Financial pressures and uncertainty about the future of the American healthcare industry are changing the way independent physicians and other medical professionals run their practices, finds a survey by TD Bank (No. 39 on the DiversityInc Top 50 Companies for Diversity list). These concerns impact everything from the way a practice is established to technology investments and even retirement outlook.
According to TD Bank's survey of more than 340 small medical practices in the U.S., 39 percent of physicians purchased a partnership in an established practice or an existing practice, while 37 percent started it from scratch.
Another change: More women are becoming practice owners. While respondents have been in practice for an average of 16 years, 36 percent of women reported owning their practices for less than five years, while 47 percent of men have been in practice for more than 20 years.
When assessing the future, 50 percent of doctors surveyed either have or would consider purchasing, buying into, merging or selling their practice. Among these medical professionals, 73 percent expected to do so within the next four years. Why make such a change? Forty-six percent of respondents explained that it's simply too expensive to run a practice today.
"We are seeing a growing trend of more healthcare providers buying into practices with a partnership or purchasing an existing practice because they are seeking added financial security and well-established businesses," said Dan Croft, Head of Healthcare Practice Solutions, TD Bank. "The survey findings reflect a shift in the industry because of the rising cost of doing business — from technology to insurance."
Financial Trends and Practice Management Concerns
In general, medical practices are growing, with 43 percent of respondents expecting to increase revenue over the next two years. Of those surveyed, women (56 percent) and Millennials (75 percent) are most optimistic about expected revenue growth. The most popular methods for financing the needs of a practice — including new equipment, computers, practice management software, practice acquisitions and practice buy-ins — are lines of credit (41 percent) and cash (36 percent). While Millennials (53 percent) are most likely to prefer using a line of credit, Baby Boomers (40 percent) use cash to finance their needs and Gen Xers are more likely to use credit cards (31 percent).
When asked about investing in the next few years, medical practitioners noted the following as priority areas to which they anticipate committing capital spending:
- Buying or leasing new technology – 48 percent
- Hiring more staff – 33 percent
- Training and education – 26 percent
Among their current biggest challenges, physicians named receiving timely reimbursements from insurance providers (52 percent); managing overhead costs such as supplies and rent (51 percent); and keeping up with technology (35 percent). Generationally, Millennial medical practitioners stated one of their greatest concerns is staffing and hiring as they build their practices, while Baby Boomers named new technology (41 percent). Others are concerned about the approaching national elections, with 56 percent of medical professionals very or extremely concerned about the election's implications on the healthcare industry.
As with most U.S. workers, finances are dictating retirement decisions for doctors. Eighty-four percent of medical professionals under age 35 who were surveyed think they will retire by age 65, while 76 percent of doctors currently 55 years old or older believe they will have to retire after age 65. More specifically, 30 percent of physicians across all age groups report they will have to postpone their retirement to later than originally planned.
A majority (56 percent) of medical professionals expect partners or colleagues to take over the business when they retire, while 19 percent will sell their practice and 14 percent anticipate simply shutting their doors. Fifty-five percent of physicians also expect retirement to be a gradual transition during which they will cut back on hours. When asked about their financial future:
- Forty-nine percent of physicians report they are extremely or very financially prepared for retirement.
- Forty-eight percent are extremely or very confident that their practice sale, combined with their savings/ investments, will provide them with enough funds for retirement.
- Male (54 percent) practitioners are more confident than females (37 percent) when it comes to believing that they have enough cash to support their retirement years.
"It is understandable why many near-retirement age physicians plan to cut back on time in the office, but this is not the best strategy," Croft said. "Decreasing hours or patient load can negatively impact practice or partnership value, thereby affecting retirement plans. While most physicians said they are confident they will have enough money to retire, that's not always the reality, and often it is due to the fact that they made changes in their schedule or practice that derailed their plans."
TD Bank's survey was conducted among a nationally representative sample of 342 U.S.-based respondents consisting mainly of physicians (90 percent) including general practice/family medicine, internal medicine, pediatrics, OB/GYN and other specialties. The survey also gauged sentiments from other types of medical professionals (10 percent) including dentists, veterinarians and optometrists. Generations are defined as Millennials (ages 18-34), Gen X (ages 35-54) and Baby Boomers (ages 55 and older). The survey was hosted by MARU VCR&C and was conducted Aug. 7-12, 2016.