The Economic Reality of Primary Care
The ED was slow last night, and I had a discussion with a partner about his medical school class. I attended a rather inexpensive medical school, and quite a few people from my class went into pediatrics, family practice, and internal medicine. He attended an expensive medical school in an area with a high cost of living, and his impression was that the only members of his class who went into primary care were those whose parents were footing the tuition bill (“the trust fund students.”) There was a paper published about a year ago about this phenomenon by a group at Dartmouth led by Martin Palmeri which made some interesting observations.
First, a figure on the increasing debt burden on medical students.
This is pretty self-explanatory. Over a period of 5 years the percentage of students graduating with more than $200K in debt has gone from ~8% to ~26%. That trend has worsened over the last 3-4 years to the point where a majority of graduates at many schools have over $200K in debt. Combined with higher student loan interest rates and with subsidized Stafford loans going away, this debt burden is becoming the equivalent of a second mortgage payment.
After a discussion of the phenomenon of increasing debt, the group calculated out an average primary care physician income. This calculation is well-represented by this figure:
No huge surprise here, primary care docs get paid less than specialists as a function of less time in training and relatively poor reimbursement for non-procedural medical care. There is one line I want you to pay special attention to though- retirement savings. The suggestion is that primary care docs can save $895 a month for retirement and radiologists can save $5023 for retirement. Carry that to it's logical conclusion using the future value function in any spreadsheet. Assume the primary care doc has a 35 year career and the radiologist has a 33 year career. At age 65, what is the difference in wealth? Assuming 5% real returns, the primary care doc will end up with just $1.02 Million, which at a 4% withdrawal rate, will provide a real retirement income of just over $40,000, a decidedly middle class amount. The radiologist will end up with $5.05 Million, allowing a real retirement income of $202,000 a year, five times as much as a primary care doctor (despite a salary difference of only 2.7 times). Looking at it a different way, if both doctors needed $2 Million to retire, the radiologist could retire at age 53, but the primary care doctor would have to work until age 77. Perhaps medical students choosing a specialty should look at these numbers rather than just the initial salary differences. I think I could put up with sitting in a dark room all day for a career that was half as long.
After looking at the income side of the equation, the authors next turned to the expenses side. They considered a “low-budget” physician (no student loans, kid's college was to be at a state school, and no changes to social security program) and a “high-budget” physician (high student loans deferred during residency, kids go to private colleges, and no social security program.) This figure shows what they found:
Basically, with a high-expense lifestyle (not a big house and car, just student loans and a high savings rate for his kid's college), the doctor would spend more than he earned for the first 7 years of his post-residency career. In practicality, this means if you have a high educational debt burden, you won't be able to save for retirement or college for years after starting your career.
Finally, the authors plotted out after-tax income only against a low, moderate, and high student debt burden.
As you might expect, high student loans will keep you from saving much money. Not a huge revelation, but the trend will only get worse as reimbursements fall and debt burden goes up. Primary doctors with a $220K debt burden can't put $30K a year away for retirement until their 9th year of practice now. What will happen when that figure becomes the 20th year, or never?
The authors appropriately conclude:
Physicians cannot make the decision to follow a PC career path lightly. Although declining interest in the gate-keeping disciplines of internal medicine, family medicine, and pediatrics suggests that students intuitively grasp this problem, these data make the career choice disincentives explicit. Clearly, subspecialization allows a budget surplus for discretionary spending, ranging from modest to substantial. The financial situation of those who pursue subspecialization contrasts sharply with the dilemma of PC physicians who face difficult economic choices, as this paper demonstrates. The stark differences perhaps distort the choices newly minted physicians might make otherwise (e.g., choosing a subspecialty because of monetary concerns).
This analysis should be viewed as a budgetary scaffold and not in absolute terms. The essence of the analysis is to provide a financial benchmark to guide PC policy makers and to serve as a warning that any erosion in PC physician income may make a career as an internist, family physician, or pediatrician untenable. Rising interest rates on educational loans, increasing student debt, declining Medicare/Medicaid reimbursement, and inflation can significantly reduce PC physician income.
Moral of the story for pre-meds: Don't go to an expensive school if you think you want to do primary care.
Bottom line for medical students: If there's a specialty you like almost as much as or as much as primary care, you'd best choose that instead.
