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Child of The New Gastroenterologist
Medical Liability for the Gastroenterologist
While nearly 75% of physicians in low-risk specialties and 99% of physicians in high-risk specialties may face a malpractice claim in their careers,1 malpractice is rarely discussed openly in medical school, residency, fellowship, or even amongst colleagues. Indeed, one study suggested that more than 10% of practicing gastroenterologists may face a malpractice claim,2 with gastroenterologists expected to spend 10-15% of their careers with an outstanding malpractice claim3 as cases may take 27-29 months to resolve on average.4
Believing that if a physician is sued, one must have done something “wrong” or that speaking about one’s experience may implicate a colleague, creates an intense stigma and isolation that only serves to aggravate the “second victim syndrome” (SVS) that is well documented in the surgical literature.2 Herein,
What is Malpractice? Why Do Physicians Get Sued?
Malpractice is defined as negligence on the part of a physician which causes physical or emotional damage to the patient. This requires a variety of legal issues to be evaluated (e.g. breach of duty between the physicians and patient, breach of standard of care), that often center around the question: would a “reasonable, careful, and prudent” doctor behave in the same manner in the same circumstance?
While some fields of medicine lend themselves better to algorithmic applications of highly evidence-based guidelines, many aspects of GI care and endoscopic practice are highly physician/patient-specific, dependent on local expertise, and based on low-quality evidence. As a result, an assessment of negligence may be quite subjective, depending on the expert retained by a plaintiff. Conflicting expert testimony on what professional custom is and whether practice deviates may hinge on technical details that may or may not be appreciated by a lay jury.
Plaintiffs must prove both that they have sustained an injury and that the injury (emotional or physical) was due to the physician’s negligence. While this may be straightforward in a “slip-and-fall” tort claim, medical malpractice claims usually involve sick patients with multiple comorbidities, where assigning causality to a single intervention/misinterpretation/missed opportunity is difficult to weigh against competing causes of adverse outcomes. Assessing a specific liability requires that the plaintiff prove this to a “more likely than not” standard which may be part of the reason why only 30% of cases are closed with indemnity payments, a figure that has not changed significantly in the past decade.4
While the perception amongst physicians is that tort legislation is ever increasing, data from the National Practitioner Data Bank (NPDB) demonstrates that the number of paid claims against physicians has decreased by 75% in the last 20 years.5 This may reflect a progressive improvement in the quality of care delivered or success of “tort reform” on the state level to limit damages and “nuisance” lawsuits. However, another more problematic possibility is that with the corporatization of medicine, an untold number of physicians may be removed from litigation as a named party, with their institution shielding them from reporting. While the number of cases may or may not be declining, the average indemnity payment appears to be rising to $330,000 on average,4 with one study suggesting a significant growth in paid claims in gastroenterology.6
Historically, studies of closed malpractice claims have demonstrated that 59% involved diagnostic errors involving a cancer diagnosis,7 though why this actually happens may be for a wide variety of reasons including errors in the development of a differential diagnosis, ordering of an appropriate diagnostic test, interpretation of the diagnostic test, or follow-up of an abnormality identified.
What are the Intended/Unintended Consequences of Litigation?
The objective of our tort system is to compensate patients for economic damages (medical costs and lost wages) and non-economic damages (pain and suffering), and to ideally deter negligent behavior of providers. Interestingly, data from the NPDB have suggested that approximately 1% of all physicians account for 32% of all paid claims, with the same study showing that among physicians with paid claims, 4% had at least 3.8
While certain fields are obviously more prone to litigation, the risk of additional claims on a physician with 3 prior claims was more than 3 times that of physicians with 1 lifetime claim. One would assume that the system was built to drive out a small proportion of “bad actors.” Indeed, similar data from the NPDB has demonstrated that the number of claims against physicians was associated both with their leaving the practice of medicine and relocating to smaller practice settings.9
Another frequent question is whether the threat of litigation drives “defensive medicine” (i.e. medical care that is not beneficial) or avoidance medicine (i.e. excluding high risk patients and procedures from ones’ practice). These behaviors have been well documented in physicians around the world,10 as well as several surveys of gastroenterologists specifically suggesting regular ordering of unnecessary imaging/endoscopy and referrals of patients to specialists that may not be necessary.11,12
However, does defensive medicine work: does spending more prevent you from being the target of a lawsuit? In an observational study in Florida from 2000-2009, researchers demonstrated that across specialties, greater average spending by physicians was associated with a reduced risk of incurring a malpractice claim. Indeed, the likelihood of a top quintile spending internist having a malpractice incident vs a bottom quintile spending internist was 0.3% vs 1.5%.13
Approximately 10.4-43.3% of physicians may experience SVS, experiencing trauma after an adverse patient event/medical error, manifesting with psychological trauma (shame, guilt, anxiety) and cognitive limitations (burnout, stress).2 Significant emotional consequences are common on the part of the physician and have well-documented stages to recovery,14 which if ignored may lead to long-term detrimental mental/emotional health of the physician and their future patients.
Specifically, in one study, 80.8% of physicians who had a closed malpractice claim reported significant emotional distress (regardless of the legal outcome), with frequent reports of mood symptoms that affected professional conduct.15 Recognizing these effects and implementing peer counseling and institutional support may help to expedite recovery and mitigate future adverse career outcomes.14
Anatomy/Timeline of a Liability Lawsuit
Medical malpractice cases are heard in state courts, in the jurisdictions where the care was provided. From the time an event occurs to when a jury verdict may be rendered may take 4-5 years or more depending on the local statute of limitations, discovery process, backlog of the local case docket, and specific circumstances of the case. The length of time is important to consider given the likelihood that a physician may advance in training or move practice locations during the course of litigation. Several common myths surrounding this process are summarized in the accompanying box, titled “Myths Surrounding Medical Liability Litigation.”
The plaintiff faces a statute of limitations to file a lawsuit that may range from 1-6 years depending on the state. The first indication that legal action may be pending will generally be a plaintiff’s formal request for medical records. After these records are reviewed, the plaintiff’s attorney will consult one or more experts (often credentialed in the same specialty) to assess if the case is viable and to ultimately form the basis of an affidavit of merit from a plaintiff expert.
Once the lawsuit is filed, the physician(s) named will be assigned an attorney by their employer/insurance company. A state medical board malpractice questionnaire will generally follow that will seek to independently evaluate the alleged malpractice with interrogatives to determine if censure is warranted. There is a formal response to the plaintiff’s petition by the defense and then the discovery phase begins where both sides depose the defendants/plaintiffs and retain medical experts that are favorable to their arguments.
In choosing potential “experts,” physicians must ensure that they are willing/able to be present for a potential trial, do not have any personal/professional/academic conflicts with the defendants, and are willing to provide compelling testimony to a jury. A pre-trial conference and trial date is set which may be >12 months away depending on the local docket. While the amount of time a trial may take is variable, it may be up to 5-7 days that the defendants are expected to be in court in addition to days where depositions are being taken.
During the discovery process, dismissal of the physician from the lawsuit is pursued. In addition, settlement negotiations generally proceed in parallel with discovery process and may result in a pre-trial/pre-verdict settlement. Once a verdict is reached, whether for the plaintiff or the defendant, the case may be appealed, and the trial preparation process may be repeated.
Conclusions
Awareness of the medical liability process is critical for trainees and attendings alike, given the high likelihood of litigation in a gastroenterologist’s career. Specific considerations like local tort law and malpractice coverage are important to be familiar. Ongoing health services research help to shape our understanding on the intended and unintended consequences of litigation on medicine, though detailed data on outcomes/settlements are limited by confidentiality agreements, which may hamper efforts to improve patient safety.
Dr. Das is associate professor of medicine in the Division of Gastroenterology at Washington University School of Medicine, St. Louis, Missouri. He has served as a consultant for Olympus, but has no other relevant conflicts.
References
1. Jena AB, et al. Malpractice Risk According to Physician Specialty. N Engl J Med. 2011 Aug. doi: 10.1056/NEJMsa1012370.
2. Chong RIH, et al. Scoping review of the second victim syndrome among surgeons: Understanding the impact, responses, and support systems. Am J Surg 2024 Mar. doi: 10.1016/j.amjsurg.2023.09.045.
3. Seabury S, et al. On Average, Physicians Spend Nearly 11 Percent Of Their 40-Year Careers With An Open, Unresolved Malpractice Claim. Health Aff Proj Hope. 2013 Jan. doi: 10.1377/hlthaff.2012.0967.
4. CRICO Strategies. Medical Malpractice in America: A 10-Year Asessment with Insights. 2018. Accessed Apr 28, 2025.
5. Studdert DM, Hall MA. Medical Malpractice Law — Doctrine and Dynamics. N Engl J Med 2022 Oct. doi: 10.1056/NEJMp2201675.
6. Schaffer AC, et al. Rates and Characteristics of Paid Malpractice Claims Among US Physicians by Specialty, 1992-2014. JAMA Intern Med. 2017 May. doi: 10.1001/jamainternmed.2017.0311.
7. Gandhi TK, et al. Missed and Delayed Diagnoses in the Ambulatory Setting: A Study of Closed Malpractice Claims. Ann Intern Med. 2006 Oct. doi: 10.7326/0003-4819-145-7-200610030-00006.
8. Studdert DM, et al. Prevalence and Characteristics of Physicians Prone to Malpractice Claims. N Engl J Med. 2016 Jan. doi: 10.1056/NEJMsa1506137.
9. Studdert DM, et al. Changes in Practice among Physicians with Malpractice Claims. N Engl J Med. 2019 Mar. doi: 10.1056/NEJMsa1809981.
10. Ries NM, Jansen J. Physicians’ views and experiences of defensive medicine: An international review of empirical research. Health Policy. 2021 May. doi: 10.1016/j.healthpol.2021.02.005.
11. Hiyama T, et al. Defensive medicine practices among gastroenterologists in Japan. World J Gastroenterol. 2006 Dec. doi: 10.3748/wjg.v12.i47.7671.
12. Elli L, et al. Defensive medicine practices among gastroenterologists in Lombardy: Between lawsuits and the economic crisis. Dig Liver Dis. 2013 Jun. doi: 10.1016/j.dld.2013.01.004.
13. Jena AB, et al. Physician spending and subsequent risk of malpractice claims: observational study. BMJ. 2015 Nov. doi: 10.1136/bmj.h5516.
14. Scott SD, et al. The natural history of recovery for the healthcare provider “second victim” after adverse patient events. BMJ Qual Saf. 2009 Oct. doi: 10.1136/qshc.2009.032870.
15. Gómez-Durán EL, et al. Physicians as second victims after a malpractice claim: An important issue in need of attention. J Healthc Qual Res. 2018 Oct. doi: 10.1016/j.jhqr.2018.06.002.
While nearly 75% of physicians in low-risk specialties and 99% of physicians in high-risk specialties may face a malpractice claim in their careers,1 malpractice is rarely discussed openly in medical school, residency, fellowship, or even amongst colleagues. Indeed, one study suggested that more than 10% of practicing gastroenterologists may face a malpractice claim,2 with gastroenterologists expected to spend 10-15% of their careers with an outstanding malpractice claim3 as cases may take 27-29 months to resolve on average.4
Believing that if a physician is sued, one must have done something “wrong” or that speaking about one’s experience may implicate a colleague, creates an intense stigma and isolation that only serves to aggravate the “second victim syndrome” (SVS) that is well documented in the surgical literature.2 Herein,
What is Malpractice? Why Do Physicians Get Sued?
Malpractice is defined as negligence on the part of a physician which causes physical or emotional damage to the patient. This requires a variety of legal issues to be evaluated (e.g. breach of duty between the physicians and patient, breach of standard of care), that often center around the question: would a “reasonable, careful, and prudent” doctor behave in the same manner in the same circumstance?
While some fields of medicine lend themselves better to algorithmic applications of highly evidence-based guidelines, many aspects of GI care and endoscopic practice are highly physician/patient-specific, dependent on local expertise, and based on low-quality evidence. As a result, an assessment of negligence may be quite subjective, depending on the expert retained by a plaintiff. Conflicting expert testimony on what professional custom is and whether practice deviates may hinge on technical details that may or may not be appreciated by a lay jury.
Plaintiffs must prove both that they have sustained an injury and that the injury (emotional or physical) was due to the physician’s negligence. While this may be straightforward in a “slip-and-fall” tort claim, medical malpractice claims usually involve sick patients with multiple comorbidities, where assigning causality to a single intervention/misinterpretation/missed opportunity is difficult to weigh against competing causes of adverse outcomes. Assessing a specific liability requires that the plaintiff prove this to a “more likely than not” standard which may be part of the reason why only 30% of cases are closed with indemnity payments, a figure that has not changed significantly in the past decade.4
While the perception amongst physicians is that tort legislation is ever increasing, data from the National Practitioner Data Bank (NPDB) demonstrates that the number of paid claims against physicians has decreased by 75% in the last 20 years.5 This may reflect a progressive improvement in the quality of care delivered or success of “tort reform” on the state level to limit damages and “nuisance” lawsuits. However, another more problematic possibility is that with the corporatization of medicine, an untold number of physicians may be removed from litigation as a named party, with their institution shielding them from reporting. While the number of cases may or may not be declining, the average indemnity payment appears to be rising to $330,000 on average,4 with one study suggesting a significant growth in paid claims in gastroenterology.6
Historically, studies of closed malpractice claims have demonstrated that 59% involved diagnostic errors involving a cancer diagnosis,7 though why this actually happens may be for a wide variety of reasons including errors in the development of a differential diagnosis, ordering of an appropriate diagnostic test, interpretation of the diagnostic test, or follow-up of an abnormality identified.
What are the Intended/Unintended Consequences of Litigation?
The objective of our tort system is to compensate patients for economic damages (medical costs and lost wages) and non-economic damages (pain and suffering), and to ideally deter negligent behavior of providers. Interestingly, data from the NPDB have suggested that approximately 1% of all physicians account for 32% of all paid claims, with the same study showing that among physicians with paid claims, 4% had at least 3.8
While certain fields are obviously more prone to litigation, the risk of additional claims on a physician with 3 prior claims was more than 3 times that of physicians with 1 lifetime claim. One would assume that the system was built to drive out a small proportion of “bad actors.” Indeed, similar data from the NPDB has demonstrated that the number of claims against physicians was associated both with their leaving the practice of medicine and relocating to smaller practice settings.9
Another frequent question is whether the threat of litigation drives “defensive medicine” (i.e. medical care that is not beneficial) or avoidance medicine (i.e. excluding high risk patients and procedures from ones’ practice). These behaviors have been well documented in physicians around the world,10 as well as several surveys of gastroenterologists specifically suggesting regular ordering of unnecessary imaging/endoscopy and referrals of patients to specialists that may not be necessary.11,12
However, does defensive medicine work: does spending more prevent you from being the target of a lawsuit? In an observational study in Florida from 2000-2009, researchers demonstrated that across specialties, greater average spending by physicians was associated with a reduced risk of incurring a malpractice claim. Indeed, the likelihood of a top quintile spending internist having a malpractice incident vs a bottom quintile spending internist was 0.3% vs 1.5%.13
Approximately 10.4-43.3% of physicians may experience SVS, experiencing trauma after an adverse patient event/medical error, manifesting with psychological trauma (shame, guilt, anxiety) and cognitive limitations (burnout, stress).2 Significant emotional consequences are common on the part of the physician and have well-documented stages to recovery,14 which if ignored may lead to long-term detrimental mental/emotional health of the physician and their future patients.
Specifically, in one study, 80.8% of physicians who had a closed malpractice claim reported significant emotional distress (regardless of the legal outcome), with frequent reports of mood symptoms that affected professional conduct.15 Recognizing these effects and implementing peer counseling and institutional support may help to expedite recovery and mitigate future adverse career outcomes.14
Anatomy/Timeline of a Liability Lawsuit
Medical malpractice cases are heard in state courts, in the jurisdictions where the care was provided. From the time an event occurs to when a jury verdict may be rendered may take 4-5 years or more depending on the local statute of limitations, discovery process, backlog of the local case docket, and specific circumstances of the case. The length of time is important to consider given the likelihood that a physician may advance in training or move practice locations during the course of litigation. Several common myths surrounding this process are summarized in the accompanying box, titled “Myths Surrounding Medical Liability Litigation.”
The plaintiff faces a statute of limitations to file a lawsuit that may range from 1-6 years depending on the state. The first indication that legal action may be pending will generally be a plaintiff’s formal request for medical records. After these records are reviewed, the plaintiff’s attorney will consult one or more experts (often credentialed in the same specialty) to assess if the case is viable and to ultimately form the basis of an affidavit of merit from a plaintiff expert.
Once the lawsuit is filed, the physician(s) named will be assigned an attorney by their employer/insurance company. A state medical board malpractice questionnaire will generally follow that will seek to independently evaluate the alleged malpractice with interrogatives to determine if censure is warranted. There is a formal response to the plaintiff’s petition by the defense and then the discovery phase begins where both sides depose the defendants/plaintiffs and retain medical experts that are favorable to their arguments.
In choosing potential “experts,” physicians must ensure that they are willing/able to be present for a potential trial, do not have any personal/professional/academic conflicts with the defendants, and are willing to provide compelling testimony to a jury. A pre-trial conference and trial date is set which may be >12 months away depending on the local docket. While the amount of time a trial may take is variable, it may be up to 5-7 days that the defendants are expected to be in court in addition to days where depositions are being taken.
During the discovery process, dismissal of the physician from the lawsuit is pursued. In addition, settlement negotiations generally proceed in parallel with discovery process and may result in a pre-trial/pre-verdict settlement. Once a verdict is reached, whether for the plaintiff or the defendant, the case may be appealed, and the trial preparation process may be repeated.
Conclusions
Awareness of the medical liability process is critical for trainees and attendings alike, given the high likelihood of litigation in a gastroenterologist’s career. Specific considerations like local tort law and malpractice coverage are important to be familiar. Ongoing health services research help to shape our understanding on the intended and unintended consequences of litigation on medicine, though detailed data on outcomes/settlements are limited by confidentiality agreements, which may hamper efforts to improve patient safety.
Dr. Das is associate professor of medicine in the Division of Gastroenterology at Washington University School of Medicine, St. Louis, Missouri. He has served as a consultant for Olympus, but has no other relevant conflicts.
References
1. Jena AB, et al. Malpractice Risk According to Physician Specialty. N Engl J Med. 2011 Aug. doi: 10.1056/NEJMsa1012370.
2. Chong RIH, et al. Scoping review of the second victim syndrome among surgeons: Understanding the impact, responses, and support systems. Am J Surg 2024 Mar. doi: 10.1016/j.amjsurg.2023.09.045.
3. Seabury S, et al. On Average, Physicians Spend Nearly 11 Percent Of Their 40-Year Careers With An Open, Unresolved Malpractice Claim. Health Aff Proj Hope. 2013 Jan. doi: 10.1377/hlthaff.2012.0967.
4. CRICO Strategies. Medical Malpractice in America: A 10-Year Asessment with Insights. 2018. Accessed Apr 28, 2025.
5. Studdert DM, Hall MA. Medical Malpractice Law — Doctrine and Dynamics. N Engl J Med 2022 Oct. doi: 10.1056/NEJMp2201675.
6. Schaffer AC, et al. Rates and Characteristics of Paid Malpractice Claims Among US Physicians by Specialty, 1992-2014. JAMA Intern Med. 2017 May. doi: 10.1001/jamainternmed.2017.0311.
7. Gandhi TK, et al. Missed and Delayed Diagnoses in the Ambulatory Setting: A Study of Closed Malpractice Claims. Ann Intern Med. 2006 Oct. doi: 10.7326/0003-4819-145-7-200610030-00006.
8. Studdert DM, et al. Prevalence and Characteristics of Physicians Prone to Malpractice Claims. N Engl J Med. 2016 Jan. doi: 10.1056/NEJMsa1506137.
9. Studdert DM, et al. Changes in Practice among Physicians with Malpractice Claims. N Engl J Med. 2019 Mar. doi: 10.1056/NEJMsa1809981.
10. Ries NM, Jansen J. Physicians’ views and experiences of defensive medicine: An international review of empirical research. Health Policy. 2021 May. doi: 10.1016/j.healthpol.2021.02.005.
11. Hiyama T, et al. Defensive medicine practices among gastroenterologists in Japan. World J Gastroenterol. 2006 Dec. doi: 10.3748/wjg.v12.i47.7671.
12. Elli L, et al. Defensive medicine practices among gastroenterologists in Lombardy: Between lawsuits and the economic crisis. Dig Liver Dis. 2013 Jun. doi: 10.1016/j.dld.2013.01.004.
13. Jena AB, et al. Physician spending and subsequent risk of malpractice claims: observational study. BMJ. 2015 Nov. doi: 10.1136/bmj.h5516.
14. Scott SD, et al. The natural history of recovery for the healthcare provider “second victim” after adverse patient events. BMJ Qual Saf. 2009 Oct. doi: 10.1136/qshc.2009.032870.
15. Gómez-Durán EL, et al. Physicians as second victims after a malpractice claim: An important issue in need of attention. J Healthc Qual Res. 2018 Oct. doi: 10.1016/j.jhqr.2018.06.002.
While nearly 75% of physicians in low-risk specialties and 99% of physicians in high-risk specialties may face a malpractice claim in their careers,1 malpractice is rarely discussed openly in medical school, residency, fellowship, or even amongst colleagues. Indeed, one study suggested that more than 10% of practicing gastroenterologists may face a malpractice claim,2 with gastroenterologists expected to spend 10-15% of their careers with an outstanding malpractice claim3 as cases may take 27-29 months to resolve on average.4
Believing that if a physician is sued, one must have done something “wrong” or that speaking about one’s experience may implicate a colleague, creates an intense stigma and isolation that only serves to aggravate the “second victim syndrome” (SVS) that is well documented in the surgical literature.2 Herein,
What is Malpractice? Why Do Physicians Get Sued?
Malpractice is defined as negligence on the part of a physician which causes physical or emotional damage to the patient. This requires a variety of legal issues to be evaluated (e.g. breach of duty between the physicians and patient, breach of standard of care), that often center around the question: would a “reasonable, careful, and prudent” doctor behave in the same manner in the same circumstance?
While some fields of medicine lend themselves better to algorithmic applications of highly evidence-based guidelines, many aspects of GI care and endoscopic practice are highly physician/patient-specific, dependent on local expertise, and based on low-quality evidence. As a result, an assessment of negligence may be quite subjective, depending on the expert retained by a plaintiff. Conflicting expert testimony on what professional custom is and whether practice deviates may hinge on technical details that may or may not be appreciated by a lay jury.
Plaintiffs must prove both that they have sustained an injury and that the injury (emotional or physical) was due to the physician’s negligence. While this may be straightforward in a “slip-and-fall” tort claim, medical malpractice claims usually involve sick patients with multiple comorbidities, where assigning causality to a single intervention/misinterpretation/missed opportunity is difficult to weigh against competing causes of adverse outcomes. Assessing a specific liability requires that the plaintiff prove this to a “more likely than not” standard which may be part of the reason why only 30% of cases are closed with indemnity payments, a figure that has not changed significantly in the past decade.4
While the perception amongst physicians is that tort legislation is ever increasing, data from the National Practitioner Data Bank (NPDB) demonstrates that the number of paid claims against physicians has decreased by 75% in the last 20 years.5 This may reflect a progressive improvement in the quality of care delivered or success of “tort reform” on the state level to limit damages and “nuisance” lawsuits. However, another more problematic possibility is that with the corporatization of medicine, an untold number of physicians may be removed from litigation as a named party, with their institution shielding them from reporting. While the number of cases may or may not be declining, the average indemnity payment appears to be rising to $330,000 on average,4 with one study suggesting a significant growth in paid claims in gastroenterology.6
Historically, studies of closed malpractice claims have demonstrated that 59% involved diagnostic errors involving a cancer diagnosis,7 though why this actually happens may be for a wide variety of reasons including errors in the development of a differential diagnosis, ordering of an appropriate diagnostic test, interpretation of the diagnostic test, or follow-up of an abnormality identified.
What are the Intended/Unintended Consequences of Litigation?
