Here’s how to keep doctors off financial life support


(Spencer Platt/GETTY IMAGES)
March 30, 2012

Doctors across the country are suffering from a financial flu.  Some fear going broke or buckling under the cost of malpractice insurance and lower reimbursement rates from insurers for the care they provide.

There’s no question the landscape for practicing medicine has changed.  Many doctors are merging practices or signing with hospitals to reduce overhead. But doctors can survive the new medical economy if they operate as a small business.

Running a practice like a small business is not only important for doctors, but it is critical for the communities they serve. Doctors play an important role in local and national economies. Office-based doctors support 4 million jobs nationally, according the American Medical Association. The Bureau of Labor Statistics reports job growth in office-based settings is up 20 percent since 2000.

In working with physicians and dentists around the country, I’ve seen there are a few common decisions that can improve financial health.

Just as any business owner spends time carefully selecting the site for his or her store or the location of an office, new doctors should consider where they practice based on their specialty.  Will a vascular heart surgeon be able to negotiate higher rates in a large metropolitan area or in a mid-size city with fewer specialists?   For those already in a practice and in a less-than-ideal location, consider evaluating options.  It may be possible to receive notably higher insurance reimbursements by relocating a few miles away.

Many times doctors leave residency several hundred thousands of dollars in debt. The urge to spend the six figure salary after toiling in residency is natural.  But doctors must fight the temptation and seek advice quickly on how to best manage their debt and protect their new and future income. Early strategies should include detailed cash-flow planning and incorporate appropriate disability income insurance and life insurance into a plan that will help protect a doctor’s ability to earn an income. Ignoring or putting off such a financial reality in favor of short-term rewards can interrupt patient care and adversely impact professional security.

A practice, like any small business, also requires a good management team. Experienced practice consultants know when and how to review insurance contracts and negotiate reimbursement rates.  They can also evaluate the most profitable procedures, insurance carriers and what savings to expect from a technology investment. Many doctors are unaware of what services can be negotiated or how to do so effectively and it can result in not being paid promptly for procedures or knowing when to collect on accounts receivable. 

Anyone in private practice needs to realize that change brings opportunity. Doctors must be open to new technology or opportunities for additional sources of revenue. An opportunity to buy into a surgery center or MRI facility can help generate additional revenue. Adding another provider to a practice can increase patient volume and improve patient care. 

Ultimately, adopting a more entrepreneurial mind-set or surrounding yourself with a business team that has one will be the difference between surviving and thriving in this new medical age.

Shane Tenny is a certified financial planner at MassMutual Financial Group and a partner at Spaugh Dameron Tenny, a Charlotte, N.C.-based firm that provides financial guidance to physicians.

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(Spencer Platt/GETTY IMAGES)
March 30, 2012

Doctors across the country are suffering from a financial flu.  Some fear going broke or buckling under the cost of malpractice insurance and lower reimbursement rates from insurers for the care they provide.

There’s no question the landscape for practicing medicine has changed.  Many doctors are merging practices or signing with hospitals to reduce overhead. But doctors can survive the new medical economy if they operate as a small business.

Running a practice like a small business is not only important for doctors, but it is critical for the communities they serve. Doctors play an important role in local and national economies. Office-based doctors support 4 million jobs nationally, according the American Medical Association. The Bureau of Labor Statistics reports job growth in office-based settings is up 20 percent since 2000.

In working with physicians and dentists around the country, I’ve seen there are a few common decisions that can improve financial health.

Just as any business owner spends time carefully selecting the site for his or her store or the location of an office, new doctors should consider where they practice based on their specialty.  Will a vascular heart surgeon be able to negotiate higher rates in a large metropolitan area or in a mid-size city with fewer specialists?   For those already in a practice and in a less-than-ideal location, consider evaluating options.  It may be possible to receive notably higher insurance reimbursements by relocating a few miles away.

Many times doctors leave residency several hundred thousands of dollars in debt. The urge to spend the six figure salary after toiling in residency is natural.  But doctors must fight the temptation and seek advice quickly on how to best manage their debt and protect their new and future income. Early strategies should include detailed cash-flow planning and incorporate appropriate disability income insurance and life insurance into a plan that will help protect a doctor’s ability to earn an income. Ignoring or putting off such a financial reality in favor of short-term rewards can interrupt patient care and adversely impact professional security.

A practice, like any small business, also requires a good management team. Experienced practice consultants know when and how to review insurance contracts and negotiate reimbursement rates.  They can also evaluate the most profitable procedures, insurance carriers and what savings to expect from a technology investment. Many doctors are unaware of what services can be negotiated or how to do so effectively and it can result in not being paid promptly for procedures or knowing when to collect on accounts receivable. 

Anyone in private practice needs to realize that change brings opportunity. Doctors must be open to new technology or opportunities for additional sources of revenue. An opportunity to buy into a surgery center or MRI facility can help generate additional revenue. Adding another provider to a practice can increase patient volume and improve patient care. 

Ultimately, adopting a more entrepreneurial mind-set or surrounding yourself with a business team that has one will be the difference between surviving and thriving in this new medical age.

Shane Tenny is a certified financial planner at MassMutual Financial Group and a partner at Spaugh Dameron Tenny, a Charlotte, N.C.-based firm that provides financial guidance to physicians.

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