I fully understand why choosing to be an employed physician is the preferred model for the majority of doctors, including over 90% of recent residency graduates.
Employment is turn-key, guaranteed income, and often laced with signing incentives.
Employed Physician Pain
I have been an employed physician for over 20 years. Sooner or later most employed physicians come to the realization that the ease and security of the position has a painful backside that includes losing professional and personal control over your life.
This pain can leave physicians in a position to consider making a change that helps ease the burden. That Y in the road occurred for me 10 years ago, as I teetered on the edge of burnout. There were seven in our highly successful group at that time, and we all went different directions as a result of employed physician burnout issues.
Summary of Options
The following is a summary of the options I considered at that time, and are the same options available to you:
1. Leave medicine altogether
Your identity does not have to be defined by your education. Choose something that gives you meaning and purpose. If medicine is unfulfilling, you don’t have to stay in it.
If you are unsure, take a sabbatical from medicine. Step away for a season, and do some personal inventory to reflect on what you are passionate about, and what your ideal world would look like.
With your education and degree as a physician, you have many options.
Don’t let income and lifestyle preferences force you to live miserably. Nor let the guilt of “not using your degree” impair you from pursuing your passions.
2. Migrate to Private Practice
You will maximize control of your professional life the most with this transition, especially if you open your own practice.
One of my close friends and fellow physicians in our practice chose to leave the group, during the same Y in the road. He landed in industrial medicine, but has now transitioned to his own Direct Primary Care private practice. He loves it.
But one must be mindful this transition requires the most time, energy, and resources of any of the 5 options.
3. Change Jobs
Find a greener pasture that promises to have offer you a more benevolent employer, complete with more professional autonomy. When our group broke up, a few of the doctors chose this route. Ultimately my peers felt trust was broken with management, and typically when this bedrock element is fractured, it’s hard to recover with the same employer.
Moving on was best for both physician and employer.
Depending on where you live, this could require a stress filled household move as well. Don’t minimize or monetize the price of this change in your household. The change may be best for you professionally, but it may come at a significant personal cost to the members of your home.
4. Become A Medical Contractor
You can box in your work life, and create space for personal interests by moving to shift work for contracted services. There are a host of short and long term options for this type of work depending on your specialty, but the most well-known option is specialty-specific locum tenens positions.
Many acute care hospitals offer a wide range of contracted service positions for the myriad of medical services provided at their facility. Transitioning from an employee to a contractor can provide a needed infusion of autonomy.
Two members of my group chose to go this route. They took jobs in industrial medicine that allowed them to work Monday through Friday 9 am-4 pm, no call, no weekends or holidays, slow pace, and no messing with insurances.
Most contracted doctors are self-employed, but some work as members of a group organized to provide contracted medical services.
5. Employment Lite
This is a version of contracted professional services. It is technically a PC-PSA contract
Visually a standard employment contract looks like this.
In this model you receive a W-2 from your employer controls almost everything except the dollars that land in your household after they filter through your benefit plans and taxes.
In this model you receive a W-2 from your own Professional Corporation (PC) while your PC receives a 1099 from your employer. You have now gained greater control over your personal and professional life. Your dollars are filtered strategically through your business and household so that the benefit plan and tax strategies are maximized to your individual needs. Additionally this provides the optimal business structure for adding professional side hustles to your PC’s professional services contracts.
This is where I migrated to and I love it.
Employed Physician Blind Spot
Although it is lesser-known, I believe it to be a great fit for many physicians who prefer the safe harbor of employment.
Most physicians don’t know about it for a couple of reasons:[the_ad id=”471″]
It is a hybrid of options 1, 2,3, & 4. Thus it is a bit more complex and works best under the guidance of experienced agency.
Many healthcare employers are unfamiliar with it and therefore don’t offer it in their standard boilerplate contract menu. As you probably know, creativity in contracting for physician employers is often considered too risky due to federal compliance issues.
Why I Love “Employment Lite” as the best option for regaining personal and professional control
1. It allows you to keep your current job, and not have to move or change employers.
2. You increase your professional opportunities and personal benefits far beyond the rigid structure of standard employment.
