Hi everyone. Dr. Inc. here bringing you the truth about employed physicians. I want to thank you today for your hard work and dedication. As I’m writing this, it’s a holiday weekend here in this country, and what I know about doctors is there are thousands of you as physicians who are going to work on this holiday weekend and doing your job, just like you always have, in a dedicated way to take care of patients all over the country who are in need of you today. It’s an amazing thing what you do as a doctor.
I’m thankful that I get to do this myself, and I’m thankful that there are scores of you who are providing care for patients when frankly, you might not even want to (you’d probably rather be doing something else with your family or going to the beach or to the mountains or whatever it may be). But you’ve chosen this path, you’ve chosen this career, and you’ve signed up to do the work that you’re doing on days like this when many Americans are off. Thank you. Thank you for all that hard work. Thank you for that dedication.
Today’s truth is that predictable paychecks make doctors happy.
One of the things that I’ve really enjoyed in my career is collecting that regular paycheck that is really quite substantial and large. I’ve always found that to be a sweet feeling getting that paycheck. Of course, nowadays I don’t receive a paycheck, I just receive a direct deposit to my account. So the feeling of that paper being in my hand or looking at it has really sort of gone away, however, those monthly bank deposits also result in a wonderful feeling.
Of course, this is not the reason that we do what we do as doctors. I really see it as being downstream of the beautiful thing that we get out of taking care of patients and doing what we do to provide care to people every day.
But when it comes to getting that predictable and sweet paycheck, there are some assumptions that come along with it. The greatest of these is you’re getting paid at a fair market value. You’re also getting to practice in the community of your choice and preference. There are a few things that come along with that paycheck and the responsibilities that come with being an employee, but isn’t it sweet to have some confidence to know that you’re getting paid fairly and that you’re getting to choose where you want to live, and you’re getting to choose to do what you want to do?
You know, it is the easy button for us as employed doctors, because quite frankly, we’re getting paid a guaranteed rate that allows us to know (when it comes to our own personal budget) that we’re going to have money in the bank every month. We’re going to know precisely what that amount is and we’re going to know what we want to do with that money.
Some of you found out in the past six months though, that as much as you thought you had a guaranteed contract and income when COVID came and your health care employers began to bleed a little bit and began to feel the pressures of the financial shortfalls, for many of you they began to short your checks, or they began to change your contract or they wanted to renegotiate how much you’re being paid. Many of you felt that was an injustice. Many of you felt that was wrong. Many of you felt pretty bitter towards your employer.
I’m not sure where you are in that or how that landed for you, but it certainly is a memorable event for each one of us. At the end of the day, most of us love receiving a guaranteed paycheck with a guaranteed rate as an employed physician. Many of us also enjoy the pre-packaged benefits that come with being employed. From our health insurance to our dental insurance, to our life insurance, to malpractice insurance, and all the way up to retirement programs, these are all pre-packaged in a nice HR product line that really provides some predictability to how we go about living our lives and our family’s lives and provides some of the substance that we have become used to as physicians.
Although many of you as physicians may not realize this, the majority of physician employer retirement programs will really cause you to fall short of the range that you have come to learn to live out when it comes to your retirement. So I encourage you to take a look, do a little bit of the math, and see where you’re at with that. Maybe talk to your financial planner or financial advisor, or whoever works with you in regards to these things, just to make sure that you’re meeting the goals that you have for your financial future when it comes to retirement because again, most physician employers retirement programs will cause you to fall short. There are a number of good things about those programs, but again, you need to save a little bit more.
I also love the fact that we get to forego practice management when it comes to being employed in positions. I have an office manager in my practice and she’s the one that manages all of those days today headaches that arise from having 25 employees and all the nuances that come with every Monday through Friday work week, the weekends, the sick days, the kids who are sick, and all the myriad of elements that come with employing people in today’s healthcare economy. I’m really thankful that I don’t have to deal with those issues. I’ve found that in my 25 years of practice I don’t mind being a leader and I don’t mind exerting my clinical influence in my own practice and own office, but I also don’t mind letting somebody else have the responsibility of managing all of the people that are there. I do enjoy the simplicity of simply practicing medicine and taking care of patients, and receiving a good income that comes from that. As long as I provide quality and safe care and meet the productivity requirements that my organization has set for me, I can simply enjoy those patients and enjoy practicing medicine and doing it in a quality way.
