A physician’s billing primer

What you need to know to understand about how you’ll get paid.

By Jeff Hinds | Fall 2019 | Financial Fitness


To provide the most advanced care for your patients, you’ve spent years of grueling study and practice in preparation for a future in health care. You’ve learned life-saving techniques, researched complex diseases, and perfected your listening skills to become a better diagnostician. Completion of your medical training nears, and at this point you feel medically groomed and ready to develop your own practice. Screech, halt, back up the bus.

For physicians, business billing acumen is another critical area of knowledge needed to evaluate an employment contract and to run a successful practice. Unfortunately, acquiring business knowledge is often sidelined until the ball is in play and headed down field.

As with any business, success in a medical practice is defined numerically—amount billed and amount collected. Physicians who don’t get the first down in understanding medical billing rules, regulations and collections are setting themselves up for serious financial challenges; the consequences are even more dire if you are embarking upon a solo practice.

Why billing matters

Just as medicine has a language of its own, accounting also has terminology specific to its practice. As a physician, you straddle the fence between learning the first extremely well, while understanding enough of the second so that you can impart financial information to all stakeholders.

Becoming knowledgeable in the “foreign language” of accounting ensures that you know enough to limit practice losses from patients who are uninsured or underinsured, while still providing the patient care that’s needed.

In a business where medical professionals want to care for individuals without regard to economics, keeping the balance sheet in the black becomes even more critical. Approximately $125 billion goes uncollected by U.S. medical providers each year. Part of that delta comes from individual health care consumers who have been handed a heftier financial burden from insurance companies due to rising out-of-pocket costs.

As a result, the payment shift has altered financial policies at most medical practices; physicians now place even greater emphasis on patient communications, while the practice has an eagle eye on revenue cycle management.

Because billing and collections are crucial for practice sustainability, expect that your salary and compensation as a physician will likely be tied to this accounting quagmire in one of three ways.

1 Billings or Accounts Payable (A/P): The process of submission, follow up and appeal of claims with health insurance companies used to obtain payment for medical testing, treatments and procedures.

Payment formulas based on billings will likely pay you a percentage of the money billed for the work you have performed.

2 Collections or Accounts Receivable (A/R): The amount of money your practice has a right to collect in return for services rendered and billed. The medical care, already provided to the patient, is given on credit and will be paid at a later date, hopefully sooner rather than later.

Considering the recent payment shift where individuals shoulder more of the cost of care, a collection-based payment formula requires more due diligence because your pay will be dependent upon the employer’s billing capabilities. In this scenario, the practice must first be paid, before you receive compensation for your work.

3 Relative Value Units (RVUs): A value assigned by the Centers for Medicaid & Medicare Services (CMS) to each CPT/HCPCS code. That value represents the cost for providing the service.

RVUs represent a combined total of three components, each individually adjusted based upon geographic location. As such, these units require more calculations and can often overwhelm those first exposed to them. Those three components are:

  • Physician work: Time and clinical skill for treating a patient during a visit
  • Practice expense: Labor costs, administrative costs, building expense
  • Professional liability insurance expense: Malpractice insurance premium costs

RVU-based compensation formulas only count patient encounters. For physicians practicing in a hospital setting, the amount of required administrative duties, all unpaid under this payment structure, must be weighed carefully.

Most employers don’t place physicians in an “eat what you kill” position for pay. Instead, productivity compensation is provided as additional incentives on top of base pay. Therefore, understanding how these numbers are calculated, knowing the history and average of practice collections, as well as the nuance involved in A/R numbers, will help you weigh one job offer against the next and have a financially healthier practice as your medical career blossoms.

Net 30/60/90­—or never

One thing is known about spreadsheets and balance sheets: You don’t get a full picture from only one number. In evaluating the financial health of a practice, you must look at several A/R variables.

Days in A/R: This number results from dividing the total A/R by the average daily charges for the practice. (For example: 30 days in A/R means that the practice is due payment for the equivalent of 30 days of work.) One caveat: This number does not include the age of any payment.

A/R by Age: This number represents the time since billing for a particular service. Bookkeepers and accountants place payments due for services in specific buckets. You’ll find a 0 to 30-day bucket, 31 to 60-day bucket, a 61 to 90-day bucket and so on. Once a bill passes 90 days, the chances that a practice will receive full (or any payment) significantly declines. To calculate ongoing collection performance, divide the A/R in each bucket by the total A/R to get a percentage.

Bucketed A/R month over month: Monitoring the percentage of total A/R in each bucket every 30 days and comparing it to prior monthly performance will give you a landscape view of the practice’s financial health.

For new physicians who want to dig deeper into this “business of the business” area, check out the Healthcare Financial Management Association (HFMA). The organization’s website provides a wealth of information from its members, comprised of health care executives and financial managers from provider organizations, physician practices and health plan markets.

By investing the time now to learn about cash flow, balance sheets and accounts receivable, you will be in a better position to stay in control of working capital wherever your medical career takes you. 