You form your own Professional Corporation business in order to contract your professional services through what is called a PSA
Your PC is paid by your employer typically in a productivity model, or salary.
Your own PC pays you a salary
Your own PC controls and provides your highly individualized benefit package.
3. You are not responsible for the operation of the medical practice in most cases, although this can vary based on the contractual arrangements.
4. Through the PC, your professional and personal cash flow becomes co-mingled in order to maximize your net worth.
5. You can outsource the business management of your PC to an agency of your choice for services that include (I would recommend this in order to simplify things):
Benefit plan creation and management
Tax, accounting, payroll, and book-keeping
Retirement and investment management
Contract formation and negotiation
Legal counsel and compliance for the business
6. You dramatically increase your retained income under this business structure due to cash flow management. Without doing any more work for your employer, your net annual income typically increases by $50,000 or more.
Visually Employment Lite looks like this
I urge you to make a change before the burdens of physician employment send you down the path of burnout. There are many options available to you, and employment lite might be the logical pivot to make as you seek to regain professional and personal autonomy.
I have been an employed physician for over 20 years. Having started out in private practice, I made the change in order to simplify my life. At the time, I had two small children and my wife was fighting breast cancer. Focusing on taking care of patients, and collecting a benefit-loaded paycheck every two weeks was a quick and easy way to reduce complexity in my life.
It was a great choice, and I still work for the same hospital employer. They are my preferred organization to align within my community.
As physicians, we get to choose the healthcare team jersey we want to wear. In contrast to the medical school and residency match process, our lives as attending physicians are marked by the professional freedom to move about the world with little restriction.
Honeymoon Is Over
However, nearly 10 years ago, progressive employment and healthcare economy changes began to intrude in my idyllic primary care world.
The aggressive interjection of 3rd parties into medicine led to the erosion of control over my personal and professional worlds. There is a mesmerizing process that unfolds as the goalposts are gradually moved imperceptively by management. Most of us acquiesce for the good of the team, convincing ourselves that each step is the new normal. Professional growth and development seem to demand this adaptability. We tend to put our heads down and simply work harder.
The Slow Fade
We are conditioned to this mentality in our training. Adapt, work harder, and trust the process of professional development.
Sadly, for many physicians there is a slow fade associated with this process. We experience and accept an increasing loss of clinical autonomy, the fatigue of working hard every day, and the disempowering awareness that others control us.
We conform dutifully, collect our paychecks, and focus our attention on personal pleasures outside of medicine. Areas that we can control and which often provide meaning. This allows us to escape the pressures of medicine. But over time, even our personal life can become a victim to the time thief of medicine. Working at home after finishing patients at the clinic has become normative to too many physicians (thank you EMR’s).
We dream of regaining our freedom from this form of indentured servanthood.
Loss of Control
For me the last straw came when I was unilaterally asked to take a pay cut through a corporate contract restructuring process that did not take into account my individuality and fair market value as a physician. I was asked to sign or find a new job.
I believe many employed physicians can identify with feeling a loss of professional and personal autonomy which necessitates a need to make a change. Odds are either you or your spouse has thought it or said it.
Misery and Conversations
With the recent economic downturn, many physicians are having these thoughts and conversations in their homes.
But the thought of job change just seems too massive to undertake, so most of us shrink back into employed physician zombie-land believing that there are no good options.
Instead many choose to focus on the weekends, vacations, and time out of the clinic. You might even dream about retirement, rationalizing that your current high income is worth the misery. It seems to be a fair exchange for when you walk away from medicine and are set free to do what YOU want, when YOU want.
I believe physicians are meant for more than this sad compromise.
Looking for Solutions
Based on my personal experience, I believe you do have freedom restoring options available now, but you are simply unaware of them.
Thankfully when I hit this wall, I met with healthcare consultants to consider all my possibilities. They helped me to see beyond what I knew and opened the door to unseen opportunities.
The following is a summary of the options we discussed, and are the same options available to you:
1. Leave medicine altogether
This is a radical option, but provides a clean break for you.
2. Migrate to Private Practice
This option provides the maximum control over your professional world, but is becoming a shrinking option in a sea of 3rd parties who control healthcare.