And I think many of you feel the same way. That’s one of the great things that you do enjoy about being an employed doctor. You also probably enjoy the good life that comes from being a high-income earner and all the money that results from it. I find it a rich blessing to be an employed doctor in today’s world really provides massive opportunities for me to just enjoy patients and enjoy practicing medicine and do what I was made to do and do it in a way that provides a very good living for me and my family.
I hope that many of you have found that the predictability of that paycheck and the predictability of all the benefits that come with being an employed doctor are true for you as well. And I invite you to give me your insight and your feedback on what it is that’s made you choose to be an employed doctor, and what you would like or don’t like about the paycheck, the benefits, the management, the guaranteed rates, how your contracts are arranged–there are so many nuances to it that are worthy conversations that we’ll have as continue to unpack these truths.
One thing is for certain, the majority of us are happy that we have a predictable paycheck.
Hi, everyone, this is Dr. Incorporated helping doctors maximize their personal and professional satisfaction. I want to thank you for everything you’ve done today. When you look around your home, I hope you see a wife, children, friends, companions, roommates, extended sources of relationships that you’re making happy that you are influencing for the better; that you are making a difference in their lives not just because of what you do for them medically, because of who you are. And because of the security and the provisions that you provide in their world because really, your life and your income and really what you do as a person. You are highly valued. And I know you don’t always hear that from your employer, I know you don’t always hear that from your patients. And I know, you may not even hear that from your family members. But I want you to know, today you are highly valued.
This brings me to today’s truth. Today’s truth is that you must prove your worth to your employer. You must prove your worth to your employer. This is a subject that took me a little while to get my mind wrapped around as a physician with 25 years of employment experience. I’ve always been driven by really an internal monitor that I knew that I was doing my best, I knew that I was making patients better and making them happy and satisfied with my care. And I knew that I was practicing good medicine efficiently and productively. And for many years, I felt like I could just sort of ignore all the stuff going on around me in terms of what my employer expected from me. Because, frankly, I wasn’t too concerned about it, I knew I was a good doctor. And I knew that being a good doctor the outcomes would be good in regards to my patients. But as time has gone on over the years, one of the things that have begun to eat away at me is just a sense that I have to prove my worth every month.
I don’t know about you, but we have these practice council meetings that are monthly in our office and have quarterly business meetings for our physician employment group. And each one of those meetings, we go over the myriad of numbers that have to do with our productivity and the economic forces that flow out of us and through us when it comes to the care of patients. We review our patient satisfaction scores, our safety and quality scores, and a host of other things that are scorecards that sometimes influence how much we’re paid. But sometimes they’re just sort of a scorecard or report card that gives us feedback about how we’re doing. And one of the great challenges of those meetings for me is, first of all, because I’m in primary care, our practice sites are often basically losing money. And it’s been a source of confusion to me for many years. Because I keep thinking to myself, how can I be working so hard and seeing so many patients, taking care of so many people, yet this practice is losing money?
As most of you have realized by now it’s because, as an employed doctor, you have given up the huge amount of downstream income that would have been contained in your office but has now been allocated to other sites within your healthcare employers organization. So your practice is set up quite honestly to most of the time, lose money.
It’s not about how much money you are making. It’s about how much money you’re losing.
Every organization wants to mitigate the amount of money that each one of its physician groups is losing in the outpatient environment. But that’s made up for the downstream revenue, because at the end of the day, most of those employers have chosen you as an employee, a physician employee in particular, because of the downstream revenue that you create for their organization. Not within the office, but outside of the office.
It’s amazing to me that the average physician generates about $2.5 million in downstream revenue per year, which is exactly why so many healthcare employers are working hard to employ more and more doctors because they realize that their downstream revenue is something worthy of capturing. That’s why they like you, quite honestly. I know for me in my practice, because I’m a traditional family doctor who does obstetrics, through surgeries, including c sections, and so forth, I provide about $5 million in income in my downstream to my organization. And you can bet your bottom dollar that they kind of like me, because of that. I do garner some respect within the organization. Because of that, I don’t get off the hook in terms of my accountability and my need to prove my worth to them every month, but yet, they are aware of what I produce and how much I provide to them.
I hope you’re aware of the downstream revenue that you provide for your organization. If they’re not providing those to you, those monthly reports or quarterly reports, I encourage you to reach out to your administrator and ask them for one of those reports that provide how much downstream revenue you’re providing for your employer.