Summary for practicing primary care docs: You are not rich, so don't live like it. You can have a comfortable middle class lifestyle, but you simply cannot live in a house as big as a specialist's, drive a car as nice as a specialist's, go on vacation like a specialist, or retire early like a specialist. You cannot put off retirement savings until you get a larger amount of discretionary income or you may never have a comfortable retirement. You must carve those retirement contributions out of your lifestyle.
Summary for specialists: Don't laugh. With reimbursements falling and educational costs rising the primary care docs may just be the canaries in the gold mine.
i read the contract negotiations book you recommended and my memory is that the data they presented showed for 2010 the lowest AMGA avg across all fields of medicine was closer to 200k. With that said, it is still harder for primary care any way you slice it. I personally think few people chose their specialty based on debt. Frankly i feel many get locked out of the specialty they would want to do bc of grades, scores, or some other factor even though im sure they would do fine in that specialty.
Nice article about the problems with selecting an expensive medical school and choosing a primary care specialty. I work in anesthesia and it is sad to see CRNA’s (certified registered nurse anesthetists) making more than primary care doctors.
Having said that, I think it is important to consider costs when selecting undergrad and medical school. Both my wife and I went to public colleges and med schools so as a result we had much lower debt levels after graduation (which we have already paid off). Our parents were all hard working, thrifty, and solidly middle class. I went to med school with a lot of Ivy League/Stanford grads and now I work alongside doctors who went to expensive private colleges and med schools. The only significant difference is that they spent more on education and tend to have more educational debts (unless they had wealthy parents who paid for everything).
We both chose mid-tier (in terms of pay) specialties like anesthesia and hematology-oncology and we tend to be savers (>60% of disposable income) so I think we should be OK for the future. I think we would’ve been fine even if we were both in primary care with our spending habits.
We would be able to afford to support our daughter through a private college and grad/professional school. However, as we live in California, I would still encourage her to go to good public schools UC’s(University of California) for college and grad/professional school and use the saved money to help her get a good start on her financial future (i.e. help with down payment on her first house).
As someone interested in being a hospitalist , how would that be a career choice financially?
Dan-
I think a hospitalist would be a rewarding career, but I confess I rarely see a happy one. The lifestyle isn’t too bad since it is shift work (although usually 12-24 hour shifts instead of the usual 8-12 you see with emergency medicine) but the pay is less and the hours are more. Plus many hospitalists feel like everyone else in the hospital is dumping on them.
Salary-wise, it’s still primary care, so be careful how much debt you run-up if it is what you want to do.
I’m a hospitalist. I’ve worked killer hours. My first year and a half out of residency, I worked 230 hours a month average. Shifts for our group are usually 10-12 hours, less if the census is light and you go home early. We share the night shifts in our group so that equates to about 5 nights shifts a month. I made around $280000 my first complete year as an attending. I’m making close to $300000 my second full year out as an attending but then again, I’m also the hospitalist director now. I work about 180 clinical hours a month plus all the administrative work.
Not all hospitalists work as much as I or my partners did. Our hospitalist program was short staffed for quite some time. Average hours and pay for a hospitalist is around 170 hours a month and $200000 a month.
I love the job. I love seeing all the different diseases. I’m not stuck listening to just the heart all day or focusing on just one organ system. I don’t sit in an office and hear about cough and colds all the time, or excuses why someone’s sugars, blood pressure or weight is still out of control. While I love meeting people, there are certain personalities I know I would absolutely hate seeing all the time. I get the feeling of accomplishment when I see patients go from admission to discharge.
One of my attendings in residency told me that primary care was easy. You get your patient panel, know your patients well, get to grow old with them and just refer out. Right there and then, I knew family practice really wasn’t for me. I didn’t go into medicine so I can hit the “easy” button.
As a hospitalist, we see legitimately ill people. Some sicker than others. We run the ICU as well. I can intubate, put in lines and manage vents. Sure, do we a lot of chest pain rule outs that don’t pan out. But we do get those ones too whose lives we save after we send them out for cath or a CABG. We save lives of people who come in septic for whatever reason. We run the codes in the hospital.
I don’t feel like we get “dumped on”. Co-managing and tuck in services are good for patient care, convenience and allows specialists time to do what they were trained to do – procedures. But I’ll be honest, those services we provide are business opportunities to make sure our practice is profitable for the large hospitalist company I work for. And realistically speaking, specialists don’t like working at hospitals that don’t have a strong hospitalist service to provide them support. i.e., admitting, baby sitting and discharging.