3. Change Jobs
Finding a new employer who is better for your life is always an option due to the increasing physician shortage.
4. Become A Medical Contractor
Contracted physician work usually providers satisfying personal and professional boundaries that reduce the tension between home and work.
5. Employment Lite
This is a version of contracted professional services. In essence, you stay in your current position but switch out contractual terms to more favorably provide you personal and professional autonomy.
Employment Lite is where I migrated to and I love it.
Visually it looks like this illustration. It is called a Professional Services Agreement (PSA), but is known as an Employment Lite arrangement. It involves you forming your own Professional Corporation (PC).
Although it is lesser-known, I believe it to be a great fit for many physicians who prefer the safe harbor of employment.
It allowed me to do the following, and I suggest you consider it for the same reasons:
1. No job change
I did not have to move, nor change my team jersey.
2. Invisible Transition
My patients, staff, hospital, and peers were unaware of the transition, it was invisible to all except administration.
3. Restoration
It restored autonomy to my professional and personal life.
4. More Dollars
Without having to work harder or work more hours, the new structure increased my retained income and increased my retirement funding.
5. Professional Support[the_ad id=”471″]
Outsourcing the work to an experienced agency was a wise move. I paid a comprehensive professional team to organize, create, and support the needed structure on my behalf. Building a structure to maximize my professional and personal worlds simultaneously led to unexpected positive synergy. Having a professional team to negotiate and support the transition during the conversations with my employer’s legal department added credibility and power as well.
6. Simplicity
I simplified the ongoing management of my new work-home structure through an agency that took care of it all elements. No more need for separate legal, accounting, bank, insurance, investment, retirement sources. Now it was all in one location. Every team member worked in unison on my behalf.
If you are an employed physician who is tired of being controlled, I encourage you to consider these options but especially consider employment lite.
I have pursued the SBA PPP because I am a physician small business that is organized as a PC, and I am part of the legion of American small businesses that have been impacted by the COVID-19 crisis.
Aren’t Physician’s Making Money In A Pandemic?
The average citizen assumes that a medical pandemic has resulted in an income boost for physicians because healthcare is in the news all the time.
Of course, they are wrong because the majority of us are not located in surge regions, nor are we in service lines connected to COVID-19. Thus, most of us have seen significant reductions in our income the past few months, including 1 in 5 having our employer reduce our pay.
For private practice physicians, this has led to a host of short-term interventions in their struggle to keep their business afloat. The SBA PPP is a helpful bridge for many to help their business to survive. Not only does it help the physician owner get paid, but it helps them pay the staff. This is a critical piece connected to retaining staff, who can easily find other jobs in a very competitive environment for healthcare workers. Staff retention is a huge challenge in physician practices.
For example, my primary nurse has chosen to take a furlough from the practice to work at an extended care facility that has offered her a large financial incentive. This includes leading the development of their COVID-19 unit for nearly $10,000/month. It’s hard to compete with that, and I suspect I may never get her back.
For employed or specialty contracted physicians, the PPP is of no help to them, as those funds go to their employer, the company that generates their paycheck. Even with this government support, many physician employers are slashing salaries and compensation due to massive corporate losses from the moratorium on elective, non-emergency healthcare.
PC’s Are Unique Small Businesses
For me, as I outlined in my last post, I have an employment lite agreement with my PC that has insulated me from most of the challenges that private practice and employed physicians face in regard to the business of medicine during the pandemic.
Due to my unique structure as a small corporation under the pseudonym “Country Doc MD, PC”, I am eligible for PPP funds. This is because my own company writes my paycheck each month. It employs me, and my wife who serves as our bookkeeper. Like most PCs, it is a lean company. This mirrors most small businesses whose employees often originate from within their personal households.
Do I Want A Bailout?
My initial response to this government bailout program was one of passivity for three reasons:
Because I am a small business with less than a million dollars in revenue annually, I wasn’t sure of the amount of money involved would be worth the process.
Speaking of process, I figured the process of gathering data and information for proof of the need for a government program would be too cumbersome
Personally and corporately, I was financially secure enough really not need the loan.
