responsibility of adequate staffing lies with the person collecting the billing. I can't tell you how many meetings I've been in or heard about where administrators try to use physician altruism to guilt them into accepting less than they deserve. Physicians are guilted and chastised for asking for fair compensation. Is this only about money to you? Do you care about the patients? Because we do have a strong sense of altruism, the ploy often works. The irony of this being said by administrators focused on the bottom line while taking an absorbent salary can't be stressed enough. If we want patients cared for, we need to fairly compensate those people caring for patients and increase the number of people caring for patients. The healthcare system has done much the opposite. The number of hospital administrators grew by 3,200% from 1975 to 2010. In comparison, the number of physicians rose by only 150%. Currently, there are ten administrators for every physician in our system. So much for focusing on patient care. Yes, I work to provide for my family, too, and no, I don't feel guilty about it. I don't feel guilty about demanding work-life balance anymore, either. What good is providing for my future when I don't have one?
Shouldn't the profits from anesthesia billing cover anesthesia staffing costs? Remember- the commodity being sold is your education, talents, and time- your work. We should also note that outside physicians and advanced providers in the healthcare system, every other employee is purely an expense or loss to the system. Unlike the rest, our work is the commodity; it generates revenue (billing), which the system collects. If the hospital wants to earn the total billing surrounding a surgery, the cost of appropriate staffing levels should be part of the equation. As reimbursement for anesthesia services declined, subsidizing anesthesia collection to provide staffing has become the norm. If you've ever had surgery, you know the bill for the surgeon and anesthesia services is minuscule compared to the bill from the hospital or surgery center.
I would not start or join a private group now. I value work-life balance, and the benefits of work-life balance in an independent practice far outweigh the financial benefits. Who would want the stress and hassle of running a private group anymore for lower pay than an independent practice? I've spoken with many former partners of private anesthesia groups who are more content as independent contractors. Private practice anesthesia groups aren't innocent in their demise. Their failure to adapt to change is partly to blame. New graduates have different expectations for work-life balance. Attitudes like I suffered, and so should you, drove new graduates to employed positions. Asking new graduates to take a financial loss to join a group with no equity in a dying market was not a bright move. I passed on multiple job offers like this over the past ten years. Not to mention markets like Chicago, where groups gained a reputation for taking advantage of new graduates by making them work extended hours for lower pay to prove their dedication enough to earn a position as a partner that was always an illusion. While no work environment is perfect, you can evolve your independent practice more than any prior work restrictions allowed.
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