Financial Savvy for Health Professionals THIS PRESENTATION IS A GENERAL OVERVIEW OF BEST FINANCIAL LITERACY PRACTICES REGARDING MANAGING PERSONAL FINANCES AND FINANCING HIGHER EDUCATION AND ARE NOT INTENDED TO BE FINANCIAL, TAX OR LEGAL ADVICE. THE LAWS, REGULATIONS AND OTHER RULES APPLICABLE TO SPECIFIC SITUATIONS ARE COMPLEX, SUBJECT TO CHANGE AND ARE DEPENDENT ON THE FACTS OF EACH PARTICULAR CASE. YOU SHOULD CONSULT YOUR FINANCIAL, TAX OR LEGAL ADVISORS WITH QUESTIONS REGARDING YOUR SPECIFIC SITUATION. Planning Out Your Future as a Health Professional • Introduction • The Future for the Health Profession • Current Salaries • The Cost of Achieving the Dream • Fine Tuning the Direction of Your Career • Is a Private Practice In my Future? • Financial Considerations for New Doctors How did you get here? The decision to become a doctor was not something that just happened. Maybe there was a parent or relative who inspired you… Maybe it was after a trip to the doctor’s office that clinched it for you… Or maybe it was a profound interest in Science and Medicine that made you know that you were fated to become a doctor. Whatever the reason for your decision… • Here you are, in the midst of that long journey, finally approaching the long anticipated goal. • So far, your journey has been about long hours of academic and clinical study, lab reports and tests, long nights of studying and anxiety over MCATs, GPAs and applications to Med School. • The cost and financial sacrifice has been high for many of you continuing in Med School, long after many of your peers have gone on to work in the real world. • Maybe you have avoided long term relationships, put off getting married or struggle to support a family on limited income. Whatever your story is.. • You know deep in your heart that it has been worth it. • The question is, in this economy, will it be worth it? • What is the future outlook for Medicine? • How much debt can one incur before it’s not worth it? • Will you ever be able to afford a private practice? • These are questions well worth asking. THE FUTURE OUTLOOK FOR THE MEDICAL/HEALTH PROFESSIONAL The Good News… …is that jobs in the Health Profession are expected to grow at a faster pace than most career industries. The most recent statistics (2008) by the Bureau of Labor Statistics reports that there are over 14.3 million jobs currently available. Within the next 10 year period, 2008-2018, an additional 3.2 million jobs are expected to be developed. Why? The fact is that our population is not only growing but aging. The demand for medical professionals to meet the needs of a growing and aging population is considerable. With life expectancy rates increasing, the need for highly trained health care providers to treat the population will continue to be in demand. Although improvements in technology contribute significantly to the quality and efficiency of care, this is a field that relies on a highly skilled/trained workforce. So where will the jobs be? Currently, health professionals work in three major settings: hospitals, ambulatory care and nursing facilities. While hospitals employ a large percentage of these providers, hospitals comprise a little over 1.3 % of the health care facilities, with 87.3% of medical care being provided in private and group practices. Going forward, it is predicted that ambulatory care will play an even more significant role in health care and that is where there is expected to be significant growth. The largest increases are expected to be in Medical Offices (34%), Home Health Care (46%), Other Health Offices (41%), Outpatient Care (38.6%) and Medical Diagnostic Labs (39.8%). Hospitals (10%) and Nursing Facilities (21%) will have less growth. Healthcare Professions by category (Bureau of Labor Statistics, 2008) Management level (finance & business) - 4.3% Professional - 43.8% • Counselors - 1.2% • Social Workers - 1.4% • Dieticians and Nutritionists - .3% • Pharmacists - .5% • Physicians and Surgeons - 3.6% • Physicians’ Assistants - .5% • RNs - 15.3% • Clinical Technicians - 1.9% • EMT and Paramedics - 1.0% • LPN and orderlies - 4.3% Office support and administration - 17.9% * Note that occupations with smaller numbers have not been included, hence the percentages indicated do not total up. The current status of the Medical Field and Increased Specialization • As of 2008, there were 661,400 physicians in the US. 12% of them identified themselves as self employed, 53% work in medical practices and 19% work in hospitals. • While 32% of all doctors work in primary care, an increasing number of doctors choose to continue on in their education and specialize. The AMA (2009) reports the following top seven areas of specialty: – Internal Medicine - 20.1% – Family and General Practice - 12.4% – Pediatrics - 9.6% – Ob/Gyn - 5.6% – Anesthesiology - 5.5% – Psychiatry - 5.0% – Emergency Medicine - 4.1% EDUCATIONAL COSTS/ EDUCATIONAL DEBT Rising educational costs outstrip inflation • We all have heard about the rising cost of a college education in general. • It is not uncommon to meet students who have graduated from college with a Bachelor’s Degree, with debt in excess of 50,000 dollars. • Knowing that, we cannot be surprised that there are many medical school graduates who will complete their education by borrowing in excess of 200,000 dollars. And regardless of the total amount borrowed, the Association of American Medical Colleges reported in 2007 that over 85% of all public medical school graduates and 86% of all private medical school graduates have some level of educational debt. Is the cost worth the reward? • Most students who have taken on educational debt to finance medical school justify the debt by pointing out the high earning potential of a physician. • While the salary is just one of many rewarding reasons why a person pursues an MD or DO or DDS, it makes sense to keep an eye on current employment and salary trends. After all, life does not stop at graduation. There are considerations about the future to be made: Residency and Sub specialization, debt repayment, private practice, family, etc. Salary Expectations • Bureau of Labor Statistics (2008) report the annual median salary for Primary Care physicians at $186,064. • The annual median salary for physicians in some specialty/sub specialty is significantly higher at $339,738. • In general salaries will vary depending upon geographic region, number of years in practice, hours worked, skill level, personality and professional reputation. Salaries of the top 4 popular specialties Specialty Mean Hourly Mean Annual Wage Wage Family & GP $83.59 $173,860 Internist $91.10 $189,480 Ob/Gyn $101.13 $210,340 Pediatrics $79.67 $165,720 Although these salaries have probably increased since 2008, it is important for students currently enrolled in medical school programs to consider these numbers. These are average salaries of doctors who have already established some level of medical practice. Current residency programs may pay a quarter of this salary annually. Depending