But, as I saw reports of large corporations around the country going after these funds that were framed as forgivable loans, I realized that it would be foolish to turn my back on it.
Civic Duty
After all it seemed like my civic duty to acquire the money that our government wanted to rapidly re-infuse into the economy. So I decided to check into it further.
SimpliMD Team
[the_ad id=”471″]Fortunately, my corporate accounting and legal team called SimpliMD was already working on it behind the scenes, and in essence said “sign here” and they would get the SBA PPP loan documents to the bank for funding. Wow, now that is worth every dime of my fixed fee structure for this dynamic team at KDU who leads my business and fiduciary operations. I didn’t even look at the application that closely, I just did what my team told me to do, and trusted their wisdom. I love that about having a trusted professional team to guide my enterprise month after month.
It kind of reminded me of how I operate with my primary care office team, I depend on them to round up and complete the various forms needed for DME, Home Health, Transitional Care, etc..and I just “sign here”. Beautiful! I trust them to do the work, especially the busy work, and simply sign where needed.
The Traffic Jam At the Bank
As some of you know, the banks and lending institutions ended up being thrust into the drama. They were unprepared and overwhelmed by the loan application process from so many small businesses.
The banks sorted themselves out into 4 categories in regards to helping small businesses:
For a minority of banks, the bank as a whole AND their commercial banking staff went above and beyond working with clients, started early, stayed late, and nailed it. Everyone in, everyone good.
Others decided it was too hard, and too much work, so they had their IT department create a web-portal and effectively said, “Do it yourself, and best of luck”
Yet others had applications come in, and elected to cherry-pick which of those clients (all who had long-standing relationships with them) they would put in first. Not who got their clean application in first, but who they “decided” they should put in first.
The large banks like CHASE and BofA all did portals, and the process for the masses was slow as expected.
With my application pending, I heard reports that the SBA PPP loan fund had dried up, especially as numerous large corporations took huge chunks of it. Now that’s pretty frustrating when Ruth’s Chris was able to steal funds intended for me!
Denied
I was notified the next day in an email from my bank that my application was not processed in time, and therefore was not funded.
It left me wondering whether I was a victim of large corporate raiders of the fund, or if my bank someone viewed me with less value, thus putting at the bottom of their stack.
Funded
But the good news is that congress rallied, and appropriated more money, and my application got processed and funded.
Although I have been honest, it didn’t happen until I emailed the bank and asked them to check on the status of my application. After getting an immediate “let me check on that” response, I then got an email to say that it was being it was funded. Surprisingly, that same day they sent me the closing documents to sign.
It leaves me wondering what would have happened if I had not called?
The Loan
So I am taking the $22,500 PPP loan for my PC. It is a modest amount that I know I can easily pay back, but I plan to comply with whatever pathway is necessary to make it forgivable.
My team also warned me that these forgivable loans will likely get taxed as the IRS seeks to recoup more revenue through the process. This makes it feel like laundered money will be used to refill the treasury. Congress is seeking to over-ride this Treasury interlude and hopefully will succeed.
Small Business Support
I do think that this stimulus package will prove to be a wise investment in the small businesses of America as long as both the IRS and the large corporate raiders can keep their hands out of it.
For my fellow physician-owned small businesses, I hope you are able to gain access to this program as well.
Most physician employees receive W-2’s from their employer and have NO PROTECTION OF THEIR PAYCHECK under the congressional CARES Act. These funds were created for small businesses, with some controversy on size requirements, to keep their employees working and paid.
The majority of employed physicians have either seen their pay reduced, or have been asked to voluntarily reduce it as a good corporate citizen. In my physician network it was a simple email request to employed physicians:
However, I am a W-2 employee, and the SBA Paycheck Protection Program has been helpful. You might ask, how can that be???
Let’s start with the understanding that I own my healthcare company under the pseudonym of “Country Doc MD, PC”.
Employment Lite
“Country Doc MD, PC” is contracted with our local physician network to provide family practice with obstetrics medical care to our community and receives an annual 1099 for the Professional Services Agreement (PSA) otherwise known as an “employment lite” agreement.
