New attendings.. what to look for?

[ENTdoc]

As residency is coming closer to an end, I am forced to think about some grown up decisions. I am hoping for some inputs from new and experienced ENTs out there about what I should be aware of and to be smart about as a new physician starting in a private practice.

I do have a few specific questions.

1) Disability insurance: do you need it? if so, what type and what are the differences really? When to get it?

2) Do you save up and pay your student loans ASAP, or stay on 30 yr plan at 5 to 6.8% interest?

3) What does being a "partner" actually mean? I know I should know this, particular since I am suppose to be a partner after two years with the group I'm joining. But quite honestly, I have no idea what it actually entails other than I will longer be salaried and I have voting rights in this group. Is that really what it's all about?

I appreciate your input and any other "smart" tips you can provide for someone about to start out in the real world.

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[DrBodacious]

As a new attending this year, I will try to answer.

Here is a really good thread from a couple years ago where some of the attendings in the forum here (resxn, Fah-Q, otohns) goes over some business aspects that I found very useful.

Disability insurance - I didn't carry it in residency, but it is real life now and if you don't have it and something happens you are really in a pinch for the rest of your life. There will probably be some insurance agents trying to sell it to you before you graduate so you can lock in a lower rate. Look carefully at how much coverage is provided. My policy I started after residency covers $7500/mo (or $15000/mo for "catestrophic disability"). Even that is not much compared to what I am making, but it will get me by if I can not work. I think you tend to pay for what you get. I was told that if you have more than one policy (i.e. you buy one in residency, and then you add one after to get more coverage) it gets a little more complicated where the policies have be modified specifically to account for each other, otherwise, if you are disabled, each policy can point the finger at the other one to pay and you actually end up missing out on at least a portion of the coverage that you thought you were paying for.

Student loans - I think debt is a good thing in today's economy. All the government stimulus is creating a lot of inflation, and another market slump is a real possibility, so trying to maximize your investment in the stock market is probably not the bets option. 6.8% interest rates on loans are too high, though. My wife had a bunch of those and we are paying them off quickly this year. I have some 2.7% loans, I will probably keep those for the entire duration. If you have any other assets or family you could tap in to, borrow from, or mortgage at a lower rate, that is helpful. It is really easy for attending physicians to get loans for a house or business real estate.

Partnership - There are a lot of different partnership structures, so that is a really good question. I would describe a partnership agreement as an agreement that delineates how the expenses, revenue, liabilities and assets of the parthnership are distributed. Beyond that basic definition, there are a lot of different ways that can be written out, depending on the needs of the people involved. I am in the process of joining up with a doctor in town, so we are working out how our arrangement will work for us. The real estate is usually separate from the practice corporation, so that may or may not be what is being offered in your partnership. Also, you could be thought of as a junior "partner" or an equal "partner." I have seen where the senior partner distributes all of the referrals to the junior partner. That is not what I was going for. There is a pretty big opportunity to be taken advantage of. Older docs can feel entitiled to a share of your earnings over your initial years, even after you are a partern, and depending on your compensation package (i.e. salary guarantee for the initial years of practice), they may be justified in feeling that way. The number one piece of advice I have on this is to not over-commit until you are in a really comfortable position regarding understanding the financials of the practice and your value in the practice. Similarly, be mentally and financially prepared to bail out and start practicing somewhere else if you find you are being taken advantage of. See the linked thread above for some good discussion on some partnership options.

 

[Pir8DeacDoc]

Good advice above! I have been in practice for about 1.5 years. I am in private practice and and working day by day to better understand the ins and outs of private medical practice. I have no background in finances, etc.

1. It would be a very, very, very poor decision to not have disability insurance. You are far more likely to be disabled than killed. Pay for this with post tax money or they will tax your payout if you ever need it. Key thing to look for is specialty specific coverage. Some cheaper policies will not include this rider and if you were unable to operate, they could force you to practice medicine in a non-operative capacity. You also want the ability to have your monthly payout increase but not allow them the ability to cancel your coverage. I took the most amount that my company would offer me. Do this independently for yourself, whatever coverage your office may offer is usually garbage. My yearly premium is around 3800. In the same vein, you should probably get life insurance. In fact, before I got approved for the bank loan for my real estate buy in, the bank wanted proof of my disability and life insurance.

