Physician Life Cycle Part Five: Do You Really Need an Emergency Fund? Section Two- Real Life Case Scenarios
One of the most common arguments against maintaining an Emergency Fund for physician is a belief that physicians are protected from career setbacks. In actuality, you are at a greater risk than average. And when the problems do occur, they tend to be lengthy and costly.
Author: Robert A Felberg MD
Topic: Physician Finance
Editor: Here’s a link to the first part of this series
Cajun Bob always says “the third glass of wine has killed more careers than partying all night before MCAT’s”.
This is where Cajun Bob turns into Debbie Downer! Sorry about that- there’s no way to cheerfully discuss physicians’ who face devastating financial issues.
Editor: There are several good physician finance bloggers out there in the blog-o-sphere. Unfortunately, many are highly technical in a confusing way and this can easily lead to “decision paralysis”. This popular blog series brought to you by NegotiationMD addresses common physician finance quandaries in a more explanatory and theoretical manner. The posts follow a logical order, so starting at the first one and working your way through makes sense. Please sign up for our newsletter to keep up with future installments.
In the first post on Emergency Funds (Section One), I discussed the common arguments regarding the building and maintain of an emergency fund. I mentioned one minor argument, that the “cash” holdings can earn better then often stated, although not nearly as much as in the long-term stock market. The more dangerous argument is the idea that physicians are protected from risk in general due to their training and “stability” of their position. I’ll use the risky technique of presenting very specific cases and then asking you to generalize. I realize that these specific examples may not directly me relevant in your case, but I know I could come up with something that could- let your imagination run wild.
I’m going to discuss several scenarios that have occurred to actual physicians. Many of them could have been avoided with perfect hindsight, but it’s arrogant to believe you are somehow immune to similar events. The point here is that everyone will have a worst day of their lives. For some of physicians, that worst day will lead to financial ruin if you are not prepared with a ready source of cash.
Case One: The third glass of wine
It’s shocking how many physician careers have been destroyed by Driving under influence or D.U.I charges. These tend to go 2 ways. The first is the chronic secret alcoholic and the DUI is a blessing in disguise- a chance to clean up before they kill someone. Much more common is the third glass of wine scenario. You go to dinner. You drink a third glass of wine. You feel a little effect, but not in the stumbling drunk range. You get pulled over. You blow 0.9. You are charged with DUI.
After that DUI your life rapidly goes out of control. You are featured in the local paper. The state medical board suspends your license for 3 years. You are terminated immediately. You lose your ability to earn. You can’t work as a physician anywhere since you can’t get licensed. You pay an attorney nearly $75,000 in fees. You pay an impaired physician center $40,000 for clearance. You need to cover all expenses including health and life insurance and need to tap your 401k in a down market.
After 12 months your license is reinstated under probation for an additional 36 months with a cost of $25,000 annually for mandated ongoing alcohol counseling and random drug testing. In addition, you are fined $15,000 by the medical board. The same fine is also levied by the 6 additional states where you are licensed. The great job you had before? Gone. You’ll be forced to take whatever is offered. Even Locums could be closed to you as the hiring hospital review your file. There is no insurance that can cover this scenario. You will need to pay it all in personal funds.
Case Two: The Iatrogenically Impaired physician
I’ve seen this scenario a handful of times and it always disappoints me.
A military veteran develops neuralgia pain in the left arm from a crush injury sustained while overseas. At first, the pain is managed with NSAIDs and physical therapy. However, as the years progress and concurrent diabetes develops, the pain progresses. Under the care of a pain specialist, Gabapentin and then extended release opiates are prescribed. One day, a certified letter comes from the medical board. You have been reported anonymously as an impaired physician. Who reported you? A competitor? A colleague? You’ll never know and the motives won’t be considered.
The board determines that since you perform highly complex procedures requiring precise fine motor movements, you are to be considered impaired. This is a common scenario, even with complete lack of evidence for ant harm. The board has a blanket policy- opiates=dangerous. Even under the direct care of physician. You are also placed under an impaired physician plan requiring ongoing therapy at personal expense.
From the case above, you know what happens. Unable to perform procedures, you lose most of your revenue and your contract is not renewed. The medical board proceedings are made public and your reputation is ruined. Several ex-patients decide to sue for malpractice. You need to settle since they now have a slam-dunk case against the doped up surgeon.
You attend an impaired physician clinic and see several pain management services all at personal cost. You eventually find work in a clinic where you are not expected to perform complex procedures at a dramatically reduced income.
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Final Scenario: The 500-year Flood.
This is a personal story that happened to me. I practiced in New Orleans first job out of fellowship. At the same time, I built 2 side business related to Institutional Review Boards, and statistical analysis of research trials. In 2005, Katrina hit and my home, business, and entire city was devastated.
Fortunately, my hospital was still partly open and I was able to work, but the salary was delayed. My house was gone and I needed some place to stay and also had to house my family. My employees and needed to be paid. And, I would need to repair and remediate my home.
Yes, I had flood insurance and that would eventually pay off about 75% of the rebuilding costs. There was no coverage for housing, rental cars, etc. during this time. Prices on rentals, generators, gas, food, repairs went through the roof. My side businesses were unable to continue to produce work since my teams were scattered and equipment destroyed. I lost all my ongoing contracts and had to shut down, while owing several months of wages.
I eventually was able to make some of the money back on flood insurance. But, I took a huge hit on the lost businesses and had months of delayed income. I probably lost $650,000 upfront and was compensated $375,000 after about 18 months. That emergency fund was a life saver. Fortunately, the stock market held after Katrina- I may have had to sell into a bear market if I needed to tap my non-cash assets. Imagine if I tried to sell my flooded home to raise funds? Or tried to rely on a HELOC? The key point here was that I was maximally insured, but still took a beating!
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There’s a whole list of risks I haven’t touched upon: social media risks, relationship risks including sexual relations with co-workers, risks due to the actions of your children, political or organizational risks. The possibilities go on and they are never brought up in your typical emergency fund discussion. Yes, if you need a new transmission or your air conditioning breaks, as a doctor you can put this on your credit card and pay it off if you’d like. But, you can’t insure yourself against a family member getting in a multi-fatality MVA after using drugs at a concert and your business failing as a result. And as much as I may seem an alarmist, these risks are real and need to be considered.
In the final portion of this review on emergency funds, I’ll go a little more into physician’s risks and try to tie the whole discussion up. I’ll also touch on why having an emergency fund is even more important for a physician to build and maintain.
What are your thoughts? Am I just being a Debbie Downer? Perhaps I overestimate the risk since many of these physicians seek me out for advice and so I am over-exposed to the downtrodden? Are you under the belief that somehow you are immune to all this? Share your thoughts in the comments