My most recent column in ACEP NOW is entitled You, Incorporated (print version,page 18). (Online Version) I wrote this post to help those who are “stuck” as employees, probably for their entire career, to think of themselves as a business, with multiple sources of revenue and expenses. The entrepreneurial mindset of being an owner is valuable, even for an employee.
Q. It seems that fewer emergency physicians own their own groups. What can I do to increase my income and financial security?
A. The percentage of emergency physicians who are partners in small democratic groups decreases each year, and it’s easy to understand why. Not having to worry about “business stuff” is attractive to many doctors. The growing debt burden for new residency graduates has increased the need for higher initial salaries—perhaps at the cost of lower long-term income. That means that coming up with a financial, or “sweat equity,” buy-in for a heavily indebted graduate could also be difficult, especially with the prospect of a small democratic group becoming part of a contract management group (CMG) before the investment could be recouped. In addition, there are now so few small democratic groups that many doctors interested in that model no longer have the option in their desired geographic areas and are faced with the likelihood of being an employee for their entire career.
This puts numerous emergency physicians in the same position that many employees in corporate America have been in for some time. Loyalty to “the company” isn’t rewarded in the same way it might have been decades ago. Employees are unlikely to stay in the same location, working for the same employer for their entire career, and then retire with a pension and health care provided by the company.
Your job as the CEO of You Inc. is to get as much as you can in exchange for your work and value.
If a small democratic group isn’t in your future, you still stand the best chance to be successful if you think of yourself as an owner: the owner of “You Incorporated.” Just like any business owner, you have revenue and expenses. From time to time, you’ll negotiate contracts that will increase revenue. And as the chief financial officer of You Inc., you’re in charge of reducing expenditures. Taking this attitude should change the way you approach your personal finances.
USE FLEXIBILITY TO YOUR ADVANTAGE
Partially driven by the rapid increase in both investor- and hospital-owned freestanding emergency departments, the number of emergency departments and ED patient visits in the country is increasing at a rate much higher than the increase in emergency physicians coming out of residency. Even before this trend, there were many emergency departments in the country that weren’t yet staffed by residency-trained, board-certified emergency physicians. Demand is much higher than supply, and this can work to your advantage.
You may not have the control over your nursing staffing level like you would if you owned your own freestanding emergency department. You may not have the control over physician staffing levels, shift lengths, and the vacation calendar like you might have in a small democratic group. You may not have access to the additional profits that come with a successful business. But you do have something that in some ways can be just as valuable: an in-demand skill set and the potential for an extreme amount of flexibility. Your job as the CEO of You Inc. is to get as much as you can in exchange for your work and value. The more flexible you can be, the higher the rate for which you can exchange your time.
There are many situations where hospitals, CMGs, and other employers have difficulty staffing the emergency department. It may be a relatively undesirable town to live in or a difficulty in covering night, weekend, or holiday shifts. (You might be amazed to learn the going hourly rate for covering Christmas Eve in a difficult-to-staff location.) Maybe the emergency department has poor levels of support staff or call coverage. Or perhaps the CMG just acquired the contract and is still scrambling to find doctors interested in working there in the long term.
Whether you relocate your family or simply commute to fill these shifts, they’re all opportunities to increase the revenue of You Inc. and gain benefits you might not have as part of a small democratic group. As a “gunslinger” for a CMG or locum tenens company, you can set up your personal finances such that you spend much less than you earn. This will allow you to take sabbaticals lasting weeks or even months, which a partner in a small democratic group could never do. For many docs, this extreme flexibility can more than make up for the inconveniences of not knowing what emergency department you may be working in six months from now.
ADD REVENUE STREAMS
You Inc. should also keep its eyes open for additional revenue streams. By virtue of the fact that most ED shifts don’t occur during banking hours, emergency physicians have discovered the value of having multiple weekday mornings off each week. While this time is often used for resting, recovering, and recreating, it can also be profitably used to develop other revenue streams.
This is the time to feed your entrepreneurial streak. You can be an EMS medical director, do medical legal work, consult for insurance companies, or start a business unrelated to medicine. Perhaps you’ve wanted to become a writer, speaker, or politician. Emergency medicine lends itself to these side pursuits far better than many specialties that are locked into standard clinic or operating room hours. These additional income streams reduce the risk of disability, job loss, contract loss, and other financial catastrophes. After a while, and especially if you keep living expenses down, they may even free you from the need to practice medicine for money at all.