The objective of our tort system is to compensate patients for economic damages (medical costs and lost wages) and non-economic damages (pain and suffering), and to ideally deter negligent behavior of providers. Interestingly, data from the NPDB have suggested that approximately 1% of all physicians account for 32% of all paid claims, with the same study showing that among physicians with paid claims, 4% had at least 3.8
While certain fields are obviously more prone to litigation, the risk of additional claims on a physician with 3 prior claims was more than 3 times that of physicians with 1 lifetime claim. One would assume that the system was built to drive out a small proportion of “bad actors.” Indeed, similar data from the NPDB has demonstrated that the number of claims against physicians was associated both with their leaving the practice of medicine and relocating to smaller practice settings.9
Another frequent question is whether the threat of litigation drives “defensive medicine” (i.e. medical care that is not beneficial) or avoidance medicine (i.e. excluding high risk patients and procedures from ones’ practice). These behaviors have been well documented in physicians around the world,10 as well as several surveys of gastroenterologists specifically suggesting regular ordering of unnecessary imaging/endoscopy and referrals of patients to specialists that may not be necessary.11,12
However, does defensive medicine work: does spending more prevent you from being the target of a lawsuit? In an observational study in Florida from 2000-2009, researchers demonstrated that across specialties, greater average spending by physicians was associated with a reduced risk of incurring a malpractice claim. Indeed, the likelihood of a top quintile spending internist having a malpractice incident vs a bottom quintile spending internist was 0.3% vs 1.5%.13
Approximately 10.4-43.3% of physicians may experience SVS, experiencing trauma after an adverse patient event/medical error, manifesting with psychological trauma (shame, guilt, anxiety) and cognitive limitations (burnout, stress).2 Significant emotional consequences are common on the part of the physician and have well-documented stages to recovery,14 which if ignored may lead to long-term detrimental mental/emotional health of the physician and their future patients.
Specifically, in one study, 80.8% of physicians who had a closed malpractice claim reported significant emotional distress (regardless of the legal outcome), with frequent reports of mood symptoms that affected professional conduct.15 Recognizing these effects and implementing peer counseling and institutional support may help to expedite recovery and mitigate future adverse career outcomes.14
Anatomy/Timeline of a Liability Lawsuit
Medical malpractice cases are heard in state courts, in the jurisdictions where the care was provided. From the time an event occurs to when a jury verdict may be rendered may take 4-5 years or more depending on the local statute of limitations, discovery process, backlog of the local case docket, and specific circumstances of the case. The length of time is important to consider given the likelihood that a physician may advance in training or move practice locations during the course of litigation. Several common myths surrounding this process are summarized in the accompanying box, titled “Myths Surrounding Medical Liability Litigation.”
The plaintiff faces a statute of limitations to file a lawsuit that may range from 1-6 years depending on the state. The first indication that legal action may be pending will generally be a plaintiff’s formal request for medical records. After these records are reviewed, the plaintiff’s attorney will consult one or more experts (often credentialed in the same specialty) to assess if the case is viable and to ultimately form the basis of an affidavit of merit from a plaintiff expert.
Once the lawsuit is filed, the physician(s) named will be assigned an attorney by their employer/insurance company. A state medical board malpractice questionnaire will generally follow that will seek to independently evaluate the alleged malpractice with interrogatives to determine if censure is warranted. There is a formal response to the plaintiff’s petition by the defense and then the discovery phase begins where both sides depose the defendants/plaintiffs and retain medical experts that are favorable to their arguments.
In choosing potential “experts,” physicians must ensure that they are willing/able to be present for a potential trial, do not have any personal/professional/academic conflicts with the defendants, and are willing to provide compelling testimony to a jury. A pre-trial conference and trial date is set which may be >12 months away depending on the local docket. While the amount of time a trial may take is variable, it may be up to 5-7 days that the defendants are expected to be in court in addition to days where depositions are being taken.
During the discovery process, dismissal of the physician from the lawsuit is pursued. In addition, settlement negotiations generally proceed in parallel with discovery process and may result in a pre-trial/pre-verdict settlement. Once a verdict is reached, whether for the plaintiff or the defendant, the case may be appealed, and the trial preparation process may be repeated.
Conclusions
Awareness of the medical liability process is critical for trainees and attendings alike, given the high likelihood of litigation in a gastroenterologist’s career. Specific considerations like local tort law and malpractice coverage are important to be familiar. Ongoing health services research help to shape our understanding on the intended and unintended consequences of litigation on medicine, though detailed data on outcomes/settlements are limited by confidentiality agreements, which may hamper efforts to improve patient safety.
Dr. Das is associate professor of medicine in the Division of Gastroenterology at Washington University School of Medicine, St. Louis, Missouri. He has served as a consultant for Olympus, but has no other relevant conflicts.
References
1. Jena AB, et al. Malpractice Risk According to Physician Specialty. N Engl J Med. 2011 Aug. doi: 10.1056/NEJMsa1012370.
2. Chong RIH, et al. Scoping review of the second victim syndrome among surgeons: Understanding the impact, responses, and support systems. Am J Surg 2024 Mar. doi: 10.1016/j.amjsurg.2023.09.045.
3. Seabury S, et al. On Average, Physicians Spend Nearly 11 Percent Of Their 40-Year Careers With An Open, Unresolved Malpractice Claim. Health Aff Proj Hope. 2013 Jan. doi: 10.1377/hlthaff.2012.0967.
4. CRICO Strategies. Medical Malpractice in America: A 10-Year Asessment with Insights. 2018. Accessed Apr 28, 2025.
5. Studdert DM, Hall MA. Medical Malpractice Law — Doctrine and Dynamics. N Engl J Med 2022 Oct. doi: 10.1056/NEJMp2201675.
6. Schaffer AC, et al. Rates and Characteristics of Paid Malpractice Claims Among US Physicians by Specialty, 1992-2014. JAMA Intern Med. 2017 May. doi: 10.1001/jamainternmed.2017.0311.
7. Gandhi TK, et al. Missed and Delayed Diagnoses in the Ambulatory Setting: A Study of Closed Malpractice Claims. Ann Intern Med. 2006 Oct. doi: 10.7326/0003-4819-145-7-200610030-00006.
8. Studdert DM, et al. Prevalence and Characteristics of Physicians Prone to Malpractice Claims. N Engl J Med. 2016 Jan. doi: 10.1056/NEJMsa1506137.
9. Studdert DM, et al. Changes in Practice among Physicians with Malpractice Claims. N Engl J Med. 2019 Mar. doi: 10.1056/NEJMsa1809981.
10. Ries NM, Jansen J. Physicians’ views and experiences of defensive medicine: An international review of empirical research. Health Policy. 2021 May. doi: 10.1016/j.healthpol.2021.02.005.
11. Hiyama T, et al. Defensive medicine practices among gastroenterologists in Japan. World J Gastroenterol. 2006 Dec. doi: 10.3748/wjg.v12.i47.7671.
12. Elli L, et al. Defensive medicine practices among gastroenterologists in Lombardy: Between lawsuits and the economic crisis. Dig Liver Dis. 2013 Jun. doi: 10.1016/j.dld.2013.01.004.
13. Jena AB, et al. Physician spending and subsequent risk of malpractice claims: observational study. BMJ. 2015 Nov. doi: 10.1136/bmj.h5516.
14. Scott SD, et al. The natural history of recovery for the healthcare provider “second victim” after adverse patient events. BMJ Qual Saf. 2009 Oct. doi: 10.1136/qshc.2009.032870.
15. Gómez-Durán EL, et al. Physicians as second victims after a malpractice claim: An important issue in need of attention. J Healthc Qual Res. 2018 Oct. doi: 10.1016/j.jhqr.2018.06.002.
The Essential Guide to Estate Planning for Physicians: Securing Your Legacy and Protecting Your Wealth
As a physician, you’ve spent years building a career that not only provides financial security for your family but also allows you to make a meaningful impact in your community. However, without a comprehensive estate plan in place, much of what you’ve worked so hard to build may not be preserved according to your wishes.
Many physicians delay estate planning, assuming it’s something to consider later in life. However, the most successful estate plans are those that are established early and evolve over time. Proper planning ensures that your assets are protected, your loved ones are provided for, and your legacy is preserved in the most tax-efficient and legally-sound manner possible.1
This article explores why estate planning is particularly crucial for physicians, the key elements of a strong estate plan, and how beginning early can create long-term financial advantages.
Why Estate Planning Matters for Physicians
Physicians are in a unique financial position compared to many other professionals. With high earning potential, specialized assets, and significant liability exposure, their estate planning needs differ from those of the average individual. A well-structured estate plan not only facilitates the smooth transfer of wealth but also protects assets from excessive taxation, legal complications, and potential risks such as malpractice claims.
1. High Net-Worth Considerations
Physicians often accumulate substantial wealth over time. Without a clear estate plan, your estate could face excessive taxation, with a large portion of your assets potentially going to the government rather than your heirs. Estate taxes, probate costs, and legal fees can significantly erode your legacy if not properly planned for.
2. Asset Protection from Liability Risks
Unlike most professionals, physicians are at a higher risk of litigation. A comprehensive estate plan can incorporate asset protection strategies, such as irrevocable trusts, family limited partnerships, or liability insurance, to shield your wealth from lawsuits or creditor claims.
3. Family and Generational Wealth Planning
Many physicians prioritize ensuring their family’s financial stability. Whether you want to provide for your spouse, children, or even charitable causes, estate planning allows you to dictate how your wealth is distributed. Establishing trusts for your children or grandchildren can help manage how and when they receive their inheritance, preventing mismanagement and ensuring financial responsibility.
4. Business and Practice Continuity
If you own a medical practice, succession planning should be part of your estate plan. Without clear directives, the future of your practice may be uncertain in the event of your passing or incapacitation. A well-drafted estate plan provides a roadmap for ownership transition, ensuring continuity for patients, employees, and business partners.
Key Elements of an Effective Estate Plan
Every estate plan should be customized based on your financial situation, goals, and family dynamics. However, certain fundamental components apply to nearly all high-net-worth individuals, including physicians.
1. Revocable Living Trusts
A revocable living trust allows you to manage your assets during your lifetime while providing a clear path for distribution after your passing. Unlike a will, a trust helps your estate avoid probate, ensuring a smoother and more private transition of wealth. You maintain control over your assets while also establishing clear rules for distribution, particularly useful if you have minor children or complex family structures.2
2. Irrevocable Trusts for Asset Protection
For physicians concerned about lawsuits or estate tax exposure, irrevocable trusts can offer robust asset protection. Since assets placed in these trusts are no longer legally owned by you, they are shielded from creditors and legal claims while also reducing your taxable estate.2
3. Powers of Attorney and Healthcare Directives
Estate planning isn’t just about what happens after your passing—it’s also about protecting you and your family if you become incapacitated. A durable power of attorney allows a trusted individual to manage your financial affairs, while a healthcare directive ensures your medical decisions align with your wishes.3
4. Life Insurance Planning
Life insurance is an essential estate planning tool for physicians, providing liquidity to cover estate taxes, debts, or income replacement for your family. A properly structured life insurance trust can help ensure that policy proceeds remain outside of your taxable estate while being efficiently distributed according to your wishes.4
5. Business Succession Planning
If you own a medical practice, a well-designed succession plan can ensure that your business continues to operate smoothly in your absence. This may involve buy-sell agreements, key-person insurance, or identifying a successor to take over your role.5
The Long-Term Benefits of Early Estate Planning
Estate planning is not a one-time event—it’s a process that should evolve with your career, financial growth, and family dynamics. The earlier you begin, the more control you have over your financial future. Here’s why starting early is a strategic advantage:
1. Maximizing Tax Efficiency
Many estate planning strategies, such as gifting assets or establishing irrevocable trusts, are most effective when implemented over time. By spreading out wealth transfers and taking advantage of annual gift exclusions, you can significantly reduce estate tax liability while maintaining financial security.
2. Adjusting for Life Changes
Your financial situation and family needs will change over the years. Marriages, births, career advancements, and new investments all impact your estate planning needs. By starting early, you can make gradual adjustments rather than facing an overwhelming restructuring later in life.1
3. Ensuring Asset Protection Strategies Are in Place
Many asset protection strategies require time to be effective. For instance, certain types of trusts must be in place for a number of years before they fully shield assets from legal claims. Delaying planning could leave your wealth unnecessarily exposed.
4. Creating a Legacy Beyond Wealth
Estate planning is not just about finances—it’s about legacy. Whether you want to support a charitable cause, endow a scholarship, or establish a foundation, early planning gives you the ability to shape your long-term impact.
5. Adapt to Ever Changing Legislation
Estate planning needs to be adaptable. The federal government can change the estate tax exemption at any time; this was even a topic of the last election cycle. Early planning allows you to implement necessary changes throughout your life to minimize estate taxes. At present, unless new policy is enacted, the exemption per individual will reduce by half in 2026 (see Figure 1).
Final Thoughts: Taking Action Today
The complexity of physician finances—ranging from high income and significant assets to legal risks—makes individualized estate planning an absolute necessity.
By taking proactive steps today, you can maximize tax efficiency, safeguard your assets, and ensure your wishes are carried out without unnecessary delays or legal battles. Working with a financial advisor and estate planning attorney who understands the unique needs of physicians can help you craft a plan that aligns with your goals and evolves as your career progresses.
Mr. Gardner is a financial advisor at Lifetime Financial Growth, LLC, in Columbus, Ohio, one of the largest privately held wealth management firms in the country. John has had a passion for finance since his early years in college when his tennis coach introduced him. He also has a passion for helping physicians, as his wife is a gastroenterologist at Ohio State University. He reports no relevant disclosures relevant to this article. If you have additional questions, please contact John at 740-403-4891 or john_s_gardner@glic.com.
References
1. The Law Offices of Diron Rutty, LLC. https://www.dironruttyllc.com/reasons-to-start-estate-planning-early/.
2. Physician Side Gigs. https://www.physiciansidegigs.com/estateplanning.
3. Afshar, A & MacBeth, S. https://www.schwabe.com/publication/estate-planning-for-physicians-why-its-important-and-how-to-get-started/. December 2024.
4. Skeeles, JC. https://ohioline.osu.edu/factsheet/ep-1. July 2012.
5. Rosenfeld, J. Physician estate planning guide. Medical Economics. 2022 Nov. https://www.medicaleconomics.com/view/physician-estate-planning-guide.
As a physician, you’ve spent years building a career that not only provides financial security for your family but also allows you to make a meaningful impact in your community. However, without a comprehensive estate plan in place, much of what you’ve worked so hard to build may not be preserved according to your wishes.
Many physicians delay estate planning, assuming it’s something to consider later in life. However, the most successful estate plans are those that are established early and evolve over time. Proper planning ensures that your assets are protected, your loved ones are provided for, and your legacy is preserved in the most tax-efficient and legally-sound manner possible.1
This article explores why estate planning is particularly crucial for physicians, the key elements of a strong estate plan, and how beginning early can create long-term financial advantages.
Why Estate Planning Matters for Physicians
Physicians are in a unique financial position compared to many other professionals. With high earning potential, specialized assets, and significant liability exposure, their estate planning needs differ from those of the average individual. A well-structured estate plan not only facilitates the smooth transfer of wealth but also protects assets from excessive taxation, legal complications, and potential risks such as malpractice claims.
1. High Net-Worth Considerations
Physicians often accumulate substantial wealth over time. Without a clear estate plan, your estate could face excessive taxation, with a large portion of your assets potentially going to the government rather than your heirs. Estate taxes, probate costs, and legal fees can significantly erode your legacy if not properly planned for.
2. Asset Protection from Liability Risks
Unlike most professionals, physicians are at a higher risk of litigation. A comprehensive estate plan can incorporate asset protection strategies, such as irrevocable trusts, family limited partnerships, or liability insurance, to shield your wealth from lawsuits or creditor claims.
3. Family and Generational Wealth Planning
Many physicians prioritize ensuring their family’s financial stability. Whether you want to provide for your spouse, children, or even charitable causes, estate planning allows you to dictate how your wealth is distributed. Establishing trusts for your children or grandchildren can help manage how and when they receive their inheritance, preventing mismanagement and ensuring financial responsibility.
4. Business and Practice Continuity
If you own a medical practice, succession planning should be part of your estate plan. Without clear directives, the future of your practice may be uncertain in the event of your passing or incapacitation. A well-drafted estate plan provides a roadmap for ownership transition, ensuring continuity for patients, employees, and business partners.
Key Elements of an Effective Estate Plan
Every estate plan should be customized based on your financial situation, goals, and family dynamics. However, certain fundamental components apply to nearly all high-net-worth individuals, including physicians.
1. Revocable Living Trusts
A revocable living trust allows you to manage your assets during your lifetime while providing a clear path for distribution after your passing. Unlike a will, a trust helps your estate avoid probate, ensuring a smoother and more private transition of wealth. You maintain control over your assets while also establishing clear rules for distribution, particularly useful if you have minor children or complex family structures.2
2. Irrevocable Trusts for Asset Protection
For physicians concerned about lawsuits or estate tax exposure, irrevocable trusts can offer robust asset protection. Since assets placed in these trusts are no longer legally owned by you, they are shielded from creditors and legal claims while also reducing your taxable estate.2
3. Powers of Attorney and Healthcare Directives
Estate planning isn’t just about what happens after your passing—it’s also about protecting you and your family if you become incapacitated. A durable power of attorney allows a trusted individual to manage your financial affairs, while a healthcare directive ensures your medical decisions align with your wishes.3
4. Life Insurance Planning
Life insurance is an essential estate planning tool for physicians, providing liquidity to cover estate taxes, debts, or income replacement for your family. A properly structured life insurance trust can help ensure that policy proceeds remain outside of your taxable estate while being efficiently distributed according to your wishes.4
5. Business Succession Planning
If you own a medical practice, a well-designed succession plan can ensure that your business continues to operate smoothly in your absence. This may involve buy-sell agreements, key-person insurance, or identifying a successor to take over your role.5
The Long-Term Benefits of Early Estate Planning
Estate planning is not a one-time event—it’s a process that should evolve with your career, financial growth, and family dynamics. The earlier you begin, the more control you have over your financial future. Here’s why starting early is a strategic advantage:
1. Maximizing Tax Efficiency
Many estate planning strategies, such as gifting assets or establishing irrevocable trusts, are most effective when implemented over time. By spreading out wealth transfers and taking advantage of annual gift exclusions, you can significantly reduce estate tax liability while maintaining financial security.
2. Adjusting for Life Changes
Your financial situation and family needs will change over the years. Marriages, births, career advancements, and new investments all impact your estate planning needs. By starting early, you can make gradual adjustments rather than facing an overwhelming restructuring later in life.1
3. Ensuring Asset Protection Strategies Are in Place
Many asset protection strategies require time to be effective. For instance, certain types of trusts must be in place for a number of years before they fully shield assets from legal claims. Delaying planning could leave your wealth unnecessarily exposed.
4. Creating a Legacy Beyond Wealth
Estate planning is not just about finances—it’s about legacy. Whether you want to support a charitable cause, endow a scholarship, or establish a foundation, early planning gives you the ability to shape your long-term impact.
5. Adapt to Ever Changing Legislation
Estate planning needs to be adaptable. The federal government can change the estate tax exemption at any time; this was even a topic of the last election cycle. Early planning allows you to implement necessary changes throughout your life to minimize estate taxes. At present, unless new policy is enacted, the exemption per individual will reduce by half in 2026 (see Figure 1).
Final Thoughts: Taking Action Today
The complexity of physician finances—ranging from high income and significant assets to legal risks—makes individualized estate planning an absolute necessity.
By taking proactive steps today, you can maximize tax efficiency, safeguard your assets, and ensure your wishes are carried out without unnecessary delays or legal battles. Working with a financial advisor and estate planning attorney who understands the unique needs of physicians can help you craft a plan that aligns with your goals and evolves as your career progresses.
Mr. Gardner is a financial advisor at Lifetime Financial Growth, LLC, in Columbus, Ohio, one of the largest privately held wealth management firms in the country. John has had a passion for finance since his early years in college when his tennis coach introduced him. He also has a passion for helping physicians, as his wife is a gastroenterologist at Ohio State University. He reports no relevant disclosures relevant to this article. If you have additional questions, please contact John at 740-403-4891 or john_s_gardner@glic.com.
References
1. The Law Offices of Diron Rutty, LLC. https://www.dironruttyllc.com/reasons-to-start-estate-planning-early/.
2. Physician Side Gigs. https://www.physiciansidegigs.com/estateplanning.
3. Afshar, A & MacBeth, S. https://www.schwabe.com/publication/estate-planning-for-physicians-why-its-important-and-how-to-get-started/. December 2024.
4. Skeeles, JC. https://ohioline.osu.edu/factsheet/ep-1. July 2012.
5. Rosenfeld, J. Physician estate planning guide. Medical Economics. 2022 Nov. https://www.medicaleconomics.com/view/physician-estate-planning-guide.
As a physician, you’ve spent years building a career that not only provides financial security for your family but also allows you to make a meaningful impact in your community. However, without a comprehensive estate plan in place, much of what you’ve worked so hard to build may not be preserved according to your wishes.
Many physicians delay estate planning, assuming it’s something to consider later in life. However, the most successful estate plans are those that are established early and evolve over time. Proper planning ensures that your assets are protected, your loved ones are provided for, and your legacy is preserved in the most tax-efficient and legally-sound manner possible.1
This article explores why estate planning is particularly crucial for physicians, the key elements of a strong estate plan, and how beginning early can create long-term financial advantages.
Why Estate Planning Matters for Physicians
Physicians are in a unique financial position compared to many other professionals. With high earning potential, specialized assets, and significant liability exposure, their estate planning needs differ from those of the average individual. A well-structured estate plan not only facilitates the smooth transfer of wealth but also protects assets from excessive taxation, legal complications, and potential risks such as malpractice claims.
1. High Net-Worth Considerations
Physicians often accumulate substantial wealth over time. Without a clear estate plan, your estate could face excessive taxation, with a large portion of your assets potentially going to the government rather than your heirs. Estate taxes, probate costs, and legal fees can significantly erode your legacy if not properly planned for.
2. Asset Protection from Liability Risks
Unlike most professionals, physicians are at a higher risk of litigation. A comprehensive estate plan can incorporate asset protection strategies, such as irrevocable trusts, family limited partnerships, or liability insurance, to shield your wealth from lawsuits or creditor claims.
3. Family and Generational Wealth Planning
Many physicians prioritize ensuring their family’s financial stability. Whether you want to provide for your spouse, children, or even charitable causes, estate planning allows you to dictate how your wealth is distributed. Establishing trusts for your children or grandchildren can help manage how and when they receive their inheritance, preventing mismanagement and ensuring financial responsibility.
4. Business and Practice Continuity
If you own a medical practice, succession planning should be part of your estate plan. Without clear directives, the future of your practice may be uncertain in the event of your passing or incapacitation. A well-drafted estate plan provides a roadmap for ownership transition, ensuring continuity for patients, employees, and business partners.
Key Elements of an Effective Estate Plan
Every estate plan should be customized based on your financial situation, goals, and family dynamics. However, certain fundamental components apply to nearly all high-net-worth individuals, including physicians.
1. Revocable Living Trusts
A revocable living trust allows you to manage your assets during your lifetime while providing a clear path for distribution after your passing. Unlike a will, a trust helps your estate avoid probate, ensuring a smoother and more private transition of wealth. You maintain control over your assets while also establishing clear rules for distribution, particularly useful if you have minor children or complex family structures.2
2. Irrevocable Trusts for Asset Protection
For physicians concerned about lawsuits or estate tax exposure, irrevocable trusts can offer robust asset protection. Since assets placed in these trusts are no longer legally owned by you, they are shielded from creditors and legal claims while also reducing your taxable estate.2
3. Powers of Attorney and Healthcare Directives
Estate planning isn’t just about what happens after your passing—it’s also about protecting you and your family if you become incapacitated. A durable power of attorney allows a trusted individual to manage your financial affairs, while a healthcare directive ensures your medical decisions align with your wishes.3
4. Life Insurance Planning
Life insurance is an essential estate planning tool for physicians, providing liquidity to cover estate taxes, debts, or income replacement for your family. A properly structured life insurance trust can help ensure that policy proceeds remain outside of your taxable estate while being efficiently distributed according to your wishes.4
5. Business Succession Planning
If you own a medical practice, a well-designed succession plan can ensure that your business continues to operate smoothly in your absence. This may involve buy-sell agreements, key-person insurance, or identifying a successor to take over your role.5
The Long-Term Benefits of Early Estate Planning
Estate planning is not a one-time event—it’s a process that should evolve with your career, financial growth, and family dynamics. The earlier you begin, the more control you have over your financial future. Here’s why starting early is a strategic advantage:
1. Maximizing Tax Efficiency
Many estate planning strategies, such as gifting assets or establishing irrevocable trusts, are most effective when implemented over time. By spreading out wealth transfers and taking advantage of annual gift exclusions, you can significantly reduce estate tax liability while maintaining financial security.
2. Adjusting for Life Changes
Your financial situation and family needs will change over the years. Marriages, births, career advancements, and new investments all impact your estate planning needs. By starting early, you can make gradual adjustments rather than facing an overwhelming restructuring later in life.1
3. Ensuring Asset Protection Strategies Are in Place
Many asset protection strategies require time to be effective. For instance, certain types of trusts must be in place for a number of years before they fully shield assets from legal claims. Delaying planning could leave your wealth unnecessarily exposed.
4. Creating a Legacy Beyond Wealth
Estate planning is not just about finances—it’s about legacy. Whether you want to support a charitable cause, endow a scholarship, or establish a foundation, early planning gives you the ability to shape your long-term impact.
