[Editor's Note: I recently had a 10-page article published in Practice Link magazine titled “What Are You Really Worth?”  I wanted to title it “The Light At The End Of The Tunnel”, but the editor didn't like that so much.  Several regular readers of the blog were also featured.  While it focuses on determining how much a new residency graduate is worth to a prospective employer, I managed to throw in plenty of personal finance and investing pearls that would be worth your time.]

What Are You Really Worth?

Having a realistic idea of your needs and expectations will help you plan your next steps.

You’ve been working hard for more than a decade and will soon be leaving the familiar world of residency or fellowship and moving into the real world.

If you’re like most new attending physicians, you have acquired a good sum of debt that now must be paid back, and you have been delaying gratification for a long time. To make matters worse, you’ve had little training in personal finance, investing or business and the likelihood of being taken advantage of is high.

Be assured that few other professions ever recite anything like the Hippocratic Oath and that there are many that plan to feed their own families off your naiveté. The steep learning curve you have been on the last few years will continue for another year or two with regards to your medical skills and knowledge, but you will also be placed onto an even steeper business/finance learning curve—whether you wish to or not.

Your successful acquisition of this new knowledge and skill set will unfortunately be much more important in determining your financial success and living standard than what you learned in medical school and residency.

How much do you really need?

A frequent question discussed in many job-hunting situations is how much the new employee really needs as compensation for the job. This consideration may not make much sense for a new attending. The compensation for even a low-paying job as an attending is likely to be three to 10 times a resident salary. Physicians are also among the most highly compensated of professionals. As I often remark to residents and new attendings, if you can’t live on $200,000 a year, you have a spending problem, not an earning problem.

That said, a new attending has significant financial pressures. Loan payments that have been deferred or artificially lowered via the incentive-based repayment program will now require significant monthly payments. A typical graduate in her early- to mid-30s is a decade behind her college roommates in saving for retirement.

A physician leaving training will appropriately take on a significant burden of expensive insurance policies including malpractice, personal liability, disability, property, and life insurance. The new attending will also notice that her tax burden has increased dramatically, often tenfold. Notice that I haven’t even mentioned the additional expenses involved in the significant upgrade in lifestyle (bigger house, nice car, better vacations, furniture that isn’t purchased at a thrift store, etc.) that a typical resident and her significant other have been looking forward to for so long. But even with these new expenses, it’s still questionable for a new attending to argue that she needs a $220,000 salary instead of the $200,000 salary she may be offered.

Get paid what you’re worth

Despite all that, physicians rightly expect to be paid what they are worth, rather than some sum of money that they “need.” The single best way to ensure this happens is to figure out what other physicians with comparable expertise, doing a comparable amount of work, in a comparable area are earning.

Turns out this information is harder to come by than you might expect. People in general, especially physicians, are hesitant to spend much time talking about money. It’s a bit of a taboo subject, as it seems to make those who bring it up feel greedy or look greedy to others. But if you have no idea what you are worth, you may settle for ridiculously low compensation that can add up to a difference of millions of dollars over a career.

Employees are never paid what they’re worth

Keep in mind that as an employee, you’ll never be paid what you are truly worth. If you were paid exactly the amount of income you generate, minus the expenses you generate, then you would provide no profit to the business.

If a business doesn’t make a profit, it doesn’t stay in business long, and the job it provides disappears. Thus the highest-paying job is usually going to be a well-run business in which the physician is at least a partial owner. This relationship is easily seen in salary surveys. For example, the 2012 Daniel Stern And Associates Survey of Emergency Physician Compensation showed the average total compensation for partners was $326,000 versus $279,000 for employees.

The type of work matters

Most new residency graduates won’t be offered an ownership position right off the bat unless they open their own practice. Even a position that is expected to become a partnership position in one to three years generally starts out as an employee or an independent contractor position.

Job seekers often have a difficult time comparing a job where they will be an employee (paid on IRS Form W-2 at the end of the year) against a job where they will function as an independent contractor (paid on IRS Form 1099 at the end of the year). An independent contractor is self-employed and is eligible for a few additional tax deductions, but mostly just has new expenses, including the employer’s half of payroll taxes (Social Security and Medicare) and her own benefits, including health insurance, dental insurance, and a retirement plan.

