Month: October 2015

Should You Join An HMO Practice?

Plenty of my friends from medical training have gone the way of the HMO (health maintenance organization), particular those who are working in California (read: KPMG). HMO’s were formed as a way to streamline healthcare costs whereby the healthcare system and the insurer are either the same organization or a closely knit partnership. It is sort of a top-down one stop approach to healthcare (a la Super Walmart). Presumably all specialists are available within the organization to consult and provide efficient healthcare.

Sounds like an ideal system, right? You really have to know what you’re getting yourself into.

HMOs provide a platform to jump start your career

After you become a newly anointed physician, patients still don’t know that you exist. In order to build your patient population you have to establish relationships with referring doctors and your presence in the community. However, in HMO’s the referral network has already been established. The patient volume seen by HMO doctors during their first year of employment are as high as those doctors who have been working for a decade in a metropolitan city!  This immediate volume is beneficial in that it provides a platform for instant experience. Not only that, many treatment protocols are typically in place to treat certain diseases. These “flowcharts” help ease your daily routine of medical practice.

Because you’re instantaneously busy in an HMO practice, you are generating revenue for the practice. They can afford to pay a decent salary. Since these entities are generally well-established, they also will likely have good pension, retirement plans, medical and dental insurance coverage (in their network!).

Despite advantages, practicing at an HMO isn’t a panacea

HMO practice isn’t suited for everyone. Because so many protocols are in place, it may feel like you’re practicing cookie-cutter medicine. If you need to offer treatment that is off-protocol, you might be out of luck. Then again, if you are in the private world, the patient’s insurance company may not cover off-protocol/non-standard treatments anyway.

The generous salary and benefits in HMO practices often translates into more rigidity in the daily schedule. If you need to take a Friday afternoon off for errands, you might have to use a vacation day. Need extra time off? It’s not a easy as shutting down the office for a day. Everything has to be run through the administration. The doctor, while she may be a shareholder of HMO, still functions as an employee in the system. In a way, you really aren’t the owner or controller of your medical career.

In light of a decent salary, you probably could make a whole lot more money if you saw a similar volume of patients and worked for yourself. There is no free lunch in the world, and if you are paid handsomely that means you are unlikely sitting around blogging during work hours.

Only You Will Know If You Are Suited For an HMO

HMO practices definitely offer a stable job for doctors at the expense of control of your schedule. As a summary, the pros and cons are as follows:

[vc_column width=’1/2′]

[vc_row]Pros of an HMO Practice[/vc_row]

[vc_row]Instant patient volume[/vc_row]

[vc_row]Well-established practice patterns and protocols[/vc_row]

[vc_row]Good benefits[/vc_row]

[vc_row]Less pressure to distinguish yourself[/vc_row]

[/vc_column]

[vc_column width=’1/2′]

[vc_row]Cons of an HMO Practice[/vc_row]

[vc_row]Less flexibility to innovate[/vc_row]

[vc_row]Less flexibility on scheduling[/vc_row]

[vc_row]Career success dependent upon system[/vc_row]

[/vc_column]

 

What are your opinions on HMO practices?

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Where You Live Significantly Impacts Your Ability to Build Your Wealth

I’ve said this before, and I’ll say it again: Wealth = Income – Expenses. In order to build wealth, you either have to increase your income or decrease your expenses. Simple as that.

Income Building

As a physician, your income is contingent on how many patients you see, your reimbursement schedules, plus any ancillary income you can generate associated with your profession (speaker fees, real estate from surgical centers, or consulting fees). We can control this simply by working smarter (more efficiently), harder (pile on more patients per day), or longer (add in clinic hours). There is obviously an upper limit on your income.

Expense Control 

By far the highest expense for most people is housing. The problem with housing is that the costs vary wildly throughout the country. Unfortunately, physician income does not usually track cost of living well. The good news is that physician income also is relatively high so you can grow your wealth quite rapidly if you can control your expenses.  This equates to controlling where you live.

I recently found a general surgeon position at a large HMO practice in the San Francisco Bay area. The posting was for an income of $400,000 annually. At first glance, that sounds like serious money. But remember, you only get what doesn’t get taxed and what you don’t spend. I found a similar job opening in Madison, Wisconsin for the same type of specialty with income starting at $300,000. If you look strictly at numbers, it seems like a no-brainer to choose the job in San Francisco. You get paid more AND you get to live in a more desirable part of the country. With an extra $100,000 a year in income, you should be able to make up the difference in cost of living easily right?

Not really.

According to PayScale.Com, an income of $400,000 in the Bay Area is equivalent to $261,000 in Madison, WI! How is that possible? You not only pay more for housing in San Francisco, but also gas, utilities, transportation, food, and taxes. An extra $100,000 for someone in the top marginal tax bracket living in California will likely give up at least 50%  to Uncle Sam. In Madison, I can get a fifteen year mortgage on a $240,000 home for less than $1,500 a month. In San Francisco, I’d pay $3,900 a month for a studio or 1-BR rental! If I wanted a 2,000 square foot house in San Francisco, I’d have to be looking at something at least $2,000,000!

So no, $400,000 in San Francisco is actually not equivalent to $300,000 in Madison. That is the price you pay to live in the mecca of tech—as a doctor.*

* A job that actually pays that well in SF is actually quite unusual. If you take a job like that, be prepared to work hard.

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