Category: medicine

How much income do you need to stick through your doctor job?

How much income do you need to stick through your doctor job?

Side income is the wave of the new generation. Having multiple income streams is sexy. If you are not bound by a single means to survive, then psychologically the stressors of a particular job may not affect you as much. In medicine it is becoming more popular to have additional income, passive or active, so that the goal of reaching financial freedom comes sooner.

The stress of your day job matters

Most doctors like what they do, but there are probably some aspects of our jobs that we would rather do without. Callbacks, charting, meetings, insurance denials, disgruntled patients, midnight calls…they’re all synonymous with our jobs but it’s truly not common that any of us actually likes the nitty gritty annoyances of the profession.

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Medicine inherently is a stressful profession–many of our decisions and actions can determine life or death. In our society, there is a big emphasis on malpractice. The premiums on some medical professions range in the six figures–this certainly can add indirectly to the stress of the job.

Certainly how stressful your profession is and how much your tolerance level is will contribute to your desire to find a change.

How much control do you have in your job?

Even though the premise of medicine is to take care of patients, how a clinic or hospital is structured makes all the difference in the world with physician autonomy. Employment through a large hospital system or managed healthcare group often translates to standardized benefits and expectations (i.e. it would be difficult to reschedule a patient clinic in two days–some manager will hear about it and probably intervene). But you probably won’t have to directly deal with any logistics of letting go a low-performing staff member or most issues that a human resources department would be responsible for.
If you are a self-employed physician or a physician-owner of a medical practice, the onus falls on you to handle everything. Sure, you might have an office manager handling the dirty work but in the end you fit the bill, and you lose the sleep if things don’t function smoothly. Many physicians are okay with these responsibilities, and they want to have the control.

How much you make matters

There is more to life than money, but we all have a certain expectation of our worth that interplays with career satisfaction.
I once knew of an anesthesiologist who quit her academic position to develop a medical spa and infusion clinic empire. While I do not have exact numbers, but I suspect that the business likely produces a multiple seven-figure net income. I have no doubt that the business empire checks off many needs and desires: high income, satisfaction that you’ve created a wildly successful business, freedom to spend more time with family and friends, and simply a validated means of success.

Would she have chosen a different path if her academic clinical position was different? Let’s look through some hard numbers. An academic anesthesiologist might have a salary of $250,000-$300,000 working 55 hours a week. This would include uncompensated time to prepare lectures or administrative roles. Would she have started her business if she worked in private practice 40 hours a week earning $450,000? What about $450,000 working 32 hours a week? Or $800,000 working 35 hours a week?

It is a fascinating thought exercise to see how each person would react to a given scenario. Maybe she would have started her business anyway even if she made $1 million a year at her day job, but many of us would probably opt not to rock the boat if our clinical job gave us career satisfaction, a comfortable income, and time for family.

Our final choice also depends on our view on risk

Doctors, in general, are risk adverse. Some of you might be comfortable handling seven to eight figure+ commercial real estate, but the reality is that most people in the medical field want to make a good living and not get ripped off by the system. If you had your dream medical job, how likely would you opt to have additional income?

If your clinical job had tolerable hours, above what salary would you not consider another career path?

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Financial parasites in the healthcare world

Financial parasites in the healthcare world

Healthcare is big business, with medical practices vying for contracts, hospitals undergoing facelifts in order to cater to patient experiences, and insurance companies making deals with pharmacies.  Some of these arrangements are negotiated in the name of reducing healthcare spending, but there has to be some skepticism when for-profit entities are implicated.  Physician salaries aren’t exactly growing with inflation—some fields have had massive cuts in spending over the years too.

The problem with these stagnant and reductions in physician salaries are that they are targeted in the name of curbing healthcare costs since there are no more dollars to be distributed in the system.  All the while, the number of administrators and middlemen/women in the system consume more healthcare dollars.  Yes, this may be an oversimplification of the problem, but I’ve seen hospitals hire minders to explicitly observe whether a healthcare worker uses hand sanitizer in front of a patient!  Talk about waste in healthcare dollars!  When you slash the compensation of the people on the ground while making them do more work, there will undoubtedly be unrest.