on the length of the program, a new doctor may have to wait anywhere from 3-7 years before collecting a salary that approximates these figures. Once you factor in educational loan repayment, you will have a much more realistic idea of what your disposable income is. ENSURING YOUR FINANCIAL SUCCESS Dealing with Money Matters • Whether you pursue a specialty that can guarantee you higher earning potential or start up a private practice earlier than planned, the direction you take in protecting your financial future is something that you must start thinking about now. • Although you have probably spent most of your time studying, training and competing for the best educational and training opportunities, it is now time to start thinking about the financial side of the business. Even if you plan on working in a hospital or group practice, there are many financial concerns you will have, starting with your educational debt. What happens after the ink dries on the diploma? • For many of you, the temptation to run out and splurge, to buy that item that you always dreamed of owning is appealing. After all, you earned it after all of that hard work. And of course, you’re a doctor now! • But as appealing as that may be, you have a lot of other things to consider. Not only do you have college debt hanging over your head, you also have to start thinking about the other things that you want to accomplish in your life. – Purchasing a home – Starting a family – Opening a private practice – Doing volunteer work – Taking a vacation A Financial Strategy will get you where you want to go • In addition to debt repayment, you need to consider: – Life insurance – Disability Insurance – Educational Expenses for your children – Purchasing a New Home – Starting a Private Practice – Saving for retirement Most financial planners caution young doctors to take this part of their life as seriously as they took the years leading up to graduation. The same planning and sacrifice has to be utilized if you plan on attaining the future you worked so hard for. Do I jump into a private practice right away? A private practice is not for everyone. At the end of the day, you are a small business owner. Do you have what it takes to run your own business? There are pros and cons to both sides. Many individuals like the idea of working for themselves and being able to reap all of the earnings from their own hard work. Maybe you would prefer to work in a setting outside of the hospital. Perhaps you envision setting up a practice in a suburban or rural community that has a strong need for your services. Many private practitioners like the independence they have to forge a practice that fits their own values, interests and lifestyle. Or do I work for a hospital and collect a paycheck? On the other hand, some people like to work as part of a team or be in the midst of the medical advancements and training often found in the larger regional or teaching hospitals. Maybe a group practice appeals to you because you are able to share some of the bigger expenses of a practice: equipment, office space, staffing and insurance while remaining more independent. Maybe you just want to practice Medicine and don’t want the financial headache of billing, hiring staff or worrying about HR. This is the time to visit practices and a variety of settings, to talk with doctors and get some advice from your mentors. Which work setting fits you? Things to consider if you start a private practice. • Start with a Plan - It tells you where you’re going and how you want to get there. If you know you are going to need to borrow for your start up, you will have to have projections, financial statements and a pro forma to demonstrate what you think it will cost to run your business over at least 3 years. • Have you consulted a lawyer/accountant to determine what type of business you want to register as? Have you filed the appropriate paper work, obtained a tax id number, established banking in the company name? • In addition to Malpractice Insurance, Are you covered for corporate liability, workmen’s comp, health and disability and personal life insurance? • Credentialing with Third Party Payers - Without these contracts, your ability to compete as a starting practice is very limited. Even if you have not had a positive experience with many of the larger health insurance companies, this is a fast way of getting referrals. But be aware that the amount of time it can take to be approved can be problematic. Also, keep in mind that most procedures must take that into consideration. Have you applied for hospital privileges at the local hospitals in your area? Next steps to establishing a successful practice • Medical Facilities: Finding the right office location and obtaining the equipment and supplies you need can be a challenge. Many practices take advantage of existing clinic space, or rent space in medical office buildings to save on some of the office build out costs. • Staffing: Hiring the right people is key to a successful practice. You need to find motivated, responsible, experienced staff to get things rolling. Here is one place you don’t want to skimp. Aside from the nightmare of discovering that your billing manager has been stealing from you, the cost of hiring and training new personnel can take up time that is better spent seeing patients. • Identifying Sources: Referral, support and back up coverage are extremely important. As a private practitioner, you may not have the opportunities to consult with colleagues on a daily basis, so networking is extremely important. Good tech support and a user friendly EMR system can make Record Keeping and Billing much easier. Am I what I do? • It is natural after spending so much time in your life pursuing the degree to begin to identify yourself as nothing more than a doctor. • It doesn’t help if you work 6 days a week, 8-10 hours a day. • It’s hard to just be You when you are continually sought out to field medical questions by family, friends, and neighbors. You are so much more than what you do! • Keeping your profession in perspective to the rest of your life will allow you the balance to really enjoy the various aspects of your life: work, relationships, family, recreation. It will also help you avoid many of the mistakes that many middle aged professionals struggle with as they review the direction their lives have taken. It is very hard to recover the time one has lost. That’s why a little financial planning now can help you to have the kind of life you’ll want years from now. Whether it’s time teaching or engaging in meaningful research, traveling on a medical mission, playing golf on Wednesday afternoons or showing up at your child’s soccer game, having the time and financial independence to pursue your interests is well worth all of the hard work that you have put into your life. • The last thing you want to do 40 years from now is wake up with regrets…that’s not what all this work has been about.
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