5. Adapt to Ever Changing Legislation
Estate planning needs to be adaptable. The federal government can change the estate tax exemption at any time; this was even a topic of the last election cycle. Early planning allows you to implement necessary changes throughout your life to minimize estate taxes. At present, unless new policy is enacted, the exemption per individual will reduce by half in 2026 (see Figure 1).
Final Thoughts: Taking Action Today
The complexity of physician finances—ranging from high income and significant assets to legal risks—makes individualized estate planning an absolute necessity.
By taking proactive steps today, you can maximize tax efficiency, safeguard your assets, and ensure your wishes are carried out without unnecessary delays or legal battles. Working with a financial advisor and estate planning attorney who understands the unique needs of physicians can help you craft a plan that aligns with your goals and evolves as your career progresses.
Mr. Gardner is a financial advisor at Lifetime Financial Growth, LLC, in Columbus, Ohio, one of the largest privately held wealth management firms in the country. John has had a passion for finance since his early years in college when his tennis coach introduced him. He also has a passion for helping physicians, as his wife is a gastroenterologist at Ohio State University. He reports no relevant disclosures relevant to this article. If you have additional questions, please contact John at 740-403-4891 or john_s_gardner@glic.com.
References
1. The Law Offices of Diron Rutty, LLC. https://www.dironruttyllc.com/reasons-to-start-estate-planning-early/.
2. Physician Side Gigs. https://www.physiciansidegigs.com/estateplanning.
3. Afshar, A & MacBeth, S. https://www.schwabe.com/publication/estate-planning-for-physicians-why-its-important-and-how-to-get-started/. December 2024.
4. Skeeles, JC. https://ohioline.osu.edu/factsheet/ep-1. July 2012.
5. Rosenfeld, J. Physician estate planning guide. Medical Economics. 2022 Nov. https://www.medicaleconomics.com/view/physician-estate-planning-guide.
The Federal Trade Commission’s Non-Compete Ban
Non-compete agreements (NCAs) in physician contracts, also termed “restrictive covenants” or “covenants not to compete,” have become a hot topic recently because of the Federal Trade Commission’s (FTC’s) April 2024 ruling invalidating almost all NCAs. But in fact, NCAs have long been controversial, and no more so than in the realm of physician NCAs, which involve substantial policy concerns.
how it relates to a physician employment contract currently, and its possible evolution.
What is It?
Generally speaking, an NCA, usually in the form of an employment contract clause, is an agreement between the employer and the employee that the employee will not enter into post-contract competition with that employer within the limitations of a specific duration, scope of practice, and/or geography. NCAs have traditionally been regulated under state statutory law and common law and have been permitted based on policy considerations that attempt to balance competing employee and employer interests. Physicians should understand their states’ statutory treatment of an NCA.
NCAs protect important employer business interests, including the protection of proprietary information, safeguarding trade secrets, reducing employee turnover, and protecting patient lists. Employees, though, have limited mobility in changing professional positions, have less bargaining power with the employer, and may find themselves with limited options for comparable professional positions.
The NCA ostensibly appears to greatly benefit the employer’s interests over the employee’s; however, NCA protection of employer interests may also substantially benefit employees by encouraging substantial employer investment in employees whom the employer recognizes as a stable and likely long-term human resource, ultimately fostering increased employee satisfaction and innovation. Indeed, one concern with the FTC’s non-compete ban is the potential for significant underinvestment in information sharing and employee training, because employers would, without a NCA, be less likely to recoup those employee investments and would have limited ability to keep competitors from free-riding on investments in employees who leave and join competitors. Ultimately, this would lead to decreased market efficiency.
What is Its Status Today?
Regulation of NCAs, including physician NCAs, has traditionally been based on state statutory law and by common law. Perhaps because of the increasing use of the NCA in professional settings, the NCA has been increasingly scrutinized by courts and state legislatures in the last few decades, with an overall increasing focus on NCA reasonableness and appropriate fit in individual employment settings, and with an emphasis on employer demonstration of legitimate and significant business interests for using a NCA.
States have evolved differently in their treatment of NCAs; some states ban NCAs altogether while others allow them with varying interpretation and enforceability, frequently focused upon the NCA’s duration, scope, and geography. Similarly, in common law, courts will frequently invalidate NCAs that are found to be unreasonably overbroad, either geographically, temporally, and/or in regard to scope.
On April 23, 2024, however, the FTC altered this existing state of affairs by issuing a rule banning new NCAs in all employment situations after September 3, 2024. The rule also holds that existing NCAs are not enforceable, with a small carve-out for some senior executives. It applies to for-profit businesses, and some, but not all, non-profit organizations. The FTC’s stated intent is to reduce healthcare spending by increasing employee compensation and mobility. The FTC’s ban is likely meant to reduce transaction costs by increasing physician mobility.
There have been several lawsuits regarding the FTC ruling, challenging it on different grounds. The US District Court for the Northern District of Texas in Ryan LLC v. FTC issued first a preliminary injunction, then a final decision overturning the FTC’s rule. The Court held that the FTC had exceeded its statutory authority, and further, that the rule was arbitrary and capricious. It noted that the rule’s “categorical ban” has no equivalent in state law, is “unreasonably overbroad without a reasonable explanation,” “provides no evidence or reasoned basis,” does not “consider the positive benefits of non-compete agreements,” and does not “address alternatives to the Rule.” The Ryan Court reasoned that as an administrative agency, the FTC can only act as Congress authorizes by statute. On Oct. 18, 2024, the FTC appealed the Court’s decision to the Fifth Circuit Court of Appeals, seeking to reverse the holding setting aside its NCA ban.
The United States District Court for the Eastern District of Pennsylvania in ATS Tree Services LLC v. FTC denied the plaintiff’s motion to stay enforcement of the rule, refusing to issue a preliminary injunction preventing its implementation. As in Ryan, the ATS Tree Services LLC v. FTC plaintiffs argued that the FTC had exceeded its statutory authority in issuing the rule. However, the Plaintiff did not appeal the holding.
The US District Court for the Middle District of Florida in Properties of the Villages, Inc. v. FTCheld, like Ryan, that the rule exceeds the FTC’s statutory authority, noting the FTC’s prior lack of any NCA enforcement actions; however, its reasoning differed from Ryan. The Florida Court held that the FTC in fact has statutory authority to issue such rules; however, the Court held that the FTC could not enforce its rule because it violates the “major questions doctrine.” The “major questions doctrine” requires an agency such as the FTC to “point to clear congressional authorization” for any rule it issues that has “extraordinary ... economic and political significance,” as the NCA ban rule certainly does.
What is Its Future?
The FTC’s NCA ban remains unsettled. State legislatures, in response to the recent court holdings, are reassessing their statutory law regarding NCAs. The Ryan Court’s holding prevented the FTC’s rule from going into effect on September 4, 2024. The Texas and Florida court decisions are awaiting 5th and 11th Circuit Court of Appeals review, respectively. Assuming affirmation of either of the cases on appeal, a circuit split regarding the NCA ban may occur. The US Supreme Court may be called upon to determine the validity of the FTC rule banning NCAs. The Circuit Court decisions are likely to occur in 2025, and any Supreme Court decision would not likely occur until 2026. Meanwhile, state statutory law and common law still apply to NCAs, and the FTC may challenge the validity of NCAs on a case-by-case basis.
US antitrust law remains a potential remedy to scrutinize and restrain inappropriate business practices, including NCA-related abuses. The Sherman Act allows federal and state actors and private citizens, to sue for redress. Antitrust cases are typically considered using the “rule of reason” formulated by the Supreme Court in 1911, which requires plaintiffs show that defendant businesses possessing market power did in fact undertake anticompetitive conduct that had or likely had anticompetitive effects. In other words, the court in an antitrust case will require that the plaintiff show that the business actually had a significant controlling market presence in the geographic area; and further, that the plaintiff show that the business’ actions in fact had an anticompetitive effect, or likely had one. The latter can be found by showing an anticompetitive effect such as abusive pricing
The FTC’s ruling is legally and academically controversial and in fact may not withstand court scrutiny. The rule was put forth by the FTC as an ambitious rule to reduce healthcare spending. But businesses survive only if their revenue surpasses their costs, including personnel costs. Further, maximization of capitalization is attained when businesses require NCAs. Businesses invest heavily in recruiting, hiring, and training personnel, and increased personnel turnover increases these expenditures. NCAs arguably provide a collective benefit by ensuring force continuity, mitigating the risk of the loss of highly trained personnel with proprietary knowledge. NCAs also help a business maintain a skilled workforce, helping maximize business valuation. If FTC’s NCA ban rule were ultimately upheld, businesses would likely respond by instituting longer-term employee contracts, extended termination notice periods, and disincentives for employees who do not fully serve their contract length, including substantial financial disincentives. Business valuation might decrease, reducing investment incentives.
NCAs have long been a method of balancing the interests of employees and employers. They protect businesses’ confidential information, trade secrets, and patient lists, at some cost to employees pursuing new opportunities. The employee, though, is also provided with some benefit from the NCA, albeit indirect. State statutory law and courts have traditionally worked to ensure an appropriate delicate balance between interests, with courts generally finding unbalanced NCAs unenforceable.
For now, physicians should understand the policy considerations of and recognize the uncertainty surrounding NCAs, become familiar with their state’s statutory NCA law, review employment contracts carefully for NCA reasonableness, and seek legal advice if necessary.
Perhaps the FTC’s approach is the correct one for our future. Or perhaps the appropriate future of NCA interpretation and enforcement should continue to rest on state statutory law and common law, where antitrust enforcement is on a case-by-case basis, rather than FTC rulemaking. The results of high court decisions, state statutory law changes in response to the FTC rule, and perhaps US congressional action will provide the final answer.
Dr. Allen is based at the University of Oklahoma Health Sciences Center in Oklahoma City. He has declared no conflicts of interest in relation to this article.
Non-compete agreements (NCAs) in physician contracts, also termed “restrictive covenants” or “covenants not to compete,” have become a hot topic recently because of the Federal Trade Commission’s (FTC’s) April 2024 ruling invalidating almost all NCAs. But in fact, NCAs have long been controversial, and no more so than in the realm of physician NCAs, which involve substantial policy concerns.
how it relates to a physician employment contract currently, and its possible evolution.
What is It?
Generally speaking, an NCA, usually in the form of an employment contract clause, is an agreement between the employer and the employee that the employee will not enter into post-contract competition with that employer within the limitations of a specific duration, scope of practice, and/or geography. NCAs have traditionally been regulated under state statutory law and common law and have been permitted based on policy considerations that attempt to balance competing employee and employer interests. Physicians should understand their states’ statutory treatment of an NCA.
NCAs protect important employer business interests, including the protection of proprietary information, safeguarding trade secrets, reducing employee turnover, and protecting patient lists. Employees, though, have limited mobility in changing professional positions, have less bargaining power with the employer, and may find themselves with limited options for comparable professional positions.
The NCA ostensibly appears to greatly benefit the employer’s interests over the employee’s; however, NCA protection of employer interests may also substantially benefit employees by encouraging substantial employer investment in employees whom the employer recognizes as a stable and likely long-term human resource, ultimately fostering increased employee satisfaction and innovation. Indeed, one concern with the FTC’s non-compete ban is the potential for significant underinvestment in information sharing and employee training, because employers would, without a NCA, be less likely to recoup those employee investments and would have limited ability to keep competitors from free-riding on investments in employees who leave and join competitors. Ultimately, this would lead to decreased market efficiency.
What is Its Status Today?
Regulation of NCAs, including physician NCAs, has traditionally been based on state statutory law and by common law. Perhaps because of the increasing use of the NCA in professional settings, the NCA has been increasingly scrutinized by courts and state legislatures in the last few decades, with an overall increasing focus on NCA reasonableness and appropriate fit in individual employment settings, and with an emphasis on employer demonstration of legitimate and significant business interests for using a NCA.
States have evolved differently in their treatment of NCAs; some states ban NCAs altogether while others allow them with varying interpretation and enforceability, frequently focused upon the NCA’s duration, scope, and geography. Similarly, in common law, courts will frequently invalidate NCAs that are found to be unreasonably overbroad, either geographically, temporally, and/or in regard to scope.
On April 23, 2024, however, the FTC altered this existing state of affairs by issuing a rule banning new NCAs in all employment situations after September 3, 2024. The rule also holds that existing NCAs are not enforceable, with a small carve-out for some senior executives. It applies to for-profit businesses, and some, but not all, non-profit organizations. The FTC’s stated intent is to reduce healthcare spending by increasing employee compensation and mobility. The FTC’s ban is likely meant to reduce transaction costs by increasing physician mobility.
There have been several lawsuits regarding the FTC ruling, challenging it on different grounds. The US District Court for the Northern District of Texas in Ryan LLC v. FTC issued first a preliminary injunction, then a final decision overturning the FTC’s rule. The Court held that the FTC had exceeded its statutory authority, and further, that the rule was arbitrary and capricious. It noted that the rule’s “categorical ban” has no equivalent in state law, is “unreasonably overbroad without a reasonable explanation,” “provides no evidence or reasoned basis,” does not “consider the positive benefits of non-compete agreements,” and does not “address alternatives to the Rule.” The Ryan Court reasoned that as an administrative agency, the FTC can only act as Congress authorizes by statute. On Oct. 18, 2024, the FTC appealed the Court’s decision to the Fifth Circuit Court of Appeals, seeking to reverse the holding setting aside its NCA ban.
The United States District Court for the Eastern District of Pennsylvania in ATS Tree Services LLC v. FTC denied the plaintiff’s motion to stay enforcement of the rule, refusing to issue a preliminary injunction preventing its implementation. As in Ryan, the ATS Tree Services LLC v. FTC plaintiffs argued that the FTC had exceeded its statutory authority in issuing the rule. However, the Plaintiff did not appeal the holding.
The US District Court for the Middle District of Florida in Properties of the Villages, Inc. v. FTCheld, like Ryan, that the rule exceeds the FTC’s statutory authority, noting the FTC’s prior lack of any NCA enforcement actions; however, its reasoning differed from Ryan. The Florida Court held that the FTC in fact has statutory authority to issue such rules; however, the Court held that the FTC could not enforce its rule because it violates the “major questions doctrine.” The “major questions doctrine” requires an agency such as the FTC to “point to clear congressional authorization” for any rule it issues that has “extraordinary ... economic and political significance,” as the NCA ban rule certainly does.
What is Its Future?
The FTC’s NCA ban remains unsettled. State legislatures, in response to the recent court holdings, are reassessing their statutory law regarding NCAs. The Ryan Court’s holding prevented the FTC’s rule from going into effect on September 4, 2024. The Texas and Florida court decisions are awaiting 5th and 11th Circuit Court of Appeals review, respectively. Assuming affirmation of either of the cases on appeal, a circuit split regarding the NCA ban may occur. The US Supreme Court may be called upon to determine the validity of the FTC rule banning NCAs. The Circuit Court decisions are likely to occur in 2025, and any Supreme Court decision would not likely occur until 2026. Meanwhile, state statutory law and common law still apply to NCAs, and the FTC may challenge the validity of NCAs on a case-by-case basis.
US antitrust law remains a potential remedy to scrutinize and restrain inappropriate business practices, including NCA-related abuses. The Sherman Act allows federal and state actors and private citizens, to sue for redress. Antitrust cases are typically considered using the “rule of reason” formulated by the Supreme Court in 1911, which requires plaintiffs show that defendant businesses possessing market power did in fact undertake anticompetitive conduct that had or likely had anticompetitive effects. In other words, the court in an antitrust case will require that the plaintiff show that the business actually had a significant controlling market presence in the geographic area; and further, that the plaintiff show that the business’ actions in fact had an anticompetitive effect, or likely had one. The latter can be found by showing an anticompetitive effect such as abusive pricing
The FTC’s ruling is legally and academically controversial and in fact may not withstand court scrutiny. The rule was put forth by the FTC as an ambitious rule to reduce healthcare spending. But businesses survive only if their revenue surpasses their costs, including personnel costs. Further, maximization of capitalization is attained when businesses require NCAs. Businesses invest heavily in recruiting, hiring, and training personnel, and increased personnel turnover increases these expenditures. NCAs arguably provide a collective benefit by ensuring force continuity, mitigating the risk of the loss of highly trained personnel with proprietary knowledge. NCAs also help a business maintain a skilled workforce, helping maximize business valuation. If FTC’s NCA ban rule were ultimately upheld, businesses would likely respond by instituting longer-term employee contracts, extended termination notice periods, and disincentives for employees who do not fully serve their contract length, including substantial financial disincentives. Business valuation might decrease, reducing investment incentives.
NCAs have long been a method of balancing the interests of employees and employers. They protect businesses’ confidential information, trade secrets, and patient lists, at some cost to employees pursuing new opportunities. The employee, though, is also provided with some benefit from the NCA, albeit indirect. State statutory law and courts have traditionally worked to ensure an appropriate delicate balance between interests, with courts generally finding unbalanced NCAs unenforceable.
For now, physicians should understand the policy considerations of and recognize the uncertainty surrounding NCAs, become familiar with their state’s statutory NCA law, review employment contracts carefully for NCA reasonableness, and seek legal advice if necessary.
Perhaps the FTC’s approach is the correct one for our future. Or perhaps the appropriate future of NCA interpretation and enforcement should continue to rest on state statutory law and common law, where antitrust enforcement is on a case-by-case basis, rather than FTC rulemaking. The results of high court decisions, state statutory law changes in response to the FTC rule, and perhaps US congressional action will provide the final answer.
Dr. Allen is based at the University of Oklahoma Health Sciences Center in Oklahoma City. He has declared no conflicts of interest in relation to this article.
Non-compete agreements (NCAs) in physician contracts, also termed “restrictive covenants” or “covenants not to compete,” have become a hot topic recently because of the Federal Trade Commission’s (FTC’s) April 2024 ruling invalidating almost all NCAs. But in fact, NCAs have long been controversial, and no more so than in the realm of physician NCAs, which involve substantial policy concerns.
how it relates to a physician employment contract currently, and its possible evolution.
What is It?
Generally speaking, an NCA, usually in the form of an employment contract clause, is an agreement between the employer and the employee that the employee will not enter into post-contract competition with that employer within the limitations of a specific duration, scope of practice, and/or geography. NCAs have traditionally been regulated under state statutory law and common law and have been permitted based on policy considerations that attempt to balance competing employee and employer interests. Physicians should understand their states’ statutory treatment of an NCA.
NCAs protect important employer business interests, including the protection of proprietary information, safeguarding trade secrets, reducing employee turnover, and protecting patient lists. Employees, though, have limited mobility in changing professional positions, have less bargaining power with the employer, and may find themselves with limited options for comparable professional positions.
The NCA ostensibly appears to greatly benefit the employer’s interests over the employee’s; however, NCA protection of employer interests may also substantially benefit employees by encouraging substantial employer investment in employees whom the employer recognizes as a stable and likely long-term human resource, ultimately fostering increased employee satisfaction and innovation. Indeed, one concern with the FTC’s non-compete ban is the potential for significant underinvestment in information sharing and employee training, because employers would, without a NCA, be less likely to recoup those employee investments and would have limited ability to keep competitors from free-riding on investments in employees who leave and join competitors. Ultimately, this would lead to decreased market efficiency.
What is Its Status Today?
Regulation of NCAs, including physician NCAs, has traditionally been based on state statutory law and by common law. Perhaps because of the increasing use of the NCA in professional settings, the NCA has been increasingly scrutinized by courts and state legislatures in the last few decades, with an overall increasing focus on NCA reasonableness and appropriate fit in individual employment settings, and with an emphasis on employer demonstration of legitimate and significant business interests for using a NCA.
States have evolved differently in their treatment of NCAs; some states ban NCAs altogether while others allow them with varying interpretation and enforceability, frequently focused upon the NCA’s duration, scope, and geography. Similarly, in common law, courts will frequently invalidate NCAs that are found to be unreasonably overbroad, either geographically, temporally, and/or in regard to scope.
On April 23, 2024, however, the FTC altered this existing state of affairs by issuing a rule banning new NCAs in all employment situations after September 3, 2024. The rule also holds that existing NCAs are not enforceable, with a small carve-out for some senior executives. It applies to for-profit businesses, and some, but not all, non-profit organizations. The FTC’s stated intent is to reduce healthcare spending by increasing employee compensation and mobility. The FTC’s ban is likely meant to reduce transaction costs by increasing physician mobility.
There have been several lawsuits regarding the FTC ruling, challenging it on different grounds. The US District Court for the Northern District of Texas in Ryan LLC v. FTC issued first a preliminary injunction, then a final decision overturning the FTC’s rule. The Court held that the FTC had exceeded its statutory authority, and further, that the rule was arbitrary and capricious. It noted that the rule’s “categorical ban” has no equivalent in state law, is “unreasonably overbroad without a reasonable explanation,” “provides no evidence or reasoned basis,” does not “consider the positive benefits of non-compete agreements,” and does not “address alternatives to the Rule.” The Ryan Court reasoned that as an administrative agency, the FTC can only act as Congress authorizes by statute. On Oct. 18, 2024, the FTC appealed the Court’s decision to the Fifth Circuit Court of Appeals, seeking to reverse the holding setting aside its NCA ban.
The United States District Court for the Eastern District of Pennsylvania in ATS Tree Services LLC v. FTC denied the plaintiff’s motion to stay enforcement of the rule, refusing to issue a preliminary injunction preventing its implementation. As in Ryan, the ATS Tree Services LLC v. FTC plaintiffs argued that the FTC had exceeded its statutory authority in issuing the rule. However, the Plaintiff did not appeal the holding.
The US District Court for the Middle District of Florida in Properties of the Villages, Inc. v. FTCheld, like Ryan, that the rule exceeds the FTC’s statutory authority, noting the FTC’s prior lack of any NCA enforcement actions; however, its reasoning differed from Ryan. The Florida Court held that the FTC in fact has statutory authority to issue such rules; however, the Court held that the FTC could not enforce its rule because it violates the “major questions doctrine.” The “major questions doctrine” requires an agency such as the FTC to “point to clear congressional authorization” for any rule it issues that has “extraordinary ... economic and political significance,” as the NCA ban rule certainly does.
What is Its Future?
The FTC’s NCA ban remains unsettled. State legislatures, in response to the recent court holdings, are reassessing their statutory law regarding NCAs. The Ryan Court’s holding prevented the FTC’s rule from going into effect on September 4, 2024. The Texas and Florida court decisions are awaiting 5th and 11th Circuit Court of Appeals review, respectively. Assuming affirmation of either of the cases on appeal, a circuit split regarding the NCA ban may occur. The US Supreme Court may be called upon to determine the validity of the FTC rule banning NCAs. The Circuit Court decisions are likely to occur in 2025, and any Supreme Court decision would not likely occur until 2026. Meanwhile, state statutory law and common law still apply to NCAs, and the FTC may challenge the validity of NCAs on a case-by-case basis.
US antitrust law remains a potential remedy to scrutinize and restrain inappropriate business practices, including NCA-related abuses. The Sherman Act allows federal and state actors and private citizens, to sue for redress. Antitrust cases are typically considered using the “rule of reason” formulated by the Supreme Court in 1911, which requires plaintiffs show that defendant businesses possessing market power did in fact undertake anticompetitive conduct that had or likely had anticompetitive effects. In other words, the court in an antitrust case will require that the plaintiff show that the business actually had a significant controlling market presence in the geographic area; and further, that the plaintiff show that the business’ actions in fact had an anticompetitive effect, or likely had one. The latter can be found by showing an anticompetitive effect such as abusive pricing
The FTC’s ruling is legally and academically controversial and in fact may not withstand court scrutiny. The rule was put forth by the FTC as an ambitious rule to reduce healthcare spending. But businesses survive only if their revenue surpasses their costs, including personnel costs. Further, maximization of capitalization is attained when businesses require NCAs. Businesses invest heavily in recruiting, hiring, and training personnel, and increased personnel turnover increases these expenditures. NCAs arguably provide a collective benefit by ensuring force continuity, mitigating the risk of the loss of highly trained personnel with proprietary knowledge. NCAs also help a business maintain a skilled workforce, helping maximize business valuation. If FTC’s NCA ban rule were ultimately upheld, businesses would likely respond by instituting longer-term employee contracts, extended termination notice periods, and disincentives for employees who do not fully serve their contract length, including substantial financial disincentives. Business valuation might decrease, reducing investment incentives.
NCAs have long been a method of balancing the interests of employees and employers. They protect businesses’ confidential information, trade secrets, and patient lists, at some cost to employees pursuing new opportunities. The employee, though, is also provided with some benefit from the NCA, albeit indirect. State statutory law and courts have traditionally worked to ensure an appropriate delicate balance between interests, with courts generally finding unbalanced NCAs unenforceable.
For now, physicians should understand the policy considerations of and recognize the uncertainty surrounding NCAs, become familiar with their state’s statutory NCA law, review employment contracts carefully for NCA reasonableness, and seek legal advice if necessary.
