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The demands on medical practitioners today can seem overwhelming.
It’s no secret that health-care delivery is changing, and those changes
are reflected in the financial issues that health-care professionals
face every day. You must continually educate yourself about new research
in your
chosen specialty, stay current on the latest technology that is transforming
health care, and pay attention to business considerations, including
ever-changing state and federal insurance regulations.
Like many, you may have transitioned from medical school and residency
to being on your own with little formal preparation for the substantial
financial issues you now face. Even the day-to-day concerns that affect
most people — paying college tuition bills or student loans, planning for
retirement, buying a home, insuring yourself and your business — may be complicated
by the challenges and rewards of a medical practice. It’s no wonder that
many medical practitioners look forward to the day when they can relax and
enjoy the fruits of their labors.
Unfortunately, substantial demands on your time can make it difficult to accurately evaluate your financial plan, or monitor changes that
can affect it. That’s especially true given ongoing health-care reform efforts that will affect the future of the industry as a whole. Just as patients need periodic checkups, you may need to
work with a financial professional to make sure your finances receive the
proper attention.
Maximizing your personal assets
Much like medicine, the field of finance has been the subject of much
scientific research and data, and should be approached with the same level
of discipline and thoughtfulness. Making the most of your earning years
requires a plan for addressing the following issues.
Retirement
Your years of advanced training and perhaps the additional costs of launching
and building a practice may have put you behind your peers outside the health-care
field by a decade or more in starting to save and invest for retirement.
You may have found yourself struggling with debt from years of college,
internship, and residency; later, there’s the ongoing juggling act between
making mortgage payments, caring for your parents, paying for tuition and weddings for your children, and maybe trying to squeeze in a vacation here
and there. Because starting to save early is such a powerful ally when it
comes to building a nest egg, you may face a real challenge as you pursue a comfortable financial future. A solid financial plan can help.
Investments
Getting a late start on saving for retirement can create other problems.
For example, you might be tempted to try to make up for lost time by making
investment choices that carry an inappropriate level or type of risk for
you. Speculating with money you will need in the next year or two could
leave you short when you need that money. And once your earnings improve,
you may be tempted to overspend on luxuries you were denied during the lean
years. One of the benefits of a long-range financial plan is that it can
help you protect your assets — and your future — from inappropriate choices.
Tuition
Many medical professionals not only must pay off student loans but also
have a strong desire to help their children with college costs, precisely
because they began their own careers saddled with large debt.
Tax considerations
Once the lean years are behind you, your success means you probably need
to pay more attention to tax-aware investing strategies that help you keep
more of what you earn.
Using preventive care
The nature of your profession requires that you pay special attention
to making sure you are protected both personally and professionally from
the financial consequences of legal action, a medical emergency of your
own, and business difficulties. Having a well-defined protection plan can
give you confidence that you can practice your chosen profession without
putting your family or future in jeopardy.
Liability insurance
Medical professionals are caught financially between rising premiums
for malpractice insurance and fixed reimbursements from managed-care programs,
and you may find yourself evaluating a variety of approaches to providing
that protection. Some physicians also carry insurance that helps protect them
against unintentional billing errors or omissions. Remember that in addition
to potential malpractice claims, you also face the same potential liabilities
as other business owners. You might consider an umbrella policy as well
as coverage that helps protect you against business-related exposures such as
fire, theft, employee dishonesty, or business interruption, up to the policy limits.
Disability insurance
Your income depends on your ability to function, especially if you’re
a solo practitioner, and you may have fixed overhead costs that would need
to be covered if your ability to work were impaired. One choice you’ll face
is how early in your career to purchase disability income insurance. Age plays
a role in determining premiums, and you may qualify for lower premiums if
you are relatively young. When evaluating disability income policies, medical
professionals should pay special attention to how the policy defines disability.
Look for a liberal definition such as “own occupation,” which
can help ensure that you’re covered in case you can’t practice in your chosen
specialty.
To help protect your business if you become disabled, consider business overhead
expense insurance that can help cover routine expenses such as payroll, utilities,
and equipment rental. An insurance professional can help evaluate your needs.
Practice management and business planning
Is a group practice more advantageous than operating solo, taking in
a junior colleague, or working for a managed-care network? If you have an
independent practice, should you own or rent your office space? What are
the pros and cons of taking over an existing practice compared to starting
one from scratch? If you’re part of a group practice, is the practice structured
financially to accommodate the needs of all partners? Does running a “concierge” or
retainer practice appeal to you? If you’re considering expansion, how should
you finance it?
Questions like these are rarely simple and should be done in the context
of an overall financial plan that takes into account both your personal
and professional goals.
Many physicians have created processes and products for their own
practices, and have then licensed their creations to a corporation.
If you are among them, you may need help with legal and financial concerns
related to patents, royalties, and the like. And if you have your own
practice, you may find that cash-flow management, maximizing return
on working capital, hiring and managing employees, and financing equipment
purchases and maintenance become increasingly complex issues as your
practice develops.
Practice valuation
You may have to make tradeoffs between maximizing current income from
your practice and maximizing its value as an asset for eventual sale.
Also, timing the sale of a practice and helping reduce taxes on its proceeds
can be complex. If you’re planning a business succession, or considering
changing practices or even careers, you might benefit from help with
evaluating the financial consequences of those decisions.
Estate planning
Estate planning, which can both potentially reduce taxes and further your personal
and philanthropic goals, probably will become important to you at some point.
Options you might consider include:
- Life insurance
- Buy-sell agreements for your practice
- Charitable trusts
You’ve spent a long time acquiring and maintaining expertise in your
field, and your patients rely on your specialized knowledge. Doesn’t it
make sense to treat your finances with the same level of care?