How The Historical Origins of doctors as a Small business can provide a Path for Burnout Prevention
A doctor just a few years ago did not have to be reminded of the idea that they were a business. It was built into their mindset. Thus it was assumed that one would enter the marketplace after completing training and set up or join a small business known as a private practice. A physician was, by default, a small business person. The professional and personal autonomy built into operating a small healthcare business is nicely aligned with the DNA of most doctors. We like being in charge and are trained to be analytical decision-makers with an aptitude for continually learning new things. These all overlap with the skill set needed to be a successful small business person. But this Norman Rockwell picture of the past medical practice has quickly faded over the past few years and has been replaced by a more industrialized Henry Ford-like assembly line of health care. Your economic value and power are now being commoditized by large corporations who are eviscerating your autonomy.
Historical basis
The personal economic power of doctors has been well documented over the centuries. Historically physicians could earn income by teaching students or serving as public doctors. Ancient Greece and Rome had examples of healthcare institutions that provided payment for physicians and guaranteed treatment for the community. The Greeks and Roman civilizations often supported physicians within municipalities and framed their service as a public duty and calling. In particular, the Greek physician Hippocrates, often called the “father of medicine,” has influenced the ethical mindset of this long-standing tension between professionalism and business. The Hippocratic tradition, which is the most famous today due to the Hippocratic Oath, argued that the physician ought to prioritize treatment and not fees and that if a patient was suffering economic hardship, the physician ought to dispense with payment altogether:
“Consider carefully your patient’s superabundance or means. Sometimes give your services for nothing, calling to mind a previous benefaction or satisfaction. And if there is an opportunity of serving one who is a stranger in financial straits, give full assistance to all such. For where there is the love of man, there is the love of the art.”
This Hippocratic philosophy of how to blend medical business and the ethical duty to equally help the public has served as a cornerstone mindset for physicians through the subsequent thousands of years.
Throughout ancient and modern times in Western Civilization, doctors have had a long-standing tension regarding their professional obligations to service versus running a business. For example, hundreds of years ago, English physicians could not legally bill for their services. Instead, following the Roman practice, patients paid “honoraria” to be given voluntarily in connection to medical service.
The Us History
Ultimately, the progressive civic philosophy and legal rules that differentiated professions from businesses in Western Europe did not survive the trip to the American colonies. That being said, I think it’s helpful to pause here and consider the impact of the only physician to sign the declaration of independence, Dr. Benjamin Rush.
DR. Benjamin Rush
He was influential in many regards to not just the formation of our country but also how the business of medicine was viewed in the new world. Dr. Rush was an interesting combination of humanitarianism, social reform, and patriotism. Rush’s vision for his nation was that it must be a moral society, not just political power. After completing the best-available medical training at the University of Edinburgh, Rush immediately began to apply his knowledge to improving life for his fellow Americans by opening a practice in Philadelphia in 1769. Here, he became the first chemistry professor in America at 23, and his private medical practice focused almost exclusively on the poor.
“Be indulgent to the poor.” Those were the last words Benjamin Rush spoke to his son. This was an appropriate ethical code for a man who may have had the deepest altruistic streak of our nation’s founders.
This altruistic passion led Dr. Rush in 1786 to provide expertise and resources to open the Philadelphia Dispensary—the first free walk-in health clinic in the United States. An on-site apothecary compounded medicines of all sorts, which were given away at no charge along with the advice of the attending physicians. Rush did all of his work at the dispensary for free, even though the thousands of patients he cared for there led to a reduction in his private practice by a fourth. Rush’s model of this civic dispensary subsequently spread to other cities and for generations became the primary means of providing health care to the urban poor.
Thus, one can see how Dr. Rush married his ethical duty to those unable to pay for medical care with his business interests built around the diversity of his private practice, hospital practice, and chemistry professorship at the University of Pennsylvania. These diverse income streams were based on his understanding of his business power. They became the basis for a fantastic life in which he traveled the world, served as a Surgeon General during the Revolutionary War, and was the friend of the first three Presidents of the United States. Ultimately it provided the resources for him to full his enlightenment passions that led to founding organizations and a college which still exists more than 200 years later.