Perhaps the FTC’s approach is the correct one for our future. Or perhaps the appropriate future of NCA interpretation and enforcement should continue to rest on state statutory law and common law, where antitrust enforcement is on a case-by-case basis, rather than FTC rulemaking. The results of high court decisions, state statutory law changes in response to the FTC rule, and perhaps US congressional action will provide the final answer.
Dr. Allen is based at the University of Oklahoma Health Sciences Center in Oklahoma City. He has declared no conflicts of interest in relation to this article.
Navigating the Physician Mortgage Loan
Navigating the path to homeownership can be particularly challenging for physicians, who often face a unique set of financial circumstances. With substantial student loan debt, limited savings, and a delayed peak earning potential, traditional mortgage options may seem out of reach.
Enter physician mortgage loans—specialized financing designed specifically for medical professionals. These loans offer tailored solutions that address the common barriers faced by doctors, making it easier for them to achieve their homeownership goals. In this article, we’ll
What Is a Physician Mortgage Loan?
A physician mortgage loan, also known as a ‘doctor loan,’ is a specialized mortgage product designed for a specific group of qualifying medical professionals. These loans are particularly attractive to new doctors who may have substantial student loan debt, limited savings, and an income that is expected to increase significantly over time. As unique portfolio loans, physician mortgage products can vary considerably between lending institutions. However, a common feature is that they typically require little to no down payment and do not require private mortgage insurance (PMI).
Beyond the common features, loan options and qualifying parameters can vary significantly from one institution to another. Therefore, it’s important to start gathering information as early as possible, giving you ample time to evaluate which institution and loan option best meet your needs.
How Do I Know if I Am Eligible for a Physician Mortgage Loan?
Physician loans are typically offered to MDs, DOs, DDSs, DMDs, and ODs, though some institutions expand this list to include DPMs, PAs, CRNAs, NPs, PharmDs, and DVMs. Additionally, most of these loan products are available to residents, fellows, and attending or practicing physicians.
How Do I Know What Physician Mortgage Loan Is Best for Me?
When selecting the optimal physician loan option for your home purchase, consider several important metrics:
- Duration of Stay: Consider how long you expect to live in the home. If you’re in a lengthy residency or fellowship program, or if you plan to move for a new job soon after, a 30-year fixed-rate loan might not be ideal. Instead, evaluate loan options that match your anticipated duration of stay. For example, a 5-year or 7-year ARM (adjustable rate mortgage) could offer a lower interest rate and reduced monthly payments for the initial fixed period, which aligns with your shorter-term stay. This can result in substantial savings if you do not plan to stay in the home for the full term of a traditional mortgage.
- Underwriting Guidelines: Each lender has different underwriting standards and qualifying criteria, so it’s essential to understand these differences. For instance, some lenders may have higher minimum credit score requirements or stricter debt-to-income (DTI) ratio limits. Others might require a larger down payment or have different rules regarding student loan payments and closing costs. Flexibility in these guidelines can impact your ability to qualify for a loan and the terms you receive. For example, some lenders may allow you to include student loan payments at a lower percentage of your income, which could improve your DTI ratio and help you secure a better loan offer.
- Closing Timing: The timing of your home closing relative to your job start date can be crucial, especially if you’re relocating. Some lenders permit closing up to 60-90 days before your job begins, while others offer up to 120 days. If you need to relocate your family before starting your new position, having the ability to close earlier can provide you with more flexibility in finding and moving into a home. This additional time can ease the transition and allow you to settle in before your new job starts.
Given the wide range of options and standards, it’s important to strategically identify which factors are most meaningful to you. Beyond interest rates, consider the overall cost of the loan, the flexibility of terms, and how well the loan aligns with your financial goals and career plans. For example, if you value lower monthly payments over a longer period or need to accommodate significant student loan debt, ensure that the loan program you choose aligns with these priorities.
What Attributes Should I Look for in My Loan Officer?
When interviewing multiple loan officers for your upcoming loan needs, it’s essential to use the right metrics—beyond just the interest rate—to determine the best fit for your situation. Some critical factors to consider include the loan officer’s experience working with physicians, that person’s availability and responsiveness, and the potential for building a long-term relationship.
As in most professions, experience is paramount—it’s something that cannot be taught or simply read in a training manual. Physicians, especially those in training or just stepping into an attending role, often have unique financial situations. This makes it crucial to work with a loan officer who has extensive experience serving physician clients. An experienced loan officer will better understand how to customize a loan solution that aligns with your specific needs, resulting in a much more tailored and meaningful mortgage. There is no one-size-fits-all mortgage. You are unique, and your loan officer should be crafting a mortgage solution that reflects your individuality and financial circumstances.
In my opinion, availability and responsiveness are among the most critical attributes your chosen loan officer should possess. Interestingly, this factor doesn’t directly influence the ‘cost’ of your loan but can significantly impact your experience. As a physician with a demanding schedule, it’s unrealistic to expect that all communication will take place strictly during business hours—this is true for any consumer. Pay close attention to how promptly loan officers respond during your initial interactions, and evaluate how thoroughly they explain loan terms, out-of-pocket costs, and the overall loan process. Your loan officer should be your trusted guide as you navigate through the complexities of the loan process, so setting yourself up for success starts with choosing someone who meets your expectations in this regard.
It’s crucial to build a good rapport with the loan officer you choose, as this likely won’t be the last mortgage or financial need you encounter in your lifetime. Establishing a personal connection with your loan officer fosters a level of trust that is invaluable. Whether you’re considering refinancing your current mortgage or exploring additional loan products for other financial needs, having a trusted advisor you can rely on as a financial resource is immensely beneficial as you progress in your career. A strong, long-standing relationship with a loan officer ensures you receive reliable and sound financial advice tailored to your unique needs.
Additional Things to Consider if You Are a First-Time Home Buyer
Interview multiple lenders and make those conversations about more than just interest rates. This approach will help you gauge their knowledge of physician mortgage loans while allowing you to assess who might be the best fit for you in terms of compatibility. Relying solely on an email blast to inquire about rates could easily lead you to a subpar lender and result in an unfavorable experience.
Don’t be afraid to ask a lot of questions! As a first-time home buyer, it’s natural to feel a bit overwhelmed by the process—it can seem daunting if you’ve never been through it before. That’s why it’s crucial to ask any questions that come to mind and to work with a lender who is willing to take the time to answer them while educating you throughout the home-buying journey. With a trusted guide and the right education, the process will feel far less overwhelming, leading to a smoother and more positive experience from start to finish.
In conclusion, choosing the right lender for a physician mortgage loan is a crucial step in securing your financial future and achieving homeownership. By thoroughly evaluating interest rates, down payment requirements, loan terms, and other key metrics, you can find a lender that offers competitive rates and favorable terms tailored to your unique needs. Consider factors such as customer service, closing costs, and the lender’s experience with physician loans to ensure a smooth and supportive mortgage process. By taking the time to compare options and select the best fit for your financial situation, you can confidently move forward in your home-buying journey and set the stage for a successful and fulfilling homeownership experience.
Mr. Kelley is vice president of mortgage lending and a physician mortgage specialist at Arvest Bank in Overland Park, Kansas.
Navigating the path to homeownership can be particularly challenging for physicians, who often face a unique set of financial circumstances. With substantial student loan debt, limited savings, and a delayed peak earning potential, traditional mortgage options may seem out of reach.
Enter physician mortgage loans—specialized financing designed specifically for medical professionals. These loans offer tailored solutions that address the common barriers faced by doctors, making it easier for them to achieve their homeownership goals. In this article, we’ll
What Is a Physician Mortgage Loan?
A physician mortgage loan, also known as a ‘doctor loan,’ is a specialized mortgage product designed for a specific group of qualifying medical professionals. These loans are particularly attractive to new doctors who may have substantial student loan debt, limited savings, and an income that is expected to increase significantly over time. As unique portfolio loans, physician mortgage products can vary considerably between lending institutions. However, a common feature is that they typically require little to no down payment and do not require private mortgage insurance (PMI).
Beyond the common features, loan options and qualifying parameters can vary significantly from one institution to another. Therefore, it’s important to start gathering information as early as possible, giving you ample time to evaluate which institution and loan option best meet your needs.
How Do I Know if I Am Eligible for a Physician Mortgage Loan?
Physician loans are typically offered to MDs, DOs, DDSs, DMDs, and ODs, though some institutions expand this list to include DPMs, PAs, CRNAs, NPs, PharmDs, and DVMs. Additionally, most of these loan products are available to residents, fellows, and attending or practicing physicians.
How Do I Know What Physician Mortgage Loan Is Best for Me?
When selecting the optimal physician loan option for your home purchase, consider several important metrics:
- Duration of Stay: Consider how long you expect to live in the home. If you’re in a lengthy residency or fellowship program, or if you plan to move for a new job soon after, a 30-year fixed-rate loan might not be ideal. Instead, evaluate loan options that match your anticipated duration of stay. For example, a 5-year or 7-year ARM (adjustable rate mortgage) could offer a lower interest rate and reduced monthly payments for the initial fixed period, which aligns with your shorter-term stay. This can result in substantial savings if you do not plan to stay in the home for the full term of a traditional mortgage.
- Underwriting Guidelines: Each lender has different underwriting standards and qualifying criteria, so it’s essential to understand these differences. For instance, some lenders may have higher minimum credit score requirements or stricter debt-to-income (DTI) ratio limits. Others might require a larger down payment or have different rules regarding student loan payments and closing costs. Flexibility in these guidelines can impact your ability to qualify for a loan and the terms you receive. For example, some lenders may allow you to include student loan payments at a lower percentage of your income, which could improve your DTI ratio and help you secure a better loan offer.
- Closing Timing: The timing of your home closing relative to your job start date can be crucial, especially if you’re relocating. Some lenders permit closing up to 60-90 days before your job begins, while others offer up to 120 days. If you need to relocate your family before starting your new position, having the ability to close earlier can provide you with more flexibility in finding and moving into a home. This additional time can ease the transition and allow you to settle in before your new job starts.
Given the wide range of options and standards, it’s important to strategically identify which factors are most meaningful to you. Beyond interest rates, consider the overall cost of the loan, the flexibility of terms, and how well the loan aligns with your financial goals and career plans. For example, if you value lower monthly payments over a longer period or need to accommodate significant student loan debt, ensure that the loan program you choose aligns with these priorities.
What Attributes Should I Look for in My Loan Officer?
When interviewing multiple loan officers for your upcoming loan needs, it’s essential to use the right metrics—beyond just the interest rate—to determine the best fit for your situation. Some critical factors to consider include the loan officer’s experience working with physicians, that person’s availability and responsiveness, and the potential for building a long-term relationship.
As in most professions, experience is paramount—it’s something that cannot be taught or simply read in a training manual. Physicians, especially those in training or just stepping into an attending role, often have unique financial situations. This makes it crucial to work with a loan officer who has extensive experience serving physician clients. An experienced loan officer will better understand how to customize a loan solution that aligns with your specific needs, resulting in a much more tailored and meaningful mortgage. There is no one-size-fits-all mortgage. You are unique, and your loan officer should be crafting a mortgage solution that reflects your individuality and financial circumstances.
In my opinion, availability and responsiveness are among the most critical attributes your chosen loan officer should possess. Interestingly, this factor doesn’t directly influence the ‘cost’ of your loan but can significantly impact your experience. As a physician with a demanding schedule, it’s unrealistic to expect that all communication will take place strictly during business hours—this is true for any consumer. Pay close attention to how promptly loan officers respond during your initial interactions, and evaluate how thoroughly they explain loan terms, out-of-pocket costs, and the overall loan process. Your loan officer should be your trusted guide as you navigate through the complexities of the loan process, so setting yourself up for success starts with choosing someone who meets your expectations in this regard.
It’s crucial to build a good rapport with the loan officer you choose, as this likely won’t be the last mortgage or financial need you encounter in your lifetime. Establishing a personal connection with your loan officer fosters a level of trust that is invaluable. Whether you’re considering refinancing your current mortgage or exploring additional loan products for other financial needs, having a trusted advisor you can rely on as a financial resource is immensely beneficial as you progress in your career. A strong, long-standing relationship with a loan officer ensures you receive reliable and sound financial advice tailored to your unique needs.
Additional Things to Consider if You Are a First-Time Home Buyer
Interview multiple lenders and make those conversations about more than just interest rates. This approach will help you gauge their knowledge of physician mortgage loans while allowing you to assess who might be the best fit for you in terms of compatibility. Relying solely on an email blast to inquire about rates could easily lead you to a subpar lender and result in an unfavorable experience.
Don’t be afraid to ask a lot of questions! As a first-time home buyer, it’s natural to feel a bit overwhelmed by the process—it can seem daunting if you’ve never been through it before. That’s why it’s crucial to ask any questions that come to mind and to work with a lender who is willing to take the time to answer them while educating you throughout the home-buying journey. With a trusted guide and the right education, the process will feel far less overwhelming, leading to a smoother and more positive experience from start to finish.
In conclusion, choosing the right lender for a physician mortgage loan is a crucial step in securing your financial future and achieving homeownership. By thoroughly evaluating interest rates, down payment requirements, loan terms, and other key metrics, you can find a lender that offers competitive rates and favorable terms tailored to your unique needs. Consider factors such as customer service, closing costs, and the lender’s experience with physician loans to ensure a smooth and supportive mortgage process. By taking the time to compare options and select the best fit for your financial situation, you can confidently move forward in your home-buying journey and set the stage for a successful and fulfilling homeownership experience.
Mr. Kelley is vice president of mortgage lending and a physician mortgage specialist at Arvest Bank in Overland Park, Kansas.
Navigating the path to homeownership can be particularly challenging for physicians, who often face a unique set of financial circumstances. With substantial student loan debt, limited savings, and a delayed peak earning potential, traditional mortgage options may seem out of reach.
Enter physician mortgage loans—specialized financing designed specifically for medical professionals. These loans offer tailored solutions that address the common barriers faced by doctors, making it easier for them to achieve their homeownership goals. In this article, we’ll
What Is a Physician Mortgage Loan?
A physician mortgage loan, also known as a ‘doctor loan,’ is a specialized mortgage product designed for a specific group of qualifying medical professionals. These loans are particularly attractive to new doctors who may have substantial student loan debt, limited savings, and an income that is expected to increase significantly over time. As unique portfolio loans, physician mortgage products can vary considerably between lending institutions. However, a common feature is that they typically require little to no down payment and do not require private mortgage insurance (PMI).
Beyond the common features, loan options and qualifying parameters can vary significantly from one institution to another. Therefore, it’s important to start gathering information as early as possible, giving you ample time to evaluate which institution and loan option best meet your needs.
How Do I Know if I Am Eligible for a Physician Mortgage Loan?
Physician loans are typically offered to MDs, DOs, DDSs, DMDs, and ODs, though some institutions expand this list to include DPMs, PAs, CRNAs, NPs, PharmDs, and DVMs. Additionally, most of these loan products are available to residents, fellows, and attending or practicing physicians.
How Do I Know What Physician Mortgage Loan Is Best for Me?
When selecting the optimal physician loan option for your home purchase, consider several important metrics:
- Duration of Stay: Consider how long you expect to live in the home. If you’re in a lengthy residency or fellowship program, or if you plan to move for a new job soon after, a 30-year fixed-rate loan might not be ideal. Instead, evaluate loan options that match your anticipated duration of stay. For example, a 5-year or 7-year ARM (adjustable rate mortgage) could offer a lower interest rate and reduced monthly payments for the initial fixed period, which aligns with your shorter-term stay. This can result in substantial savings if you do not plan to stay in the home for the full term of a traditional mortgage.
- Underwriting Guidelines: Each lender has different underwriting standards and qualifying criteria, so it’s essential to understand these differences. For instance, some lenders may have higher minimum credit score requirements or stricter debt-to-income (DTI) ratio limits. Others might require a larger down payment or have different rules regarding student loan payments and closing costs. Flexibility in these guidelines can impact your ability to qualify for a loan and the terms you receive. For example, some lenders may allow you to include student loan payments at a lower percentage of your income, which could improve your DTI ratio and help you secure a better loan offer.
- Closing Timing: The timing of your home closing relative to your job start date can be crucial, especially if you’re relocating. Some lenders permit closing up to 60-90 days before your job begins, while others offer up to 120 days. If you need to relocate your family before starting your new position, having the ability to close earlier can provide you with more flexibility in finding and moving into a home. This additional time can ease the transition and allow you to settle in before your new job starts.
Given the wide range of options and standards, it’s important to strategically identify which factors are most meaningful to you. Beyond interest rates, consider the overall cost of the loan, the flexibility of terms, and how well the loan aligns with your financial goals and career plans. For example, if you value lower monthly payments over a longer period or need to accommodate significant student loan debt, ensure that the loan program you choose aligns with these priorities.
What Attributes Should I Look for in My Loan Officer?
When interviewing multiple loan officers for your upcoming loan needs, it’s essential to use the right metrics—beyond just the interest rate—to determine the best fit for your situation. Some critical factors to consider include the loan officer’s experience working with physicians, that person’s availability and responsiveness, and the potential for building a long-term relationship.
As in most professions, experience is paramount—it’s something that cannot be taught or simply read in a training manual. Physicians, especially those in training or just stepping into an attending role, often have unique financial situations. This makes it crucial to work with a loan officer who has extensive experience serving physician clients. An experienced loan officer will better understand how to customize a loan solution that aligns with your specific needs, resulting in a much more tailored and meaningful mortgage. There is no one-size-fits-all mortgage. You are unique, and your loan officer should be crafting a mortgage solution that reflects your individuality and financial circumstances.
In my opinion, availability and responsiveness are among the most critical attributes your chosen loan officer should possess. Interestingly, this factor doesn’t directly influence the ‘cost’ of your loan but can significantly impact your experience. As a physician with a demanding schedule, it’s unrealistic to expect that all communication will take place strictly during business hours—this is true for any consumer. Pay close attention to how promptly loan officers respond during your initial interactions, and evaluate how thoroughly they explain loan terms, out-of-pocket costs, and the overall loan process. Your loan officer should be your trusted guide as you navigate through the complexities of the loan process, so setting yourself up for success starts with choosing someone who meets your expectations in this regard.
It’s crucial to build a good rapport with the loan officer you choose, as this likely won’t be the last mortgage or financial need you encounter in your lifetime. Establishing a personal connection with your loan officer fosters a level of trust that is invaluable. Whether you’re considering refinancing your current mortgage or exploring additional loan products for other financial needs, having a trusted advisor you can rely on as a financial resource is immensely beneficial as you progress in your career. A strong, long-standing relationship with a loan officer ensures you receive reliable and sound financial advice tailored to your unique needs.
Additional Things to Consider if You Are a First-Time Home Buyer
Interview multiple lenders and make those conversations about more than just interest rates. This approach will help you gauge their knowledge of physician mortgage loans while allowing you to assess who might be the best fit for you in terms of compatibility. Relying solely on an email blast to inquire about rates could easily lead you to a subpar lender and result in an unfavorable experience.
Don’t be afraid to ask a lot of questions! As a first-time home buyer, it’s natural to feel a bit overwhelmed by the process—it can seem daunting if you’ve never been through it before. That’s why it’s crucial to ask any questions that come to mind and to work with a lender who is willing to take the time to answer them while educating you throughout the home-buying journey. With a trusted guide and the right education, the process will feel far less overwhelming, leading to a smoother and more positive experience from start to finish.
In conclusion, choosing the right lender for a physician mortgage loan is a crucial step in securing your financial future and achieving homeownership. By thoroughly evaluating interest rates, down payment requirements, loan terms, and other key metrics, you can find a lender that offers competitive rates and favorable terms tailored to your unique needs. Consider factors such as customer service, closing costs, and the lender’s experience with physician loans to ensure a smooth and supportive mortgage process. By taking the time to compare options and select the best fit for your financial situation, you can confidently move forward in your home-buying journey and set the stage for a successful and fulfilling homeownership experience.
Mr. Kelley is vice president of mortgage lending and a physician mortgage specialist at Arvest Bank in Overland Park, Kansas.
Retirement Planning for Gastroenterologists
Retirement planning starts the day we start our careers. Whenever we start any project, it is always worthwhile to learn how the project works, what we want to pursue and achieve with the project, how to exit the project, and when is the right time to exit.
As physicians, gastroenterologists go through several years of vigorous training, years spent studying, researching, practicing, and juggling between work and life, trying to lead a well-balanced life. With all the years of medical training, we do not get the same level of education in financial planning in order to attain financial stability, financial empowerment, or resources that we need to put in place for a successful retirement.
Many physicians like to work and provide services as long as they can, provided the physical and mental capacity permits. Retirement planning should start as early as possible — at your first job, with the first paycheck. Having a strategic plan and understanding several personal factors can help one make this journey successful.
Financial Planning
Financial planning starts with investments in 401k, IRA, defined benefit, and defined contribution plans, as early as possible and to the maximum extent possible. It is beneficial to contribute at the first opportunity and contribute enough to the employer retirement plan to earn the full employer match. Also consider capital investment opportunities that match your risk appetite and returns, as these compound and grow over time. This can be done by adjusting personal expenses and lifestyle, giving priority to savings and future wealth management, and auto-escalation of permitted retirement contributions annually.
Assessing your financial situation periodically to determine retirement needs based on how long you intend to work and preferred lifestyle post retirement (travel, leisurely activities, etc.) is important. It is also pertinent to align revenue earned, expenses made, and wealth saved to support post-retirement life. Consider hiring a financial advisor who has the best interests in your personal wealth management. These are usually found with reputable institutions at a fixed percentage cost. Finding a trustworthy knowledgeable advisor is the key. Learning from your colleagues, networking, and learning from friends in and out of healthcare are good resources to find the right financial advisor.
Healthcare expenses should be planned as well as part of financial planning. Short-term and long-term disability and long-term care expenses should be investigated when planning for healthcare needs.
Transition Planning
Timing of retirement is based on factors such as age, financial status, personal health and preferences. The transition can be facilitated by better communication with colleagues, partners, employer, staff, and patients. Identifying a successor and planning for continuity of care of the patients, such as transitioning patients to another provider, is important as well. This may involve hiring a new associate, merging with another practice, or selling the practice.
Healthcare Coverage
One of the biggest expenses with retirement is healthcare coverage. Healthcare coverage options need to be analyzed which may include Medicare eligibility, enrollment, potential needs after retirement, including preventative care, treatment of chronic conditions, long term care services, and unexpected health outcomes and consequences.
Lifestyle and Travel Planning
Reflect on the retirement lifestyle, hobbies, and passions to be explored. Some activities like volunteer work, continuing educational opportunities, and advisory work, will help maintain physical and mental health. Consider downsizing living arrangements to align with retirement lifestyle goals which may include relocating to a different area as it fits your needs.
Legal and Estate Planning
Review and update legal documents including power of attorney, healthcare directives, will, trusts, and periodically ensure that these documents reflect your wishes.
Professional Development
Retirement may not mean quitting work completely. Some may look at this as an opportunity for professional development and pivoting to a different career that suits their lifestyle and needs. Gastroenterologists may contribute to the field and stay connected by being mentors, advisors, or, industry partners; being involved in national organizations; leading purposeful projects; or teaching part-time or on a volunteer basis.
Emotional and Social Support
Being a physician and a leader on treatment teams after so many years, some may feel lonely and unproductive with a lack of purpose in retirement; while others are excited about the free time they gained to pursue other activities and projects.
The process can be emotionally challenging even for well-prepared individuals. Finding friends, family, and professionals who can support you through this process will be helpful as you go through the uncertainties, anxiety, and fear during this phase of life. Think of developing hobbies and interests and nurturing networks outside of work environment that will keep you engaged and content during this transition.
Gastroenterologists can plan for a financially secure, emotionally fulfilling, and professionally satisfying transition tailored to their needs and preferences. Seeking help from financial advisors, legal experts, mentors, and other professionals who can provide valuable advice, support, and guidance is crucial during this process.
Do what you love and love what you do.
Dr. Appalaneni is a gastroenterologist at Dayton Gastroenterology in Beavercreek, Ohio, and a clinical assistant professor at Boonshoft School of Medicine, Wright State University in Dayton, Ohio. This article is not a financial planning document, nor legal advice; these are the author’s learnings, experiences, and opinions and are not considered financial advice.
Retirement planning starts the day we start our careers. Whenever we start any project, it is always worthwhile to learn how the project works, what we want to pursue and achieve with the project, how to exit the project, and when is the right time to exit.
As physicians, gastroenterologists go through several years of vigorous training, years spent studying, researching, practicing, and juggling between work and life, trying to lead a well-balanced life. With all the years of medical training, we do not get the same level of education in financial planning in order to attain financial stability, financial empowerment, or resources that we need to put in place for a successful retirement.