Jeff Hinds, MHA is president of Premier Physician Agency, and has guided hundreds of physicians through the dizzying job search process. He helps secure ideal practice opportunities for physicians, and with the help of a team of experts, provides security for physician contracts worth millions.



Money talks

How to address the compensation discussion with prospective employers.

By Jeff Hinds, MHA & Justin Mongler | Financial Fitness | Summer 2019


“Do you have any salary expectations or requirements that we should know about?”

Conversations about compensation expectations or requirements are some of the most difficult (albeit some of the most important) topics to be discussed with a potential employer—and you can bet they’ll come up during the interview process.

As the interviewee hoping to secure the coveted job offer, it’s crucial that you fully understand the dynamics surrounding this question and the potential ramifications that exist regarding how and when the discussion occurs.

When to talk money

The general rule is to let the potential employer initiate the compensation discussion. A candidate initiating this conversation too early may run the risk of coming across as being too aggressive or motivated only by money—traits that could deter the employer from seriously considering you.

Though it does vary by employer, it is not uncommon for some variation of the compensation question to arise as early as the initial phone interview. While the specific numbers are not likely to be discussed or disclosed that early in the process, the question is typically used as a screening mechanism to filter out any candidates up front that may not be a viable option.

Candidates expressing unrealistic expectations can be eliminated earlier in the process before the employer has to spend additional time and resources to bring that candidate onsite. Regardless of how early the question arises, you should be prepared to respond accordingly.

How to best answer

To determine your best response, you must consider both the employer’s motive for asking this question, and how your answer may affect the eventual offer.

Any number you throw out has the potential to be too high or too low. If you disclose a number that is too high, they may immediately dismiss you from consideration if they have other candidates of equal caliber with lower expectations. Conversely, if you disclose a number that is too low, you could significantly decrease your potential offer if they were initially prepared to offer more than what you disclosed.

As such, your primary goal is to attempt to get the employer to disclose their number (or range) first. This can be accomplished in many cases by simply turning the question back around to the employer. The response could be as simple as: “This is my first position out of training, and I’m not entirely sure what I should be expecting or what is appropriate in your area. What should I be expecting?” Or: “Compensation is not my top priority; I do not have a specific number in mind, as I am more concerned with finding the best fit.” Some variation of that approach can help you avoid the risks associated with disclosing a number too early and allow you the opportunity to move forward in the process while also buying time to research or discover your actual worth prior to an offer being extended.

How to determine what’s an appropriate offer

There are a number of ways to research and uncover relevant compensation data to determine market value for your specific specialty. Possessing this data is invaluable after you have received the offer and proceed with the final compensation discussion and contract negotiation.

Employers will be much more receptive to compensation negotiations when you have the data to support your request versus throwing out random numbers. Employers will typically have a range within which they have budgeted for this position. Possessing the market data could help you maximize your position within this range. Employers commonly use compensation surveys from the Medical Group Management Association (MGMA), the American Medical Group Association (AMGA) and Sullivan Cotter, among others, to determine market value for their providers. These are great resources for you to use, too, as part of your market evaluation.

In addition, there is great benefit to going on multiple interviews and collecting multiple offers. Not only are you then able to make the most informed decision, but you’ll also have multiple options to use as part of your negotiations.

In short, your leverage and ability to negotiate compensation on the back end is greatly influenced by the market data you possess. However, this data/leverage may become insignificant if you fail to approach compensation discussions appropriately from the onset of your search.

Jeff Hinds, MHA is president and Justin Mongler is vice president of Premier Physician Agency, LLC, a national consulting firm specializing in personalized physician job search and contract assistance.



Upping your income (and $ know-how)

How to successfully transition from the salary of a resident to that of a practicing physician.

By Christian Claudio | Financial Fitness | Spring 2019


The transition from residency to becoming a fully licensed physician is an exciting one that typically includes a significant financial increase. Invest the time now in managing your new financial situation, and you’ll likely reap rewards both in the short- and long-term.

So what are some of the basic issues that newly-graduated residents should be contemplating? I asked Jerret Sykes, CFP, a Northwestern Mutual financial advisor who has been counseling new physicians for years.

Claudio: What is the most important first step physicians should take following graduation from their residency program?

Sykes: The first step, which is perhaps the most important, is preparing a financial plan.

You’ve been living like a pauper for the last several years, working your fingers to the bone and not getting compensated adequately for it. You’ve no doubt seen all your non-resident friends from high school and college buying homes and taking bucket-list vacations. Your income is about to increase significantly, and the temptation is to try and catch up with them as quickly as possible.

This instinct, while understandable, can lead you to make a string of poor financial decisions. The solution is, instead, to work with a trusted financial adviser to develop a proper financial plan.

Claudio: One of the biggest issues new physicians have to contend with is student loan debt. What’s your advice for dealing with student loans?

Sykes: You’re likely entering your career with six figures of student loan debt. There are multiple options that you can look into in order to efficiently pay these down or have them forgiven altogether.

One of the best things to do now is to look into whether it makes sense to refinance your loans to get a more favorable interest rate. If you’ll be working for a 501(c)3 (and still have federal loans), you’ll want to understand how to qualify for PSLF (Public Service Loan Forgiveness).

