In this article we will be taking a quick look at what working at a large medical group vs. a smaller private medical practice means and how much a physician gets paid. We must start by saying that the actual pay a doctor makes at a private practice or large medical group depends very much on their individual circumstances and specialty, but here we present a general idea of where a doctor's pay comes from in a small and large medical group. 

We'll start by saying that most doctor's pay is based on reimbursement rates from insurance companies that a medical group receives minus the overhead cost that it takes to run a medical group. 

Large hospitals and medical groups across the country have a lot going for them: namely, they are able to secure higher reimbursement rates from insurance companies.

Why?

Because they have A LOT of doctors working for them. The more doctors they have working for them, the more leverage they have at the negotiating table with insurance companies, and the more clout they carry in the industry as a whole. 

So, as a practicing physician, it might seem advantageous to work with a large medical group that gets higher reimbursement rates from insurance companies. After all, that is what you are getting paid on, right?

This is true, but you must take into account the huge DISADVANTAGE of being a doctor working for a large medical group, and that is OVERHEAD! Overhead costs might take away a lot of that reimbursement rate, and in a large medical group overhead costs are often not as transparent as they might be in a smaller private group, so you might be taken advantage of and might be taking home less pay despite having a higher reimbursement rate. (See our video on this here.)  It is important to remember that quite a few large conglomerates may have a lot of hidden costs that are not very transparent.  

On the other hand, if you work at a smaller private practice, as an owner or employee, you are faced with a different set of challenges. 

Sure, you don't have the same bargaining power as a large hospital and might be bargaining for a smaller reimbursement rate from the same insurance company as compared to the large hospital, but what you have is CHOICE!

Let us explain:

As a private practice, you can be more agile when it comes to negotiating reimbursement contacts and rates. You can contract with multiple insurance plans, HMOs, and carriers, and are not bound to any one company. As a small organization, you really do not have to put all of your eggs in one basket. Large hospitals and medical groups, however, often have to commit to certain companies to get the highest reimbursement rates, which is why they don't have the same freedom as a smaller practice does. 

Much like having a diverse financial portfolio, not having to rely on any single insurance company for reimbursement not only gives small independent practices flexibility but also strength and success, because they are not tied to any one insurance company making it or breaking it.

But perhaps more importantly, this freedom of choice also gives practices one more much needed thing...PATIENTS! Being able to sign with a whole host of plans means that a small practice can be open to a lot more patients. So although a small practice might not be getting the absolute highest reimbursement rates, the sheer volume of patients coming in can still grow the business!

And finally, we must return to one more aspect of the reimbursement equation: OVERHEAD. Unlike with a large organization that has many hidden overhead costs, a small independent practice is unlikely to have any hidden or excessive overhead costs (like executive salary or group administration). So, as a doctor working for or owning a small practice, you can see and understand exactly where your pay is coming from based on reimbursement rates. Whether or not your reimbursement rate is higher than at a large group, you might have more take home pay than an equivalent doctor at a large group if you can reduce your overhead enough, which is more in your control as compared to being in a large group. 

So, do doctors make more money working for a small practice or a large medical group? As we said in the beginning, it depends! But we hope that this article helps to understand the difference between the two types of practices when it comes to a doctor's pay, and what doctors need to know about working in both types of practices.

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