I also know that many employers encourage accountability when it comes to corporate citizenship. Corporate citizenship can look like a lot of things when it comes to your loyalty to the organization, whether it’s diminishing the leakage of referrals that you’re making to doctors and organizations outside of your employer, or perhaps it has to do with how many times you’re volunteering to serve on committees, or perhaps how many times you’re speaking in a community environment or the number of medical students and residents that you’re hosting with you. There are just several things that are involved in corporate citizenship, that many organizations value, but they frankly hold you accountable and make you prove your worth by proving that you are a worthy corporate citizen.
I can tell you that I again found this a little bit strange because I enjoy doing things to help people and I enjoy doing everything I can to improve the quality and benefit of my community and help those who are interested in going and healthcare. But I never thought of it as sort of a ledger, that I kept track of, that put notches on my belt when I did that. But for each one of you, you probably know very well that some employ you who are watching over those elements for you. Then there’s the quality work element.
I know that I am doing good quality work with my patients. And the frustrating part of that process is I can know that I’m doing good quality work, that patients can know I’m doing good quality work, and even my staff that are working with me to support and transcribe my notes can know I’m doing good, quality work. But if it’s not in a mindful location on the patient’s EMR, or the insurance or third party is not able to gather that information of what I’ve done or not done in terms of my medical decision making and communication, then they act like I never did it. Which is so frustrating when it comes to quality of care. I know for many of you doctors, this is one of those things, just a thorn in your side. I know it is for me because I am very aware of my quality of care and I believe is as good as anybody else in the country. Yet, I get these reports back within the organization that just kind of makes me feel like I’ve forgotten to do things, whether it be the diabetic whose foot exam wasn’t done, although it was done – it just wasn’t documented in the right place to prove that it was done, or whether it be the patient who needed a mammogram and I ordered it when they left the office but the patient failed to show up to get the mammogram and I get dinged in a report because the patient didn’t follow through with what I recommended.
There are all these elements of quality of care that we’re measured by as physicians that quite honestly are so beyond our control and so frustrating at times, yet I know as employed physicians, you are constantly having people beat you down when it comes to this stuff. You have to prove your worth to those employers when it comes to the quality of care that you provide. And then, of course, there’s the whole EMR proficiency thing, which is just absolutely absurd that we are asked to waste our time populating EMR records with minimal data when we could be using our time so much more efficiently. That’s why I’m a big fan of team care, our scribed model of care for physicians because I think it’s only wise to have physicians use their brains and their resources to really provide patient care and to make medical decisions, to do the right things medically for the patient and let others help you with that documentation process. So that it is placed in the right place, in the right location, and documented in the right way.
I think there is a lot of good about EMRs, but man, there’s a whole lot of bad. And if there’s one huge physician dissatisfier that continues to come up year after a year, it’s the EMR and we all know that. Unfortunately, we have to prove our worth to our organizations and they expect us to be proficient with the EMR population and note-taking. They don’t care if we have to get our notes done at lunchtime, before the office or after the office or at nighttime, or on the weekends. They just know it needs to be done and they expect it to come.
If I’ve heard one administrator say it to me once, I’ve heard it 1,000 times- “Well, that’s just one more click. That’s just one more click here. One more click there.” And what they don’t realize is that those “one-more-clicks” taken are compounded by the scores of hundreds and thousands, really equate to another 10, 15, 20, even 30 minutes of extra time in my day, that lead to me getting home later for supper that leads to physician burnout and physician exhaustion and physician dissatisfaction. But this is the world that we live in. We have to prove our worth to our employers, that we can be proficient with EMRs, and get all the work done that they expect us to prove that we can make the money they need us to make.
So, employed doctors, I know there’s a lot of good about what we have going on. And there are many qualities to that, that that come along with that predictable paycheck that we love. These are a few of the things that are a little bit behind the scenes that we all know of. I invite you as followers on this journey with me to chime in. What are some of your frustrations or challenges or unique things that you’ve learned from having to prove your worth to your employer?
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.
A little-known secret to the average citizen is that many physicians live paycheck to paycheck. Yep, and that risky personal financial strategy has gotten exposed during the economic hurricane called COVID-19.
In the midst of this crisis, the emergency fund that the dutiful doc had intended to put away, never happened, due to the tyranny of the urgent. Most of the time, it was put off due to some other consumptive purchase that was a result of unleashing all that pent-up delayed gratification associated with becoming a doctor.
