3 Financial Symptoms That Private Practices Are a Dying Art

JULY 10, 2016
Dave Denniston
Are private practices stricken with a malady? Are they on life support? 

As a private practice physician, you shudder at the thought. Your body twitches with anxiety. You quickly try and focus on something else to calm your nerves.

You think of the silver lining to cheer yourself up and push through. You want to take a break, and keep counting your days till retirement. The Wall Street Journal claims that people who are looking to retire should maintain 70% of their current income in retirement. Think about this. 

Are you in a situation that can help you to do that? Are you generating enough income now without spending too much on your current lifestyle? 

Have you ever paused to wonder whether you are adequately prepared? Did you work on your retirement plan?

Did you think about what you will do once you retire? Are you financially safe? 

It is important to ask yourself all these questions, as they will help you to understand how you are doing financially, and how much more you need to make before you can start taking it easy. 

As we consider the state of private practice, we are left grappling with this question… how are recent changes affecting the retirement of physicians in private practice?

Financial planning for doctors has become a crucial piece of the puzzle today, since many doctors working in private healthcare systems do not get adequate benefits after retirement. The optimistic idea of being involved in a noble profession can easily get dislodged as a main motivator when for years, you keep on looking at patients all day while yearning for a break from the daily grind. 

The Wall Street Journal article "How People Underestimate Spending in Retirement" focuses on how people happily rely on the 70% of their pre-retirement income, but forget that they will have to bear the emotional cost of losing the rest 30%. This means that their living expenditures have to be controlled, and this will require a major lifestyle change. 

Sure, after retirement, doctors may not have to worry about high fuel costs (no need to drive to work every day), or buying expensive suits to wear to conferences. 

However, after retirement, there will be other costs that will become the priority—frequent vacations, helping out your kids and grandkids (financially AND with time), healthcare costs, and so much more. 

A study commissioned by The Abernathy Group showed that many physicians have poor financial preparation. Since they are so devoted to their job, they have little time for anything else. 

While it is true that as a doctor you will definitely be in one of the high-income groups in society, the fact still remains that doctors do not usually preserve generational wealth. This means that they do not use their current wealth to generate more that they could save up to retire. 

Does the idea of visiting the practice chamber to look at patients all day when you are in your 60s still excite you? 

Or do you picture yourself set up in a beach house with your family, where you can enjoy the days as they come and go? It all depends on your level of preparation. 

The dangers that private practice physicians face today are monumental. Many private practice doctors have seemed to have developed symptoms that are endangering their retirement.

How will you as a private practice doctor, be negatively affected by the current healthcare system? 

1. Your practice may be purchased at a lower premium due to regulatory uncertainty.

In the 1980s and 1990s, many practices were screaming in valuation. Physicians could get many times the annual revenues and incomes. Unfortunately, today many private practices and private groups are bleeding in red ink. Consider the implications…

This means that you may not be able to get much of a value for the practice itself. The true value of a practice is in your real estate and surgery centers. 

Additionally, consider how young physicians are drowning in medical school debt. Unfortunately, this malady practically forces physicians to sell out to hospital systems. Bigger is better! Although, I confess I wish it were the opposite.

As a result, you may hardly have anything to rely on to get a big financial windfall in the end. 

2. You will be subjected to higher malpractice insurance.

You know that there are lesser physicians in the medical field nowadays. This shortage has increased the number of patients per doctor, and this is why you find yourself stuck in your chamber for long hours every day.

With so many people to tend to, there are higher risks of making more mistakes. Costs for insurance and litigations are quite high, which means that doctors end up losing more money. 

3. Poor Practice Management.

If you are running your own private practice, you are in charge of taking care of your business in every possible way. But you have been trained to help people medically; how can you manage the financial aspects? 

When will you have the time? 

It’s often said that physicians have a “Porsche drawer” full of reimbursements that haven’t been processed or followed up on.

Of course, you would need to hire an advisor and business manager. But records show that advisors often do not provide the right suggestions to doctors regarding their future financial plan. You will still be required to review the financial statements at the end of every month, so as to ensure that your business operates smoothly.

Final Thoughts

These three factors can become quite problematic and may act as a major obstacle right before you are about to retire. Remember, it is all about being adequately prepared.

We have seen many private practice physicians that are struggling with retirement. As a matter of fact, more and more physicians end up postponing and postponing their retirement party.

Do not rely on your earnings alone, hire a good financial advisor who can help you to make the right investments to generate more wealth. Make it a priority to pay your debts off as soon as possible, so that every penny you earn after that is money you can save.

Try to build up a safe financial plan and see your money grow slowly but safely and you will finally be ready for retirement!

 
Dave Denniston, Chartered Financial Analyst (CFA), is an author and authority for physicians providing a voice and an advocate for all of the financial issues that doctors deal with. He is the author of 5 Steps to Get out of Debt for Physicians, The Insurance Guide for Doctors, The Tax Reduction Prescription, and his new book, The Freedom Formula for Physicians.
 
He’s glad to answer any questions about finances for physicians and the stage that you are currently in. 
 
You can check out his latest podcast at DoctorFreedomPodcast.com.
 
You can also contact him at (800) 548-1820, at dave@daviddenniston.com, or visit his website at DoctorFreedomBook.com to get a copy of The Freedom Formula for Physicians.


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