Many physicians like to work and provide services as long as they can, provided the physical and mental capacity permits. Retirement planning should start as early as possible — at your first job, with the first paycheck. Having a strategic plan and understanding several personal factors can help one make this journey successful.
Financial Planning
Financial planning starts with investments in 401k, IRA, defined benefit, and defined contribution plans, as early as possible and to the maximum extent possible. It is beneficial to contribute at the first opportunity and contribute enough to the employer retirement plan to earn the full employer match. Also consider capital investment opportunities that match your risk appetite and returns, as these compound and grow over time. This can be done by adjusting personal expenses and lifestyle, giving priority to savings and future wealth management, and auto-escalation of permitted retirement contributions annually.
Assessing your financial situation periodically to determine retirement needs based on how long you intend to work and preferred lifestyle post retirement (travel, leisurely activities, etc.) is important. It is also pertinent to align revenue earned, expenses made, and wealth saved to support post-retirement life. Consider hiring a financial advisor who has the best interests in your personal wealth management. These are usually found with reputable institutions at a fixed percentage cost. Finding a trustworthy knowledgeable advisor is the key. Learning from your colleagues, networking, and learning from friends in and out of healthcare are good resources to find the right financial advisor.
Healthcare expenses should be planned as well as part of financial planning. Short-term and long-term disability and long-term care expenses should be investigated when planning for healthcare needs.
Transition Planning
Timing of retirement is based on factors such as age, financial status, personal health and preferences. The transition can be facilitated by better communication with colleagues, partners, employer, staff, and patients. Identifying a successor and planning for continuity of care of the patients, such as transitioning patients to another provider, is important as well. This may involve hiring a new associate, merging with another practice, or selling the practice.
Healthcare Coverage
One of the biggest expenses with retirement is healthcare coverage. Healthcare coverage options need to be analyzed which may include Medicare eligibility, enrollment, potential needs after retirement, including preventative care, treatment of chronic conditions, long term care services, and unexpected health outcomes and consequences.
Lifestyle and Travel Planning
Reflect on the retirement lifestyle, hobbies, and passions to be explored. Some activities like volunteer work, continuing educational opportunities, and advisory work, will help maintain physical and mental health. Consider downsizing living arrangements to align with retirement lifestyle goals which may include relocating to a different area as it fits your needs.
Legal and Estate Planning
Review and update legal documents including power of attorney, healthcare directives, will, trusts, and periodically ensure that these documents reflect your wishes.
Professional Development
Retirement may not mean quitting work completely. Some may look at this as an opportunity for professional development and pivoting to a different career that suits their lifestyle and needs. Gastroenterologists may contribute to the field and stay connected by being mentors, advisors, or, industry partners; being involved in national organizations; leading purposeful projects; or teaching part-time or on a volunteer basis.
Emotional and Social Support
Being a physician and a leader on treatment teams after so many years, some may feel lonely and unproductive with a lack of purpose in retirement; while others are excited about the free time they gained to pursue other activities and projects.
The process can be emotionally challenging even for well-prepared individuals. Finding friends, family, and professionals who can support you through this process will be helpful as you go through the uncertainties, anxiety, and fear during this phase of life. Think of developing hobbies and interests and nurturing networks outside of work environment that will keep you engaged and content during this transition.
Gastroenterologists can plan for a financially secure, emotionally fulfilling, and professionally satisfying transition tailored to their needs and preferences. Seeking help from financial advisors, legal experts, mentors, and other professionals who can provide valuable advice, support, and guidance is crucial during this process.
Do what you love and love what you do.
Dr. Appalaneni is a gastroenterologist at Dayton Gastroenterology in Beavercreek, Ohio, and a clinical assistant professor at Boonshoft School of Medicine, Wright State University in Dayton, Ohio. This article is not a financial planning document, nor legal advice; these are the author’s learnings, experiences, and opinions and are not considered financial advice.
Retirement planning starts the day we start our careers. Whenever we start any project, it is always worthwhile to learn how the project works, what we want to pursue and achieve with the project, how to exit the project, and when is the right time to exit.
As physicians, gastroenterologists go through several years of vigorous training, years spent studying, researching, practicing, and juggling between work and life, trying to lead a well-balanced life. With all the years of medical training, we do not get the same level of education in financial planning in order to attain financial stability, financial empowerment, or resources that we need to put in place for a successful retirement.
Many physicians like to work and provide services as long as they can, provided the physical and mental capacity permits. Retirement planning should start as early as possible — at your first job, with the first paycheck. Having a strategic plan and understanding several personal factors can help one make this journey successful.
Financial Planning
Financial planning starts with investments in 401k, IRA, defined benefit, and defined contribution plans, as early as possible and to the maximum extent possible. It is beneficial to contribute at the first opportunity and contribute enough to the employer retirement plan to earn the full employer match. Also consider capital investment opportunities that match your risk appetite and returns, as these compound and grow over time. This can be done by adjusting personal expenses and lifestyle, giving priority to savings and future wealth management, and auto-escalation of permitted retirement contributions annually.
Assessing your financial situation periodically to determine retirement needs based on how long you intend to work and preferred lifestyle post retirement (travel, leisurely activities, etc.) is important. It is also pertinent to align revenue earned, expenses made, and wealth saved to support post-retirement life. Consider hiring a financial advisor who has the best interests in your personal wealth management. These are usually found with reputable institutions at a fixed percentage cost. Finding a trustworthy knowledgeable advisor is the key. Learning from your colleagues, networking, and learning from friends in and out of healthcare are good resources to find the right financial advisor.
Healthcare expenses should be planned as well as part of financial planning. Short-term and long-term disability and long-term care expenses should be investigated when planning for healthcare needs.
Transition Planning
Timing of retirement is based on factors such as age, financial status, personal health and preferences. The transition can be facilitated by better communication with colleagues, partners, employer, staff, and patients. Identifying a successor and planning for continuity of care of the patients, such as transitioning patients to another provider, is important as well. This may involve hiring a new associate, merging with another practice, or selling the practice.
Healthcare Coverage
One of the biggest expenses with retirement is healthcare coverage. Healthcare coverage options need to be analyzed which may include Medicare eligibility, enrollment, potential needs after retirement, including preventative care, treatment of chronic conditions, long term care services, and unexpected health outcomes and consequences.
Lifestyle and Travel Planning
Reflect on the retirement lifestyle, hobbies, and passions to be explored. Some activities like volunteer work, continuing educational opportunities, and advisory work, will help maintain physical and mental health. Consider downsizing living arrangements to align with retirement lifestyle goals which may include relocating to a different area as it fits your needs.
Legal and Estate Planning
Review and update legal documents including power of attorney, healthcare directives, will, trusts, and periodically ensure that these documents reflect your wishes.
Professional Development
Retirement may not mean quitting work completely. Some may look at this as an opportunity for professional development and pivoting to a different career that suits their lifestyle and needs. Gastroenterologists may contribute to the field and stay connected by being mentors, advisors, or, industry partners; being involved in national organizations; leading purposeful projects; or teaching part-time or on a volunteer basis.
Emotional and Social Support
Being a physician and a leader on treatment teams after so many years, some may feel lonely and unproductive with a lack of purpose in retirement; while others are excited about the free time they gained to pursue other activities and projects.
The process can be emotionally challenging even for well-prepared individuals. Finding friends, family, and professionals who can support you through this process will be helpful as you go through the uncertainties, anxiety, and fear during this phase of life. Think of developing hobbies and interests and nurturing networks outside of work environment that will keep you engaged and content during this transition.
Gastroenterologists can plan for a financially secure, emotionally fulfilling, and professionally satisfying transition tailored to their needs and preferences. Seeking help from financial advisors, legal experts, mentors, and other professionals who can provide valuable advice, support, and guidance is crucial during this process.
Do what you love and love what you do.
Dr. Appalaneni is a gastroenterologist at Dayton Gastroenterology in Beavercreek, Ohio, and a clinical assistant professor at Boonshoft School of Medicine, Wright State University in Dayton, Ohio. This article is not a financial planning document, nor legal advice; these are the author’s learnings, experiences, and opinions and are not considered financial advice.
Navigating the Search for a Financial Adviser
As gastroenterologists, we spend innumerable years in medical training with an abrupt and significant increase in our earning potential upon beginning practice. The majority of us also carry a sizeable amount of student loan debt. This combination results in a unique situation that can make us hesitant about how best to set ourselves up financially while also making us vulnerable to potentially predatory financial practices.
Although your initial steps to achieve financial wellness and build wealth can be obtained on your own with some education, a financial adviser becomes indispensable when you have significant assets, a high income, complex finances, and/or are experiencing a major life change. Additionally, as there are so many avenues to invest and grow your capital, a financial adviser can assist in designing a portfolio to best accomplish specific monetary goals. Studies have demonstrated that those working with a financial adviser reduce their single-stock risk and have more significant increase in portfolio value, reducing the total cost associated with their investments’ management.1 Those working with a financial adviser will also net up to a 3% larger annual return, compared with a standard baseline investment plan.2,3
Based on this information, it may appear that working with a personal financial adviser would be a no-brainer. Unfortunately, there is a caveat: There is no legal regulation regarding who can use the title “financial adviser.” It is therefore crucial to be aware of common practices and terminology to best help you identify a reputable financial adviser and reduce your risk of excessive fees or financial loss. This is also a highly personal decision and your search should first begin with understanding why you are looking for an adviser, as this will determine the appropriate type of service to look for.
Types of Advisers
A certified financial planner (CFP) is an expert in estate planning, taxes, retirement saving, and financial planning who has a formal designation by the Certified Financial Planner Board of Standards Inc.4 They must undergo stringent licensing examinations following a 3-year course with required continuing education to maintain their credentials. CFPs are fiduciaries, meaning they must make financial decisions in your best interest, even if they may make less money with that product or investment strategy. In other words, they are beholden to give honest, impartial recommendations to their clients, and may face sanctions by the CFP Board if found to violate its Code of Ethics and Standards of Conduct, which includes failure to act in a fiduciary duty.5
CFPs evaluate your total financial picture, such as investments, insurance policies, and overall current financial position, to develop a comprehensive strategy that will successfully guide you to your financial goal. There are many individuals who may refer to themselves as financial planners without having the CFP designation; while they may offer similar services as above, they will not be required to act as a fiduciary. Hence, it is important to do your due diligence and verify they hold this certification via the CFP Board website: www.cfp.net/verify-a-cfp-professional.
An investment adviser is a legal term from the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) referring to an individual who provides recommendations and analyses for financial securities such as stock. Both of these agencies ensure investment advisers adhere to regulatory requirements designed to protect client investers. Similar to CFPs, they are held to a fiduciary standard, and their firm is required to register with the SEC or the state of practice based on the amount of assets under management.6
An individual investment adviser must also register with their state as an Investment Adviser Representative (IAR), the distinctive term referring to an individual as opposed to an investment advising firm. Investment advisers are required to pass the extensive Series 65, Uniform Investment Advisor Law Exam, or equivalent, by states requiring licensure.7 They can guide you on the selection of particular investments and portfolio management based on a discussion with you regarding your current financial standing and what fiscal ambitions you wish to achieve.
A financial adviser provides direction on a multitude of financially related topics such as investing, tax laws, and life insurance with the goal to help you reach specific financial objectives. However, this term is often used quite ubiquitously given the lack of formal regulation of the title. Essentially, those with varying types of educational background can give themselves the title of financial adviser.
If a financial adviser buys or sells financial securities such as stocks or bonds, then they must be registered as a licensed broker with the SEC and IAR and pass the Series 6 or Series 7 exam. Unlike CFPs and investment advisers, a financial adviser (if also a licensed broker) is not required to be a fiduciary, and instead works under the suitability standard.8 Suitability requires that financial recommendations made by the adviser are appropriate but not necessarily the best for the client. In fact, these recommendations do not even have to be the most suitable. This is where conflicts of interest can arise with the adviser recommending products and securities that best compensate them while not serving the best return on investment for you.
Making the search for a financial adviser more complex, an individual can be a combination of any of the above, pending the appropriate licensing. For example, a CFP can also be an asset manager and thus hold the title of a financial adviser and/or IAR. A financial adviser may also not directly manage your assets if they have a partnership with a third party or another licensed individual. Questions to ask of your potential financial adviser should therefore include the following:
- What licensure and related education do you have?
- What is your particular area of expertise?
- How long have you been in practice?
- How will you be managing my assets?
Financial Adviser Fee Schedules
Prior to working with a financial adviser, you must also inquire about their fee structure. There are two kinds of fee schedules used by financial advisers: fee-only and fee-based.
Fee-only advisers receive payment solely for the services they provide. They do not collect commissions from third parties providing the recommended products. There is variability in how this type of payment schedule is structured, encompassing flat fees, hourly rates, or the adviser charging a retainer. The Table below compares the types of fee-only structures and range of charges based on 2023 rates.9 Of note, fee-only advisers serve as fiduciaries.10
Fee-based financial advisers receive payment for services but may also receive commission on specific products they sell to you.9 Most, if not all, financial experts recommend avoiding advisers using commission-based charges given the potential conflict of interest: How can one be absolutely sure this recommended financial product is best for you, knowing your adviser has a financial stake in said item?
In addition to charging the fees above, your financial adviser, if they are actively managing your investment portfolio, will also charge an assets under management (AUM) fee. This is a percentage of the dollar amount within your portfolio. For example, if your adviser charges a 1% AUM rate for your account totaling $100,000, this equates to a $1,000 fee in that calendar year. AUM fees typically decrease as the size of your portfolio increases. As seen in the Table, there is a wide range of the average AUM rate (0.5%–2%); however, an AUM fee approaching 2% is unnecessarily high and consumes a significant portion of your portfolio. Thus, it is recommended to look for a money manager with an approximate 1% AUM fee.
Many of us delay or avoid working with a financial adviser due to the potential perceived risks of having poor portfolio management from an adviser not working in our best interest, along with the concern for excessive fees. In many ways, it is how we counsel our patients. While they can seek medical information on their own, their best care is under the guidance of an expert: a healthcare professional. That being said, personal finance is indeed personal, so I hope this guide helps facilitate your search and increase your financial wellness.
Dr. Luthra is a therapeutic endoscopist at Moffitt Cancer Center, Tampa, Florida, and the founder of The Scope of Finance, a financial wellness education and coaching company focused on physicians. Her interest in financial well-being is thanks to the teachings of her father, an entrepreneur and former Certified Financial Planner (CFP). She can be found on Instagram (thescopeoffinance) and X (@ScopeofFinance). She reports no financial disclosures relevant to this article.
References
1. Pagliaro CA and Utkus SP. Assessing the value of advice. Vanguard. 2019 Sept.
2. Kinniry Jr. FM et al. Putting a value on your value: Quantifying Vanguard Advisor’s Alpha. Vanguard. 2022 July.
3. Horan S. What Are the Benefits of Working with a Financial Advisor? – 2021 Study. Smart Asset. 2023 July 27.
4. Kagan J. Certified Financial PlannerTM(CFP): What It Is and How to Become One. Investopedia. 2023 Aug 3.
5. CFP Board. Our Commitment to Ethical Standards. CFP Board. 2024.
6. Staff of the Investment Adviser Regulation Office Division of Investment Management, U.S. Securities and Exchange Commission. Regulation of Investment Advisers by the U.S. Securities and Exchange Commission. 2013 Mar.
7. Hicks C. Investment Advisor vs. Financial Advisor: There is a Difference. US News & World Report. 2019 June 13.
8. Roberts K. Financial advisor vs. financial planner: What is the difference? Bankrate. 2023 Nov 21.
9. Clancy D. Average Fees for Financial Advisors in 2023. Harness Wealth. 2023 May 25.
10. Palmer B. Fee- vs. Commission-Based Advisor: What’s the Difference? Investopedia. 2023 June 20.
As gastroenterologists, we spend innumerable years in medical training with an abrupt and significant increase in our earning potential upon beginning practice. The majority of us also carry a sizeable amount of student loan debt. This combination results in a unique situation that can make us hesitant about how best to set ourselves up financially while also making us vulnerable to potentially predatory financial practices.
Although your initial steps to achieve financial wellness and build wealth can be obtained on your own with some education, a financial adviser becomes indispensable when you have significant assets, a high income, complex finances, and/or are experiencing a major life change. Additionally, as there are so many avenues to invest and grow your capital, a financial adviser can assist in designing a portfolio to best accomplish specific monetary goals. Studies have demonstrated that those working with a financial adviser reduce their single-stock risk and have more significant increase in portfolio value, reducing the total cost associated with their investments’ management.1 Those working with a financial adviser will also net up to a 3% larger annual return, compared with a standard baseline investment plan.2,3
Based on this information, it may appear that working with a personal financial adviser would be a no-brainer. Unfortunately, there is a caveat: There is no legal regulation regarding who can use the title “financial adviser.” It is therefore crucial to be aware of common practices and terminology to best help you identify a reputable financial adviser and reduce your risk of excessive fees or financial loss. This is also a highly personal decision and your search should first begin with understanding why you are looking for an adviser, as this will determine the appropriate type of service to look for.
Types of Advisers
A certified financial planner (CFP) is an expert in estate planning, taxes, retirement saving, and financial planning who has a formal designation by the Certified Financial Planner Board of Standards Inc.4 They must undergo stringent licensing examinations following a 3-year course with required continuing education to maintain their credentials. CFPs are fiduciaries, meaning they must make financial decisions in your best interest, even if they may make less money with that product or investment strategy. In other words, they are beholden to give honest, impartial recommendations to their clients, and may face sanctions by the CFP Board if found to violate its Code of Ethics and Standards of Conduct, which includes failure to act in a fiduciary duty.5
CFPs evaluate your total financial picture, such as investments, insurance policies, and overall current financial position, to develop a comprehensive strategy that will successfully guide you to your financial goal. There are many individuals who may refer to themselves as financial planners without having the CFP designation; while they may offer similar services as above, they will not be required to act as a fiduciary. Hence, it is important to do your due diligence and verify they hold this certification via the CFP Board website: www.cfp.net/verify-a-cfp-professional.
An investment adviser is a legal term from the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) referring to an individual who provides recommendations and analyses for financial securities such as stock. Both of these agencies ensure investment advisers adhere to regulatory requirements designed to protect client investers. Similar to CFPs, they are held to a fiduciary standard, and their firm is required to register with the SEC or the state of practice based on the amount of assets under management.6
An individual investment adviser must also register with their state as an Investment Adviser Representative (IAR), the distinctive term referring to an individual as opposed to an investment advising firm. Investment advisers are required to pass the extensive Series 65, Uniform Investment Advisor Law Exam, or equivalent, by states requiring licensure.7 They can guide you on the selection of particular investments and portfolio management based on a discussion with you regarding your current financial standing and what fiscal ambitions you wish to achieve.
A financial adviser provides direction on a multitude of financially related topics such as investing, tax laws, and life insurance with the goal to help you reach specific financial objectives. However, this term is often used quite ubiquitously given the lack of formal regulation of the title. Essentially, those with varying types of educational background can give themselves the title of financial adviser.
If a financial adviser buys or sells financial securities such as stocks or bonds, then they must be registered as a licensed broker with the SEC and IAR and pass the Series 6 or Series 7 exam. Unlike CFPs and investment advisers, a financial adviser (if also a licensed broker) is not required to be a fiduciary, and instead works under the suitability standard.8 Suitability requires that financial recommendations made by the adviser are appropriate but not necessarily the best for the client. In fact, these recommendations do not even have to be the most suitable. This is where conflicts of interest can arise with the adviser recommending products and securities that best compensate them while not serving the best return on investment for you.
Making the search for a financial adviser more complex, an individual can be a combination of any of the above, pending the appropriate licensing. For example, a CFP can also be an asset manager and thus hold the title of a financial adviser and/or IAR. A financial adviser may also not directly manage your assets if they have a partnership with a third party or another licensed individual. Questions to ask of your potential financial adviser should therefore include the following:
- What licensure and related education do you have?
- What is your particular area of expertise?
- How long have you been in practice?
- How will you be managing my assets?
Financial Adviser Fee Schedules
Prior to working with a financial adviser, you must also inquire about their fee structure. There are two kinds of fee schedules used by financial advisers: fee-only and fee-based.
Fee-only advisers receive payment solely for the services they provide. They do not collect commissions from third parties providing the recommended products. There is variability in how this type of payment schedule is structured, encompassing flat fees, hourly rates, or the adviser charging a retainer. The Table below compares the types of fee-only structures and range of charges based on 2023 rates.9 Of note, fee-only advisers serve as fiduciaries.10
Fee-based financial advisers receive payment for services but may also receive commission on specific products they sell to you.9 Most, if not all, financial experts recommend avoiding advisers using commission-based charges given the potential conflict of interest: How can one be absolutely sure this recommended financial product is best for you, knowing your adviser has a financial stake in said item?
In addition to charging the fees above, your financial adviser, if they are actively managing your investment portfolio, will also charge an assets under management (AUM) fee. This is a percentage of the dollar amount within your portfolio. For example, if your adviser charges a 1% AUM rate for your account totaling $100,000, this equates to a $1,000 fee in that calendar year. AUM fees typically decrease as the size of your portfolio increases. As seen in the Table, there is a wide range of the average AUM rate (0.5%–2%); however, an AUM fee approaching 2% is unnecessarily high and consumes a significant portion of your portfolio. Thus, it is recommended to look for a money manager with an approximate 1% AUM fee.
Many of us delay or avoid working with a financial adviser due to the potential perceived risks of having poor portfolio management from an adviser not working in our best interest, along with the concern for excessive fees. In many ways, it is how we counsel our patients. While they can seek medical information on their own, their best care is under the guidance of an expert: a healthcare professional. That being said, personal finance is indeed personal, so I hope this guide helps facilitate your search and increase your financial wellness.
Dr. Luthra is a therapeutic endoscopist at Moffitt Cancer Center, Tampa, Florida, and the founder of The Scope of Finance, a financial wellness education and coaching company focused on physicians. Her interest in financial well-being is thanks to the teachings of her father, an entrepreneur and former Certified Financial Planner (CFP). She can be found on Instagram (thescopeoffinance) and X (@ScopeofFinance). She reports no financial disclosures relevant to this article.
References
1. Pagliaro CA and Utkus SP. Assessing the value of advice. Vanguard. 2019 Sept.
2. Kinniry Jr. FM et al. Putting a value on your value: Quantifying Vanguard Advisor’s Alpha. Vanguard. 2022 July.
3. Horan S. What Are the Benefits of Working with a Financial Advisor? – 2021 Study. Smart Asset. 2023 July 27.
4. Kagan J. Certified Financial PlannerTM(CFP): What It Is and How to Become One. Investopedia. 2023 Aug 3.
5. CFP Board. Our Commitment to Ethical Standards. CFP Board. 2024.
6. Staff of the Investment Adviser Regulation Office Division of Investment Management, U.S. Securities and Exchange Commission. Regulation of Investment Advisers by the U.S. Securities and Exchange Commission. 2013 Mar.
7. Hicks C. Investment Advisor vs. Financial Advisor: There is a Difference. US News & World Report. 2019 June 13.
8. Roberts K. Financial advisor vs. financial planner: What is the difference? Bankrate. 2023 Nov 21.
9. Clancy D. Average Fees for Financial Advisors in 2023. Harness Wealth. 2023 May 25.
10. Palmer B. Fee- vs. Commission-Based Advisor: What’s the Difference? Investopedia. 2023 June 20.
As gastroenterologists, we spend innumerable years in medical training with an abrupt and significant increase in our earning potential upon beginning practice. The majority of us also carry a sizeable amount of student loan debt. This combination results in a unique situation that can make us hesitant about how best to set ourselves up financially while also making us vulnerable to potentially predatory financial practices.
Although your initial steps to achieve financial wellness and build wealth can be obtained on your own with some education, a financial adviser becomes indispensable when you have significant assets, a high income, complex finances, and/or are experiencing a major life change. Additionally, as there are so many avenues to invest and grow your capital, a financial adviser can assist in designing a portfolio to best accomplish specific monetary goals. Studies have demonstrated that those working with a financial adviser reduce their single-stock risk and have more significant increase in portfolio value, reducing the total cost associated with their investments’ management.1 Those working with a financial adviser will also net up to a 3% larger annual return, compared with a standard baseline investment plan.2,3
Based on this information, it may appear that working with a personal financial adviser would be a no-brainer. Unfortunately, there is a caveat: There is no legal regulation regarding who can use the title “financial adviser.” It is therefore crucial to be aware of common practices and terminology to best help you identify a reputable financial adviser and reduce your risk of excessive fees or financial loss. This is also a highly personal decision and your search should first begin with understanding why you are looking for an adviser, as this will determine the appropriate type of service to look for.