Under the direction of Dr. Rush and our other founding fathers, medical practitioners from the beginning in the US were viewed through business-law principles and were allowed to charge and collect fees based on the services they provided in addition to the consideration for a person’s ability to pay. Thus from the beginning, physicians in America did not fully follow the “public calling” principle and its associated honoria system. Rather they followed small business practices of the newly formed American capitalist system, which prioritized private ownership over government or institutional control. In conjunction with Hippocratic professional and ethical considerations, this later morphed into adopting a subjectively driven “sliding scale” medical services price model allowing a doctor to charge what they perceived the patient could afford. The remuneration could include a mixture of goods, services, or money. This sliding scale matrix allowed for the fusion of a doctor’s duty to serve the public and one’s interest in operating a business.
The Present
This historical journey affirms that your knowledge and expertise in providing medical services to patients has always had a built-in monetized value, which in the United States has long been viewed as a small private business. For years, the value of your services has been self-determined and influenced by the free market forces inter-connected to the medical business’s location.
This all changed with the arrival of private health insurance on the scene, primarily after WWII. This was further accelerated by the federal government’s version of health insurance in 1965 when Medicare and Medicaid were signed into law. Their arrival signaled the loss of control of physicians subjectively choosing prices in conjunction with the free market defining the value of their services. As these parties were empowered, they began to determine the value of a physician’s professional service.
In the present healthcare economy, the value of your services is nearly completely determined by 3rd parties, not by you.
YOU ARE A MEDICAL SMALL BUSINESS
Your professional services are valuable, and when they are informed by their historical roots in the US, they automatically make you a medical business, which is most commonly organized as a PC. You alone get to determine whether to unlock this business power for yourself or trade in its power to your corporate employer to unlock. In today’s world of medical employment, many physicians are unaware that they even possess this power as an earned asset.
Broadly speaking, you are part of a distinctive family of service professionals in many industries. These include lawyers, dentists, architects, accountants, financial advisers, and engineers. Each can offer customized, knowledge-based services to their clients within a business arrangement.
Unlike other businesses, professional service firms sell knowledge and expertise – not visible, physical products. Their products are generally intangible and are not amenable to economies of scale on the “cost of goods sold.” But their services do have value, and this, in turn, generates revenue for their business.
A PROFESSIONAL CORPORATION (PC)
Your medical professional services can be treated as a small business under the tax code. You are among the aforementioned professionals whose unique services allow you to form and operate a special type of entity called a professional corporation (PC). This is a special privilege to be able to form a corporation around yourself. It is a power that you have earned during your rigorous training as a medical professional, and thus you should carefully consider how it can be used to help you live your best life as a physician. Doctors don’t have to incorporate, and for several reasons, many of you are choosing not to incorporate in exchange for the simplicity of individual W-2 employment with a large corporate employer. And it turns out that this is a big mistake due to the downstream negative consequences that this often has on your personal and professional well-being. It is one of the major reasons we are in the midst of a burnout crisis.
I’ll have to admit that I can’t recall anyone in my first 15 years of practice explaining that I had the power to form a business around my personal professional services. I thought incorporation was only for those who wanted to go into private practice. I didn’t know that I was endowed with these small business powers that are common to a host of service professionals. . I suspect it is relatively new to many of you as well, since the concept of you forming an individual corporation is not covered by most medical schools, and the majority of residencies offer little guidance to their trainees about the business of medicine and individual medical corporations. As traditional employment has gained more momentum for doctors coming out of training, the mindset that professional incorporation is not needed has been tightly coupled with it. This assumption is incorrect, and I invite you to follow along with me as explore new and innovative ways to look at employment and incorporation that will enhance your well-being.
Look for my post next week to read part 2 of this introductory blog on professional corporations, where I’ll dig deeper into why your own professional corporation is a foundational component to a thriving personal and professional life as a doctor. I believe the past should inform your future.