A couple of really good resources to get educated on student loan options are whitecoatinvestor.com and nerdwallet.com.

Claudio: What’s another building block of financial security that physicians should consider?

Sykes: Risk management is the foundation of your financial future. You’ve worked tirelessly to get to this point, where your income is going to finally match your efforts. Protecting your future unearned income is essential.

Risk management includes:

  • 3 to 6 months of cash (emergency fund)
  • Maximum disability policy to help protect your income
  • Life insurance that totals 12 to 16 years worth of salary

Most physicians will probably earn more than $10 million over the course of their careers. What could derail this earning potential is premature death or a disability that prevents you from practicing medicine. To mitigate these risks, consider purchasing a strong life and disability insurance program.

Claudio: Should retirement planning be a consideration at this point?

Sykes: Absolutely. What we typically see with physicians reaching the end of their residency or fellowship and who are experiencing a big jump in income is that they immediately start putting a massive amount toward their student loan and/or credit card debt and spend the remainder on the “fun stuff” that they’ve been deprived of for so many years.

While being debt-free is a great objective, it’s also important to understand the power of compound interest. Money doubles every 10 years if you average 7.2 percent returns on your investments. Your college friends have been funding their retirement accounts for eight to 10 years already; they have a big head start on you. The runway for you to be financially secure by age 60, 65 or even 70 is much shorter than most professionals. However, the good news is that catching up is still a definite possibility.

In order to catch up, you should probably be maxing out your qualified retirement accounts, such as a 401(k) or 403(b). Begin maxing those out on day one if you can.

The challenge for physicians with these retirement accounts is that there’s only so many pretax dollars you are allowed to contribute on an annual basis. This will require you to look outside into the “non-qualified” arena to find good places for long-term dollars such as investments, annuities, and cash value life insurance.

Creating a financial plan, developing risk management strategies, maxing out pre-tax retirement contributions, and paying down debt should be the very first steps graduating residents consider in order to create a path to financial security.

Christian Claudio is a Regional Director of Physician Recruiting with Envision Physician Services. Jerret Sykes, CFP, is a certified financial planner at Northwestern Mutual in Dallas.



To buy or not to buy…

Moving for work? Here are the options physicians consider.

By Karen Landry | Financial Fitness | Winter 2019


Cardboard boxes in room

Signing an employment contract doesn’t always come easy for physicians. The stress of a move, along with the decision of whether or not to purchase a home, can be daunting. Add to that the student debt held by today’s graduating medical students and new attending physicians, and many think the dream of home ownership is years away. Here are some of the options physicians face.

Buying a house

When comparing a purchase rather than a lease, it’s important to obtain information about the area based on sales trends. When a market is experiencing growth and an upswing in pricing, it’s a good time to buy. This is especially true if the physician plans to live in the property three or more years.

If the market is declining, the most important factor would be the net mortgage payment taking into consideration the tax advantage of home ownership. Communicate your purchase plans with a trusted financial adviser, local real estate agent or CPA to accurately determine net costs.

Deciding to rent

If renting is a consideration, consider the customary upfront fees in that particular area. Many times the costs can include first and last month’s rent, security deposit and one month’s rent for a broker’s fee. This can become a very expensive feat.

Other options

Many new residents choose to purchase a condo rather than a single-family home, allowing for a smaller mortgage, ease of maintenance and the potential to use the property for future rental income. In many areas, this is a more affordable option than renting. There are also unique health care provider lending services and loans specifically for practicing physicians, dentists, residents and fellows. Some of the benefits include up to 100 percent mortgage financing (varies by state and price range), waived private mortgage insurance, and fixed or adjustable rate mortgages to reduce monthly payments. Student loans that are deferred or in forbearance are not considered in the qualifying ratios, which allows for more purchase power.

Physicians have worked for years to join the ranks of an elite few and deserve to have the best financial resources available for one of the biggest decisions they will make.

Karen Landry is a licensed real estate agent and is the owner of Pulse Concierge Services for Providers. She specializes in physician relocation with in-depth resources for specialized physician loans.



5 common student loan questions

Being strategic about your student loans and repayment will help you maximize your compensation.

By Jason DiLorenzo | Fall 2018 | Financial Fitness


Loan Repayment

As founder of the company Doctors Without Quarters (DWOQ), I speak to residents and fellows often about their financial goals—and how to get there. The answers to these five common questions can help you, too, manage your debt and maximize your income.

1 Most of my federal student loans are between 5.4 and 8.5 percent. Are there opportunities to refinance to lower rates, and if so, does that make sense?

This is an important question, as many students and graduates are being approached or seeing advertising for lower rates available from companies like SoFi, Laurel Road, Credible, CommonBond, Earnest and many others.

The private lending marketplace has become increasingly crowded and competitive over the last year, which is good for borrowers. The issue to consider is suitability, as lenders tend to be transaction-focused and refinancing isn’t always the best option for you.