This “employment lite” agreement allows the physician network to maintain control and alignment of my professional services, and in exchange, I gain control of my income flow, tax strategies, and benefit plans just to name a few.
Like most PSA’s, “Country Doc MD, PC” is paid based upon the fair market value RVUs that are generated by my workload on a monthly basis. It’s that simple in my PSA, I have no other responsibilities for the practice, employees, billings, collections, etc.
I am paid a fair market W-2 annual salary by “Country Doc MD, PC” for the medical work provided.
This is a diagram of “Employment Lite” or a PSA
My wife and I are the only two employees of the PC, as she provides the book-keeping for “Country Doc MD, PC.” The PC structure allows for income flow control that adds levels of tax strategies and retirement benefits for our household that are not available in the typical employed physician W-2 arrangement, nor in the typical contracted physician 1099 arrangement.
The Secret Sauce
There is a secret sauce involved in organizing this business structure that leads to significant retained income and significant increases in retirement savings. Of course, it’s all within the boundaries of the tax code.
The PC-PSA structure has provided a level of insulation for me from the economic undulations associated with COVID-19
Unlike my private practice friends, who have several employees (including themself) depending on the business to stay afloat, I have no pressures like this to manage.
Unlike my physician network employer, who is managing the tension of reduced revenue in connection with complex staffing decisions associated with running a primary care clinic, I don’t have to worry about coming up with the solutions.
While my employer looks to voluntarily, or involuntarily cut physician pay, I am out of this loop.
Protection From Productivity Losses
For better or worse, my PC is paid for the work I do, and it’s just that simple. The translation is that my company will likely see a 25% dip in the “Country Doc MD, PC” income over the next few months as the RVU’s go down. But my employee salary has been set at a much lower number than the corporation earns, thus most reductions in corporate income will not negatively impact my monthly pay.
Note here, although it is counterintuitive, the lower W-2 salary in this secret sauce actually leads to greater retained income than standard employment contracts.
Let me say that again, due to my business structure, my productivity losses due to COVID-19 will not negatively affect my employment salary.
No Hand Wringing
This is why am I not wringing my hands over the healthcare economic downturn from COVID-19?
I have chosen “employment lite” for the very reason that I don’t want to worry about all elements of practice management associated with running a primary care clinic, including the profits and losses associated. √
The only employees to manage are myself and my wife, and we have organized our professional and personal financial structure to weather this storm. √
Here Are Some Other Reasons Not To Wring My Hands
I Am Financially Independent
I have no pressure to earn a certain amount of money per month in order to pay my bills. The biggest element that propelled me to Financial Independence, was switching from standard physician employment to a PC-PSA model. This transition was worth a million dollars, or more, to my net worth. Modest living, some financial literacy, and having a great financial advisor-planner have also helped my family get to this wonderful place of freedom.
Passive Income
My wife and I knew that we would want to have passive income to supplement our retirement income that was limited to ERISA caps as an employed physician. Many physicians falsely believe maxing out their employer-sponsored retirement programs will lead to enough to retire on. Since most physicians are used to living on a higher monthly income than ERISA accounts for, employer-sponsored programs will typically leave the physician well short of their goal.
We began to build passive income channels through real estate and construction business ownership as a strategy to augment my employer-sponsored programs. I made my share of mistakes in this realm, especially with angel investments, but I have managed to organize it into an integrated portfolio that has led to building our long-term net worth. Net worth is the most important number to keep in mind.
The two most valuable decisions that I made to help increase net worth and retirement funds were both linked to my transition to a PC-PSA
I purchased a medical office building, negotiated to move my practice to that location, and began leasing to my employer. Currently the building is paid off, and this provides nearly $10,000 per month in income. With multiple providers in the building and a thriving practice, it is likely to continue as a leased medical office building even after I retire. The monthly revenue from the building and the value of the asset makes it a double win.
By forming a professional corporation with my wife and me as the sole employees, we are able to significantly broaden and deepen the benefit plans that are individualized to our needs, and this is especially the case with retirement funding. We are now putting away 4x more in retirement the amount than we could with a traditional physician employment contract.