Malpractice insurance premiums, however, are usually paid by the hospital or group hiring the independent contractor. Because of these additional expenses, a physician should expect to be paid more as an independent contractor than as an employee. A typical independent contractor will owe an additional 6.2 percent in Social Security taxes on the first $113,700 in earnings ($7,050) and an additional 1.45 percent in Medicare taxes on all of her earnings ($2,900 for earnings of $200,000). Health and dental benefits may also be worth up to $1,000 per month. These additional expenses are tax-deductible but assuming malpractice is covered, a physician earning in the $200,000 range should expect independent contractor payments to be 5 to 10 percent higher than an employee salary.

Money isn’t the most important thing

Salary isn’t the most important factor in selecting a job. It may not even be in the top five factors. Just as in selecting a residency, the quality of the people you work with, the work environment, unique opportunities associated with the job, and the city the job is located in are all likely more important to you than the total compensation.

For hand surgeon Bret Peterson, M.D., the fit of the practice—and the longevity of the employees there—was more important than compensation when selecting his first post-training position in Colorado.

Changing jobs is expensive due to moving expenses, transaction costs incurred when buying or selling a home, licensing fees, and the opportunity cost of being out of work for even a short period of time.

Choose a job that is likely to be rewarding for many years to help you avoid burnout and provide longevity to your career. Try to select your last job first. Often you will NOT want the highest paying job available to you.

Bret Peterson, M.D., a hand surgeon finishing his training in 2013 and taking a position in highly coveted Colorado, was very concerned about the statistics showing that up to 50 percent of physicians leave their first job within two years. “I was very focused on achieving a good fit with the group, and was relieved to see that the group hasn’t lost a physician in two decades,” he says. He noted that he could have made a lot more money working elsewhere, but that fit was far more important.

There is often a reason an employer has to offer more money to fill a position. It might be an undesirable location, a particularly burdensome job, or an unpleasant work environment. It will take an awful lot of money (far more than most new graduates realize) to make you happy to go in each day to a job you hate or to live in a city you find unattractive.

Types of compensation

Your new job may pay you an hourly rate, a rate per shift, a flat salary, a rate tied to your productivity, or even a combination of the above. None of these methods are necessarily superior to any other, but keep in mind that there may be one that is better for you. If you were among the most productive of your residency classmates, perhaps you will earn more money in a productivity-based model. If you are not particularly fast or efficient, you may wish to avoid having a large chunk of your income tied to your productivity. Some people may prefer the guarantee and the predictability associated with a flat salary or rate (assuming there are a guaranteed number of hours or shifts provided).

Michael Brown, D.O., a family physician who started his first job in Lee’s Summit, Mo., was pleased to see that his position offers not only a guaranteed base, but a significant bonus based on the RVUs he generates. Make sure when comparing jobs that you are comparing apples to apples. For example, if you are comparing a job where you are paid per shift instead of hourly, you’d be wise to find out how long on average you’ll be at the hospital after your shift ends and count those hours when comparing your salary to another location where you are paid on an hourly basis.

“I’d done my research and knew what a good offer was in my field and area, so when I saw my initial offer was good I didn’t have to negotiate much to be treated fairly,” Brown says. Knowledge is power when it comes to negotiating.

The first offer isn’t the best offer

In the business world, it’s said that “you never take the first offer.” Sadly, a large percentage of physicians sign the first thing that is put in front of them, not realizing that they might be able to add tens of thousands of dollars to their salary by simply asking.

It takes a great deal of time and effort to hire a physician. If they like you, they’re almost surely willing to pay at least a little more than the initial offer rather than starting their job search all over or moving on to the next most attractive candidate.

A physician skill set is still a remarkably rare and valuable commodity, especially in a community facing a physician shortage. Just as you aren’t selecting a job based on maximum compensation, they aren’t selecting you based on you being the cheapest doctor available.