Once you refinance federal loans to a private lender, you lose all of the federal benefits. Though a 3 percent rate might seem attractive, if it comes with a high origination fee and is a variable rate loan, you might find yourself in a more costly loan if rates go up from their current historic lows.

Even more importantly, a refinanced loan will also not be eligible for Income-Driven Repayment (IDR) plans or the substantial loan forgiveness available through these programs for those who work in nonprofits or public service.

2 Are public service and federal loan forgiveness really viable options?

I’ll assume that most of you at this point are familiar with the PSLF program (if you aren’t, please contact me), and that your residency/fellowship can count toward this 10-year clock if you’re utilizing an IDR. Some people don’t believe that this program will exist as it does currently, and in fact recently proposed legislation suggests considerable changes.

But housestaff at nonprofit programs should be reassured by a few things. For one, the Master Promissory Notes created a legal contract between you and the federal government saying that you borrowed under the assumption you’d be able to utilize the PSLF program under the terms of the program at the time you took out the loan.

Secondly, if you’re actively working toward repaying your loans through the PSLF program and have made economic decisions based on the program’s details, you’ve demonstrated a reliance on the terms as they exist today. As such, the federal government may be obligated to grandfather you in through any changes to the laws. In summary, we hope this means you’re unlikely to be affected by the proposed changes.

3 When and why would it make sense to consolidate my loans?

In July 2010, Direct Loans became the lender for all federal student loans. Stafford and Grad PLUS loans borrowed prior to this time may have been originated by a private lender (Sallie Mae, Wells Fargo, etc.) under the FFEL program. These loans need to first be consolidated to Direct Loans before making IDR payments on them will qualify for PSLF.

Furthermore, Perkins and select need-based loans are not eligible for an IDR on a stand-alone basis, but they can be consolidated to Direct Loans for eligibility. Variable rate loans originated before July of 2006 can also be fixed at extremely low rates through consolidation.

If you’ve yet to enter an IDR, the first step in your action plan is to review all of your loans and determine if a consolidation is necessary to maximize your savings opportunity.

If you have already completed qualifying payments towards PSLF, consolidating to a new loan will actually create a new loan and erase your progress toward PSLF. Don’t do this!

4 What is loan forbearance, and why might using it be a bad idea during my training? Isn’t that what residents used to do?

In forbearance, no loan payments are required, but interest continues to accrue. It’s true that in past years, many residents did not pay on their loans during training. But times have changed, and loan forbearance is typically the most costly option for today’s residents.

Though forbearance allows you more access to your modest training income, it is important to note that ALL of this interest accrues with no federal subsidy or forgiveness opportunity. Furthermore, interest can capitalize in each year that forbearance is renewed. A resident with $220,000 of federal student loan debt will accumulate almost $65,000 in additional interest over the course of a four-year residency by using forbearance.

Choosing among the available IDR plans is likely a superior alternative, as they require affordable loan payments during training, provide an interest subsidy, and can position many residents and fellows for significant loan forgiveness.

5 How should my loan repayment strategy change after training?

This is the most critical loan decision you’ll make if you’ve been using available IDRs strategically during training, particularly if you’re deciding between offers from a PSLF-qualified employer and a private sector employer after training.

In one of our case studies, a graduating resident after four years of training with $250,000 in federal student loan debt was comparing a $150,000 salary directly by a nonprofit hospital and a $205,000 salary from a for-profit program.

After contemplating the after-tax impact of PSLF and the corresponding reduction in payments required for the next six years, the $150,000 salary was actually worth over $240,000 on average for that six-year period. Only by utilizing an IDR during training can you position yourself for this opportunity.

Jason DiLorenzo is founder and executive director of Doctors Without Quarters, which helps physicians strategically manage their student loans. Since 2010, he has spoken at medical schools, hospitals and conferences nationally on the topic of student loan legislation and its impact on early-career physicians.



What’s your student loan strategy?

Managing your student loans effectively takes an understanding of the payback programs available.

By Jason Dilorenzo | Financial Fitness | Summer 2018



College debt

When it comes to practicing medicine, you’re an expert. When it comes to providing strategic repayment guidance for your student loans, you might need some help.

Of the five income-driven repayment (IDR) plans available today, there are really three that are most suitable for today’s house staff with federal student loan debt:

  • Income-Based Repayment (IBR)
  • Pay As You Earn (PAYE)
  • Revised Pay As You Earn (REPAYE)

Income-based repayment (IBR)

IBR was launched in 2009. It’s a federal repayment program that limits monthly loan payments to 15 percent of your discretionary income. To be eligible, a partial financial hardship must exist, meaning that 15 percent of your discretionary income, calculated on a monthly basis, is less than what you’d be required to pay on a 10-year standard repayment plan.

This hardship exists for most trainees with federal student loan debt, as 15 percent of the discretionary income of a single resident with a $50,000 salary would result in a roughly $400/month payment. The 10-year standard monthly payment on $220,000 of debt, by comparison, would cost about $2,500/month. Clearly, a hardship exists.