2. I'm in a different position than you. I have about 125K in loans but the rate is 3%. I'm in no hurry to pay that back. I make the minimum payment each month for a 30 year period. I may bump it up at some point just to clean the slate, but it's such a low rate that I'd rather have my money somewhere else. ~ 7% is real money and I'd consider paying that back pretty quickly if you can. One of the new anesthesiologists here has a similar rate and he rented a very modest place for the first few years and paid a big chunk of his loans. I think a very good decision. Beyond that reason, no one knows which way healthcare will go and you don't want a huge payment 10-15 years from now when we may be making a lot less money.

3. The above partnership advice is very good. It's really just an agreement to have you share in the risks and rewards in the office. I had a one year income guarantee. Now I am a full partner. Buy in details can be quite variable depending on your situation. It can involve accounts receivable as well as tangible practice assets (chairs, booths, scopes, etc). Partnership agreement will determine how you are compensated. You can definitely get screwed over here, and you need to be careful. How are patients assigned to each provider? Do you get the uninsured or medicaid pts? Does the sr partner get the good insurance pts and better cases? No one tried that with me but that would have been a direct out for me. Have an attorney who is familiar with physician and preferably ENT partnerships review your contract. Money well spent. It would be nice to know this information before you even start, so the timeline and specifics for buy in are well laid out. My practice hadn't hired a partner in years and the process was more drawn out than any of us anticipated. The real estate buy in is a separate transaction. Key with that is to get 3 separate appraisals and average the three to come to a fair price. Be careful in a small town, there's always the chance the appraisers are friends with your senior partners. You can ask for an out of town appraiser. Shop around for the best bank rate. Much like residential real estate, the rates and terms can vary widely. It's a big transaction and most banks would like to have that type of safe business.

the key with the entire process is transparency. If you sense someone is trying to screw you over, they might be. It also might be just poor communication. I've personally become very paranoid that people are trying to screw me over since starting practice (you'll have a pretty big paycheck and everyone sees $$ signs when they come to do work or offer some service to you. get someone you really trust to help pick out life/disability insurance and/or investments). But generally that hasn't proven to be true. But it's never wrong to be very vigilant. Ask questions. If something feels wrong they should want to explain it to you and make sure you are comfortable.

Good luck

 

[neutropeniaboy]

Great advice so far.

I can address some of these issues -- less so the third.

Disability: This is one of those things that you don't think about in residency, but generally as you age you start to think more and more about. As with all insurance, it is a gamble. In most cases, the insurance companies win because you pay them money, and for the most part, you never have a problem and they take all your money. You only win really with life insurance, but then again, you lose because you're dead and someone else gets the money! You should get disability insurance, and you should try to find specialty-specific insurance. It's just a good idea. As with all insurance, it's there when you need it.

Loans: My loans are around 2.25%. When I completed fellowship, I had about $250k in loans along with interest. I've been in practice around 6 years, and I've paid about $150k of that off. It's been painful, and I've been overpaying my loans. I would not significantly overpay your loans. If you have no children, no spouse or no significant assets and are planning on living cheaply for a while, then I would suggest finding some lender who will take your loans at a low rate and then invest in your retirement and other worthy market investments instead of rapidly paying your loans. You have to think about "net" wealth an accumulation of wealth. You're gonna make some bank out there, whether you're academic or private. Instead of thinking about paying it back at once or letting it string out over 30 years, think about working with a financial counselor and find ways to maximize your money. If that means holding off on investments and paying back your loans because of the rate, then do that. Ours has recommended we pay over the minimum and invest in other things with the difference. It's working to our benefit. On the flip side of things, we don't know what's going to happen to medicine as a field. We may all find ourselves with less income in the next 10 years, and for those of you coming out with a lot of loans (I see no general interest out there in lowering the cost of medical education), you'll have less disposable income to pay off loans. You just have to be wise with your money. Don't spend it frivolously in the next couple of years before you understand your cash flow needs. This takes a couple of years IMO.

