Organic chemistry, call shifts, and board exams. These are just a few of the many hurdles we have overcome to earn those letters after our last name. Our extensive training prepares us well to practice medicine, however, entering the business of medicine is a different story. This can be particularly daunting for those of us considering a private practice or self-employed career path in the ever-evolving health care industry.
After finishing training, I was eager to work with several hospitals in different locations as an “independent contractor,” or self-employed physician. In my mind, the prospects of optimizing my clinical schedule for efficiency and experience trumped the monotonous alternatives of providing clinical anesthesia services in a single location without significant case variety. However, the costs of business become quite apparent after a few years of practice.
In 2018, as a fellowship-trained anesthesiologist three years into practice in California, I spent $38,385 between insurance premiums, maintenance of licensure and certification, medical society memberships, and business-related expenses. And projections for subsequent years are anxiety-provoking, to say the least.
Salary and location notwithstanding, one must consider dozens of additional price tags while seeking their first (or next) job, which may or may not subsidize these costs:
- Group practices and university-affiliated hospitals tend to cover several of these costs as fringe benefits before providing employees a salary with pre-tax deductions.
- Physicians who are employed as “independent contractors” are responsible for the majority of these fees, the majority receiving untaxed distributions for each operating location.
- Furthermore, business-legal logistics associated with forming an independent entity, managing billing collections and providing an infrastructure to carry out a solo medical practice incur additional costs.
In this article, I will describe the different categories of fees, premiums, and business-related costs that are applicable to all practicing physicians. Furthermore, I will describe the factors impacting cost or contributing to cost variation for each category.
Expenses For All Physicians
1. Medical and Dental Insurance
Factors impacting cost: Age, personal medical history, coverage benefit amount, and plan choice (e.g. family versus individual plan), Patient or Exclusive Preferred Organization (PPO or EPO) versus a Health Maintenance Organization (HMO) plan.
2. Life Insurance
Factors impacting cost: Age, personal medical history, sex, whether you participate in any activities that are deemed to be hazardous, type of policy (term or permanent, and how it is structured), benefit amount, and insurance carrier.
3. Disability Insurance
Factors impacting cost: Personal preference (most often related to being commensurate to one’s current or estimated income), age (i.e. < or > 35), occupation-specific and specialty-specific inclusion criteria, pre-existing medical conditions, additional riders.
4. Professional Liability Insurance
Factors impacting cost (premiums): Specialty (and subspecialty), location, number of years in practice, specific procedure risk categories (e.g. obstetrics), and prior claims
5. State Medical License Fees
Factors impacting cost: Based on each individual state, but not inclusive of the initial application fee and related costs, associated certifications and permits (i.e. Dental Board) or any restrictions and mandated services (such as remediation, rehabilitation, and physician monitoring programs).
6. Board Certification / Maintenance of Certification (MOC) Fees
Factors impacting cost: Specific to specialty medical board, initial exam / re-exam and test registration fees, travel and lodging costs (for oral board examinations), and any additional MOC requirements. Subspecialty (e.g. fellowship) certification incurs an additional monthly fee.
7. ACLS / PALS Certification
Factors impacting cost: Dependent on the certifying organization providing the course, with in-person didactic training inevitably more expensive than online courses and trainee-sponsored programs. The first course (which is required to be completed in-person) is typically more expensive.
8. Drug Enforcement Agency (DEA) Licensure
Factors impacting cost: A separate DEA license is needed for each state in which intends to or already practices.
9. Medical Staff Dues / Credentialing Fees
Factors impacting cost: Subsidies of fees granted by specialty group practices and training programs, part-time (e.g. consultant, affiliate) vs. full-time status, specific privileges being requested, and any considerations for re-credentialing.
10. Memberships & Conferences
Factors impacting cost: Varies based on organization, number of years in practice, subsidies by group or training program, national specialty association membership. Conference fees depend on organizational membership status, trainee status, involvement in conference proceedings (i.e. research presentations and adjudication, workshop leadership), and registration for special exhibits and seminars
Expenses For Individual Practice Physicians
With many of the specific costs noted, we now turn to broader considerations a self-employed physician must ponder.
Most independent physicians carry a corporation-type structure, such as a limited liability corporation (LLC) or S-Corp, for determining deductions, dividing distributions and salary, and tax pass-through purposes. The details of different corporation structures are beyond the scope of this article. Regardless of the company or the medical specialty, all independent physicians receive untaxed distributions from any group, health care setting, other physicians, or outside entity with which the physician contracts.
It is not meant to be exhaustive, but rather serve as a starting point from which you can further outline your business plan. Beyond financial structure and the related legalities, the factors impacting cost for the remaining variables (i.e. IT, marketing) are largely dependent on the number and frequency of services requested by the physician.
1. Certified Public Accountant (CPA)
Factors impacting cost: Number of tax preparations, additional filings (e.g. extensions, gain/loss statements), number of years of experience and prior clientele, additional services requested (i.e. business planning, estate preparation). Complexities of personal and business finances (i.e. malpractice history, partner buy-ins, divorce settlements) can also affect rates.
2. Financial Advisor
Factors impacting cost: Scope of services desired, frequency of meetings, and whether your advisor will be managing your investment portfolio for you or whether you will be retaining this responsibility yourself, among others.
Factors impacting cost: number of employees, deduction and payment frequency, in addition to setup of the base account.
4. Billing and collections purchased services
Factors impacting costs: Commission percentages vary according to volume, location, specialty and payer demographics.
5. Communication: Information Technology
Includes hardware, software and electronic access, website management, and maintenance & on-call support
6. Communication: Marketing
Includes printable marketing tools (i.e. business cards) and media shoots, search engine optimization, and social media outreach
7. Other Tax-Deductible Business-Related Expenses
Includes business-legal costs, rental space for the home office, administrative assistance, office supplies, and business-related food and travel.
Aalap Shah, MD is a paid blog writer at Xenon Health; CEO of PRPmobile, LLC; and an independent quality improvement consultant for health care organizations in Southern California.