Code Red: Two Economists Examine the U.S. Healthcare System

March 3, 2013

Physician Entrepreneurs

Filed under: Uncategorized — David Dranove and Craig Garthwaite (from Oct 11, 2013) @ 5:51 pm

I have been taking a vacation from blogging as I try to get through a very busy academic quarter. But my last blog, “My Son the Electrician” elicited a lot of comments and I have always wanted to follow up. And today I see that the Chicago Sun Times has generously quoted me, in particular noting how I liken physicians to entrepreneurs. Lest anyone get the wrong impression, let me briefly explain what I mean.

Like entrepreneurs, physicians launch their careers by making large investments – up to ten years of post-graduate training. Such investments do not come with a guarantee. Entrepreneurial physicians – those who own their own practices or work in small partnerships, must build their practices and maintain relationships with other physicians. All successful physicians, whether entrepreneurs or employees, enjoy personally and professional satisfying careers and comfortable, sometimes more than comfortable, incomes. But only physicians entrepreneurs have ultimate responsibility for their practices and their patients. This is what defines entrepreneurs – risk takers who assume full responsibility for their successes and failures. I have no doubt that with that added responsibility comes harder work and greater professional fulfillment.

The era of the physician entrepreneur may be coming to a close. For any number of reasons – the costs of maintaining a practice, uncertainty about future market conditions, or a waning desire for the long hours and administrative tasks that come with entrepreneurship – most new physicians are opting for employment at large hospital systems and multispecialty medical groups. As employees they will continue to care for patients and save lives, but they will no longer have ultimate responsibility for their successes or failures. The physician-patient relationship cannot help but evolve, and not necessarily for the better.

My wife saw the Sun Times article today and reminded me that she has recently experienced just what I have been writing about. After a long search, she had finally found a primary care physician whom she liked very much. Last month, that PCP, who is affiliated with a large local hospital system, informed her patients that she was moving her office to be closer to the parent hospital. I am sure this makes business sense for the hospital system, but it means a 30 minute commute for my wife and for many other patients. The PCP will have to rebuild her practice. Had she owned her own practice, had she been an entrepreneur, I am sure she would put her heart and soul into the effort. But who would blame this PCP/employee if she lets her hospital system build her practice for her? Unfortunately for my wife and many others, the hospital system does not have a heart or soul. That PCPs’ relationships with her patients is bound to change.

So you see, I have nothing but the highest regard for physician-entrepreneurs. After all, the iconic Marcus Welby, MD was an entrepreneur, and no physician, fictional or real, had a bigger heart or more compassionate soul. As our healthcare system moves ahead, let us mark the passing of the physician-entrepreneur as a signal moment, one when the physician-patient relationship that members of my generation came to know and cherish, headed into uncharted waters.


  1. There are also the physician-entrepreneurs highlighted by Atul Gawande in his piece (demand inducing diagnostic entrepreneurs). It seems to me there is a positive and negative connotation (as you have pointed out). It would be profitable to call out those highlighted by Gawande in order to make room for what you advocate.

    Comment by erik — March 3, 2013 @ 5:57 pm

    • Erik,

      Yes, doctors do respond to incentives, and the incentives are changing.

      BTW, my dissertation (completed in 1983) was about the stuff that Gawande wrote about. And I was building off of research done by others in the 60s and 70s. Indeed, the Committee on the Cost of Medical Care commented on this in 1932. What we must understand as we move forward is that entrepreneurship has one set of incentives and employment another. At the same time, physicians are professionals whose desires to serve their patients often transcend those incentives. It will be exciting to see if new organizational forms, even some that we have not yet imagined, will be able to harness incentives and professionalism for unambiguously positive change.

      Comment by dranove — March 3, 2013 @ 6:46 pm

  2. Davd
    You lost me.

    Having watched my dad build and own his own practice, I witnessed the sweat equity poured into his office. I also watched how employees, leaks, overhead, etc., distracted him.

    I now work for a hospital system and concentrate on patient care. My preference, but I just direct towards clinical activity.

    Innumerable times, when I speak to my colleagues who still own, offline they will convey ordering habits reflecting the realities of running an office (overhead again). I have heard the same approach to practice so often the conveyance has gone beyond anecdote. Others in my position will likely hear and reflect similarly on the oft heard refrain: “I got an office to run”

    I get your point and understand, but you seem to view focusing on care without the shackles of entrepreneurship as bad. The other side of the fence also not a terrible place to be, and may even be good for patients. Dont know if data exists for outcomes or patient/doc satisfaction in both settings–maybe for docs changing venues–but would be a heck of an interesting query.


    Comment by Brad F — March 3, 2013 @ 6:25 pm

    • Brad,

      Points well taken. Entrepreneurship has its downside, for sure. What you highlight is that the job is changing, often in positive ways. It will be interesting to track those changes over a generation, when we have physicians whose parents never heard of Marcus Welby.


      Comment by dranove — March 3, 2013 @ 6:38 pm

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