Partnership: The only thing I have to offer here is to try to achieve a level of transparency. Whether you are in private practice or in academics, you need to know where you stand, what your options are and where the glass ceiling is. If you don't have an understanding of this, someone along the line is taking advantage of you.

 

[OtoHNS]

1. Agree with above. Get disability insurance and make sure it is specialty specific.

2. For the loans, it depends on how much you owe, how high the interest rate is, and your own preferences on debt. You can think about paying down debt like any other investment. If you have a $100K loan at 3% interest, paying it off all at once is like earning 3% interest on a $100K investment. 3% return is really not all that great. On the other hand, if your loans are at 6.8% (or higher) interest, paying that debt off is like getting 6.8% return on your investment, which is not so bad.
My student loan is at 2.8%, so I would much rather pay that off gradually over the next 20+ years and invest my money in other places where I am likely to have a better rate of return. My loan interest rate is actually less than inflation (~4% historically), though inflation has been very low the last 15 years (including the recent recession and govt stimulus era).

3. You'll probably be hired initially as a salaried employee or some other salary guarantee. Partnership will not occur for 1-3 years on average. When you become a partner, you'll become a part owner of the corporation that is the practice. There can be a lot of different ways to determine your take-home pay and your share of the expenses at that point. You also need to understand your responsibilities and potential liabilities. For example, how would you be affected if one of your partners sexually harasses an employee and that employee sues the practice? This is just one of many bad scenarios. Get a lawyer who is experienced in physician contracts to go over this stuff with you and review your contract.

 

[MR Insurance]

I’m not sure if any of you are aware but there is a great blog that an SDNer started a few years ago called whitecoatinvestor.com. It specifically covers finance related issues for physicians and touches on some of the most difficult decisions physicians must make during and post training. He also does a great job of blowing the whistle on some financial products that get heavily solicited to physicians.
Regarding the student loan issue, here is a great post: http://whitecoatinvestor.com/student-loans-vs-investing/ He has a number of posts related to disability insurance as well.

As many have noted, you should be looking for specialty specific disability insurance. It is important to understand exactly what that means though, because not all companies actually include specialty specific wording even though they function identically. The key is finding a policy that includes a True Own-Occupation definition of total disability which means you are considered disabled when an injury or illness prevents you from performing the material duties of your occupation, even if you are able and chose to work in a different occupation. The beautiful thing about this definition is that the option is yours and if you are able and select to work in some other capacity, the insurance company still continues paying your benefit as long as you cannot perform the material duties of your pre-disability occupation. Some companies take it one step beyond by stating that they’ll consider your occupation to be your medical specialty, but realistically it is based on your duties which simply are what they are. There are a number of insurance companies offering this favorable wording, but for your specialty I’d assume you’ll be deciding between MetLife and Guardian, unless you are a female and have access to gender-neutral pricing elsewhere.

Some other things you’ll want to look for:
- Noncancellable and Guaranteed Renewable (the insurance company cannot increase your premiums or alter the policy, generally guaranteed thru age 65)
- True Own Occupation definition of total disability (already noted)
- Residual disability benefits (provide for partial disability)
- Future Purchase Option (particularly important for residents/fellows, this feature allows you to increase your coverage in the future without requiring further medical screening. As your income increases, you’ll be able to increase your disability insurance regardless of changes in your health)
- Cost of Living Adjustment (This is particularly important for young physicians, it will adjust your monthly benefit by a stated % each year of a disability insurance claim. It does nothing for you if you never become disabled, but can be critical if you have the misfortune of becoming permanently disabled from your occupation. Obviously as we age, the potential benefit of this feature diminishes)
- Mental/psychiatric/drug/alcoholism illness related claims (Some companies limit these benefits to a 24-month maximum benefit period, rather than the full policy benefit period)

The fun is differentiating these features with each of the companies offering this coverage, as they are all unique.