No Debt
Literally right as COVID-19 hit the US, we made our last banknote payment of any type, it was on the medical office building. We owe no-one any amount of money. That feels really good, as all of our real estate and business ventures are fully paid for. This component especially creates a sense of peace and stability in regards to any physician income changes that could occur associated with COVID-19, or any other economic crisis. Regardless of how little or big my monthly paycheck is, it literally is the icing on our financial cake.
Personal Finances and A Support Team
We have always created and followed an annual budget, sought to live frugally, enjoyed the good life associated with a physician income, gave to charity with an increasing percentage every year, and worked with a fee-only financial planner-advisor who supported us every step of our professional and personal journey.
We really turned the corner though when we put together a financial-business team that included a financial planner-retirement-wealth manager along with an accountant and an attorney. When we all sat in a room together and worked as a team, the outcome was magical. It led to the formation of my PC, the PC-PSA agreement, and separate business development and marketing company that supports the PC.
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In fact, I became so convinced that my personal and professional journey is within the wheelhouse of thousands of physicians around the country, that I helped create a company to make it simple, yet individualized for each physician. You too, can have a physician-led team that provides a full accounting, legal, business, and benefit plan team that works together on your behalf, all at a fixed fee that has over a 300% ROI. Check out SimpliMD if you want to know more.
I Qualify For The SBA Paycheck Protection Program
So, even though I am a W-2 employee, my company “Country Doc MD, PC” does qualify for the SBA PPP. And under the direction of my support team, I applied for an SBA PPP loan.
Check-in with me later this week with my next blog post to walk through that experience together.
I admit it, my wife and I are very frugal and we have taught our children to be the same. One place this shows up is with beverages when we eat out. Having a family of 7, the quickest way to add $25 to a periodic restaurant experience is to order drinks of any kind. So we did what any good frugal family does, we ordered water, it was free.
But on those very special occasions when we busted out the “get whatever you want” offer, it was special to order a soda. But what was even more special was a “free refill”. When that straw slurped to the bottom of the cup, it was exhilarating to know that we could get more. In essence, the cup was bottomless.
Bottomless anything creates a sense of indulgence, freedom, and security. We often ignore the normal boundaries that guard against overdoing it or the mental signals of self-control that provide healthy limits. Certainly running out of the bottomless product, rarely crosses our mind. Self-regulation is typically the limiting factor.
Physicians have become conditioned to a bottomless supply of patients, and the downstream income associated with those patient visits. Employed and contracted physicians, in particular, seem to expect their employer to serve up the multitude of patients on a silver platter. After all, isn’t that why you were hired and given such a sizable contract?
Cracks in the Wall
But healthcare economics doesn’t always work like this, even though healthcare is considered relatively recession-proof. The growing populations of patient healthcare needs, coupled with a widening physician shortage reinforce the idea that physician-patient micro-economics are unaffected by most geopolitical forces.
Physicians have discovered employers can’t always deliver on bottomless supplies of patients. Yes, COVID-19 has uncovered this reality, but the tension preceded the pandemic.
Patient Volume
The patients may not always be there as promised. The forces that drive patients to your practice no longer include just hanging a sign or putting your name on a door. Healthcare is complex, and even great doctors can find them-self in a struggling practice depending on insurance alignments, market share competition, and the effectiveness of your employer’s marketing department.
Economic Challenges
Your employer could have economic problems that trickle down to you in the employment pool. It’s remarkable how many employers hire robustly during a good fiscal year, only to tighten the screws the next year when the pendulum swings back the other direction. Just like any responsible corporation, this often leads to re-organizing and re-structuring service lines.
As a primary care doctor, I realize that we are rarely given much organizational capital since we are typically a non-strategic service line. It’s the specialist who gathers all of this attention as big money makers, and depending on the year, the star of the show will vary.