Some revenue streams are more passive than others. An investment in low-cost index mutual funds, for example, requires almost zero additional effort after the initial setup. Publishing a book represents a lot of work up front for writing, editing, publishing, and marketing but eventually reverts to almost completely passive income. Some pursuits, such as real estate investing, are a mix of passive and active income. Many tasks can be outsourced as needed to make them as passive or active as you desire.
Speaking to groups of physicians or consulting for profit lies on the other end of the spectrum, as these are almost entirely active pursuits where you trade your time for money. By diversifying your income, you become less reliant on your employer and are in a much better negotiating position.
You may find it increasingly difficult to own your own practice these days, but that shouldn’t stop you from thinking like a business owner. As the owner of You Inc., you can take positive steps to boost profits, income, and flexibility as well as decrease burnout throughout your career.
Do you think of yourself as a business? How has that helped you? What benefits have you seen from an entrepreneurial mindset? Comment below!
This is great. My spreadsheet where I track all of my financials has always been my initials, inc. So every time I open XYZ, Inc. I am reminded to think of myself as a business owner of myself.
BTW, related to the “incorporating” stuff… If someone is venturing into various sideline businesses, it can be a pretty good option to conglomerate activities into a single corporate entity. This “tossed salad” approach may let the entrepreneur avoid limitations related to deducting expenditures… i.e., make it easier to net profits in one established venture with losses on another ‘startup phase’ venture. E.g., the curious case of Tracy Topping:
https://asci.uvm.edu/equine/law/cases/taxes/topping.htm
Hm, this may be a good way of starting a bunch of small businesses that are starting up (and saving on associated fees) while protecting/separating from the main gig of medicine. Simple idea but one I never considered. Thanks!
The Tracy Topping case is interesting, but I don’t see how it applies to aggregating multiple start up businesses. Perhaps I’m missing the point you wish to make, but from my reading of the case, all I see is that she successfully convinced the tax court that her passion and expertise in horse competition was integral to the business she started as a horse barn interior designer. Therefore her significant horse-racing expenses could offset the interior design business profit as “ordinary and necessary expenses”. The opinion clearly lays out how this is different from other cases where “You, Inc CEO” tried to make lifestyle choices a part of their main business in order to deduct costs (e.g. tax court disallowed the plastic surgeon’s contention that his horse ranch/polo parties helped get clients for cosmetic surgery).
Agree with above comments: great way to make the most of your business-related expenses (deductions), stay organized, and bunch all of your (hopefully) profitable activities under one umbrella.
Have one more question, I am currently organized as an owner-employee LLC (single proprietor). I was thinking of adding my wife as a 50/50 co-owner, for a couple of reasons: (1) Able to contribute under her name to a solo 401k (2) At least 50% women owned businesses do get some perks here locally, as far as startup funding. Any downsides to adding her?
There are some asset protection issues to consider. For example, if one business gets sued and they’re all under one umbrella you could lose them all. Adding a spouse might cause you to lose more in a divorce, but I judged not really when I added mine since she was going to get half the stuff anyway.
Agree with the above comments. Having an excel file to track your regular expenses and progress is indeed clever. Making your day-to-day activities and report can make you more organize. There might be people who are born to become owners of their own businesses yet for some who are first timers, it could be intimidating. A lot of unknown plunges may have come your way. Good thing that readers of this article will have a chance to show off their entrepreneurial skills and try to go out of their comfort zones through trying new things out. Can’t wait to see a vast number of You Inc in the near future!
Thank you!
As an employed physician I can say hell yes that the Corporation demands loyalty and gives none in return. As the number of democratic groups shrinks (and also get pushed out by CMGs), I see the future of EM as essentially a locums-based specialty. Outside of highly desirable places (New York, San Francisco), EM docs have little reason to commit themselves to one practice.
As permatemps, docs will lose security (although there never is any with a CMG or hospital) but will once again gain (some) control of their finances by selling his or her labor to the highest bidder. The coming licensing compact will make this even easier. Already salaries have gone up massively; locums never quotes below $200/hr, almost unheard of a few years ago. The tax savings alone and increased retirement savings (not to mention lifestyle flexibility) make locums even more attractive. And, as you state, it will force docs (as they should) to think of themselves as business people.