President Joe Biden recently signaled that a multi-trillion-dollar spending plan for our country should be paid for by the rich corporations and wealthy individual Americans who make over $400,000. Doctors fit the latter category and should tune in.
Beyond the government, the unique qualities of doctors make us a target for many who want to access our high income and our business revenue. Our passivity to these poachers places us at great risk because they recognize that we lack the time and proficiency to avoid them. Add our financial illiteracy to this, and you have a recipe for stakeholders reaching into our paycheck every pay period and inconspicuously taking their share from us.
Let’s take a look at the stakeholders who are targeting us.
Employers want you, and they’ll give you a lot of love to hook up with you. But in reality, they want your patients. Be prepared to separate their business interest in you from their personal interest.
Health care corporations recognize that physicians are unique employee-assets who can generate revenue with a relatively large return on investment. For example, a physician whose salary and benefits cost them $350,000 will lead to as much as $2-3 million dollars in downstream revenue. Through physician alignment, corporations gain market share and thus voluminous clinical care that converts into cash for the system.
Unlike other employees, only the physician (physician extenders are inefficient proxy’s) can gather health care’s most valuable asset, the patient. It is a matter of debate within modern health care about who controls patients more — doctors, insurers, health care corporations or the government.
But this much is true: All of the stakeholders recognize that by aligning themselves with you as a physician, they will gain access and control of the patient.
Entering the safe harbor of employment provides you a needed landing place in the battle for patient alliance, and this harbor allows you to focus on good clinical care while collecting a fair paycheck. But be aware that this passive position has its downside — the loss of professional autonomy, which is the backdrop for doctors’ current nearly 50% burnout rate.
The U.S. government loves W-2 employees. When you signed that standard employment contract, you joined the legion of W-2 workers in our country. In essence, this tribe of individual taxpayers are easy targets for tax code changes due to a continuous narrowing of all tax strategies afforded to this group.
Now that the majority of physicians are employed, we are a target for both federal and state governments as they find new ways to spend money.
As a high-income W-2 earner, the Biden administration is coming after you. And sadly, you don’t have much recourse to do anything about it.
Your predictable paycheck from employment is a nice feature, but it creates a large tax exposure.
Unlike individuals, corporations, especially small businesses, are equipped with a significantly larger menu of options for reducing their tax liability. But leveraging this is only possible if you are a partner-owner in a medical group that is incorporated or if you have your individual professional corporation (PC).
This very issue is why I chose a progressive employment model called “employment lite,” which blends having my own personal corporation that contracts with my employer through a professional services agreement. My small business has provided me with many more opportunities to deploy tax strategies that help me retain more of my hard-earned income. When you are a large corporation W-2 employee, you miss out on this.
Unfortunately, patients often view us as takers rather than givers. In that context, they don’t hesitate to try to reach into our deep pockets through malpractice lawsuits.
The expectation from most patients is that all medical care will always result in an excellent outcome with no complications. Although this is the goal, it is not reality. Your high income makes you a target as reparation for an unexpected result.
Your annual malpractice premium is the regular reminder of this target on your back.
It’s no secret that many doctors are financially illiterate. This is partly due to the arduous process associated with becoming a doctor — a process that requires our full attention at the neglect of all others and one that is simultaneously cloaked by a period of lean living with little income.
The financial industry knows this dirty little secret and preys on our rapidly expanding financial needs, growing income, and continuous hyper-focus on our medical career. This bombardment intensifies with the movement from residency into attending physician life.
The truth is that many of us are aware of the need for life and disability insurance, investment direction and retirement products. But what we are less discerning about are the fees, commissions, and quality of the products that these salesmen, who pretend to be experts, push upon us.
Then there is the behavioral finance side of the equation that heavily influences our management of debt. We are forced to take on large educational debts that are doled out to us with ease due to our low-risk and large lifetime earning potential. But then, early in our career, lenders profile us in the same way and make doctor’s mansions and luxury cars easily accessible through loans that are just too tempting to surpass. Having spent well over a decade living like a pauper, we are ready to live like a doctor — those who offer you the education, housing and consumer loans know this about your behavioral tendencies. You are especially an easy target for an amortized loan payment that fits into your large monthly paycheck as an attending physician.
I encourage you to make some adjustments in your life to reduce your personal and professional risks associated with each of these stakeholders who target you.
Tod Stillson is a rural family physician who does surgical obstetrics and teaches residents and medical students. He is also founder, SimpliMD, Doctor Incorporated, and The Employed Physician’s World Facebook group.
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