Primary care is typically a money loser among the service lines, and therefore, is considered to have a poor ROI with capital investment. In fact, it tends to be a necessary loser so that others in the system can be winners. Most corporations have stripped all of the profitable components in primary care offices and centralized them somewhere else in the enterprise. Ultimately, it’s the primary care market share that we call “patients”, but are labeled corporately as “populations”, that get pushed through the system. This leads to downstream income, which proves the primary care worth. Primary care doctors are front-line influencers who have been stripped of their clinic profitability, for the benefit of the system. Never forget this when you sit at those monthly or quarterly physician network meetings and they flash on the screen how much money you are losing. It used to confound me as I personalized being a loser, but now I have learned to accept having a big “L” slapped on my forehead. It’s for the good of the enterprise.
Contracts
Employment contracts based upon guaranteed salaries, or productivity formulas, typically do accomplish their desired purpose. You show up to work, perform as an excellent physician, and collect a predictable income and benefits. This works well if the flow of patients is indeed bottomless, and if your employer does their duty to build and support your practice.
But as many have recently discovered, the flow of patients is not always bottomless. Thus your productivity-based pay can drop, even precipitously in a pandemic.
Additionally, your contract can be unilaterally breached, and your income is NOT guaranteed. Many have learned this unfortunate truth during the COVID-19 crisis. Too many physicians blindly sign their employment contracts, myopically focused on the salary, and ignore all the other critical details. It’s those details that are often slanted towards your employer, and they smartly pull it forward at times like this. I strongly encourage you to always hire an experienced healthcare attorney to review your contract.
Administrator Turnover and Promises
The administrator who hired you will eventually leave the organization, as they all have very limited lifespans. Their replacement doesn’t know you, your value, or the unwritten understandings in your contract. In fact, they might not even want to get to know you, or they may have a new program that is much different than the understanding you had with their predecessor.
Bottom line, you have to prove your worth all over again and re-gain the relational and corporate capital associated with being favorably viewed by the layers of administrators that have oversight over your practice. Your value to your employer is not bottomless, in fact, it has an expiration date that follows the lifespan of your direct report administrator.
You Are A Faceless Line Item
The hard truth is that you are just a line on a spreadsheet in a massive healthcare enterprise with hundreds of lines on innumerable spreadsheets.
It’s not uncommon to find out your support structure and resourcing for your clinical services is much weaker than you were promised when you were recruited. Staffing hours, number of support staff, and equipment all can be frozen due to budget issues, even though you were assured to receive them. I especially have seen this play out when a physician is recruited in one budget cycle only to start practice in a different corporate budget cycle. This happened to my new family practice partner who did some additional training in OB ultrasound with the plan to do it in our office. Those ultrasound machines are expensive, so its addition to our office has been delayed for a year. Not good in the context of keeping one’s skills sharp! In these situations, you suddenly find you are competing in a different pool of money with new preferred capital competitors, and administrators with new agendas who have moved on from your little world. So, although you expect the promised bottomless support to help you and your practice succeed, the support can turn out to be lacking. In fact, your practice support could be very short-lived. Timing is everything.
Quality of Life
Your quality of life in your work community is not bottomless either. Although you did your homework on learning about the community, and you listened to the recruiter tell you about the community’s strengths, it is very difficult to understand community life prior to immersing in it. In order to reduce the risk of this happening, it is no surprise that less than 5% of new residency graduates will look for jobs in communities of less than 25,000 people. Living in a rural community myself, I am very aware of this truth as we travel the long road of recruitment for any service line. No doubt that larger communities offer a greater sense of bottomless lifestyle and social circle choices. But there have been many disillusioned doctors and their spouses who sign up to work somewhere, only to find out that quality of life outside of medicine is impaired by their geography.
Today’s doctors look for bottomless opportunities that allow for nearly limitless upsides. The best situations often maximize professional autonomy and community need for your services. The best employers are the ones who are willing to fairly share in this bounty with you.
My family loves Mexican-American food, and we especially delight in the bottomless tortilla chips along with homemade salsa. This combo typically precedes our food order when are going to our favorite local Mexican establishment. We always go into the restaurant with the resolve not to over-eat the chips before the meal arrives, but always seem to miss that mark.
Bottomless anything creates a sense of indulgence, freedom, and security. We often ignore the normal boundaries that guard against overdoing it or the mental signals of self-control that provide healthy limits. Certainly running out of the bottomless product, rarely crosses our minds. Self-regulation is typically the limiting factor.