IBR is also a qualifying repayment plan for the Public Service Loan Forgiveness (PSLF) program. Taxable loan forgiveness is granted through IBR after 25 years of repayment. However, payments in IBR are capped at the 10-year standard payment amount established when the borrower entered IBR. Because of this cap, many attending physicians would pay off their loans through IBR before the 25-year forgiveness period expires.

IBR is the least-used IDR plan by today’s graduates since the introduction of the following programs.

Pay As You Earn (PAYE)

PAYE was launched in 2012. Similar to IBR, PAYE limits payments—but to 10 percent of a borrower’s discretionary income instead of IBR’s 15 percent. Under PAYE, taxable loan forgiveness is granted after 20 years of repayment. The payment cap is also the borrower’s 10-year standard repayment amount. PAYE is a qualifying repayment plan for PSLF as well.

Only borrowers who have no outstanding balance on a federal student loan issued prior to October 1, 2007, and who took out a federal student loan on or after October 1, 2011, are eligible.

Revised Pay As You Earn (REPAYE)

REPAYE became available in December of 2015, and it may make sense for continuing house staff to consider entering the program. Here’s a brief summary of its features:

  • 50 percent of accruing interest is paid by the government (making unsubsidized loans partially subsidized)
  • Payments of 10 percent of discretionary income required (just like PAYE)
  • PSLF eligible
  • If you switch into REPAYE from IBR, the 10-year forgiveness clock won’t reset (unless you consolidate)
  • Household income will be used regardless of how you file taxes
  • 25-year taxable forgiveness for graduate students
  • No cap to payments (10-year standard in IBR & PAYE)

A note about enrolling

Once you enter one of these IDR plans, you cannot be removed from them (although you can switch between them as appropriate), even if the hardship that qualified you does not exist after training, when you’re making more income.

Therefore, a critical part of your repayment strategy is to perform an analysis and determine the best course of action based on your salary and sector of employment AFTER training.

Paying it back

I’m often asked: “If I can afford to make larger payments than required in an IDR plan while I’m in residency, should I?” This is an extremely important question, and my answer is somewhat counterintuitive.

I generally believe you should not pay more than required through an IDR during residency, because those overpayments likely compromise both your subsidy savings and your potential loan forgiveness.

In addition, unlike in forbearance, interest is not capitalized while you’re in training and have the hardship that qualifies you for these programs.

If you’re an intern or a PGY2 and your required payment is less than $100/month, you might be able to afford $400/month. But instead of overpaying on your loans, I would suggest placing that extra in a money market or savings account. Even if you get 1 percent return on those funds, it’s actually outperforming the accruing interest on your loans because the interest isn’t capitalizing during your training.

If your employment after training no longer positions you for significant loan forgiveness, you’ll be able to apply this savings toward the repayment of accrued interest before it capitalizes. If you remain employed by a non-profit or government entity after training, you can retain this savings and allocate it to other vehicles.

Refinancing is an option

In addition to the opportunity for savings available through federal programs, the private refinancing marketplace has recently become both crowded and competitive for many graduate health professionals. Refinancing reduces the interest rate on the loan portfolio, saving the borrower a substantial amount of interest cost over the life of the loan.

In order to achieve these savings, however, you must forgo all federal loan benefits, including forgiveness. As such, a suitability analysis should be conducted in order to assess the applicability of those benefits for each borrower. Only once suitability has been determined and the risks are understood should an application be submitted.

Jason DiLorenzo is founder and executive director of Doctors Without Quarters, which helps physicians strategically manage their student loans. Since 2010, he has spoken at medical schools, hospitals and conferences nationally on the topic of student loan legislation and its impact on early-career physicians.



What’s your retirement plan?

When it comes to retirement, you either outlive your assets or they outlive you. The deciding factor is whether you have a formal, comprehensive plan.

By James McNaughton | Financial Fitness | Spring 2018


Glasses and clock on the business paper. Report chart

When it comes to retirement, you either outlive your assets or they outlive you. The deciding factor is whether you have a formal, comprehensive plan.

Depending on your specialty, you just spent the last 12 to 15 years of your life preparing for your “real job.” While your friends from undergrad have been in the workforce for 10 years, you have been increasing your debt load during medical school while working for a fraction of your worth during residency. You have given up one of the most important components of investing: time.

Fortunately, physicians can earn a higher paycheck than most. Unfortunately, the temptation to purchase items that were unrealistic during residency (luxury cars, large houses) can be overwhelming.

The good news is that, by exercising some common sense and creating a formal plan, accumulating the assets needed for your “work optional” lifestyle is not as difficult as it seems.

Create a budget beyond student loans

Creating a budget is a great idea for two reasons. First, it will give you an idea of how much you spend on necessities, the things you need to live. Secondly, it will determine your discretionary income, or surplus, after you cover the necessities.

From this discretionary income, you can determine how much you need to invest to achieve your target retirement age. There will be non-investing factors, such as the cost of setting up a practice or running expenses for a clinic. There will also be investing factors to consider, such as contributing to a taxable account vs. retirement accounts.

Start saving early

Once you decide on a “work optional” age, you’ll need to calculate how much to invest each year to accomplish your goal. You will also want to choose a hypothetical rate of return determined by your risk tolerance.