Types of Advisers
A certified financial planner (CFP) is an expert in estate planning, taxes, retirement saving, and financial planning who has a formal designation by the Certified Financial Planner Board of Standards Inc.4 They must undergo stringent licensing examinations following a 3-year course with required continuing education to maintain their credentials. CFPs are fiduciaries, meaning they must make financial decisions in your best interest, even if they may make less money with that product or investment strategy. In other words, they are beholden to give honest, impartial recommendations to their clients, and may face sanctions by the CFP Board if found to violate its Code of Ethics and Standards of Conduct, which includes failure to act in a fiduciary duty.5
CFPs evaluate your total financial picture, such as investments, insurance policies, and overall current financial position, to develop a comprehensive strategy that will successfully guide you to your financial goal. There are many individuals who may refer to themselves as financial planners without having the CFP designation; while they may offer similar services as above, they will not be required to act as a fiduciary. Hence, it is important to do your due diligence and verify they hold this certification via the CFP Board website: www.cfp.net/verify-a-cfp-professional.
An investment adviser is a legal term from the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) referring to an individual who provides recommendations and analyses for financial securities such as stock. Both of these agencies ensure investment advisers adhere to regulatory requirements designed to protect client investers. Similar to CFPs, they are held to a fiduciary standard, and their firm is required to register with the SEC or the state of practice based on the amount of assets under management.6
An individual investment adviser must also register with their state as an Investment Adviser Representative (IAR), the distinctive term referring to an individual as opposed to an investment advising firm. Investment advisers are required to pass the extensive Series 65, Uniform Investment Advisor Law Exam, or equivalent, by states requiring licensure.7 They can guide you on the selection of particular investments and portfolio management based on a discussion with you regarding your current financial standing and what fiscal ambitions you wish to achieve.
A financial adviser provides direction on a multitude of financially related topics such as investing, tax laws, and life insurance with the goal to help you reach specific financial objectives. However, this term is often used quite ubiquitously given the lack of formal regulation of the title. Essentially, those with varying types of educational background can give themselves the title of financial adviser.
If a financial adviser buys or sells financial securities such as stocks or bonds, then they must be registered as a licensed broker with the SEC and IAR and pass the Series 6 or Series 7 exam. Unlike CFPs and investment advisers, a financial adviser (if also a licensed broker) is not required to be a fiduciary, and instead works under the suitability standard.8 Suitability requires that financial recommendations made by the adviser are appropriate but not necessarily the best for the client. In fact, these recommendations do not even have to be the most suitable. This is where conflicts of interest can arise with the adviser recommending products and securities that best compensate them while not serving the best return on investment for you.
Making the search for a financial adviser more complex, an individual can be a combination of any of the above, pending the appropriate licensing. For example, a CFP can also be an asset manager and thus hold the title of a financial adviser and/or IAR. A financial adviser may also not directly manage your assets if they have a partnership with a third party or another licensed individual. Questions to ask of your potential financial adviser should therefore include the following:
- What licensure and related education do you have?
- What is your particular area of expertise?
- How long have you been in practice?
- How will you be managing my assets?
Financial Adviser Fee Schedules
Prior to working with a financial adviser, you must also inquire about their fee structure. There are two kinds of fee schedules used by financial advisers: fee-only and fee-based.
Fee-only advisers receive payment solely for the services they provide. They do not collect commissions from third parties providing the recommended products. There is variability in how this type of payment schedule is structured, encompassing flat fees, hourly rates, or the adviser charging a retainer. The Table below compares the types of fee-only structures and range of charges based on 2023 rates.9 Of note, fee-only advisers serve as fiduciaries.10
Fee-based financial advisers receive payment for services but may also receive commission on specific products they sell to you.9 Most, if not all, financial experts recommend avoiding advisers using commission-based charges given the potential conflict of interest: How can one be absolutely sure this recommended financial product is best for you, knowing your adviser has a financial stake in said item?
In addition to charging the fees above, your financial adviser, if they are actively managing your investment portfolio, will also charge an assets under management (AUM) fee. This is a percentage of the dollar amount within your portfolio. For example, if your adviser charges a 1% AUM rate for your account totaling $100,000, this equates to a $1,000 fee in that calendar year. AUM fees typically decrease as the size of your portfolio increases. As seen in the Table, there is a wide range of the average AUM rate (0.5%–2%); however, an AUM fee approaching 2% is unnecessarily high and consumes a significant portion of your portfolio. Thus, it is recommended to look for a money manager with an approximate 1% AUM fee.
Many of us delay or avoid working with a financial adviser due to the potential perceived risks of having poor portfolio management from an adviser not working in our best interest, along with the concern for excessive fees. In many ways, it is how we counsel our patients. While they can seek medical information on their own, their best care is under the guidance of an expert: a healthcare professional. That being said, personal finance is indeed personal, so I hope this guide helps facilitate your search and increase your financial wellness.
Dr. Luthra is a therapeutic endoscopist at Moffitt Cancer Center, Tampa, Florida, and the founder of The Scope of Finance, a financial wellness education and coaching company focused on physicians. Her interest in financial well-being is thanks to the teachings of her father, an entrepreneur and former Certified Financial Planner (CFP). She can be found on Instagram (thescopeoffinance) and X (@ScopeofFinance). She reports no financial disclosures relevant to this article.
References
1. Pagliaro CA and Utkus SP. Assessing the value of advice. Vanguard. 2019 Sept.
2. Kinniry Jr. FM et al. Putting a value on your value: Quantifying Vanguard Advisor’s Alpha. Vanguard. 2022 July.
3. Horan S. What Are the Benefits of Working with a Financial Advisor? – 2021 Study. Smart Asset. 2023 July 27.
4. Kagan J. Certified Financial PlannerTM(CFP): What It Is and How to Become One. Investopedia. 2023 Aug 3.
5. CFP Board. Our Commitment to Ethical Standards. CFP Board. 2024.
6. Staff of the Investment Adviser Regulation Office Division of Investment Management, U.S. Securities and Exchange Commission. Regulation of Investment Advisers by the U.S. Securities and Exchange Commission. 2013 Mar.
7. Hicks C. Investment Advisor vs. Financial Advisor: There is a Difference. US News & World Report. 2019 June 13.
8. Roberts K. Financial advisor vs. financial planner: What is the difference? Bankrate. 2023 Nov 21.
9. Clancy D. Average Fees for Financial Advisors in 2023. Harness Wealth. 2023 May 25.
10. Palmer B. Fee- vs. Commission-Based Advisor: What’s the Difference? Investopedia. 2023 June 20.
Tax Questions Frequently Asked by Physicians
Physicians spend years of their lives in education and training. There are countless hours devoted to studying, researching, and clinical training, not to mention residency and possible fellowships. Then literally overnight, they transition out of a resident salary into a full-time attending pay with little to no education around what to do with this significant increase in salary.
Every job position is unique in terms of benefits, how compensation is earned, job expectations, etc. But they all share one thing in common — taxes. Increased income comes with increased taxes. 
FAQ 1. What is the difference between W2 income and 1099 income?
A: If you are a W2 employee, your employer is responsible for paying half of your Social Security and Medicare taxes. You, as the employee, are then responsible only for the remaining half of your Social Security and Medicare taxes. Additionally, your employer will withhold these taxes, along with federal income taxes, from your paycheck each pay period. You are not responsible for remitting any taxes to the IRS or state agencies, as your employer will do this for you. As a W2 employee, you are not able to deduct any employee expenses against your income.
As a 1099 contractor, you are considered self-employed and are responsible for the employer and employee portion of the Social Security and Medicare taxes. You are also responsible for remitting these taxes, as well as quarterly estimated federal withholding, to the IRS and state agencies. You can deduct work-related expenses against your 1099 income.
Both types of income have pros and cons. Either of these can be more beneficial to a specific situation.
FAQ 2. How do I know if I am withholding enough taxes?
A: This is a very common issue I see, especially with physicians who are transitioning out of training into their full-time attending salary. Because this transition happens mid-year, often the first half of the year you are withholding at a rate much lower than what you will be earning as an attending and end up with a tax surprise at filing. One way to remedy this is to look at how much taxes are being withheld from your paycheck and compare this to what tax bracket you anticipate to be in, depending on filing status (Figure 1). If you do this and realize you are not withholding enough taxes, you can submit an amended form W4 to your employer to have additional withholding taken out each pay period.
FAQ 3. I am a 1099 contractor; do I need a PLLC, and should I file as an S-Corporation?
A: The term “S-Corp” gets mentioned often related to 1099 contractors and can be extremely beneficial from a tax savings perspective. Often physicians may moonlight — in addition to working in their W2 positions — and would receive this compensation as a 1099 contractor rather than an employee. This is an example of when a Professional Limited Liability Company (PLLC) might be advisable. A PLLC is created at a state level and helps shield owners from potential litigation. The owner of a PLLC pays Social Security and Medicare taxes on all income earned from the entity, and the PLLC is included in the owner’s individual income tax return.
A Small-Corporation (S-Corporation) is a tax classification that passes income through to the owners. The PLLC is now taxed as an S-Corporation, rather than a disregarded entity. The shareholders of the S-Corporation are required to pay a reasonable salary (W2 income). The remaining income passes through to the owner and is not subject to Social Security and Medicare taxes, only federal income tax. This taxation status requires an additional tax return and payroll service. Because there are additional expenses with being taxed as an S-Corporation, a cost-benefit analysis should be done before changing the tax classification to confirm that the tax savings are greater than the additional costs.
FAQ 4. What is the ‘backdoor Roth’ strategy? Should I implement it?
A: A Roth IRA is a specific type of Individual Retirement Account (IRA) that is funded with after-tax dollars. The contributions and growth in a Roth IRA can be withdrawn at retirement, tax free. As physicians who are typically high earners, you are not able to contribute directly to a Roth IRA because of income limitations. This is where the Roth conversion strategy — the backdoor Roth — comes into play. This strategy allows you to make a nondeductible traditional IRA contribution and then convert those dollars into a Roth IRA. In 2023, you can contribute up to $6,500 into this type of account. There are many additional considerations that must be made before implementing this strategy. Discussion with a financial advisor or CPA is recommended.
FAQ 5. I’ve always done my own taxes. Do I need to hire a CPA?
A: For many physicians, especially during training, your tax situation may not warrant the need for a Certified Public Accountant (CPA). However, as your income and tax complexity increase, working with a CPA not only decreases your risk for error, but also helps ensure you are not overpaying in taxes. There are many different types of services that a CPA can offer, the most basic being tax preparation. This is simply compiling your tax return based on the circumstances that occurred in the prior year. Tax planning is an additional level of service that may not be included in tax preparation cost. Tax planning is a proactive approach to taxes and helps maximize tax savings opportunities before return preparation. When interviewing a potential CPA, you can ask what level of services are included in the fees quoted.
These are just a few of the questions I regularly answer related to physicians’ taxation. The tax code is complex and ever changing. Recommendations that are made today might not be applicable or advisable in the future to any given situation. Working with a professional can ensure you have the most up-to-date and accurate information related to your taxes.
Ms. Anderson is with Physician’s Resource Services and is on Instagram @physiciansrs . Dr. Anderson is a CA-1 Resident in Anesthesia at Baylor Scott and White Health. The authors have no conflicts of interest.
Physicians spend years of their lives in education and training. There are countless hours devoted to studying, researching, and clinical training, not to mention residency and possible fellowships. Then literally overnight, they transition out of a resident salary into a full-time attending pay with little to no education around what to do with this significant increase in salary.
Every job position is unique in terms of benefits, how compensation is earned, job expectations, etc. But they all share one thing in common — taxes. Increased income comes with increased taxes.
FAQ 1. What is the difference between W2 income and 1099 income?
A: If you are a W2 employee, your employer is responsible for paying half of your Social Security and Medicare taxes. You, as the employee, are then responsible only for the remaining half of your Social Security and Medicare taxes. Additionally, your employer will withhold these taxes, along with federal income taxes, from your paycheck each pay period. You are not responsible for remitting any taxes to the IRS or state agencies, as your employer will do this for you. As a W2 employee, you are not able to deduct any employee expenses against your income.
As a 1099 contractor, you are considered self-employed and are responsible for the employer and employee portion of the Social Security and Medicare taxes. You are also responsible for remitting these taxes, as well as quarterly estimated federal withholding, to the IRS and state agencies. You can deduct work-related expenses against your 1099 income.
Both types of income have pros and cons. Either of these can be more beneficial to a specific situation.
FAQ 2. How do I know if I am withholding enough taxes?
A: This is a very common issue I see, especially with physicians who are transitioning out of training into their full-time attending salary. Because this transition happens mid-year, often the first half of the year you are withholding at a rate much lower than what you will be earning as an attending and end up with a tax surprise at filing. One way to remedy this is to look at how much taxes are being withheld from your paycheck and compare this to what tax bracket you anticipate to be in, depending on filing status (Figure 1). If you do this and realize you are not withholding enough taxes, you can submit an amended form W4 to your employer to have additional withholding taken out each pay period.
FAQ 3. I am a 1099 contractor; do I need a PLLC, and should I file as an S-Corporation?
A: The term “S-Corp” gets mentioned often related to 1099 contractors and can be extremely beneficial from a tax savings perspective. Often physicians may moonlight — in addition to working in their W2 positions — and would receive this compensation as a 1099 contractor rather than an employee. This is an example of when a Professional Limited Liability Company (PLLC) might be advisable. A PLLC is created at a state level and helps shield owners from potential litigation. The owner of a PLLC pays Social Security and Medicare taxes on all income earned from the entity, and the PLLC is included in the owner’s individual income tax return.
A Small-Corporation (S-Corporation) is a tax classification that passes income through to the owners. The PLLC is now taxed as an S-Corporation, rather than a disregarded entity. The shareholders of the S-Corporation are required to pay a reasonable salary (W2 income). The remaining income passes through to the owner and is not subject to Social Security and Medicare taxes, only federal income tax. This taxation status requires an additional tax return and payroll service. Because there are additional expenses with being taxed as an S-Corporation, a cost-benefit analysis should be done before changing the tax classification to confirm that the tax savings are greater than the additional costs.
FAQ 4. What is the ‘backdoor Roth’ strategy? Should I implement it?
A: A Roth IRA is a specific type of Individual Retirement Account (IRA) that is funded with after-tax dollars. The contributions and growth in a Roth IRA can be withdrawn at retirement, tax free. As physicians who are typically high earners, you are not able to contribute directly to a Roth IRA because of income limitations. This is where the Roth conversion strategy — the backdoor Roth — comes into play. This strategy allows you to make a nondeductible traditional IRA contribution and then convert those dollars into a Roth IRA. In 2023, you can contribute up to $6,500 into this type of account. There are many additional considerations that must be made before implementing this strategy. Discussion with a financial advisor or CPA is recommended.
FAQ 5. I’ve always done my own taxes. Do I need to hire a CPA?
A: For many physicians, especially during training, your tax situation may not warrant the need for a Certified Public Accountant (CPA). However, as your income and tax complexity increase, working with a CPA not only decreases your risk for error, but also helps ensure you are not overpaying in taxes. There are many different types of services that a CPA can offer, the most basic being tax preparation. This is simply compiling your tax return based on the circumstances that occurred in the prior year. Tax planning is an additional level of service that may not be included in tax preparation cost. Tax planning is a proactive approach to taxes and helps maximize tax savings opportunities before return preparation. When interviewing a potential CPA, you can ask what level of services are included in the fees quoted.
These are just a few of the questions I regularly answer related to physicians’ taxation. The tax code is complex and ever changing. Recommendations that are made today might not be applicable or advisable in the future to any given situation. Working with a professional can ensure you have the most up-to-date and accurate information related to your taxes.
Ms. Anderson is with Physician’s Resource Services and is on Instagram @physiciansrs . Dr. Anderson is a CA-1 Resident in Anesthesia at Baylor Scott and White Health. The authors have no conflicts of interest.
Physicians spend years of their lives in education and training. There are countless hours devoted to studying, researching, and clinical training, not to mention residency and possible fellowships. Then literally overnight, they transition out of a resident salary into a full-time attending pay with little to no education around what to do with this significant increase in salary.
Every job position is unique in terms of benefits, how compensation is earned, job expectations, etc. But they all share one thing in common — taxes. Increased income comes with increased taxes.
FAQ 1. What is the difference between W2 income and 1099 income?
A: If you are a W2 employee, your employer is responsible for paying half of your Social Security and Medicare taxes. You, as the employee, are then responsible only for the remaining half of your Social Security and Medicare taxes. Additionally, your employer will withhold these taxes, along with federal income taxes, from your paycheck each pay period. You are not responsible for remitting any taxes to the IRS or state agencies, as your employer will do this for you. As a W2 employee, you are not able to deduct any employee expenses against your income.
As a 1099 contractor, you are considered self-employed and are responsible for the employer and employee portion of the Social Security and Medicare taxes. You are also responsible for remitting these taxes, as well as quarterly estimated federal withholding, to the IRS and state agencies. You can deduct work-related expenses against your 1099 income.
Both types of income have pros and cons. Either of these can be more beneficial to a specific situation.
FAQ 2. How do I know if I am withholding enough taxes?
A: This is a very common issue I see, especially with physicians who are transitioning out of training into their full-time attending salary. Because this transition happens mid-year, often the first half of the year you are withholding at a rate much lower than what you will be earning as an attending and end up with a tax surprise at filing. One way to remedy this is to look at how much taxes are being withheld from your paycheck and compare this to what tax bracket you anticipate to be in, depending on filing status (Figure 1). If you do this and realize you are not withholding enough taxes, you can submit an amended form W4 to your employer to have additional withholding taken out each pay period.
FAQ 3. I am a 1099 contractor; do I need a PLLC, and should I file as an S-Corporation?
A: The term “S-Corp” gets mentioned often related to 1099 contractors and can be extremely beneficial from a tax savings perspective. Often physicians may moonlight — in addition to working in their W2 positions — and would receive this compensation as a 1099 contractor rather than an employee. This is an example of when a Professional Limited Liability Company (PLLC) might be advisable. A PLLC is created at a state level and helps shield owners from potential litigation. The owner of a PLLC pays Social Security and Medicare taxes on all income earned from the entity, and the PLLC is included in the owner’s individual income tax return.
A Small-Corporation (S-Corporation) is a tax classification that passes income through to the owners. The PLLC is now taxed as an S-Corporation, rather than a disregarded entity. The shareholders of the S-Corporation are required to pay a reasonable salary (W2 income). The remaining income passes through to the owner and is not subject to Social Security and Medicare taxes, only federal income tax. This taxation status requires an additional tax return and payroll service. Because there are additional expenses with being taxed as an S-Corporation, a cost-benefit analysis should be done before changing the tax classification to confirm that the tax savings are greater than the additional costs.
FAQ 4. What is the ‘backdoor Roth’ strategy? Should I implement it?
A: A Roth IRA is a specific type of Individual Retirement Account (IRA) that is funded with after-tax dollars. The contributions and growth in a Roth IRA can be withdrawn at retirement, tax free. As physicians who are typically high earners, you are not able to contribute directly to a Roth IRA because of income limitations. This is where the Roth conversion strategy — the backdoor Roth — comes into play. This strategy allows you to make a nondeductible traditional IRA contribution and then convert those dollars into a Roth IRA. In 2023, you can contribute up to $6,500 into this type of account. There are many additional considerations that must be made before implementing this strategy. Discussion with a financial advisor or CPA is recommended.
FAQ 5. I’ve always done my own taxes. Do I need to hire a CPA?
A: For many physicians, especially during training, your tax situation may not warrant the need for a Certified Public Accountant (CPA). However, as your income and tax complexity increase, working with a CPA not only decreases your risk for error, but also helps ensure you are not overpaying in taxes. There are many different types of services that a CPA can offer, the most basic being tax preparation. This is simply compiling your tax return based on the circumstances that occurred in the prior year. Tax planning is an additional level of service that may not be included in tax preparation cost. Tax planning is a proactive approach to taxes and helps maximize tax savings opportunities before return preparation. When interviewing a potential CPA, you can ask what level of services are included in the fees quoted.
These are just a few of the questions I regularly answer related to physicians’ taxation. The tax code is complex and ever changing. Recommendations that are made today might not be applicable or advisable in the future to any given situation. Working with a professional can ensure you have the most up-to-date and accurate information related to your taxes.
Ms. Anderson is with Physician’s Resource Services and is on Instagram @physiciansrs . Dr. Anderson is a CA-1 Resident in Anesthesia at Baylor Scott and White Health. The authors have no conflicts of interest.
Five personal finance questions for the young GI
While this article will get you started, these are complex topics, and each could warrant several standalone articles. I strongly encourage you to develop some basic understanding of personal finance through books, websites, and podcasts. If you can manage Barrett’s esophagus, Crohn’s, and cirrhosis, you can understand the basics of personal finance.
1. What should I do about my student loans? Go for public service loan forgiveness or pay them off?
The first step is knowing your debt burden, knowing your options, and developing a plan to pay off student loans. Public service loan forgiveness (PSLF) can be a good option in many situations. For borrowers staying in academic or other 501(c)(3) positions, PSLF is often an obvious move. Importantly, a fall 2022 statement by the U.S. Department of Education clarified that physicians working as contractors for nonprofit hospitals in California and Texas may now qualify for PSLF.1,2
For trainees debating an academic/501(c)(3) position vs. private practice, I would generally not advise making a career choice based purely on PSLF eligibility. However, borrowers with very high federal student loan burdens (e.g., debt to income ratio of > 2:1), or who are very close to the PSLF 10-year requirement may want to consider choosing a qualifying position for a few years to receive PSLF student loan forgiveness. Please see TNG’s 2020 article3 for a deeper discussion. Consultation with a company specializing in student loan advice for physicians may be well worth the upfront cost.
2. Do I need disability insurance? What should I look for?
I would strongly advise getting disability insurance as soon as possible (including while in training). While disability insurance is not cheap, it is one of the first steps you should take and one of the most important ways to protect your financial future. It is essential to look for a specialty-specific own occupation policy. Such a policy will provide disability payments if you are no longer able to work as a gastroenterologist/hepatologist (including an injury which prevents you from doing endoscopies).
There are two major types of disability policies: group policies and individual policies. See table 1 for a detailed comparison.
Your hospital/employer may provide a group policy at a heavily subsidized rate. Alternatively, you can purchase an individual disability policy, which is independent of your employer and will stay with you even if you change jobs. Currently, the only companies providing high quality own-occupation policies for physicians are Mass Mutual, Principal, Guardian, The Standard, and Ameritas. Because disability insurance is complicated, it is highly advisable to work with an agent experienced in physician disability policies.
Importantly, even if you have a group disability policy, you can purchase an individual policy as a supplement to provide extra coverage. If you leave employers, the individual policy can then become your primary disability policy without any additional medical underwriting.
3. Do I need life insurance? What type should I get?
If anyone is dependent on your income (partner, child, etc.), you should have life insurance. Moreover, if you expect to have dependents in the near future (e.g., children), you could consider getting life insurance now while you are younger and healthier. For a young GI with multiple financial obligations, term life insurance is generally the right product. Term life insurance is a straightforward, affordable product that can be purchased from multiple high-quality insurance carriers. There are two major considerations: The amount of coverage ($2 million, $3 million, etc.) and the length of coverage (20 years, 30 years, etc.). To estimate the appropriate amount of coverage, start with your expected annual household living expenses, and multiply by 25-30. While this is a rule of thumb, it will get you in the ballpark. For many young physicians, a $2-$5 million policy with 20- to 30-year coverage is reasonable.
Many financial advisers may suggest whole life insurance policies. These are typically not the ideal policy for young GIs who are just starting their careers. While whole life insurance may be the right choice in select cases, term life insurance will be the best product for most of TNG’s audience. As an example, a $3 million, 25-year term policy for a healthy, nonsmoking 35-year-old male would cost approximately $175 per month. A similar $3 million whole life policy could cost $2,000 per month or more.
4. What do I need to know about retirement accounts and investing?
The alphabet soup of retirement accounts can be confusing – IRA, 401k, 457. Retirement accounts provide a tax break to incentivize saving for retirement. Traditional (“non-Roth”) accounts provide a tax break today, but you will pay taxes when withdrawing the money in retirement. Roth accounts provide no tax break now but provide tax-free growth for decades, and no taxes are due when withdrawing money. See table 2 for a detailed comparison of retirement accounts.
Once you place money into a retirement account, you will need to choose specific investments to grow your money. The two most common asset classes are stocks and bonds, though there are many other reasonable assets, such as real estate, commodities, and alternative currencies. It is generally recommended to have a higher proportion of stock-based investments early on (60%-90%) and then increase the ratio of bonds closer to retirement. Using low cost, passive index funds (or exchange traded funds) is a good way to get stock exposure. Target date retirement funds can be a nice tool for beginning investors since they will automatically adjust the stock/bond ratio for you.
Calculating the amount needed for retirement is beyond the scope of this article. However, saving at least 20% of your gross income specifically for retirement is a good starting point and should set you up for a reasonable retirement in about 30 years. For the average GI physician, this would mean saving $4,000 or more per month for retirement. If you aim to retire earlier, consider investing a higher percentage.
