After your initial financial education (typically done the last year of residency and the first year or two out) of reading a handful of good financial books, blog posts, and internet forums, I recommend you read one good financial book per year (in addition to continuing to follow the blog for topics of interest.)
The books this week were selected from books I’ve been sent over the last year or books that I actually purchased from my own interest. I chose them because I thought they were books that readers would enjoy and learn from. So the fact that I’m reviewing them at all is an endorsement, no matter what negatives I might mention!
The Business Side of Medicine Summary
The book I would like to review today is one I’ve been sitting on for close to a year. So apologies to Tom Harbin, MD, MBA, an Atlanta ophthalmologist, for that. It’s called The Business Side of Medicine. It’s not quite as interesting as Tom’s other book, Waking Up Blind: Lawsuits Over Eye Surgery, which details all the gory details of how a doctor went bad, and then got away with it for far too long, but is much more relevant for this site. Dr. Harbin went back for an MBA after practicing for 15 years, and so much of what is found in the book reads like MBA-style coursework. That’s not a bad thing, and in fact I think is a very good thing for most physician readers.
The book is co-marketed with Student Doctor Network, whose forums I’ve been on since med school and whose finance forum we co-sponsor. It is “standard” size, 177 pages and double-spaced. It is divided into five parts- getting started, learning business, early career, mid career, and late career. It is relatively light compared to my writing on personal finance and investing topics and relatively heavy on practice management topics, making it an excellent companion to my book. Most importantly, he gets it right. There is precious little in this book that I could argue with, and it deserves much more attention than it has received so far. Let’s read a few excerpts:
“My central thesis is this: there is a business side of medicine, and indeed all the professions, the knowledge of which makes you a better doctor or academic. When you begin a practice or build a research program, you become the CEO of a small business. The CEO knowledge that you were never taught makes for better productivity, better patient flow and satisfaction, happier staff and family, and a more stress-free doctor….This material is just as important as medical knowledge and should be taught at some point during professional training. It’s ignored during our training, in part because medical school leaders themselves have no clue…”
The book is filled with lots of practical tips, gems, and pearls, including how to get a job:
“Don’t necessarily be deterred by a lack of a job listing in a given area. If you have decided on a specific city and don’t see opportunities, knock on doors. Call a doctor in each group in that city.”
How to buy into a practice:
“If you pay an upfront amount, you take all the risk of patient retention and you have to pay with after tax dollars that you borrow from the bank. If you pay a percentage of income for a few years, the retiring doctor takes the risk that you turn off the patients and he gets less. Moreover, you are paying with pre-tax dollars.”
Why non-compete agreements are not all bad:
“From the point of view of a group that wants to protect the enterprise it has built over time, a non-compete is essential. In our group, you either sign one or we find someone else.”
“You might think now is the time to buy all those things you’ve wanted: a new car, a big house, a boat…Yes, you’ve sacrificed and you’re almost there, but hold on—at least for a little while. Most young physicians have debts to pay…and you won’t net as much income as you thought when you looked at that contract.”
On financial advisors:
“You may want the help of a professional, but here you have to be careful. They all want to sell you something. Along the way they may give you good advice, but they are not attracted to you because of your personality or character. They’re in the business of extracting fees for their services and you’re no exception.”
How to write a letter to a referring physician:
“Get to the diagnosis and treatment plan quickly….think about how to make the letter easy for the reader and after a while, it will be second nature.”
How (and if) to run a meeting:
“Meet only when the personal presence of several people is essential to the meeting’s objectives. If the meeting can be reduced to a handout and no decisions need to be made, send that out and cancel the meeting….You’ll be amazed at the gratitude you engender simply by ending a meeting on time consistently.”
Overall, this book is an excellent choice for your continuing financial education book this year.
Buy The Business Side of Medicine: What Medical Schools Don’t Teach You today!
What do you think? Have you read this book? What did you like or dislike? Why do you think it is important for physicians and other high-income professionals to learn business principles? Comment below!
“In our busy, fast-paced internet era, this works a heck of a lot better online than in purpose.” person*
““If you pay a percentage of income for a few years, the retiring doctor takes the risk that you turn off the patients and he gets less. Moreover, you are paying with pre-tax dollars.”” I have no idea about how these buy outs are structured so this sentence is a bit confusing. Anyone care to explain general practice purchase/buy-out structure? Why would the departing doctor make less money if the new doc fails to retain all of his/her old patients?
“…and you won’t net as much income as you thought when you looked at that contract.” I take it this refers to 1099 employees/production-based employees and not W2 employees?
Based on the excerpts, the Harbin book seems like an interesting and worthwhile read. I’ll add it to my list.
When you pay up front you take a loan for the price of the practice. If patients stop coming then you are still on the hook for the loan.
When you pay a percentage of profits the seller gets a percentage every year for say 3 years. If the patients don’t show, it’s the seller who doesn’t get paid.
I’ve always seen the 2 options come out the same. If the seller is taking the risk, then they usually want more for the office etc. But, it is smart to look at it on an after tax basis as what’s beneficial for the seller is usually not for the buyer and sometimes you can pay more for an office, but after tax come out ahead.
Thanks for the explanation.
Thanks for the correction.
What he’s saying is that if you are paying as a percentage of what you’re generating, that goes to the owner as pre-tax dollars, since it comes out before you pay the taxes. But an “upfront amount” that you might borrow from a bank, that’s post-tax dollars (although you could deduct the interest.)
There are many different ways to structure a purchase or buy out structure. So the answer is really “it depends.”
A W-2 employee can be production based or a flat salary.
Thanks for the explanation.
I would appreciate more book recommendations regarding opening up a solo practice.
Do people still do that? 🙂
Seriously though, this is one of the better books on the subject:
https://www.whitecoatinvestor.com/the-medical-entrepreneur-a-review/