Healthcare Reform: Transitions and Decisions for Medical Practitioners

By Dr. Marty Martin

On March 23, 2010, President Barack Obama signed into law the Patient Protection and Affordable Care Act. This landmark piece of legislation resulted in a spate of organizational changes in hospitals, medical groups, health systems and insurance companies across the nation. A recent article in the New England Journal of Medicine notes, “The implications will be profound for hospitals’ dominant role in the health care system and for physicians income, autonomy, and work environments.” Bottom line: given the scope of these changes to the wise physician should get their financial and occupational house in order.

The key to go beyond surviving in this new era of health reform is to learn how to transition. As physicians across the country struggle to make ends meet they must pause and take inventory of not just their practice but all other transitions in their life – current, within the next 3-5 years, and transitions over the long haul. After taking this inventory, physicians must ask themselves, “Which decisions must be made today and which decisions can be deferred?”

In viewing this transition time for physicians, it is clear that there are five big decisions that must be made by physicians to get their financial house in order.

1. Decide on how to manage your career: A career is more than a series of jobs. A career is a calling for some, and a path for most. Be intentional in creating your career path. Clarify whether your aim is to become a better clinician or to switch over to leadership or management. Maybe you’re even considering launching an entrepreneurial enterprise. Consult with a career advisor who can assist you in assessing your interests, talents, skills and passions, then test that against the current and future marketplace to determine the feasibility of your career plan. At that point, many individuals can make their plans into a reality for themselves, but others may need or want support, guidance and coaching.

2. Decide how you will earn income until you’re ready and financially able to retire without sacrificing quality of life: For a long time, physicians were able to earn an income, often substantial. This is changing.  Over time, the number of hours worked by physicians has decreased along with physician fees in the same time period. In addition, an increasing number and proportion of physicians are employed. For those who are still in private practice, especially a solo or small practice (2-5 physicians), employment is looking better and better.  As income is increasingly derived from a single job with an employer, rather than from being self-employed, managing your career, rather than your practice, becomes very important. For physicians who are over 50 or those in their 40s planning their retirement, it is imperative to consider multiple streams of income. Consider creating “stepping stones” of earning throughout your career path until the day that you fully retire and only rely upon your retirement savings, pension and/or social security.

3. Decide how you will fund your retirement: The funding of your retirement is akin to putting together a puzzle without all the pieces in a poorly lit room. Knowing your number, or how much money you will need to continue living a quality life is necessary, but it is not sufficient. By working with an advisor, you should know how much money you can withdraw from your retirement account, savings account, and investment account each year without causing your principal to disappear or deplete precipitously. You will need to decide how you will pay for health care for you and your loved ones, and determine if you will ever return to working for income or have to because you run out of money. For those who are fortunate enough to have saved up more than enough money, the discussion with your advisor becomes about taking less risk in your portfolio, because you can, and really engaging in a dialogue about your legacy.

4. Decide how and what type of legacy you wish to leave to your organization and your family: A will, powers of attorney, and/or a simple trust are the essential elements of an estate plan. For many physicians, there are at least two other elements. First, if you run your own practice, group or business, then you will need a succession plan. The succession plan should be aligned with your estate plan, career plan and retirement plan. Second, if you are interested in leaving more than money to your family or a charity, then reflect on this question: What values or lessons do I want to leave my children, grandchildren, and their children? Once you have an answer that is meaningful for you, then you can write what is known as an Ethical Will. An ethical will is a document that passes down the values, lessons, and stories of the family. This, too, is a part of your legacy plan.

5. Decide how to handle your current spending and cash management: This guarantees that you can take care of large expenses such as buying a home, purchasing a second home, paying for college, retraining yourself, or saving for retirement. Sadly, many advisors have gotten a call or email from prospective clients embarrassedly admitting, “We had 5 million in our retirement portfolio 8 years ago and now we’re down to 2 million.” Typically, the response will be, “If you don’t mind me asking, how old are you and do you have another source of retirement income?” If the answer is older than 65 and nothing but their retirement portfolio and perhaps social security, the situation is akin to being in the Financial ICU. The good news is that by focusing on becoming wise stewards of their own financial health, most of these financial critical care cases can be prevented.

Every one of these decisions is a financial decision. Times of transition often feel like upheaval, but there is opportunity if you simply look a bit harder. For physicians, there is the opportunity to redesign their practice, to retire earlier or differently, to identify a Second Act career or to launch an entrepreneurial firm that is not dependent upon reimbursement by insurance companies. All this requires is planning. When life changes, money changes; when money changes, life changes.

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