From fast food to healthcare
Just as how a successful fast-food business such as McDonalds relies on its workers to function, healthcare relies on doctors, nurses, and allied health workers to run.  However, this is just about where the similarities end. In the fast food industry, these workers are entry-level employees that keep the ship running.  One could argue that this industry takes advantage of the labor to pad its shareholder profits and administrators’ pockets.  This industry also provides a means for someone to earn income.  If the employee does not like the management, she could simply leave and find another occupation.  If this person wanted to open her own franchise or establishment, she could do so (yes it wouldn’t be easy but possible).  There is no particular skillset that ties down the fast food worker to the business.
Unfortunately physicians aren’t all able to do the same for a number of obvious reasons.  Many medical specialties are bound to hospital care, simply due to the subspecialization of their trade.  Intensivists, for instance, have specialized training for care that can only be delivered in an intensive care unit.  Other specialists who have traditionally been able to practice medicine on their own are more restricted today by insurance contract limitations and high costs of startup.  The amount of student debt that many younger doctors have makes it challenging to take out loans to start their own medical practice.  Hence, many physicians are stuck laboring away to supply jobs for many other healthcare workers.

Golden handcuffs
I’m not sure what to think about how my labor supports the jobs of dozens of healthcare workers.  Are these workers all needed for you to do your job? How much of that other person’s salary could be going into your pocket? How much of healthcare dollars could be saved if you weren’t required to have a certain number of staff under your name?  Let’s look at a real example:

Take, for instance, the number of supporting staff for a moderate volume ophthalmologist.  Her clinic has three technicians dedicated to her, along with shared front desk and ancillary staff.  The local ambulatory surgical center has an equivalent of 1.0 FTE scrub tech and circulator essentially dedicated to this surgeon.  There is also a CRNA who generates a third of her weekly salary from that surgeon.  This amounts to essentially 4.3 FTE plus front desk that is feeding from a single doctor!

Mutualism, commensalism, or parasitism?

This amounts to $210,000 of additional healthcare dollars used, feeding over four full-time workers!  The bigger question is whether these workers are needed in order to deliver care in the system.  How much would one fewer office technician impact productivity?  Would a decrease in a $55,000 salary reduce overall revenue by $70,000 but improve the sanity of the doctor by a tenfold?  Is the doctor mandated to have this set number of support staff by the medical practice? 
The predicament that many doctors face is that they are not able to exit the system.  Their skills are tied to an inefficient system.  If they were to leave, most other options are likely similar to the system that they sought to escape. 

How many financial parasites do you have in the workplace?

The number 1 way to make your medical practice more profitable without working harder

The number 1 way to make your medical practice more profitable without working harder

Ten years ago, a giant slice of pizza at my favorite pizza stand on Broadway was $2.50.  It’s up to $5.00 now.  The cost of doing business goes up, and naturally the cost of services goes up too.  The healthcare business, somehow, has its own broken rules.  Our reimbursements tend to trend downward over time but the cost of doing business continues to rise over time.

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For instance, the professional fees for a carpal tunnel release have gradually drifted downward over the last decade, and it’s insulting how little it was reimbursed to begin with. It doesn’t matter how quickly the surgery could be performed or how “easy” a skilled hand surgeon could perform it–just look at how many years of training it actually takes to get to the point to offer the surgery! The cost of delivery of healthcare goes up over time, so our net income gets eroded.

Recent years have shown that many smaller medical practices have been absorbed by large healthcare systems or sold to private equity. Some of you in private practice might even be thinking that selling out is the way to survive. But that notion is economically incorrect.

Small medical practicesought to be significantly more nimble than their larger counterparts.

One important factor in the plight of medical practices is that not all doctors have the time and energy to pay attention to optimizing their business practices, and that is where problems arise. What I’ve found to be most effective in increasing the bottom line in a medical practice while not having to see more patients is to lower your overhead.

Those of you in private practice have the opportunity to increase your bottom line without seeing more patients or doing more work. The name of the game is controlling your own costs.

Lower your overhead

The biggest confusion I see about business expenses is that they can be “written off”.  It’s a common word that sometimes is used to imply that some sort of cost isn’t hurting the business.  Some doctors even erroneously use “write off” to mean that they didn’t bill the patient.

Wrong. Wrong.  Wrong.

There is only one good business definition of “write off”, and it means that an expense to a business can be an “above the line deduction” from the revenue for tax purposes.  For example, if you collect $100 from a day of selling lemonade and the cost of the lemons, cups, sugar, and water cost you $20, your net profit to be taxed is $80. Your $20 is a business “write off” but it’s easier to comprehend if you called it a business expense. In medicine you can also refer to unpaid/unreimbursed services as write offs too, but that’s not going to increase your income.