Do yourself a favor: Swallow your embarrassment and politely ask for more. The worst they can say is “no.” It’s easy to ask for a little more money or a better contract when you know there are several other places you can go and be perfectly happy­­—like Murali Gopal, M.D., a pulmonary/critical care physician in Punta Gorda, Fla., who was heavily recruited as he finished training in 2012. He ended up with 15 job offers.

Stay informed about compensation trends

Compensation trends are extremely specialty dependent and less dependent on region of the country—but there can be a very wide variation even within a specialty.

For example, in 2012, the 10th percentile for emergency medicine employees was a total compensation of $205,000 and the 90th percentile for emergency medicine partners was $510,000. But the difference between average compensation in the highest-paid region and average compensation in the lowest-paid region may only be $20,000 to $30,000, according to the Daniel Stern Survey.

Signing bonuses and moving expenses may be paid, but this tends to be a function of the popularity of the job. If a group had 50 applicants for the position they’re offering you, don’t count on a signing bonus. If you’re the only respondent to a small-town job that has been unfilled for a year, you can ask for the moon and just might get it. Brown noted that the family physicians graduating from his program and “going rural” were able to get $20,000 to $40,000 signing bonuses, loan repayment and even tax-free National Health Service Corps dollars. Those staying in urban areas were doing well just to get some loan repayment in addition to their base salary.

The best way to stay informed about compensation is to talk to everyone you know who has taken a position in your specialty in the last year. Most of your physician friends and associates are at least willing to privately give you a ballpark figure for their salary, benefits, and other contract specifics.

Josh Hamilton, M.D., a general surgeon in Royce City, Texas, knew exactly what he was worth because he had queried every physician in the previous two or three classes in his program about their salaries, benefits and contract details. “The job I took was always in my back pocket, but I certainly looked around at everything else available,” he says.

real estate booksIt is also wise to read all the salary surveys available. Every year there are groups that do a survey of all specialties, but the specialty-specific ones are the most useful. Sometimes you can find this survey information for free, but in general, you get what you pay for. The better surveys usually charge you for the information.

MGMA does a survey each year of 2,400 physicians just out of residency or fellowship of all specialties. They charge $655 to non-members for a copy of the results. While that seems like a lot of money, it pales in comparison to the value of the information while negotiating, especially if you split the cost among all the residents in your class. Each of the physicians I interviewed for this article was well aware of the MGMA data for his specialty, even though none had actually formally purchased it.

One of the best surveys in my specialty, the Daniel Stern survey, charges $100 to $200 but is available free to survey participants (so ask faculty and recent grads if they participate in similar surveys). There are also free surveys, such as the Medscape Physician Compensation Report and the Medical Economics Physician Earnings Report, available online. You can be sure your potential employer has read these, so you had better read them as well.

Another great source of salary information, especially for academic physicians, is available through the “right to know” laws in place in many states. The salaries of all state employees, including physicians at the local university medical center, may be listed on an easily searchable website.

Getting help

There are people out there who are willing to help you figure out what you’re worth and even help negotiate your new contract. Some full-service financial advisors offer this service, and most specialties have recruitment and consulting firms who are willing to assist on either side of the hiring process.

Attorneys and even physicians often market themselves as negotiating experts and their knowledge and expertise can be well worth the price for many physicians, although most physicians prefer to do their own negotiating. Even so, most doctors at least have their contract reviewed by a health care attorney, although there can be wide variation in how much is paid.

Hard work pays off

A recurring theme among the physicians I interviewed for this article is that they all worked very hard to get their first real job. Jared Blum, M.D., an anesthesiologist leaving the military for private practice in Washington this year, started going to career fairs as an intern. Hamilton and Blum cold-called dozens of hospitals. Gopal went on 20 interviews. Early in his residency, Peterson started contacting every group in Colorado with whom he felt he could be happy working. Just as hard work gets you through medical school and residency, it can help you land a dream job in your chosen career.

You’ve worked hard for a long time and have finally reached the light at the end of the tunnel. Start learning about personal finance, investing, and business, and you can enjoy the rewards of your hard work throughout your career and retirement.

Then come back here and let us know what you thought in the comments section.