That model works well for professional services (eg. lawyers, accountants, consultants) because require very little capital. Everything from the office they work in, to the computers they type on can be leased. The same can't be said for hospitals, which cost hundreds of millions to build and equip. How are you going to raise all that capital from only the doctors? They're rich, but not that rich. Moreover, the payback on said investment is on the order of decades. A doctor late in their career has the most to invest, but they're also nearing retirement. What are you going to do with their shares? Sell them to newly graduated doctors who are hundreds of thousands in debt? Let them keep them, at which point they turn into quasi-investors?
There were a number of physician owned hospitals. Here's one compiled list [0] circa 2013. ACA seems to have limited growth of these hospitals [1]. My view with a local flavor of this in Indianapolis (St.V Heart Center) was pretty positive and matches with the WSJ articles assertion. When doctors feel in control and view the hospital as a reflection of their own community - holistically the entire operation embodies and reflects that from the doctors to the nurses to the staff themselves. Similar to how a small-town practice reflects the values of the doctor who runs it and depends on its reputation. Some of these hospitals have been sold off and I've heard nurses and doctors lament of the better times when they felt more autonomy when the doctors made the decisions based on shaping a hospital that they'd like to be admitted to rather than the vision from an MBA.
"Specialty physician-owned hospitals focused on cardiology and cardiac surgery were found to deliver higher-quality care than nonprofit hospitals, with lower rates of hospital readmission or mortality for high-risk surgery. Physician-owned specialty hospitals for orthopedic procedures, such as hip and knee replacements, offered lower costs and higher quality than nonprofit counterparts."
That’s not true. There was a doctor owned clinic in Seattle (The Polyclinic) with multiple locations across the city. A few years ago it was purchased by Optum (United Healthcare), and the standard of care has fallen through the floor.
…and sadly the doctors have been fleeing too, all my doctors have left. Their replacements aren’t bad, but not to the same top notch level of care. The Polyclinic was honestly off the charts excellent, and now it’s just “fine”. In a few more years who knows. The alternatives are unfortunately not better.
1) There is a big difference between a hospital and medical practice, 2) this is a solved problem as it relates to other professional service firm (law firms, investment banks (back in the day)).
When people are invited to become partners, usually they needed to write a check, but also buy-in over a number of years using a percentage of their earnings, as well as the firm potentially providing financing to buy their partnership interest. On retirement, partners were bought out (in many cases, getting paid out over a time until they were fully bought out)
>When people are invited to become partners, usually they needed to write a check, but also buy-in over a number of years using a percentage of their earnings, as well as the firm potentially providing financing to buy their partnership interest
This doesn't address any of the main problem I brought up, which is that hospitals are capital intensive. "Writing a check" is easy to do when there isn't much capital tied up in the business in the first place, but what do you do when the hospital costs $100M to build and there are 100 doctors? I can't see how the numbers would work out using the methods you described.
See my point 1) medical practices <> hospitals 2) there aren’t many de novo hospitals, so the start from scratch example is not that relevant, but for fun, in your example you borrow $50m and and 25 of the doctors (the partners) pony up $2m (not a crazy amount given that average doctor pay is $300-$500k and these 25 would systems only be in the top quartile and later career
