Dear Colleague,

The completion of residency training is like writing a chapter in what promises to be a best-selling novel. In no way do you intend to quit writing the book, but you may have to stop for awhile to attend to the immediate demands of life. However, you keep in mind that other best-selling authors have 2 constants: (1) they always make time to continue writing, and (2) the chapter they are now writing prepares the reader for the next chapter. This takes planning and forethought to ensure that the transitions between chapters are smooth and seamless—with one building on the next, while preparing you for what is to come.

The same is true about the stages of a medical career. To ensure a seamless transition from one stage to the next, you must prepare long before the current chapter of your life as a resident is complete. Although it is often easy to put off difficult decisions until a solution is immediately required in our hectic lives, let us consider some of the intricate details that require thought before transitioning from our current chapter as residents to our next chapter as practicing physicians.

Medical Career

Preparing for a career should begin early in training so you have time to contemplate some important questions:

• What, exactly, do you want out of life and how can medicine help you reach that goal?
• What are your responsibilities to medicine and to society?
• Does geography matter in your career?
• Will you spend time on foreign missions?
• How much money do you want (or need) to make?

You have a variety of practice settings to consider. The academic world is starving for physicians interested in research and teaching. Academic institutions, as a general rule, do not have a lot of money to offer you, but this is offset with prestigious titles, publication opportunities, teaching positions, and, for a select few, a position as a program director, chairman, dean, vice president, or author of a respected text, such as Harrison's¹ or Schwartz's.² As far as private practice is concerned, specialty and location determine the lifestyle.

Unique, high-demand specialists will usually reside in urban areas and demand higher salaries than less-specialized physicians or those living in rural areas. However, practicing in rural America will likely place you among the elite upper class in that community, in terms of financial status and contribution to the community.

Financial Considerations

As a general rule, most young physicians have a sizable education debt. In addition, most of them will contemplate purchasing a house, buying into a practice, or establishing a practice on their own; this requires both personal and professional financial management proficiency.

Student loans. Student loans are a good place to start when contemplating a financial management strategy. You can consolidate students loans at an amazingly low interest rate; some loans can be locked at interest rates as low as 2.3% for 30 years. If you can accomplish a rate lock this low, paying off your student loans early may have little benefit, especially if you are going to borrow money for a large purchase, such as a home or a practice. Bank loans, depending on credit worthiness, can start at 6.5% for someone with good credit.

Paying off a student loan with a 2.3% rate and then taking out a loan for the same amount could cost you thousands in interest payments. If you are not planning a big purchase, you may consider putting the money you would use to pay off the student loan into a high-yield savings account at 5% and pocketing the difference. Your options will vary based on your personal situation. You should seek out the assistance of a good financial advisor, accountant, and attorney.

Business functions. You love practicing medicine, but you must also run a business if you choose a solo or a group practice setting. If you are joining a group practice, seek help from an attorney in negotiating related items, such as compensation, expense reimbursement, time off, and on-call frequency of your physician employment agreement. Look to business professionals in the community for recommendations and your local chamber of commerce to obtain available options for new business owners.

Regardless of whether you enter a group or a solo practice, you should know how to create a budget, read financial statements, and assess risk. You should always serve as a check and balance (or put several processes in place that serve this function) for those who manage your accounts receivable and payable. Failing to keep track of this function in the era of managed care and patient copayments can result in serious financial distress.

Payers. Managed care, Medicare, and Medicaid are currently a reality check as physicians transition into practice. Numerous resources are available about negotiating contracts, interacting with representatives, appealing claim denials, and the different business models of a health-maintenance organization, preferred-provider organization, indemnity, or point-of-service plan. There is also information on Medicare Advantage and Medicaid, although Medicaid is more state-specific.

Tort. Regardless of the practice setting, you need to contemplate asset-protection strategies. As physicians, we always have to consider the litigious environment in which we practice.

Asset protection involves both liability insurance and the placement of assets in vehicles that can continue to make money but are unlikely to be subject to tort. Options vary from state to state, but an attorney and financial advisor can discuss available options with you. Most will probably recommend a multitiered approach, such as the establishment of a professional corporation, limited liability partnership, and trust, and/or layers of all three.

Final Thoughts

This is just a sample of what residents need to contemplate as they head into the next chapter of their career. Remember that each chapter is a reflection of what has been written in the past and previews what will be written in the future. How well are you doing on your novel?

The American Medical Association-Resident and Fellow Section has resources on all these topics that can help you with your current chapter and prepare you for the next. Visit www.ama-assn.org/go/rfs and click on "resources at every stage."

Douglas Che Miller, MD
Secretary, Resident and Fellow Section
American Medical Association

References

1. Kasper DL, Braunwald E, Fauci AS, et al, eds. Harrison's Principles of Internal Medicine. 16th ed. New York, NY: McGraw-Hill; 2005.
2. Brunicardi FC, Andersen DK, Billiar TR, et al, eds. Schwartz's Principles of Surgery. 8th ed. New York, NY: McGraw-Hill; 2005.