5. What do I need to know about buying a house?
The first question to ask is whether it makes sense to rent or buy a house. This is a personal and lifestyle decision, not just a financial decision. Today’s market is difficult with both high home prices and high rent costs. If there is a reasonable chance that you will be moving within 3-5 years, I would consider not buying until your long-term plans are more stable. Moreover, a high proportion of physicians change jobs.4,5,6 If you are just starting a new job, it is often wise to wait at least 6-12 months before buying a house to ensure the new job is a good fit. If you are in a stable long-term situation, it may be reasonable to buy a house. While it is commonly believed that buying a house is a “good financial move,” there are many hidden costs to home ownership, including big ticket repairs, property taxes, and real estate fees when selling a home.
First-time physician home buyers can often secure a physician mortgage with competitive interest rates and a low down payment of 0%-10% instead of the traditional 20% down payment. Moreover, a good physician mortgage should not have private mortgage insurance (PMI). Given the variation between mortgage companies, my most important piece of advice is to shop around for a good mortgage. An independent mortgage broker can be very valuable.
Dr. Jain is associate professor of medicine in the division of gastroenterology and hepatology, University of North Carolina School of Medicine, Chapel Hill. He has no conflicts of interest. The information in this article is meant for general educational purposes only. For individualized personal finance advice, please seek your own financial advisor, tax accountant, insurance broker, attorney, or other financial professional. Follow Dr. Jain @AJainMD on X.
References
1. Future of PSLF Fact Sheet
2. The Loophole That Can Get Thousands of Doctors into PSLF
3. Student loan management: An introduction for the young gastroenterologist
4. Study Shows First Job after Medical Residency Often Doesn’t Last
5. More physicians want to leave their jobs as pay rates fall, survey finds
6. Physician turnover rates are climbing as they clamor for better work-life balance
While this article will get you started, these are complex topics, and each could warrant several standalone articles. I strongly encourage you to develop some basic understanding of personal finance through books, websites, and podcasts. If you can manage Barrett’s esophagus, Crohn’s, and cirrhosis, you can understand the basics of personal finance.
1. What should I do about my student loans? Go for public service loan forgiveness or pay them off?
The first step is knowing your debt burden, knowing your options, and developing a plan to pay off student loans. Public service loan forgiveness (PSLF) can be a good option in many situations. For borrowers staying in academic or other 501(c)(3) positions, PSLF is often an obvious move. Importantly, a fall 2022 statement by the U.S. Department of Education clarified that physicians working as contractors for nonprofit hospitals in California and Texas may now qualify for PSLF.1,2
For trainees debating an academic/501(c)(3) position vs. private practice, I would generally not advise making a career choice based purely on PSLF eligibility. However, borrowers with very high federal student loan burdens (e.g., debt to income ratio of > 2:1), or who are very close to the PSLF 10-year requirement may want to consider choosing a qualifying position for a few years to receive PSLF student loan forgiveness. Please see TNG’s 2020 article3 for a deeper discussion. Consultation with a company specializing in student loan advice for physicians may be well worth the upfront cost.
2. Do I need disability insurance? What should I look for?
I would strongly advise getting disability insurance as soon as possible (including while in training). While disability insurance is not cheap, it is one of the first steps you should take and one of the most important ways to protect your financial future. It is essential to look for a specialty-specific own occupation policy. Such a policy will provide disability payments if you are no longer able to work as a gastroenterologist/hepatologist (including an injury which prevents you from doing endoscopies).
There are two major types of disability policies: group policies and individual policies. See table 1 for a detailed comparison.
Your hospital/employer may provide a group policy at a heavily subsidized rate. Alternatively, you can purchase an individual disability policy, which is independent of your employer and will stay with you even if you change jobs. Currently, the only companies providing high quality own-occupation policies for physicians are Mass Mutual, Principal, Guardian, The Standard, and Ameritas. Because disability insurance is complicated, it is highly advisable to work with an agent experienced in physician disability policies.
Importantly, even if you have a group disability policy, you can purchase an individual policy as a supplement to provide extra coverage. If you leave employers, the individual policy can then become your primary disability policy without any additional medical underwriting.
3. Do I need life insurance? What type should I get?
If anyone is dependent on your income (partner, child, etc.), you should have life insurance. Moreover, if you expect to have dependents in the near future (e.g., children), you could consider getting life insurance now while you are younger and healthier. For a young GI with multiple financial obligations, term life insurance is generally the right product. Term life insurance is a straightforward, affordable product that can be purchased from multiple high-quality insurance carriers. There are two major considerations: The amount of coverage ($2 million, $3 million, etc.) and the length of coverage (20 years, 30 years, etc.). To estimate the appropriate amount of coverage, start with your expected annual household living expenses, and multiply by 25-30. While this is a rule of thumb, it will get you in the ballpark. For many young physicians, a $2-$5 million policy with 20- to 30-year coverage is reasonable.
Many financial advisers may suggest whole life insurance policies. These are typically not the ideal policy for young GIs who are just starting their careers. While whole life insurance may be the right choice in select cases, term life insurance will be the best product for most of TNG’s audience. As an example, a $3 million, 25-year term policy for a healthy, nonsmoking 35-year-old male would cost approximately $175 per month. A similar $3 million whole life policy could cost $2,000 per month or more.
4. What do I need to know about retirement accounts and investing?
The alphabet soup of retirement accounts can be confusing – IRA, 401k, 457. Retirement accounts provide a tax break to incentivize saving for retirement. Traditional (“non-Roth”) accounts provide a tax break today, but you will pay taxes when withdrawing the money in retirement. Roth accounts provide no tax break now but provide tax-free growth for decades, and no taxes are due when withdrawing money. See table 2 for a detailed comparison of retirement accounts.
Once you place money into a retirement account, you will need to choose specific investments to grow your money. The two most common asset classes are stocks and bonds, though there are many other reasonable assets, such as real estate, commodities, and alternative currencies. It is generally recommended to have a higher proportion of stock-based investments early on (60%-90%) and then increase the ratio of bonds closer to retirement. Using low cost, passive index funds (or exchange traded funds) is a good way to get stock exposure. Target date retirement funds can be a nice tool for beginning investors since they will automatically adjust the stock/bond ratio for you.
Calculating the amount needed for retirement is beyond the scope of this article. However, saving at least 20% of your gross income specifically for retirement is a good starting point and should set you up for a reasonable retirement in about 30 years. For the average GI physician, this would mean saving $4,000 or more per month for retirement. If you aim to retire earlier, consider investing a higher percentage.
5. What do I need to know about buying a house?
The first question to ask is whether it makes sense to rent or buy a house. This is a personal and lifestyle decision, not just a financial decision. Today’s market is difficult with both high home prices and high rent costs. If there is a reasonable chance that you will be moving within 3-5 years, I would consider not buying until your long-term plans are more stable. Moreover, a high proportion of physicians change jobs.4,5,6 If you are just starting a new job, it is often wise to wait at least 6-12 months before buying a house to ensure the new job is a good fit. If you are in a stable long-term situation, it may be reasonable to buy a house. While it is commonly believed that buying a house is a “good financial move,” there are many hidden costs to home ownership, including big ticket repairs, property taxes, and real estate fees when selling a home.
First-time physician home buyers can often secure a physician mortgage with competitive interest rates and a low down payment of 0%-10% instead of the traditional 20% down payment. Moreover, a good physician mortgage should not have private mortgage insurance (PMI). Given the variation between mortgage companies, my most important piece of advice is to shop around for a good mortgage. An independent mortgage broker can be very valuable.
Dr. Jain is associate professor of medicine in the division of gastroenterology and hepatology, University of North Carolina School of Medicine, Chapel Hill. He has no conflicts of interest. The information in this article is meant for general educational purposes only. For individualized personal finance advice, please seek your own financial advisor, tax accountant, insurance broker, attorney, or other financial professional. Follow Dr. Jain @AJainMD on X.
References
1. Future of PSLF Fact Sheet
2. The Loophole That Can Get Thousands of Doctors into PSLF
3. Student loan management: An introduction for the young gastroenterologist
4. Study Shows First Job after Medical Residency Often Doesn’t Last
5. More physicians want to leave their jobs as pay rates fall, survey finds
6. Physician turnover rates are climbing as they clamor for better work-life balance
While this article will get you started, these are complex topics, and each could warrant several standalone articles. I strongly encourage you to develop some basic understanding of personal finance through books, websites, and podcasts. If you can manage Barrett’s esophagus, Crohn’s, and cirrhosis, you can understand the basics of personal finance.
1. What should I do about my student loans? Go for public service loan forgiveness or pay them off?
The first step is knowing your debt burden, knowing your options, and developing a plan to pay off student loans. Public service loan forgiveness (PSLF) can be a good option in many situations. For borrowers staying in academic or other 501(c)(3) positions, PSLF is often an obvious move. Importantly, a fall 2022 statement by the U.S. Department of Education clarified that physicians working as contractors for nonprofit hospitals in California and Texas may now qualify for PSLF.1,2
For trainees debating an academic/501(c)(3) position vs. private practice, I would generally not advise making a career choice based purely on PSLF eligibility. However, borrowers with very high federal student loan burdens (e.g., debt to income ratio of > 2:1), or who are very close to the PSLF 10-year requirement may want to consider choosing a qualifying position for a few years to receive PSLF student loan forgiveness. Please see TNG’s 2020 article3 for a deeper discussion. Consultation with a company specializing in student loan advice for physicians may be well worth the upfront cost.
2. Do I need disability insurance? What should I look for?
I would strongly advise getting disability insurance as soon as possible (including while in training). While disability insurance is not cheap, it is one of the first steps you should take and one of the most important ways to protect your financial future. It is essential to look for a specialty-specific own occupation policy. Such a policy will provide disability payments if you are no longer able to work as a gastroenterologist/hepatologist (including an injury which prevents you from doing endoscopies).
There are two major types of disability policies: group policies and individual policies. See table 1 for a detailed comparison.
Your hospital/employer may provide a group policy at a heavily subsidized rate. Alternatively, you can purchase an individual disability policy, which is independent of your employer and will stay with you even if you change jobs. Currently, the only companies providing high quality own-occupation policies for physicians are Mass Mutual, Principal, Guardian, The Standard, and Ameritas. Because disability insurance is complicated, it is highly advisable to work with an agent experienced in physician disability policies.
Importantly, even if you have a group disability policy, you can purchase an individual policy as a supplement to provide extra coverage. If you leave employers, the individual policy can then become your primary disability policy without any additional medical underwriting.
3. Do I need life insurance? What type should I get?
If anyone is dependent on your income (partner, child, etc.), you should have life insurance. Moreover, if you expect to have dependents in the near future (e.g., children), you could consider getting life insurance now while you are younger and healthier. For a young GI with multiple financial obligations, term life insurance is generally the right product. Term life insurance is a straightforward, affordable product that can be purchased from multiple high-quality insurance carriers. There are two major considerations: The amount of coverage ($2 million, $3 million, etc.) and the length of coverage (20 years, 30 years, etc.). To estimate the appropriate amount of coverage, start with your expected annual household living expenses, and multiply by 25-30. While this is a rule of thumb, it will get you in the ballpark. For many young physicians, a $2-$5 million policy with 20- to 30-year coverage is reasonable.
Many financial advisers may suggest whole life insurance policies. These are typically not the ideal policy for young GIs who are just starting their careers. While whole life insurance may be the right choice in select cases, term life insurance will be the best product for most of TNG’s audience. As an example, a $3 million, 25-year term policy for a healthy, nonsmoking 35-year-old male would cost approximately $175 per month. A similar $3 million whole life policy could cost $2,000 per month or more.
4. What do I need to know about retirement accounts and investing?
The alphabet soup of retirement accounts can be confusing – IRA, 401k, 457. Retirement accounts provide a tax break to incentivize saving for retirement. Traditional (“non-Roth”) accounts provide a tax break today, but you will pay taxes when withdrawing the money in retirement. Roth accounts provide no tax break now but provide tax-free growth for decades, and no taxes are due when withdrawing money. See table 2 for a detailed comparison of retirement accounts.
Once you place money into a retirement account, you will need to choose specific investments to grow your money. The two most common asset classes are stocks and bonds, though there are many other reasonable assets, such as real estate, commodities, and alternative currencies. It is generally recommended to have a higher proportion of stock-based investments early on (60%-90%) and then increase the ratio of bonds closer to retirement. Using low cost, passive index funds (or exchange traded funds) is a good way to get stock exposure. Target date retirement funds can be a nice tool for beginning investors since they will automatically adjust the stock/bond ratio for you.
Calculating the amount needed for retirement is beyond the scope of this article. However, saving at least 20% of your gross income specifically for retirement is a good starting point and should set you up for a reasonable retirement in about 30 years. For the average GI physician, this would mean saving $4,000 or more per month for retirement. If you aim to retire earlier, consider investing a higher percentage.
5. What do I need to know about buying a house?
The first question to ask is whether it makes sense to rent or buy a house. This is a personal and lifestyle decision, not just a financial decision. Today’s market is difficult with both high home prices and high rent costs. If there is a reasonable chance that you will be moving within 3-5 years, I would consider not buying until your long-term plans are more stable. Moreover, a high proportion of physicians change jobs.4,5,6 If you are just starting a new job, it is often wise to wait at least 6-12 months before buying a house to ensure the new job is a good fit. If you are in a stable long-term situation, it may be reasonable to buy a house. While it is commonly believed that buying a house is a “good financial move,” there are many hidden costs to home ownership, including big ticket repairs, property taxes, and real estate fees when selling a home.
First-time physician home buyers can often secure a physician mortgage with competitive interest rates and a low down payment of 0%-10% instead of the traditional 20% down payment. Moreover, a good physician mortgage should not have private mortgage insurance (PMI). Given the variation between mortgage companies, my most important piece of advice is to shop around for a good mortgage. An independent mortgage broker can be very valuable.
Dr. Jain is associate professor of medicine in the division of gastroenterology and hepatology, University of North Carolina School of Medicine, Chapel Hill. He has no conflicts of interest. The information in this article is meant for general educational purposes only. For individualized personal finance advice, please seek your own financial advisor, tax accountant, insurance broker, attorney, or other financial professional. Follow Dr. Jain @AJainMD on X.
References
1. Future of PSLF Fact Sheet
2. The Loophole That Can Get Thousands of Doctors into PSLF
3. Student loan management: An introduction for the young gastroenterologist
4. Study Shows First Job after Medical Residency Often Doesn’t Last
5. More physicians want to leave their jobs as pay rates fall, survey finds
6. Physician turnover rates are climbing as they clamor for better work-life balance
More cuts to physician payment ahead
In July, the Centers for Medicare and Medicaid Services released the 2024 Physician Fee Schedule (PFS) proposed rule on proposed policy changes for Medicare payments. The proposed rule contains 2,883 pages of proposals for physician, hospital outpatient department, and ambulatory surgery center (ASC) payments for calendar year 2024. For gastroenterologists, there was good news and bad news.
Medicare physician payments have been cut each year for the better part of a decade, with additional cuts proposed for 2024.
According to the American Medical Assocition, Medicare physician payment has already declined 26% in the last 22 years when adjusting for inflation, and that’s before factoring in the proposed cuts for 2024. Physicians are one of the only health care providers without an automatic inflationary increase, the AMA reports.
AGA opposes additional cuts to physician payments and will continue to advocate to stop them. AGA and many other specialty societies support H.R. 2474, the Strengthening Medicare for Patients and Providers Act. This bill would provide a permanent, annual update equal to the increase in the Medicare Economic Index, which is how the government measures inflation in medical practice. We will continue to advocate for permanent positive annual inflation updates, which would allow physicians to invest in their practices and implement new strategies to provide high-value care.
But in some positive news from the 2024 Medicare PFS, the Hospital Outpatient Prospective Payment System (OPPS) and the ASC proposed rules include increased hospital outpatient departments and ASC payments, continued telemedicine reimbursement and coverage through 2024, and a second one-year delay in changes to rules governing split/shared visits. Specifically:
OPPS Conversion Factor: The proposed CY 2024 Medicare conversion factor for outpatient hospital departments is $87.488, an increase of 2.8%, for hospitals that meet applicable quality reporting requirements.
ASC Conversion Factor: The proposed CY 2024 Ambulatory Surgical Center conversion factor is $53.397, an increase of 2.8%, for ASCs that meet applicable quality reporting requirements. The AGA and our sister societies continue to urge CMS to reduce this gap in the ASC facility fees, when compared to the outpatient hospital facility rates, which are estimated to be a roughly 48% differential in CY 2024.
Telehealth: CMS proposes to continue reimbursing telehealth services at current levels through 2024. Payment for audio-only evaluation and management (E/M) codes will continue at parity with follow-up in-person visits as it has throughout the pandemic. Additionally, CMS is implementing telehealth flexibilities that were included in the Consolidated Appropriations Act 2023 by allowing telehealth visits to originate at any site in the United States. This will allow patients throughout the country to maintain access to needed telehealth services without facing the logistical and safety challenges that can surround in-person visits. CMS is proposing to pay telehealth services at the nonfacility payment rate, which is the same rate as in-person office visits, lift the frequency limits on telehealth visits for subsequent hospital and skilled nursing facility visits, and allow direct supervision to be provided virtually.
Split (or shared) visits: CMS has proposed a second one-year delay to its proposed split/shared visits policy. The original proposal required that the billing provider in split/shared visits be whoever spent more than half of the total time with the patient (making time the only way to define substantive portion). CMS plans to delay that through at least Dec. 31, 2024. In the interim, practices can continue to use one of the three key components (history, exam, or medical decision-making) or more than half of the total time spent to determine who can bill for the visit. The GI societies will continue to advocate for appropriate reimbursement to align with new team-based models of care delivery.
Notably, the split (or shared) visits policy was also delayed in 2023 because of widespread concerns and feedback that the policy would disrupt team-based care and care delivery in the hospital setting. The American Medical Association CPT editorial panel, the body responsible for creating and maintaining CPT codes, has approved revisions to E/M guidelines that may help address some of CMS’s concerns.
For more information on issues affecting gastroenterologists in the 2024 Medicare PFS and OPPS/ASC proposed rules, visit the AGA news website.
Dr. Garcia serves as an advisor to the AGA AMA Relative-value Update Committee. She is clinical associate professor of medicine at Stanford (Calif.) University, where she is director of the neurogastroenterology and motility laboratory in the division of gastroenterology and hepatology, and associate chief medical information officer in ambulatory care at Stanford Health Care.
In July, the Centers for Medicare and Medicaid Services released the 2024 Physician Fee Schedule (PFS) proposed rule on proposed policy changes for Medicare payments. The proposed rule contains 2,883 pages of proposals for physician, hospital outpatient department, and ambulatory surgery center (ASC) payments for calendar year 2024. For gastroenterologists, there was good news and bad news.
Medicare physician payments have been cut each year for the better part of a decade, with additional cuts proposed for 2024.
According to the American Medical Assocition, Medicare physician payment has already declined 26% in the last 22 years when adjusting for inflation, and that’s before factoring in the proposed cuts for 2024. Physicians are one of the only health care providers without an automatic inflationary increase, the AMA reports.
AGA opposes additional cuts to physician payments and will continue to advocate to stop them. AGA and many other specialty societies support H.R. 2474, the Strengthening Medicare for Patients and Providers Act. This bill would provide a permanent, annual update equal to the increase in the Medicare Economic Index, which is how the government measures inflation in medical practice. We will continue to advocate for permanent positive annual inflation updates, which would allow physicians to invest in their practices and implement new strategies to provide high-value care.
But in some positive news from the 2024 Medicare PFS, the Hospital Outpatient Prospective Payment System (OPPS) and the ASC proposed rules include increased hospital outpatient departments and ASC payments, continued telemedicine reimbursement and coverage through 2024, and a second one-year delay in changes to rules governing split/shared visits. Specifically:
OPPS Conversion Factor: The proposed CY 2024 Medicare conversion factor for outpatient hospital departments is $87.488, an increase of 2.8%, for hospitals that meet applicable quality reporting requirements.
ASC Conversion Factor: The proposed CY 2024 Ambulatory Surgical Center conversion factor is $53.397, an increase of 2.8%, for ASCs that meet applicable quality reporting requirements. The AGA and our sister societies continue to urge CMS to reduce this gap in the ASC facility fees, when compared to the outpatient hospital facility rates, which are estimated to be a roughly 48% differential in CY 2024.
Telehealth: CMS proposes to continue reimbursing telehealth services at current levels through 2024. Payment for audio-only evaluation and management (E/M) codes will continue at parity with follow-up in-person visits as it has throughout the pandemic. Additionally, CMS is implementing telehealth flexibilities that were included in the Consolidated Appropriations Act 2023 by allowing telehealth visits to originate at any site in the United States. This will allow patients throughout the country to maintain access to needed telehealth services without facing the logistical and safety challenges that can surround in-person visits. CMS is proposing to pay telehealth services at the nonfacility payment rate, which is the same rate as in-person office visits, lift the frequency limits on telehealth visits for subsequent hospital and skilled nursing facility visits, and allow direct supervision to be provided virtually.
Split (or shared) visits: CMS has proposed a second one-year delay to its proposed split/shared visits policy. The original proposal required that the billing provider in split/shared visits be whoever spent more than half of the total time with the patient (making time the only way to define substantive portion). CMS plans to delay that through at least Dec. 31, 2024. In the interim, practices can continue to use one of the three key components (history, exam, or medical decision-making) or more than half of the total time spent to determine who can bill for the visit. The GI societies will continue to advocate for appropriate reimbursement to align with new team-based models of care delivery.
Notably, the split (or shared) visits policy was also delayed in 2023 because of widespread concerns and feedback that the policy would disrupt team-based care and care delivery in the hospital setting. The American Medical Association CPT editorial panel, the body responsible for creating and maintaining CPT codes, has approved revisions to E/M guidelines that may help address some of CMS’s concerns.
For more information on issues affecting gastroenterologists in the 2024 Medicare PFS and OPPS/ASC proposed rules, visit the AGA news website.
Dr. Garcia serves as an advisor to the AGA AMA Relative-value Update Committee. She is clinical associate professor of medicine at Stanford (Calif.) University, where she is director of the neurogastroenterology and motility laboratory in the division of gastroenterology and hepatology, and associate chief medical information officer in ambulatory care at Stanford Health Care.
In July, the Centers for Medicare and Medicaid Services released the 2024 Physician Fee Schedule (PFS) proposed rule on proposed policy changes for Medicare payments. The proposed rule contains 2,883 pages of proposals for physician, hospital outpatient department, and ambulatory surgery center (ASC) payments for calendar year 2024. For gastroenterologists, there was good news and bad news.
Medicare physician payments have been cut each year for the better part of a decade, with additional cuts proposed for 2024.
According to the American Medical Assocition, Medicare physician payment has already declined 26% in the last 22 years when adjusting for inflation, and that’s before factoring in the proposed cuts for 2024. Physicians are one of the only health care providers without an automatic inflationary increase, the AMA reports.
AGA opposes additional cuts to physician payments and will continue to advocate to stop them. AGA and many other specialty societies support H.R. 2474, the Strengthening Medicare for Patients and Providers Act. This bill would provide a permanent, annual update equal to the increase in the Medicare Economic Index, which is how the government measures inflation in medical practice. We will continue to advocate for permanent positive annual inflation updates, which would allow physicians to invest in their practices and implement new strategies to provide high-value care.
But in some positive news from the 2024 Medicare PFS, the Hospital Outpatient Prospective Payment System (OPPS) and the ASC proposed rules include increased hospital outpatient departments and ASC payments, continued telemedicine reimbursement and coverage through 2024, and a second one-year delay in changes to rules governing split/shared visits. Specifically:
OPPS Conversion Factor: The proposed CY 2024 Medicare conversion factor for outpatient hospital departments is $87.488, an increase of 2.8%, for hospitals that meet applicable quality reporting requirements.
ASC Conversion Factor: The proposed CY 2024 Ambulatory Surgical Center conversion factor is $53.397, an increase of 2.8%, for ASCs that meet applicable quality reporting requirements. The AGA and our sister societies continue to urge CMS to reduce this gap in the ASC facility fees, when compared to the outpatient hospital facility rates, which are estimated to be a roughly 48% differential in CY 2024.
Telehealth: CMS proposes to continue reimbursing telehealth services at current levels through 2024. Payment for audio-only evaluation and management (E/M) codes will continue at parity with follow-up in-person visits as it has throughout the pandemic. Additionally, CMS is implementing telehealth flexibilities that were included in the Consolidated Appropriations Act 2023 by allowing telehealth visits to originate at any site in the United States. This will allow patients throughout the country to maintain access to needed telehealth services without facing the logistical and safety challenges that can surround in-person visits. CMS is proposing to pay telehealth services at the nonfacility payment rate, which is the same rate as in-person office visits, lift the frequency limits on telehealth visits for subsequent hospital and skilled nursing facility visits, and allow direct supervision to be provided virtually.