Everyone’s risk tolerance is different. If you are able to tolerate volatility and have a long-time horizon, a portfolio weighted more heavily in equities may be suitable for you. If market volatility gives you sleepless nights or you have a shorter timeline, a balanced portfolio consisting of equities and fixed income may be more suitable. Be sure to consult a financial professional if you are unsure of your risk tolerance.

Inflation is another factor to consider when creating a financial plan. Inflation is the rate at which the general level of prices for goods and services increases over time. Consequently, inflation can erode purchasing power, something to consider when building your portfolio.

Consider Dr. Jones, 30, fresh out of residency. She would like to have a “work-optional” lifestyle at age 66. She desires to withdraw $8,000 per month from her retirement accounts, adjusted for inflation. Using 3 percent inflation, Dr. Jones will need to withdraw roughly $24,000 per month at age 66 to maintain the same purchasing power as today. At a 4 percent withdrawal rate, she would need a retirement account of over $7 million!

Fortunately, time is a great ally for young physicians. What may seem daunting fresh out of residency can be achievable with some planning and discipline.

Don’t get caught up comparing numbers, as everyone’s situation is different. There are many factors that can influence your plan. Social security benefits, pensions, private business interests, liquidating shares of a surgical hospital or selling a practice can all impact your situation. The important thing is to be proactive and work with a qualified financial professional.

Establish an emergency fund

It’s recommended to have three to six months of expenses in a liquid, low-volatility account. If you are the primary income source in your household, six months should be the target. If your spouse is also a high earner, you could reduce your fund to cover three months.

Look for an FDIC-insured, high-yield savings account. As interest rates have gone up, so have the yield on these accounts. It’s best to avoid investments with volatility, such as individual stocks or equity funds. Think of this money as an emergency fund only, not a slush fund for entertainment purposes!

Work with a professional

Similar to the medical profession, the financial industry offers an array of designations. The term “financial advisor” can be used to describe a very diverse field of individuals. It is in your best interest to form a relationship with someone who can represent and work with several companies or investment products. Even as a resident or newly practicing physician, you need to be proactive with your retirement plan. Your financial numbers need to be monitored and reviewed just like your personal health. If you don’t like your current financial situation, it is much easier to make changes in your 30s and 40s than it is in your 60s.

James McNaughton, CFP, is a partner at Siouxland Investment Group, LLP, and financial adviser for Premier Physician Agency, LLC, a national consulting firm specializing in physician job search and contracts.

(Disclosure: James McNaughton is a registered representative and a registered investment adviser of Hilltop Securities Independent Network Inc. a registered broker-dealer and a registered investment adviser that does not provide tax or legal advice. Views and opinions expressed herein are solely the author’s, and not Hilltop Securities Independent Network Inc. member of FINRA and SIPC and a wholly owned subsidiary of Hilltop Holdings, INC. (NYSE: HTH), with headquarters at 1201 Elm Street, Suite 3500, Dallas, TX 75270 (214-859-1800). Premier Physician Agency, LLC is not affiliated with Hilltop Securities Independent Network Inc.)



4 Bases to Cover in Your Compensation Arrangement

Your employment contract will spell out your base salary, bonus opportunities, loan repayment and noneconomic benefits. It’s up to you to understand them.

By Bruce D. Armon | Fall 2017 | Financial Fitness


Business woman standing in front of a blackboard with a financial chart

“A nickel ain’t worth a dime anymore.” –Yogi Berra

Yogi Berra was a great catcher for the New York Yankees. He was an 18-time all-star, a 3-time MVP, won 10 World Series, and was elected to the Major League Baseball Hall of Fame. He was the ultimate winner in a team sport.

Most physicians, too, are valuable players on their teams. And for physicians, the most significant way to be rewarded for a job well done is through their employment contracts.

If you have a great year, there are upside opportunities that can be included in your contract to reward those successes. And just like a major league baseball player who has a guaranteed contract, a physician with a multi-year deal may have protections in an “off” year as well.

The four bases (baseball pun intended) of a physician’s compensation arrangement are base salary, bonuses, loan repayment (particularly for more junior physicians) and noneconomic benefits.

Base salary

“You better cut the pizza in four pieces because I’m not hungry enough to eat six.” –Yogi Berra

For most physicians, the base salary—the amount you’re paid annually over the contract term—will be the predominant source of income communicated in the employment contract. Before signing a contract with a base salary included, make sure you understand how the salary was determined. Is there independent verification of its appropriateness? When (if at all) will the base salary change, and under what circumstances? How frequently will you get paid: weekly, bi-monthly, monthly?

No physician wants to be or believe they are not being paid as competitively as their peers in the same geographic region with comparable experience and job responsibilities. Independent salary statistics, such as those from the Medical Group Management Association (mgma.com) or the Association of American Medical Colleges (aamc.org), can help you get a ballpark figure.


