Private practice - a flawed business model?
August 13th, 2008 by Kyle Fleischmann, PT, MS, OCSHere is an interesting take from an economist looking at the “business model” of small health care practices.
For most small business owners, the productivity of each employee increases revenue. Whether the product is a widget or a hot-dog or computer software, the general concept of employee productivity is that employees increase revenue and the more revenue per employee the better. Thus as sales escalate to the point of needing another employee, the revenue from that person’s productivity more than covers his cost. Thus scaleable businesses typically have desirable business models.
In private practice medicine, revenue is dependent on the productivity of one person - the doctor. Hiring more employees does not increase his productivity. The only thing that can increase revenue is for the doctor to work harder and faster to see more patients or do more procedures. He is the rate-limiting step in the business model. This is the reason why your trips to the doctor’s office get shorter and shorter.
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Tags: business model, Economy, private practice
August 13th, 2008 at 8:46 pm
Doctors can increase their productivity with physician assistants and nurse practioners. I have seen high volume primary care, internal medicine, and even surgical practices increase productivity with the investment in high quality physician extenders.
August 25th, 2008 at 7:40 pm
True, true, true. It is difficult, if not impossible to leverage time as a physician. I do know of some urologists that do group vasectomy consults, and can see 10 or 20 patients in an hour.
HIPAA, contractual arrangements, et al make it very challenging.
Jessica’s comment is accurate, but ultimately any physician will get to a point where increased through-put is no longer an option. And what then?