Split (or shared) visits: CMS has proposed a second one-year delay to its proposed split/shared visits policy. The original proposal required that the billing provider in split/shared visits be whoever spent more than half of the total time with the patient (making time the only way to define substantive portion). CMS plans to delay that through at least Dec. 31, 2024. In the interim, practices can continue to use one of the three key components (history, exam, or medical decision-making) or more than half of the total time spent to determine who can bill for the visit. The GI societies will continue to advocate for appropriate reimbursement to align with new team-based models of care delivery.
Notably, the split (or shared) visits policy was also delayed in 2023 because of widespread concerns and feedback that the policy would disrupt team-based care and care delivery in the hospital setting. The American Medical Association CPT editorial panel, the body responsible for creating and maintaining CPT codes, has approved revisions to E/M guidelines that may help address some of CMS’s concerns.
For more information on issues affecting gastroenterologists in the 2024 Medicare PFS and OPPS/ASC proposed rules, visit the AGA news website.
Dr. Garcia serves as an advisor to the AGA AMA Relative-value Update Committee. She is clinical associate professor of medicine at Stanford (Calif.) University, where she is director of the neurogastroenterology and motility laboratory in the division of gastroenterology and hepatology, and associate chief medical information officer in ambulatory care at Stanford Health Care.
Increase in message volume begs the question: ‘Should we be compensated for our time?’
The American Gastroenterological Association and other gastrointestinal-specific organizations have excellent resources available to members that focus on optimizing reimbursement in your clinical and endoscopic practice.
During the COVID-19 pandemic and public health emergency (PHE), many previously noncovered services were now covered under rules of the Centers for Medicare & Medicaid Services. During the pandemic, patient portal messages increased by 157%, meaning more work for health care teams, negatively impacting physician satisfaction, and increasing burnout.1 Medical burnout has been associated with increased time spent on electronic health records, with some subspeciality gastroenterology (GI) groups having a high EHR burden, according to a recently published article in the American Journal of Gastroenterology.2
This topic is a timely discussion as several large health systems have implemented processes to bill for non–face-to-face services (termed “asynchronous care”), some of which have not been well received in the lay media. It is important to note that despite these implementations, studies have shown only 1% of all incoming portal messages would meet criteria to be submitted for reimbursement. This impact might be slightly higher in chronic care management practices.
Providers and practices have several options when considering billing for non–face-to-face encounters, which we outline in Table 1.3
The focus of this article will be to review the more common non–face-to-face evaluation and management services, such as telephone E/M (patient phone call) and e-visits (patient portal messages) as these have recently generated the most interest and discussion amongst health care providers.
Telemedicine after COVID-19 pandemic
During the beginning of the pandemic, a web-based survey study found that almost all providers in GI practices implemented some form of telemedicine to continue to provide care for patients, compared to 32% prior to the pandemic.4,5 The high demand and essential requirement for telehealth evaluation facilitated its reimbursement, eliminating the primary barrier to previous use.6
One of the new covered benefits by CMS was asynchronous telehealth care.7 The PHE ended in May 2023, and since then a qualified health care provider (QHCP) does not have the full flexibility to deliver telemedicine services across state lines. The U.S. Department of Health and Human Services has considered some telehealth policy changes after the COVID-19 PHE and many of those will be extended, at least through 2024.8 As during the pandemic, where the U.S. national payer network (CMS, state Medicaid, and private payers) and state health agencies assisted to ensure patients get the care they need by authorizing providers to be compensated for non–face-to-face services, we believe this service will continue to be part of our clinical practice.
We recommend you stay informed about local and federal laws, regulations, and alternatives for reimbursement as they may be modified at the beginning of a new calendar year. Remember, you can always talk with your revenue cycle team to clarify any query.
Telephone evaluation and management services
The patient requests to speak with you.
Telephone evaluation and management services became more widely used after the pandemic and were recognized by CMS as a covered medical service under PHE. As outlined in Table 1, there are associated codes with this service and it can only apply to an established patient in your practice. The cumulative time spent over a 7-day period without generating an immediate follow-up visit could qualify for this CPT code. However, for a patient with a high-complexity diagnosis and/or decisions being made about care, it might be better to consider a virtual office visit as this would value the complex care at a higher level than the time spent during the telephone E/M encounter.
A common question comes up: Can my nurse or support team bill for telephone care? No, only QHCP can, which means physicians and advanced practice providers can bill for this E/M service, and it does not include time spent by other members of clinical staff in patient care. However, there are CPT codes for chronic care management, which is not covered in this article.
Virtual evaluation and management services
You respond to a patient-initiated portal message.
Patient portal messages increased exponentially during the pandemic with 2.5 more minutes spent per message, resulting in more EHR work by practitioners, compared with prior to the pandemic. One study showed an immediate postpandemic increase in EHR patient-initiated messages with no return to prepandemic baseline.1
Although studies evaluating postpandemic telemedicine services are needed, we believe that this trend will continue, and for this reason, it is important to create sustainable workflows to continue to provide this patient driven avenue of care.9
E-visits are asynchronous patient or guardian portal messages that require a minimum of 5 minutes to provide medical decision-making without prior E/M services in the last 7 days. To obtain reimbursement for this service, it cannot be initiated by the provider, and patient consent must be obtained. Documentation should include this information and the time spent in the encounter. The associated CPT codes with this e-service are outlined in Table 1.
A common question is, “Are there additional codes I should use if a portal message E/M visit lasts more than 30 minutes?” No. If an e-visit lasts more than 30 minutes, the QHCP should bill the CPT code 99423. However, we would advise that, if this care requires more than 30 minutes, then either virtual or face-to-face E/M be considered for the optimal reimbursement for provider time spent. Another common question is around consent for services, and we advise providers to review this requirement with their compliance colleagues as each institution has different policies.
Virtual check-in
Medicare also covers brief communication technology–based services also known as virtual check-ins, where patients can communicate with their provider after having established care. During this brief conversation that can be via telephone, audio/video, secure text messaging, email, or patient portal, providers will determine if an in-person visit is necessary. CMS has designed G codes for these virtual check-ins that are from the Healthcare Common Procedure Coding System (HCPCS). Two codes are available for this E/M service: G2012, which is outlined in Table 1, and G2010, which covers the evaluation of images and/or recorded videos. In order to be reimbursed for a G2010 code, providers need at least a 5-minute response to make a clinical determination or give the patient a medical impression.
Patient satisfaction, physician well-being and quality of care outcomes
Large health care systems like Kaiser Permanente implemented secure message patient-physician communication (the patient portal) even before the pandemic, showing promising results in 2010 with reduction in office visits, improvement in measurable quality outcomes, and high level of patient satisfaction.10 Post pandemic, several large health care centers opted to announce the billing implementation for patient-initiated portal messages.11 A focus was placed on educating their patients about when a message will and will not be billed. Using this type of strategy can help to improve patient awareness about potential billing without affecting patient satisfaction and care outcomes. Studies have shown the EHR has contributed to physician burnout and some physicians reducing their clinical time or leaving medicine; a reduction in messaging might have a positive impact on physician well-being.
The challenge is that medical billing is not routinely included as a curriculum topic in many residency and fellowship programs; however, trainees are part of E/M services and have limited knowledge of billing processes. Unfortunately, at this time, trainees cannot submit for reimbursement for asynchronous care as described above. We hope that this brief article will help junior gastroenterologists optimize their outpatient billing practices.
Dr. Nieto is an internal medicine chief resident with WellStar Cobb Medical Center, Austell, Ga. Dr. Kinnucan is a gastroenterologist with Mayo Clinic, Jacksonville, Fla. The authors have no conflicts of interest to disclose for this article. The authors certify that no financial and grant support has been received for this article.
References
1. Holmgren AJ et al. J Am Med Inform Assoc. 2021 Dec 9. doi: 10.1093/jamia/ocab268.
2. Bali AS et al. Am J Gastroenterol. 2023 Apr 24. doi: 10.14309/ajg.0000000000002254.
3. AAFP. Family Physician. “Coding Scenario: Coding for Virtual-Digital Visits”
4. Keihanian T. et al. Telehealth Utilization in Gastroenterology Clinics Amid the COVID-19 Pandemic: Impact on Clinical Practice and Gastroenterology Training. Gastroenterology. 2020 Jun 20. doi: 10.1053/j.gastro.2020.06.040.
5. Lewin S et al. J Crohns Colitis. 2020 Oct 21. doi: 10.1093/ecco-jcc/jjaa140.
6. Perisetti A and H Goyal. Dig Dis Sci. 2021 Mar 3. doi: 10.1007/s10620-021-06874-x.
7. Telehealth.HHS.gov. Medicaid and Medicare billing for asynchronous telehealth. Updated: 2022 May 4.
8. Telehealth.HHS.gov. Telehealth policy changes after the COVID-19 public health emergency. Last updated: 2023 Jan 23.
9. Fox B and Sizemore JO. Telehealth: Fad or the future. Epic Health Research Network. 2020 Aug 18.
10. Baer D. Patient-physician e-mail communication: the kaiser permanente experience. J Oncol Pract. 2011 Jul. doi: 10.1200/JOP.2011.000323.
11. Myclevelandclinic.org. MyChart Messaging.
12. Sinsky CA et al. J Gen Intern Med. 2022 Aug 29. doi: 10.1007/s11606-022-07766-0.
The American Gastroenterological Association and other gastrointestinal-specific organizations have excellent resources available to members that focus on optimizing reimbursement in your clinical and endoscopic practice.
During the COVID-19 pandemic and public health emergency (PHE), many previously noncovered services were now covered under rules of the Centers for Medicare & Medicaid Services. During the pandemic, patient portal messages increased by 157%, meaning more work for health care teams, negatively impacting physician satisfaction, and increasing burnout.1 Medical burnout has been associated with increased time spent on electronic health records, with some subspeciality gastroenterology (GI) groups having a high EHR burden, according to a recently published article in the American Journal of Gastroenterology.2
This topic is a timely discussion as several large health systems have implemented processes to bill for non–face-to-face services (termed “asynchronous care”), some of which have not been well received in the lay media. It is important to note that despite these implementations, studies have shown only 1% of all incoming portal messages would meet criteria to be submitted for reimbursement. This impact might be slightly higher in chronic care management practices.
Providers and practices have several options when considering billing for non–face-to-face encounters, which we outline in Table 1.3
The focus of this article will be to review the more common non–face-to-face evaluation and management services, such as telephone E/M (patient phone call) and e-visits (patient portal messages) as these have recently generated the most interest and discussion amongst health care providers.
Telemedicine after COVID-19 pandemic
During the beginning of the pandemic, a web-based survey study found that almost all providers in GI practices implemented some form of telemedicine to continue to provide care for patients, compared to 32% prior to the pandemic.4,5 The high demand and essential requirement for telehealth evaluation facilitated its reimbursement, eliminating the primary barrier to previous use.6
One of the new covered benefits by CMS was asynchronous telehealth care.7 The PHE ended in May 2023, and since then a qualified health care provider (QHCP) does not have the full flexibility to deliver telemedicine services across state lines. The U.S. Department of Health and Human Services has considered some telehealth policy changes after the COVID-19 PHE and many of those will be extended, at least through 2024.8 As during the pandemic, where the U.S. national payer network (CMS, state Medicaid, and private payers) and state health agencies assisted to ensure patients get the care they need by authorizing providers to be compensated for non–face-to-face services, we believe this service will continue to be part of our clinical practice.
We recommend you stay informed about local and federal laws, regulations, and alternatives for reimbursement as they may be modified at the beginning of a new calendar year. Remember, you can always talk with your revenue cycle team to clarify any query.
Telephone evaluation and management services
The patient requests to speak with you.
Telephone evaluation and management services became more widely used after the pandemic and were recognized by CMS as a covered medical service under PHE. As outlined in Table 1, there are associated codes with this service and it can only apply to an established patient in your practice. The cumulative time spent over a 7-day period without generating an immediate follow-up visit could qualify for this CPT code. However, for a patient with a high-complexity diagnosis and/or decisions being made about care, it might be better to consider a virtual office visit as this would value the complex care at a higher level than the time spent during the telephone E/M encounter.
A common question comes up: Can my nurse or support team bill for telephone care? No, only QHCP can, which means physicians and advanced practice providers can bill for this E/M service, and it does not include time spent by other members of clinical staff in patient care. However, there are CPT codes for chronic care management, which is not covered in this article.
Virtual evaluation and management services
You respond to a patient-initiated portal message.
Patient portal messages increased exponentially during the pandemic with 2.5 more minutes spent per message, resulting in more EHR work by practitioners, compared with prior to the pandemic. One study showed an immediate postpandemic increase in EHR patient-initiated messages with no return to prepandemic baseline.1
Although studies evaluating postpandemic telemedicine services are needed, we believe that this trend will continue, and for this reason, it is important to create sustainable workflows to continue to provide this patient driven avenue of care.9
E-visits are asynchronous patient or guardian portal messages that require a minimum of 5 minutes to provide medical decision-making without prior E/M services in the last 7 days. To obtain reimbursement for this service, it cannot be initiated by the provider, and patient consent must be obtained. Documentation should include this information and the time spent in the encounter. The associated CPT codes with this e-service are outlined in Table 1.
A common question is, “Are there additional codes I should use if a portal message E/M visit lasts more than 30 minutes?” No. If an e-visit lasts more than 30 minutes, the QHCP should bill the CPT code 99423. However, we would advise that, if this care requires more than 30 minutes, then either virtual or face-to-face E/M be considered for the optimal reimbursement for provider time spent. Another common question is around consent for services, and we advise providers to review this requirement with their compliance colleagues as each institution has different policies.
Virtual check-in
Medicare also covers brief communication technology–based services also known as virtual check-ins, where patients can communicate with their provider after having established care. During this brief conversation that can be via telephone, audio/video, secure text messaging, email, or patient portal, providers will determine if an in-person visit is necessary. CMS has designed G codes for these virtual check-ins that are from the Healthcare Common Procedure Coding System (HCPCS). Two codes are available for this E/M service: G2012, which is outlined in Table 1, and G2010, which covers the evaluation of images and/or recorded videos. In order to be reimbursed for a G2010 code, providers need at least a 5-minute response to make a clinical determination or give the patient a medical impression.
Patient satisfaction, physician well-being and quality of care outcomes
Large health care systems like Kaiser Permanente implemented secure message patient-physician communication (the patient portal) even before the pandemic, showing promising results in 2010 with reduction in office visits, improvement in measurable quality outcomes, and high level of patient satisfaction.10 Post pandemic, several large health care centers opted to announce the billing implementation for patient-initiated portal messages.11 A focus was placed on educating their patients about when a message will and will not be billed. Using this type of strategy can help to improve patient awareness about potential billing without affecting patient satisfaction and care outcomes. Studies have shown the EHR has contributed to physician burnout and some physicians reducing their clinical time or leaving medicine; a reduction in messaging might have a positive impact on physician well-being.
The challenge is that medical billing is not routinely included as a curriculum topic in many residency and fellowship programs; however, trainees are part of E/M services and have limited knowledge of billing processes. Unfortunately, at this time, trainees cannot submit for reimbursement for asynchronous care as described above. We hope that this brief article will help junior gastroenterologists optimize their outpatient billing practices.
Dr. Nieto is an internal medicine chief resident with WellStar Cobb Medical Center, Austell, Ga. Dr. Kinnucan is a gastroenterologist with Mayo Clinic, Jacksonville, Fla. The authors have no conflicts of interest to disclose for this article. The authors certify that no financial and grant support has been received for this article.
References
1. Holmgren AJ et al. J Am Med Inform Assoc. 2021 Dec 9. doi: 10.1093/jamia/ocab268.
2. Bali AS et al. Am J Gastroenterol. 2023 Apr 24. doi: 10.14309/ajg.0000000000002254.
3. AAFP. Family Physician. “Coding Scenario: Coding for Virtual-Digital Visits”
4. Keihanian T. et al. Telehealth Utilization in Gastroenterology Clinics Amid the COVID-19 Pandemic: Impact on Clinical Practice and Gastroenterology Training. Gastroenterology. 2020 Jun 20. doi: 10.1053/j.gastro.2020.06.040.
5. Lewin S et al. J Crohns Colitis. 2020 Oct 21. doi: 10.1093/ecco-jcc/jjaa140.
6. Perisetti A and H Goyal. Dig Dis Sci. 2021 Mar 3. doi: 10.1007/s10620-021-06874-x.
7. Telehealth.HHS.gov. Medicaid and Medicare billing for asynchronous telehealth. Updated: 2022 May 4.
8. Telehealth.HHS.gov. Telehealth policy changes after the COVID-19 public health emergency. Last updated: 2023 Jan 23.
9. Fox B and Sizemore JO. Telehealth: Fad or the future. Epic Health Research Network. 2020 Aug 18.
10. Baer D. Patient-physician e-mail communication: the kaiser permanente experience. J Oncol Pract. 2011 Jul. doi: 10.1200/JOP.2011.000323.
11. Myclevelandclinic.org. MyChart Messaging.
12. Sinsky CA et al. J Gen Intern Med. 2022 Aug 29. doi: 10.1007/s11606-022-07766-0.
The American Gastroenterological Association and other gastrointestinal-specific organizations have excellent resources available to members that focus on optimizing reimbursement in your clinical and endoscopic practice.
During the COVID-19 pandemic and public health emergency (PHE), many previously noncovered services were now covered under rules of the Centers for Medicare & Medicaid Services. During the pandemic, patient portal messages increased by 157%, meaning more work for health care teams, negatively impacting physician satisfaction, and increasing burnout.1 Medical burnout has been associated with increased time spent on electronic health records, with some subspeciality gastroenterology (GI) groups having a high EHR burden, according to a recently published article in the American Journal of Gastroenterology.2
This topic is a timely discussion as several large health systems have implemented processes to bill for non–face-to-face services (termed “asynchronous care”), some of which have not been well received in the lay media. It is important to note that despite these implementations, studies have shown only 1% of all incoming portal messages would meet criteria to be submitted for reimbursement. This impact might be slightly higher in chronic care management practices.
Providers and practices have several options when considering billing for non–face-to-face encounters, which we outline in Table 1.3
The focus of this article will be to review the more common non–face-to-face evaluation and management services, such as telephone E/M (patient phone call) and e-visits (patient portal messages) as these have recently generated the most interest and discussion amongst health care providers.
Telemedicine after COVID-19 pandemic
During the beginning of the pandemic, a web-based survey study found that almost all providers in GI practices implemented some form of telemedicine to continue to provide care for patients, compared to 32% prior to the pandemic.4,5 The high demand and essential requirement for telehealth evaluation facilitated its reimbursement, eliminating the primary barrier to previous use.6
One of the new covered benefits by CMS was asynchronous telehealth care.7 The PHE ended in May 2023, and since then a qualified health care provider (QHCP) does not have the full flexibility to deliver telemedicine services across state lines. The U.S. Department of Health and Human Services has considered some telehealth policy changes after the COVID-19 PHE and many of those will be extended, at least through 2024.8 As during the pandemic, where the U.S. national payer network (CMS, state Medicaid, and private payers) and state health agencies assisted to ensure patients get the care they need by authorizing providers to be compensated for non–face-to-face services, we believe this service will continue to be part of our clinical practice.
We recommend you stay informed about local and federal laws, regulations, and alternatives for reimbursement as they may be modified at the beginning of a new calendar year. Remember, you can always talk with your revenue cycle team to clarify any query.
Telephone evaluation and management services
The patient requests to speak with you.
Telephone evaluation and management services became more widely used after the pandemic and were recognized by CMS as a covered medical service under PHE. As outlined in Table 1, there are associated codes with this service and it can only apply to an established patient in your practice. The cumulative time spent over a 7-day period without generating an immediate follow-up visit could qualify for this CPT code. However, for a patient with a high-complexity diagnosis and/or decisions being made about care, it might be better to consider a virtual office visit as this would value the complex care at a higher level than the time spent during the telephone E/M encounter.
A common question comes up: Can my nurse or support team bill for telephone care? No, only QHCP can, which means physicians and advanced practice providers can bill for this E/M service, and it does not include time spent by other members of clinical staff in patient care. However, there are CPT codes for chronic care management, which is not covered in this article.
Virtual evaluation and management services
You respond to a patient-initiated portal message.
Patient portal messages increased exponentially during the pandemic with 2.5 more minutes spent per message, resulting in more EHR work by practitioners, compared with prior to the pandemic. One study showed an immediate postpandemic increase in EHR patient-initiated messages with no return to prepandemic baseline.1
Although studies evaluating postpandemic telemedicine services are needed, we believe that this trend will continue, and for this reason, it is important to create sustainable workflows to continue to provide this patient driven avenue of care.9
E-visits are asynchronous patient or guardian portal messages that require a minimum of 5 minutes to provide medical decision-making without prior E/M services in the last 7 days. To obtain reimbursement for this service, it cannot be initiated by the provider, and patient consent must be obtained. Documentation should include this information and the time spent in the encounter. The associated CPT codes with this e-service are outlined in Table 1.
A common question is, “Are there additional codes I should use if a portal message E/M visit lasts more than 30 minutes?” No. If an e-visit lasts more than 30 minutes, the QHCP should bill the CPT code 99423. However, we would advise that, if this care requires more than 30 minutes, then either virtual or face-to-face E/M be considered for the optimal reimbursement for provider time spent. Another common question is around consent for services, and we advise providers to review this requirement with their compliance colleagues as each institution has different policies.
Virtual check-in
Medicare also covers brief communication technology–based services also known as virtual check-ins, where patients can communicate with their provider after having established care. During this brief conversation that can be via telephone, audio/video, secure text messaging, email, or patient portal, providers will determine if an in-person visit is necessary. CMS has designed G codes for these virtual check-ins that are from the Healthcare Common Procedure Coding System (HCPCS). Two codes are available for this E/M service: G2012, which is outlined in Table 1, and G2010, which covers the evaluation of images and/or recorded videos. In order to be reimbursed for a G2010 code, providers need at least a 5-minute response to make a clinical determination or give the patient a medical impression.
Patient satisfaction, physician well-being and quality of care outcomes
Large health care systems like Kaiser Permanente implemented secure message patient-physician communication (the patient portal) even before the pandemic, showing promising results in 2010 with reduction in office visits, improvement in measurable quality outcomes, and high level of patient satisfaction.10 Post pandemic, several large health care centers opted to announce the billing implementation for patient-initiated portal messages.11 A focus was placed on educating their patients about when a message will and will not be billed. Using this type of strategy can help to improve patient awareness about potential billing without affecting patient satisfaction and care outcomes. Studies have shown the EHR has contributed to physician burnout and some physicians reducing their clinical time or leaving medicine; a reduction in messaging might have a positive impact on physician well-being.
The challenge is that medical billing is not routinely included as a curriculum topic in many residency and fellowship programs; however, trainees are part of E/M services and have limited knowledge of billing processes. Unfortunately, at this time, trainees cannot submit for reimbursement for asynchronous care as described above. We hope that this brief article will help junior gastroenterologists optimize their outpatient billing practices.
Dr. Nieto is an internal medicine chief resident with WellStar Cobb Medical Center, Austell, Ga. Dr. Kinnucan is a gastroenterologist with Mayo Clinic, Jacksonville, Fla. The authors have no conflicts of interest to disclose for this article. The authors certify that no financial and grant support has been received for this article.
References
1. Holmgren AJ et al. J Am Med Inform Assoc. 2021 Dec 9. doi: 10.1093/jamia/ocab268.
2. Bali AS et al. Am J Gastroenterol. 2023 Apr 24. doi: 10.14309/ajg.0000000000002254.
3. AAFP. Family Physician. “Coding Scenario: Coding for Virtual-Digital Visits”
4. Keihanian T. et al. Telehealth Utilization in Gastroenterology Clinics Amid the COVID-19 Pandemic: Impact on Clinical Practice and Gastroenterology Training. Gastroenterology. 2020 Jun 20. doi: 10.1053/j.gastro.2020.06.040.
5. Lewin S et al. J Crohns Colitis. 2020 Oct 21. doi: 10.1093/ecco-jcc/jjaa140.
6. Perisetti A and H Goyal. Dig Dis Sci. 2021 Mar 3. doi: 10.1007/s10620-021-06874-x.
7. Telehealth.HHS.gov. Medicaid and Medicare billing for asynchronous telehealth. Updated: 2022 May 4.
8. Telehealth.HHS.gov. Telehealth policy changes after the COVID-19 public health emergency. Last updated: 2023 Jan 23.
9. Fox B and Sizemore JO. Telehealth: Fad or the future. Epic Health Research Network. 2020 Aug 18.
10. Baer D. Patient-physician e-mail communication: the kaiser permanente experience. J Oncol Pract. 2011 Jul. doi: 10.1200/JOP.2011.000323.
11. Myclevelandclinic.org. MyChart Messaging.
12. Sinsky CA et al. J Gen Intern Med. 2022 Aug 29. doi: 10.1007/s11606-022-07766-0.