“When you come to a fork in the road, take it.” –Yogi Berra

Most physician bonuses are based upon some element of productivity. Productivity is often measured in cash. How much a physician personally produces will dictate the bonus threshold. An employer may state that a bonus can be achieved based on some multiple of your base salary, e.g. 1.5, 2 or 3 times. Some employers use wRVUs as the bonus threshold to avoid the variances from the payer’s reimbursements. Understanding reasonable wRVU thresholds (how many wRVUs you must produce to earn the bonus) is essential to making sure the bonus is not illusory and out of reach. An employer may do a combination of your productivity versus overhead to determine if a bonus is earned. It is important in this scenario to understand how overhead is calculated. Is each physician responsible for the same overhead? Is it based on your actual expenses? In any cash-basis bonus, it is important to understand whether trailing collections for payments received after termination or expiration of your employment agreement are included as part of the bonus calculation.

Loan repayment

“It ain’t over till it’s over.” –Yogi Berra

An employer willing to pay some or all of your loans can be a wonderful perk, but you must understand the conditions for payment. Some employers require you to be employed and in good standing at the end of each contract year before the loan amount is paid. Others may provide loan repayment on a monthly basis. An employer may “cap” the amount of the loan to be paid over the life of the contract. Or, there may be other conditions, such as a certain amount of productivity or attending a certain percentage of committee meetings.

Noneconomic benefits

“The towels were so thick there I could hardly close my suitcase.” –Yogi Berra

Salary, bonuses and loan repayments are wonderful benefits —but noneconomic perks can also have significant value.

Imagine deciding between two contracts. One contract pays $35,000 more annually. The higher-paying contract provides you with individual health insurance and a claims-based professional liability policy that requires you to pay the cost of the “tail” policy upon your departure for any reason.

The contract with the lower annual salary provides family health insurance, life insurance for you, 401(k) match, occurrence professional liability coverage that does not require you to pay for a “tail,” $5,000 annual CME allowance, payment for licenses and dues for professional societies, the ability to moonlight and retain that compensation, a signing bonus and reimbursement for moving expenses.

When viewed in the entirety, the contract with the lower base salary may actually be a much better option.

“You’ve got to be very careful if you don’t know where you are going, because you might not get there.” —Yogi Berra

When these four compensation components of the employment contract are coordinated, you can hit a professional home run. If one or more of these elements is missing or incomplete, you may strike out and feel the need to move on to the next job.

Bruce D. Armon is a partner and chair of the law firm Saul Ewing’s health care group—and a baseball fan. Bruce has helped hundreds of physicians and employers with contracts and all participants in the health care delivery system with health care transactional, regulatory and compliance matters.



Budgeting for your job-search expenses

To make the job-search process easier on both you and your wallet, anticipate and budget for these potential expenses—and ask your employer what’s covered.

By Jeff Hinds, MHA | Financial Fitness | Spring 2017


As you embark on your job search, it is important to be aware of the potential personal expenses that may arise throughout the process. Though it is not uncommon for employers to cover some of these expenses, you should familiarize yourself with them at the onset of your search so that you know what to expect down the road.

Site Visits / Interviews

Ideally, any expenses associated with on-site interviews will be covered by the employer upfront or reimbursed later on. However, that is not always what happens. It is not unheard of for employers in highly competitive areas to expect out-of-town candidates to cover their own costs if the employer has other local options. Before you make a site visit or interview trip, make sure to confirm with potential employers who is responsible for the costs if it’s not made clear upfront. These may include airfare, gas, rental car, hotel and food costs, all of which could be rather expensive depending upon the location and travel distance.

Immigration Assistance

International Medical Graduates who have yet to obtain permanent resident status or citizenship may require the assistance of an immigration attorney both when exploring the potential restrictions associated with their job searches and when filing documentation after successfully securing a job. In many instances, the employer will have a pre-existing relationship with an immigration attorney for you to use and/or may agree to cover all associated immigration costs if you already have an immigration attorney. This, too, however, will vary by employer and is something that you should take into consideration and prepare for as you assess your potential job-search expenses.

Contract Review

A professional contract review should be considered a necessary expense for all physicians. Beyond the compensation package (which tends to get the most attention from physicians), there are many legal provisions within a contract that have a substantial impact on you both professionally and personally even beyond the terms of the agreement. Because of this, it is highly important that you have an attorney (one with significant experience in reviewing physician contracts) conduct a full legal review of your contract before you sign it.

In addition to the legal review, some groups will also conduct a compensation analysis and provide negotiation assistance to physicians. Consider your options, do due diligence in determining your needs, and confirm the total cost for the review—it will vary significantly depending on the scope.

State Medical Licensure

If you are taking a position in a state where you do not already possess a permanent medical license, this may be an additional expense to expect as part of your total job-search costs. Again, this may be an expense that your employer commits to cover in your contract; however, that is not a given for all employers. It is yet another item you need to take into consideration (and eventually confirm with your future employer) as you assess your expected expenses.

Relocation Expenses

The largest potential expenses of your job search are those associated with relocation. These may include the costs of selling your current house, purchasing or renting a new house and hiring a moving company.