The large monthly cash flow created the illusion of safety. That large check always seemed to keep the ship afloat, and hid the risks that lay under the surface. Some money in the checking account and regular funding of the corporate retirement plan created a sense of security that came with a predictable high income.
The classic 50-25-25 post tax spending plan sounds good in theory. You know 50% goes to fixed expenses, 25% to variable expenses, and 25% to savings. But that the 25% savings always gets pushed to the end of the line, as more pressing bills consume those funds. We assure ourselves, at least we were saving for retirement with a maxed-out corporate plan. Little do we realize that those plans were developed with caps that represent the projected needs of the average worker, not the high-income earner.
We knew that given the size of our student loans, buying the over-leveraged “Doctor’s House” was not the best move, but doggone it, we deserved being able to have something nice. Besides, isn’t a house an investment and not truly an expense? On top of that, the mortgage is tax-deductible, so putting both ideas together, the bigger the better, right?
The new car was affordable when that $90,000 tesla was broken down to the $1100 monthly payments. Why not, you reason, there is enough in the bank each month to cover this. Or even better, just lease the car of your dreams, for $800/month as that is even cheaper than buying. Now get one for both you and your spouse.
Childcare, private school, tutors, college tuition, and such are all part of the family responsibilities that must be kept up if our kids are gonna make it in life. After all, public education may be cheaper, but the best networking and job opportunities come from the top private institutions, right?
Isn’t medicine in America recession-proof? People will always need, want, and demand healthcare in this country, won’t they? Going the employee route or contractor route, all but seals the deal with guaranteed contract money. Most of the contracts have a basement and then are incentivized for productivity bonuses. The bonus money especially feels good, as it strokes our competitive nature.
But then the walls start to erode, as the COVID-19 crisis takes hold. Suddenly financial fragility hits financial turbulence.
Our savings and net worth start to ebb away as the stock market heads into a bear market.
Our productivity goes down due to elective and non-urgent medical care being furloughed for public health safety. There go our bonuses.
Our contract is restructured so that our employer does not go bankrupt, and we are asked to accept lower pay as part of being a good citizen. It feels like we don’t have a choice.
Even worse, we could get terminated in a bear market where physician hiring is being frozen, and delayed for who knows how long. So signing on somewhere else is not a bail-out option.
If we were diversified enough to have a side hustle, those likely have melted away in a broken economy. If you were fortunate to have passive income from real estate holdings, guess what, all those leasers can’t pay their leases due to losing their jobs too. Now you are holding a negative cash flow asset, and the bank still wants its monthly commercial loan paid. Guess who has to come up with that money?
If you are in private practice, you MIGHT have gotten in line early enough to get an SBA loan in order to keep our small business afloat, while you nervously play a game of survival with your staff-employees, and likely aren’t paying yourself.
Now that you are getting a paycheck for half the normal amount, and suddenly those fixed monthly expenditures are extremely tight, and your variable expenses, which your family deem as essential, are now a contentious conversation piece.
It’s tempting to pull out the credit cards, with their $30,000 limits, and the reason that this was just a bad month, next month will be better. So you use this “get out of jail free card” now and simply pay it off next month. Guess what, this pandemic and its economic impact are going to last a while.
Next month, we ask that is the minimum payment on that maxed out 19% interest credit card, and we go to the bank and ask for a personal loan to bail your family out. After all, given our lifetime earning potential, bankers really like to loan doctors money. Besides interest rates are low now, it’s almost like free money. But you discover with everything maxed out in your personal finance, even the banker finds it difficult to figure out what will be the collateral for the loan. He is willing to offer an unsecured loan, but the interest is pretty steep. You have no choice, but to sign and take the money.
And we kick the can down the road further. Saying to ourselves that after the pandemic you are going to look for a new job that will provide a hefty signing bonus that will pay off the private loan.
Then we’ll go back to our normal life, living paycheck to paycheck, but happy as a clam that we are living the good life as doctors.
Doctors, use this interlude to do some personal inventory and break the patterns that have put you in this predicament. You don’t have to go back, you can move forward.
Get some help from a physician agency today, from people who understand the physician’s world, and have resources to help you. Check out the resources at White Coat Investors, Physician Philosopher, and SimpliMD just to name a few.
COVID-19 has collided with American physicians in many ways, but I have several observations that stick out from a physician’s perspective on the business of medicine.