Sharing the Money
Medical practice for American physicians has been a bottomless financial feast for generations.
Visualizing this feast, many have joined in to take their portion, resulting in dramatic changes in the economics of healthcare over the past 75 years. The biggest changes include the entry of controlling stakeholders like Medicare, Medicaid, private insurance, Hospital-Health Systems, and corporate healthcare employers. Don’t forget EMR’s. which are basically a Trojan horse for 3rd parties. All of these forces have moved the control of healthcare economics away from the physician. They are 3rd party raiders of what was once rightfully our domain.
Employment Safety Net
Physicians are adapting to these new forces by shifting towards employment models that lead to guaranteed income and performance bonuses. Basically, it’s a financial safety net that leads to predictable income. In exchange for this, their employers gain control of patient populations and physician alignment all while directing both towards their medical enterprise. Much like big box stores, it’s a volume and throughput game.
It’s a nice recipe for doctors who are securely reassured that their source of income and patients are going to be provided by their employer who controls a local or regional market share. No longer does the doctor need to be concerned about sourcing either element, as the employer is charged with feeding the physician a bottomless population of patients.
Given a bottomless flow of patients, our choice is to simply self-regulate the volume, delivery, and cadence that matches our preferences, specialty, and personality.
It’s kind of nice, just like going to a Mexican restaurant. The tortilla chips and salsa are at my beckon call, and I simply have to decide on the main dish. Sweet.
91%
This is why 91% of new resident graduates are opting for healthcare employment as their next step. It is a seemingly very safe step to take while stepping into a healthcare landscape in which only 8% of residency graduates feel equipped to handle the business of medicine. With this movement, private practice is rapidly becoming the minority option
This is no surprise because the battle for patient market share is no longer defined by the physician-patient dyad. The patients are now controlled by stakeholders who have purchased controlling interest in directing those patients to their own enterprise. Insurance companies and hospitals now determine who will have access to those patients. If you want bottomless access to those patients, then you are incentivized to become an employee. Becoming an employee is a whole lot more appealing than agreeing to a ridiculously discounted service contract that gives your private practice access to “their” patients. The financial disincentive to remain in private practice becomes increasingly difficult as all physicians are driven towards employment. COVID-19 may have been the final step in putting a fork in private practice physicians
Options
As physicians are driven towards employment or contracted labor, it is critical for you to know that the employment contract that your employer’s legal department slides across the table at you is not the only version of employment that exists. Too many physicians are blindly signing on to contracts whose compensation seems in the range of fair market value, but the rest of the contract heavily favors the employer.
I strongly encourage new residency graduates to form their own Professional Corporation (PC) as well as connect with a physician centric agency to represent their interests. This will equip you with a professional team and business structure that maximizes all of your options as you step into the negotiation table with your preferred employer.
Employment Lite
For example an Employment Lite or PSA contract is a nice option that provides employers with what they want—physician services and alignment, but it also provides the physician enormous control of their professional and personal financial lives.
PSA’s in a nutshell, are a form of alignment between hospitals and physicians that falls just short of full employment. It’s used as ’employment lite’ because the physician is not directly employed and still maintains some semblance of control.
Physicians should have someone represent them that understands PSA’s and Fair Market Value Compensation. SimpliMD is one such agency, but there are others. You may even have to familiarize your employer with the PSA option. After they understand it is Stark and Anti-Kickback compliant, then the next step involves making sure the deal is at a fair market value. Regardless of the type of contract or model of productivity, hospitals are required to compensate physicians appropriately for the services actually provided. At the end of the day, some type of productivity metric or work relative value unit per procedure will be used for compensation measures, and this is usually MGMA data driven.
I stepped away from a standard employment contract a few years ago for a number of reasons, but mostly because it was burning me out due to the loss of autonomy, and it was costing me nearly a million dollars in lost income.
I have been successfully using the PC-PSA model in my family medicine employment for several years now., and I love it.
It is truly a win-win relationship, and it feels bottomless for both parties.
In my next post I’ll talk a little more about the hazards of bottomless thinking for physicians.