A medical practice will have significant expenses to deduct from its revenue, and many doctors take pride in their crafty accountants (sorry, no offense to accountants!) that find interesting expenses to deduct.

Sorry folks, but finding extra deductions isn’t going to make your richer.

It’s like buying an $80 juice mixer (thrown away after using, of course) to make lemonade in the example above.  You’ve effectively deducted your entire gross revenue of $100 so that you aren’t going to pay taxes.  You’re also not going to make money.

Lowering overhead means buying lemons on discount or using bottled EZ-lemon juice.
The problem with most physician practices and overhead is that physicians are too busy to handle the details outside of the medicine.  Some doctors think that they can overcome bad overhead by seeing more patients, but that is the wrong move.  At some point, you’re going to break down from working harder or longer hours. 

The larger the practice is, the harder it is to limit expenses and observe the problems that will increase the bottom line.  We often delegate these tasks to the practice manager or whoever is in charge of operations.  Sometimes you’re going to have a superstar who can micromanage these details better than anyone else, but you’re really rolling the dice. 

If you have a competent manager that you want to delegate your expenses to, you could incentivize your manager to lower expenses.  However, if you can spare the time and effort it is best to learn about the expenses yourself so that you can audit the books or handle some of these responsibilities if your manager is out.

The easiest targets of lowering overhead is to assess all of the recurrent costs.  Cable and Internet companies are notorious about ratcheting up prices after the promotional period, and you shouldn’t have to be the sucker.  All of these prices can be negotiated down or even cut, and will save significant dollars over the lifetime of a medical practice.  Other recurrent expenses include:

  • Utilities – find the culprits like air conditioning or leaky toilets to save money and the environment. Many larger offices will have multiple heating and cooling units, so these expenses are not trivial.
  • Telephone lines – These are often costs that medical practices are hesitant to tweak because we don’t want our phone lines down, but these are also reliable cheaper solutions.
  • Landscaping
  • Pest control – Don’t cut the pest control completely, but sometimes there are competing companies that want your business more than your existing guy.
  • Office items – copier paper, printer toner, folders.  Just because you might have a purchasing plan through your favorite office superstore doesn’t mean that you’re going to save money through them. Shop around.   Not everyone needs to have a desk calendar at work either!
  • Service contracts – medical device companies are notorious for gouging doctors just because they are doctors.  Sometimes companies aren’t willing to budge, but befriending your rep or finding a reason for them to discount for you is key (maybe you’re the highest volume user of their device…)
  • Marketing expenses – These expenses consume significant dollars especially in practices that offer elective services. Make sure that they are giving you appropriate ROI.

Every single one of your recurrent services will eventually raise its prices, and paying attention to some of these costs can amount to a five figure monthly expense (sometimes even six figures). Remember, your reimbursement schedule through Medicare isn’t going up, so something has to give so that you don’t make less money in future years. In a practice with $1 million revenue, a 5% reduction in overhead is going to save you $50,000! Many medical practices have significantly higher revenue than this. Over the course of a career, this can add up.

Remember. Just like your lemonade stand, paying attention to your overhead is the key to running a successful medical practice.

What aspects of your private practice have helped you financially?

Medicare 2021 wRVUs are up, but you’re not getting a raise

Medicare 2021 wRVUs are up, but you’re not getting a raise

One of the many polarizing aspects of healthcare reimbursement has long been RVUs (relative value units).  We’ve all heard the term thrown around in those quarterly productivity reports or budget meetings.   Without going into too much of a digression, RVUs can simply be summed up as a measure of how productive a healthcare worker is, and serve as a basis for getting paid.
The big news for RVUs in 2021 is that many E/M codes–these are the five-digit numbers that we assign to patient visits to get paid by the insurance company–are now assigned to higher RVUs under Medicare.  In lay-doctor’s terms, it means that you are going to get credited for doing more work for the work that you already do.

More RVUs generally equals more pay.

This is important, because many large medical groups and hospitals pay their employees by the number of RVUs that are generated.  If you, the doctor, don’t meet the RVU requirements you can get a pay cut.  If you do more work you hopefully will get a raise.  The problem is that despite an RVU increase for 2021, your employer isn’t likely going to give you a raise
In fact if your hospital is giving you a raise in 2021 because of the increased productivity in Medicare codes, I want to hear from you.  You are the outlier.