1.We have personal risks including death due to the pandemic. This higher risk status affects those who live under our roof as well, as we become their greatest risk for them contracting the virus while they shelter in place. With this in mind, while I come in direct contact with patients who have COVID-19, I have chosen to separate myself from my family and I am now living in a separate dwelling from them. As a husband and father, I feel it is my obligation to protect them as much as I can. The truth is that worldwide thousands of healthcare workers have contracted the virus and many physicians have died while taking care of the COVID-19 patients. Make sure your life insurance plan and disability insurance are up to date and in place. If you haven’t started or updated your will and estate plan recently, get it out and take a look at it. If you need help with any of this, I have worked with an experienced team of professionals who can help you with this – Ben Hughes at Lattice Legal and Jeff Umbaugh at KDU. Reach out to them if you need help.
2. Our value to the safety and health of all America has never been more apparent. Physicians are the critical resource, although we all know it is a team game that includes nurses, pharmacists, therapists, and even administrators. The loving support from the general public for physicians and healthcare workers is unparalleled in my career. Prayers, cards, food, social media posts, texts, and phone calls all continue to pour in. As a community-based physician who still does traditional rural medicine (inpatient, outpatient, OB care, and nursing home care) I am keenly aware that my community is looking to me as their rock during this crisis. With the community beneficence in mind, our medical community has collaborated and converted my medical office to an exclusive FURI (fever and upper respiratory illness) clinic that is manned in a rotating fashion by physicians and NPs in the community. I am seeing face-to-face visits (OB, well children who need vaccines, hospital f/u’s, etc..) at another group’s clinic. This displacement for me is projected to be 8 weeks or longer, and it isn’t easy. But trying to separate the well from the ill in our community is critical to the mitigation efforts, and is a small inconvenience for each of us in our physician tribe to do. The altruism of physicians is expected by the community, and our modeling of necessary changes to social and essential services is critical to helping reduce COVID-19’s impact. Professional value to a community can be monetized, and a pandemic provides an opportunity for your unique skills and training to shine. When this pandemic passes, never forget your value at the negotiation table.
3.Your Hospital’s and Government’s assumption is that physicians are machines, and replaceable parts in the crisis, much like a ventilator. For all the doctors who are employees, you are increasingly aware of this during the crisis while you are herded around new plans and strategies developed by people above you. You may be asked for input, but mostly that is a feigned feedback process that ultimately results in a top-down directive. Mostly this is good, as we all do need a coxswain communicating to us as we grow in the same direction. My hospital system has already begun recruiting volunteers who are able and willing to manage vents (but normally don’t do it) in anticipation of the surge that likely will come. I did volunteer because it’s the right thing to do, but I must admit it does create a pang of anxiety due to the higher risk exposure, and due to the 25-year gap since I managed a vent. I will have to admit I was a little amused recently when my hospital system in a 125,000-250,000 people metro area asked for employed physician “volunteers” to man their 4 FURI clinics, and only got 5 volunteers. Our tight-knit rural medical community has no problems manning our singular FURI clinic but we are frankly used to working together eye to eye. In larger metro areas, I think it’s easier for a physician to think someone else will do it. After this pandemic starts to ebb, one might begin to reflect on how being a healthcare employee could negatively affect your well-being. Some have called this a moral injury to physicians, and COVID-19 has only accelerated this injury. The physician burnout crisis of the past few years has already exposed this issue, but this crisis may have added some additional illumination to the challenges of being an employee. If you are looking to make an adjustment after the crisis, due to your sense that you are simply a cog in someone else’s wheel, then consider a transition to an “employment lite” contract that provides you much more robust benefits as a professional.
4.Loss, or reduction of income is likely to happen for a period of time and could have enormous negative impacts on a physician’s personal finances. Unfortunately, too many physicians still live paycheck to paycheck and the fixed monthly expenses associated with loans and large purchases don’t magically go away during an economic downturn. If you are an employed physician, the government CARES Act, which targets the vulnerable lower-income earners, and the corporations (both large and small) will be of little benefit to you. You are going to have to adjust your personal finances, speak to your lender, or take out a short-term loan to bridge the downturn that is likely to last several months.
2 Trillion Dollar CARES Act Graphic
5. Small and large healthcare corporations, much like most of America’s businesses, will take a big hit during this pandemic. The business of medicine is not insulated from global or national calamities that influence the flow of money and resources. I never expected healthcare economics to be disrupted as it has. Virtually every physician, regardless of the source of his/her income will be affected by COVID-19. Because corporate America has become a significant stakeholder in the business of medicine, the downstream ramifications to physicians are inevitable. Let’s take a look at a few areas of impact based on categories of physician income.