I’m active in hospital committees. I help make sure that we deliver excellent health care and a patient experience second to none. And of course, I help make sure the hospital is profitable and running well through ensuring a lower LOS, hitting the core measures, etc…
Medicine is big business. If you’re a doctor and you’re going broke, then it’s the business side you need to learn. Whether it’s managing your personal finances wisely or making sure your practice is a well oiled machine that is capturing all the billing opportunities and seeing as many patients as possible to remain profitable, physicians need to be educated. The government and insurance companies are out to nickel and dime us. Hospitals, HMOs, and even large physician groups are out to make big money on the labors of the physician.
We’re quite alone in our financial battle. There are many out there “out to get us”. Too bad there isn’t physician union. I’d be first to join.
I love this site. I just found it. A lot of the content here are things I’ve come to realize myself in the almost 3 years since I became an attending. I wish I had run into this site sooner. Some of the things I regret doing out of residency:
Buying a 3200 sq foot home – I should have rented first or bought small instead of one we can grow into
Filling it with furniture from Stickley & Audi or Ethan Allen
Because of my poor decisions up front, I’m going to have to work a little harder for the next few years.
Still, I’m not doing too bad. I managed to save 15% of my income, all while paying down credit card debt incurred while in medschool and training. In 18 months the only debt I will have will be for 2 cars, student loan (which is way below average), and my home mortgage. I’m far from being rich or part of the 1% but I can’t complain. Life is good.
BTW, Ron Paul 2012!!!
Dennis-
Thanks for sharing your experience. I’m glad to see you doing well, both financially and in the personal happiness department. Hope you enjoy the site.
In the table above that compared primary care monthly saving to specialist saving potential I see a major flaw. No offense to my children, but a family practice physician or other primary care doctor should probably not be saving $1967 for their kids college education when that could have up to thirty plus years of growth for retirement. If the primary care Doctor saved the 2862$ at seven percent return for 35 years they would have $4.9 million. This calculation and the article also don’t address many programs that help forgive medical student loans for primary care physicians. This would help the primary care doc start contributing even more to saving even earlier.
Maybe I am biased because I worked hard to earn scholarships and went to an extremely affordable University, but I think we have to take everything into consideration. Good value for education is very important right now.
I enjoyed this post quite a bit, but I believe the financial situation for Primary Care is not quite as bad as people like to gripe about.
First, I graduated with 185K in debt in 2008, and was only able to pay interest on those 6.8% loans while in residency. Over the last 3.5 years in Family Practice, that debt is down to 60K (now refinanced to much lower rate), and we were able to purchase a home, go on exotic vacations, have two kids, and live a fine life in general (while also saving and investing!).
I agree with some comments above that it’s all about learning some basic money management techniques and simply NOT LIVING BEYOND YOUR MEANS. If I tried to “live like a doctor” right out of residency, that debt would have hobbled me to the end of days.
Really, what I find most funny, is that if I had never accrued that debt, would I ever have learned the true value of money in the first place? Would I have set a goal to retire (or at least have the option to retire) at age 50? Or would I have simply lived high on the hog for 20 year before realizing I’d better start thinking about this whole retirement thing.
I think people complain the most not because this whole medicine thing isn’t a bad deal, but because it’s just not as good a deal as it once was…… which is a whole other story.
Maybe an update is due in light of the recently released Merritt Hawkins study that’s showed increasing salary growth in primary care?
It’s going to take a while to get up to where this article no longer applies.
Thanks for the reply! I assumed as much, but they were reporting double digit raises. It’ll certainly help my wife when she gets out of residency next summer! Thanks again for all you do.
If you have $200000 in debt and make $200000 per year can you pay it off in 3 to five years how would the break down look for a single person living in nyc?
You’d have to put $40-50K per year toward it to pay it off in 5 years. Taxes will not be friendly to you as a single person making $200K in NYC though.
Hey WCI, what are you thoughts on occupational medicine, salary wise? I know it’s still not “specialist” money but I hear it is more than PC.
Surveys I’ve seen put it pretty much at the bottom of the pile. Again, that’s average. I’m sure there are ways to MAKE BANK in occ med just like every other specialty. But it usually gets combined in with preventive medicine or at best urgent care on surveys.