In my opinion, you should review your options soon, even if you decide not to apply until the month in which you graduate. For one, your need for this coverage is no less today than two years from today, so the sooner you get it the better. Second, your GME program may have discount programs (generally 10%), to which you would no longer have access as an attending.
I’m sure it’s clear by now that I deal with disability insurance. Feel free to post any questions you have on it - I'd be happy to address them, without the salesy-pressure you'd probably expect

 

[resxn]

1 - Must have disability insurance. Not sure what MR Insurance is saying about the "True Own Occupation" definition is the same as this, but bascially my one piece of advice is to get specialty specific insurance. In other words, you don't want disability for being a doc, nor do you want disability for being a surgeon, you want disability for being an ENT. If you lose your hands, you can still be a doc (radiologist, e.g.) and may not qualify for the disability if it's defined broadly, but if you get specialty specific, if you cannot perform the duties of an ENT, you will qualify for the disability. I think MR Insurance is saying the same thing.

2 - totally depends on the interest. If you can get a better ROI guaranteed than 6.8% then you'll make money investing over paying off the debt. If you can't get a vehicle (that is liquid), I would pay off the debt faster. My interest rate is 3.1% and I'm paying that off slowly. I've paid off about 50% so far by paying the min payment, but now I'm in a position where I'll likely just chunk the whole thing away before summer.

3 - totally depends on what partner means. Typically the broad definition is that you will share equally in risk and reward. As an employee you do not share equally, the salary (and any bonus structure) mitigates your risk but also lessens your potential ultimate income. In the end, partnership in a thriving practice is desirable and being employed in a struggling practice is desirable. You have to know where your practice is and the link DrB had is a great thread to help you discern the financial health of your practice even if you aren't privvy to actual numbers.

 

[ENTdoc]

Thank you for all your replies. After REALISTICALLY considering everything, I think I will try to pay off as of our debt given that both my wife has over 300K in debt @ 6.8%. Simply put, we don't know much about investment to guarantee a return better than 6.8%. Sounds like disability insurance is a must.

The whole partnership thing is still kind of elusive and confusing... but I think things will work out. I figure if you're a hard worker and make yourself valuable to the group, they're more likely to treat you well and fairly. I can't imaging that any smart business minded person would want to lose a partner/employee that would hopefully bring their practice positive revenue.

 

[MD Financial Services Scott]

As residency is coming closer to an end, I am forced to think about some grown up decisions. I am hoping for some inputs from new and experienced ENTs out there about what I should be aware of and to be smart about as a new physician starting in a private practice.

I do have a few specific questions.

1) Disability insurance: do you need it? if so, what type and what are the differences really? When to get it?

2) Do you save up and pay your student loans ASAP, or stay on 30 yr plan at 5 to 6.8% interest?

3) What does being a "partner" actually mean? I know I should know this, particular since I am suppose to be a partner after two years with the group I'm joining. But quite honestly, I have no idea what it actually entails other than I will longer be salaried and I have voting rights in this group. Is that really what it's all about?

I appreciate your input and any other "smart" tips you can provide for someone about to start out in the real world.

Let me start with the last question first. The partnership will typically mean you are eligible for profits....and loses so look at it carefully....not only the income side but the liability too. My recommendation would be to have an attorney look at the business and a CPA look at the financials to see if your 'buy in' is justified.

As for the student loans that to me is easy....pay them off as soon as you can so that you can re-capture that cash flow back into your household rather than paying to the bank with that monthly obligation. Once that debt is done you can easily use that re-captured income to pay off other debt or start to build assets.

On the topic of disability insurance you need to understand that all contracts are not created equally and that the definition of disability is the main driver in the 'claim time behavior' of the policy. In addition things to look at are the waiting period language, is the word Totally in there? Does the definition of disability allow the carrier to reduce your benefit if you found a secondary career? Is your premium level to age 65 or does it go up each year? All disability policies are priced based on your age, gender, medical specialty and state of residency and the premiums vary a great deal. You will find products have prices from the $70 range to over $3000 for what appears to be essentially the same features so make sure you know what your are looking at. Now I am not advocating a $3,000 per year premium is a better contract than one that is $1,000 because the devil is in the language! Let us know if we can be of service.