Physicians By Income Type
1.The physician employeeswho are salaried are a little more protected by the very nature of their contract, but don’t be surprised if you are asked to defer part of your salary, or even asked to be willing to get paid less. Worse yet, some employers are simply breaching contracts and unilaterally reducing pay. Healthcare employers are bleeding from many directions, and there will be a downstream to its more highly paid employees, especially if those employees are doing less work than normal. Some CEOs are doing this already. A general surgeon would be a good example of a physician whose livelihood is significantly impacted during this time of forgoing all elective procedures.
2. The physician employees that are paid on a productivity model are also very likely to see their income dip during the next many months as patients shelter in place, and all elective medical care is suspended. You will earn fewer RVU’s no matter how much telemedicine you convert to. Although E/M, RVUs are the same for an office-based 99213 and a 99213 telemedicine visit, reimbursement is less. It won’t take long for your employers to make some sort of RVU credit adjustment for telemedicine and down-shift your monthly RVU count. If it hasn’t happened yet, it is likely coming. Bottom line, your monthly paycheck is going to be less
3. Contracted physicians, especially those who aren’t directly linked to acute care with COVID-19 patients will likely see their hours, shifts, and income reduced. Pathologists, Anesthesiologist, and GI doctors for example are all feeling this pain. Most of these commonly contracted services are either hourly based or have a sort of productivity mechanism incorporated based upon seeing patients and generating income. ER physicians, Hospitalist, Locums, Intensivist, and other critical care hospital specialists are likely to see surges in their workload with extra shifts being added, and longer hours performed. It is notable some are trying negotiated “hazard pay” bonuses into their contracts in order to capitalize on their front-line workload. Lots of variabilities can be found with income expectations for contracted physicians.
4. Incorporated physicians such as PCs often have the most flexibility in a time like this. Their contracts for services can vary based on salary or productivity. So monthly income could change as well. Their overhead and employee structure are typically very lean, so the income change will not only affect their personal finances but affect their co-workers who are not employed by the PC. Some of their PC benefit plans like 401k’s or Cash Balance plans may have to flex a little if income really goes down. But the good news is that they can also borrow or take a distribution from these 401K or Cash Balance Plans without penalty due to the CARES Act. These physicians also have the flexibility to contract their services for a negotiated price to provide added relief and assistance to any surge area of medicine that they practice in. The COVID-19 pandemic could create new opportunities to diversify their business profile both short term and long term. This could balance out any losses from their primary professional services, and additional income from new channels as proverbial “side hustles”. It will be interesting to see if telemedicine emerges as a side hustle coming out of this pandemic. Unlike their employed brethren, doctors organized as PCs have really got the upper hand at times like this due to their business organization.
5. Private Practice physicians/LLP’s/LLC–depending on their specialty, will have to make adjustments as revenue will be reduced in the next few quarters. As small businesses, the CARES Act may provide some relief for you, especially if your overhead expenses are relatively fixed. Much of this comes in the form of business LOANS, not bailouts per se. Furloughing employees and reducing hours can help with this, but it’s tough to do this in a small business when you know your cuts affect real people that you are often connected closely to. In group private practices this can create uncomfortable physician conversations about who is working, who is not, and how it affects the corporate bottom line. Physicians tend to be such individualists that when things are going well, most can tolerate “group thinks”, but when things start to go south, the individualism comes to the surface more. Coming to consensus views on items, especially when it negatively affects their personal income, can be especially difficult in this model. This practice model has been declining over the past many years, and the COVID-19 crisis may hasten the demise of some in this category. If you fear falling in that category, I encourage you to check out the PC-PSA model prior to simply signing up as an employee as you transition. It will afford you many benefits that you are used to in private practice, but still, retain a host of the benefits associated with employment.
Physicians-hang in there, you’ve got this. You are highly valued and needed in our economy, and you will weather this storm. You may have to make some adjustments, but you have a lot of options to help you through these days. You will always have a job, and you will be able to put food on your table. In that context, you are way ahead of millions of Americans, who have lost their jobs. Regardless of the hardships that come your way due to COVID-19, you can adapt, weather the storm.
In my next post, I will take a deeper look at how COVID-19 is affecting the personal finances of physicians.