This is an expense many employers are willing to assist with in the form of reimbursement up to a certain dollar amount, which should be outlined in your contract. Seek quotes from moving companies to confirm that the total cost will be reimbursed by your employer.

Jeff Hinds, MHA, is president of Premier Physician Agency, LLC, a national consulting firm specializing in physician job search and contracts.



How physicians get paid

Before you can evaluate your offers, you need to understand the lingo used.

By Matt Wiggins | Fall 2016 | Financial Fitness


“Why is it that so many of us think that compensation is only about numbers?” asked one internal medicine resident recently. I stared, not knowing how to immediately answer. After helping thousands of physicians with their contracts through the years, I should have a great answer. Then it struck me!

My answer: Most doctors are led to believe that their struggles through training are due to a number, their training program salary, and that everything will be solved by a new number, their attending income.

This means that many physicians probably focus on the numbers in their contracts without understanding the legal apparatus around them. After all, won’t it be the attending income number that helps you pay off your debt? Won’t it be the sign-on bonus number that allows you to cover the expenses during your transition into this next (or first) job?

Compensation types

The best place to start is by understanding the different types of compensation.

Sign-On Bonuses. A true sign-on bonus is given to you within a short amount of time after you sign the contract. A commencement bonus is given to you within a short amount of time after starting your work with the new employer. A sign-on bonus is often preferred as it may give you some cash during a period when you may not be earning any money. A commencement bonus is often preferred by employers since they don’t have to pay it until you are actually working. If you find yourself negotiating between the two, you may have to compromise and take half after you sign and half once you start.

Guaranteed Salary. When it comes to physicians and finances, this is one of the all-time favorite word combinations. Think about it: You have the word “salary” preceded by the word “guaranteed.” Both are good words, and both connote “security.” This is simply a number that is guaranteed by the employer to be paid to you over the course of the contract. Once the contract is signed, it typically can’t be altered by performance or changes within the employer for the duration of the contract. As specialization increases, it seems that guaranteed salaries are less prevalent. Family practice and general internal medicine doctors will most likely see this type of compensation while interventional cardiologists and neurosurgeons will most likely see the next type of compensation: productivity-based.

Productivity-Based Salary. This is when compensation gets exciting and scary altogether. If you are or will be working for an employer that pays you based on your production, you may have the ability to make more money than if you were on a guaranteed salary. However, you also have more risk. If your production is higher than expected, you will be compensated for it and earn more than some of your guaranteed-salary counterparts. If your performance lags behind expectations, so will your income. The most common metrics for evaluating performance are net collections and RVUs although other models, such as capitation methods, are also used.

Productivity Bonuses. By now, some of you are probably thinking that productivity-based income sounds scary and complicated and you will be glad to not have to keep up with such a thing. However, even those of you on guaranteed salaries may have bonuses tied to some production metric. These bonuses are similar to the salary formulas above in that you will only be paid a bonus if your production exceeds the expected metric and covers the base guaranteed salary you are being paid.

Traps and Pitfalls to Avoid

Now I’ll share with you some of the frequent compensation traps and pitfalls we find in physician contracts.

Repayment Obligations. Several years ago, a doctor came to us and told us a story that should cause trepidation in every physician. He had signed his first contract out of training and was looking forward to moving back to his hometown and working as an orthopedic surgeon with the only practice in town. His salary was stated as $500,000 a year. He thought it was a fair offer and signed without much analysis. However, during the course of his first year in practice, some unforeseen matters arose, and he was unable to work as much as was expected. He kept getting paid his salary, for which he was very grateful. However, at the end of the year, the practice sent him a notification that he owed them $300,000! His salary had a repayment obligation on it and, at the end of the year, they would pay him or require from him a surplus or shortfall based on his production. He did not have $300,000 in his checking account and had to borrow the money on top of his already burdensome student debt.

This story is not uncommon and applies to salaries, bonuses and other benefits. Anything you receive from the employer could be required to be paid back in part or full if you are unable to satisfy certain terms of your contract. It’s worth noting that this doctor was savvier than most we encounter and still made this mistake.

Not Knowing or Tracking the Metric. One of the necessities of all sporting events is that the score be kept by an impartial observer or equally by a party from each participating person or team. In the case of production-based salaries or bonuses, many doctors allow one team, the employer, to make the point system and keep score without the doctor, or a representative of the doctor (CPA, attorney, etc.), understanding the system or keeping score simultaneously. One of the top reasons physicians leave their current employers is due to unmet expectations. One of the most prevalent unmet expectations is income and comes from physicians not understanding or keeping track of the variable parts of their compensation.

Assuming the Best. We all know what assuming does … and it can be costly when it involves physician compensation. Don’t assume anything when it comes to your compensation. There is much more than just numbers that impact your income. Miss those items, and your bank account may have the right to sue you for financial malpractice.

Matt Wiggins (mwiggins@oncalladvisors.com) is the lead advisor and partner at OnCall Advisors, which helps physicians educate themselves on the non-clinical aspects of their lives. For more information like this on other life in medicine topics, check out their “Attending Life” online video curriculum.




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