The healthcare payment system is complicated

We know that the healthcare system is too complicated.  So complicated that many people push for a single payor system as a solution to simplify the system.  That would certainly eliminate some existing issues, but we simply don’t know enough about the workings, politics, and finances to make an objective assessment of our situation. 

Let’s take a step back and look at the system in a simplified model.

Medicare basically has a framework that assigns a numerical RVU value to any healthcare service or procedure we provide.  Generally the higher the RVU, the more skill or difficulty was required for the service.   A dollar value is set to an RVU to establish a basis for reimbursement.  Think of this like a currency exchange.  One RVU could be worth $32.  The conversion factor is actually adjusted annually to account for budgeting and other factors.  The final reimbursement formula includes this conversion factor that is slightly adjusted based on cost of living (geographical factor) depending on where you practice.  A hip replacement might/will cost more in New York City than in Omaha.

Within the RVU system, there are work RVUs and technical RVUsWork RVUs essentially define the productivity of the physician (read: provider) while technical (practice expense) RVUs account for the cost of ancillary equipment or staffing required for you to perform the service.  In a crudely simplified model for this article, you could lump in facility reimbursements with the technical component too.

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So in this model, if a hospital-employed orthopedic surgeon does a hip replacement on a Medicare patient, the hospital gets reimbursed a certain amount based on the surgeon’s work, the technical costs of the procedure, along with some geographical value. 

How does the hospital pay the surgeon? The conversion factor for an RVU in 2021 is like $32.  Let’s say the surgeon generates 10,000 RVU’s a year.  Does she get paid ($32 * 10,000 =) $320,000?


The surgeon might actually get paid $500,000 or more, but where does this extra money come from?  This is the part that most doctors don’t realize.  That technical component to the procedure may generate a multiple more than what the physician component alone would.  This would contribute to the pot that a hospital could use to pay all of its staff and expenses.  There are also also intrinsic money-generating call contracts, trauma designations, and federal monies that a hospital might receive simply by having an orthopedic department on staff.  This pooled money is allocated to compensate employed workers to a level that a hospital might consider to be fair.

How does this play into increased RVUs and why doctors aren’t getting paid more?

There is likely a logistical side to this, and a strictly business side to this discussion.

Logistically, the term that no doctor wants to hear is budget neutrality.  There is only so much money in the pot, and there is a mandate that there can’t be an increase in expenditures in the system by more than $20 million.

You’re robbing Peter to pay Paul.

With the case of increasing RVUs for the E/M services, there is actually a decrease in the conversion factor ($36 to like $32.41 in 2021) for RVUs.  Crazy right?

So despite what we see in increased RVUs, there might not actually be more to share!

The Business side of medicine is ugly

The business side of medicine is not readily transparent.  We can also have differing opinions with any variable that comes to play.  What is not obvious (but somewhat predictable given historic data) is the payor mix in a given health system.  Medicare is typically the major insurer for many specialties but it is not the only one.  

Some commercial insurers reimburse at a greater rate than Medicare while others, less.  Knowing the exact reimbursement schedule for a given procedure for a given insurer ought to be mandatory, but quite common for a hospital or medical practice not to have any of these data on hand.  If they do, it might not be verifiable. 

What this means is that an employer’s budget might not actually be accurately determined even if the RVU changes are known.  The prior year’s budget may have been grossly incorrect due to pandemic related costs, decreased patient volumes, and a number of outside variables. 

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No employed physician wants to hear that their hospital won’t give them a raise even though on paper their productivity will likely increase.  But no administrator also wants to tell her shareholders or investors that the hospital’s operating income is not adequate to sustain operations, and one factor is that they are paying their doctors more. 

Don’t hold your breath for a raise

The healthcare system has many illogical components.  This is one of them.  You’re not likely to get a raise if your employer compensates you on RVU productivity.  If you don’t like what you see, then this is even more reason to get your finances in order and be willing to find ways to improve your situation. 

What are your thoughts on the increased RVUs in 2021?

5 Quick Tips To Succeed As A Young Attending Physician (And one to make you a superstar)

5 Quick Tips To Succeed As A Young Attending Physician (And one to make you a superstar)

After many years of trial and error, I wondered what I could have done to avoid the pain. I realized that we’ve actually heard most of the useful advice to succeed, but sometimes the knowledge doesn’t process. It’s all about the timing, explanations, and triggers that make our brains tick. The following is a list of the most useful tips my trainees have found to be helpful: