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The background story.
As the COVID-19 pandemic rages on and with shelter-at-home orders mandated across wide swaths of the United States, as well as state-implemented bans on all elective medical procedures, my medical practice has taken dramatic financial hits.
In an earlier post, “The White Coat Is Not A Shield,” I mentioned that the board of directors at my medical practice, an outpatient multi-specialty clinic of over 70 physicians, had mandated a 40% reduction in salary draw based on our 2019 W-2.
The board had recognized early on that there was a dramatic drop in patient volumes at the start of the US pandemic and rightfully deduced that this would put us in a grave financial predicament if proactive steps were not implemented.
Surgical specialties were projected to have >70% loss of patient volume and the financial consequences of that would be far-reaching, hitting even the non-surgical specialties.
The glass was not half full or empty. It was shattered.
When the board of directors made the 40% salary reduction mandate, it was still fairly early in the COVID-19 presentation.
As several more weeks of data came in, it was sad to say that original estimates, which already seemed grim, were in actuality too optimistic as the amount of patient visits were even lower than those projected.
We soon received notice that the 40% salary reduction was now increased to a 60% reduction that would remain in effect until patient visits started rebounding.
[In my previous post there was a comment about whether or not administration also subjected themselves to this financial haircut.
For this round of cost-saving measures, the administration voluntarily reduced their draw by 20%.]
Regardless of income level, a 60% financial hit with no end in sight is unsettling for anyone.
There have been previous challenges for those to live on half their income so that they can build up their savings.
But this was far worse.
Now you are supposed to live on less than half of what you previously made and also not have the benefit of bolstering your savings because of it.
Making lemonade out of lemons: Self Furlough.
Radiology, like other specialties, is a volume-based entity.
Without patients coming in for routine clinical examinations, radiology studies do not get ordered.
With patient’s sheltering at home, previously reliable volume from annual screening studies such as mammograms, also vanished.
What was once an incredibly busy 2-radiologist practice came screeching to a halt during the COVID-19 pandemic and my colleague and I found ourselves with a lot of time on our hands because of it.
I had so much time on my hands that I completed over 20 hours of CME over 2 work days, something that would have been impossible to do at any point of my career previously.
We very quickly realized that it made no sense for both of us to come in to work for the amount of volume we were witnessing.
A decision was then made to enact a self-furlough policy.
We first decided to reduce the coverage we had used in the past that allowed us to each take 1 day off a week.
So that it was not a complete financial disaster for the semi-retired radiologist who was covering us, we decided to instead have his 2 days of coverage/week reduced to 1 (every Monday which happened to be the busiest day because of the addition of any studies performed over the weekend).
That left the remaining 4 days of the week to be covered by either my colleague or I.
We decided that the best way would be one radiologist have Thursday through Wednesday completely off while the other one worked and alternate this each week.
So far we have gone through 1 1/2 cycles of this arrangement and it seems to be working quite well.
The biggest benefits have been mental.
The radiologist working is busy enough now to not feel underutilized and therefore not wasting his time.
The furloughed radiologist essentially gets a week long vacation, reduces potential exposure to COVID-19 by half, and eliminates the hassles of commuting to and from work (typically a 40 min commute for me).
Financially it should come out as a wash in this furlough system when compared to both of us working at the same time.
So it truly is as close to a win-win situation as you can have during these unsettling times and highlights how a furlough can be implemented for a positive benefit.
Light at the end of the tunnel?
It is hard to predict when the medical community will recover.
Some of my colleagues have seen patient volume drop so low that they have closed their offices until the all clear sign is lit.
There may be some light at the end of the tunnel as talks of re-opening businesses in planned phases is set to be implemented in the beginning of May.
Even of more import to my particular medical practice is that there have been rumblings that the ban on elective surgeries will be lifted in early May as well as life starts to normalize once more.
Hopefully these steps will allow those of us that were drastically impacted to claw ourselves back financially to where we were pre-COVID.
Until then, having a self-imposed furlough will have to suffice.
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Wow, there really are some big implications of this as you clearly show. At least you’re probably far better prepared for whats happening than most, being a student of FI. Good luck Doc!
Thanks Dave. Keeping fingers crossed that volume improves next month as shelter at home orders are relaxed.
I know the surgical specialities are anticipating doing elective surgeries again next week.
Wow, what a strange world we are in, with not enough work to keep a doctor busy. How wonderful that you are in a place where the financial pain is not too bad. I hope you get to enjoy some of that time off before work picks up again.
It truly is shocking to say the least. Never thought physicians would ever have trouble finding work or pulling in a decent income. Highlights the importance of an emergency fund no matter how safe you think your occupation is.
Thanks for sharing the update.
In our network: inpatient volume down 50%, ER visits down 30%, Elective surgery down 90%. No outpatient office work or elective surgery until June at the earliest.
I’m impressed that you did so much CME. I haven’t gotten as much done as I thought I would during this downtime.
I think those of us with low debt and multiple income streams will do better than others with just W-2 income. But we are all taking a hit.
Appreciate you sharing your stays as well. Wow, another month of no elective surgeries would be painful for my colleagues. I do think here we are opening that up next week.
Yeah the CME binge made at least 2 of those days feel productive. Before the self furlough I was also able to write a few blog posts in the downtime but that’s no longer possible as it is much busier running the dept solo.
Our volume in the ED is down 60%, and we all expect to be living leaner as shifts are cut. The only silver lining is that this is when people regain interest in getting their financial ducks in a row. So many friends are suddenly deeply interested in finances. Perhaps that will be the lasting impact on docs from this depression. I’m grateful that you are in a position to take the hit without to much effect, Xray.
Thanks CD. I hope things turn around quickly but you are right, there will be a bonus in that people will prioritize finances in future.
This situation has given me a taste of what retired life may be (not truly accurate since can’t travel like I would) and I have to say it is so much more relaxing on days off now, even more so than what I had previously on weekends.
Sorry to hear, but glad you are prepared. This particular situation is so much out of the ordinary it really is hard to predict where the labor market will be impacted and for how long. At least it gives a good reminder to many to prepare for the worst but hope for the best.
Very true. I think the emergency fund which many high income earners like physicians has been often neglected because you think you can cash flow any emergencies. That relies on your income to be reliable which in the past worked for physicians but this time may not be the case. I’m glad I happened to have a decent emergency amount set aside (6 months or so) but in the past if a real estate opportunity popped up I would sometimes deplete it thinking I would just refill it later. Glad I did not fall into that trap this time
Even in pediatrics, our volume is down 50% but I do expect a baby boom in another 8 months. I also have an emergency/ real estate fund in case of a black swan event or some great real estate deal. I’m now thankful to have that fund. Stay safe and enjoy the extra time with the family.
That’s a good point about quarantine baby boom down the road. Not much to do inside your home so makes sense ☺️
Glad that you, like me, didn’t have the opportunity to deploy that fund prior to this (if I did I would be a little more anxious)
I’m a salaried hospital employee, so even as someone who deals entirely in elective procedures, I’ve been shielded thus far. But as of last week even that’s starting to crack, and everyone in my group expects some period of furlough. Since pain procedures are so low risk and low utilization, we’re hoping that we can begin to ramp things back up over the next few weeks. I’m fortunate that being just a year out, we haven’t had time to expand our lifestyle too much. And this has definitely spurred me to actually build up a real emergency fund, something that… Read more »
Appreciated it. I agree that salaried hospital employees will have a little more protection than those in private practice but depending on the length of this a hospital reserve may be depleted too and will be in the same boat. I know a lot of the stimulus money is earmarked for Healthcare and I hope that it will be the saving grace until things pick up again. I too had in my mind thought emergency funds were unnecessary while I was a practicing physician (and to be honest the fund I have was really collecting money until I found a… Read more »
You are working less, but I do not consider this to be furlough. This is just adjusting coverage to accommodate the dip in volume, and you are still being paid. albeit less. Most private radiology groups across the country are doing the same.
I am truly furloughed. I have been taken off the schedule of my two contract Rad positions and have not worked or been paid since mid March.
Good point. Although I am actually not getting paid when I am off (I’m in the eat what I kill payment model) so the 6 days I am off the schedule I am earning nothing. But if I had gone in I would have earned 1/2 of what was done those days off so technically it will be a wash as the week I’m solo I earn all the professional component while my colleague gets $0. Not sure what better term to call it so I went with furlough
Furlough implies no work and no pay with expected return to work.
I have just started a Podcast launching this week. SBS Podcast is a Small Business Support Podcast. We are talking about situations like yourself and what’s happening good and bad. All about the SBA. It’s hard to not have a topic without involving Covid. Sorry for the shameless plug however it is so fitting as to what you are experiencing. Stay safe.
I think your partner and you came up with the best solution possible given the Covid-19 circumstances. This whole situation has made some of my co-workers start to really take finances seriously. In the past, it was so easy to just work extra shifts if they needed more money. Maybe this pandemic will cause more docs to work at becoming FI quickly.
Thanks Heather. Yeah for my colleague and I it really did not make any difference in the financial bottom line (which was going to be lower regardless) and it provided us with a pseudo vacation became of it (have a follow up post coming out in a bit that gives a follow up). Yes I think this has been an eye opener to a lot of docs that we can’t rely on our income to tide us through tough times. Shows the importance of having multiple income streams. Hopefully things go back to normal and this is just a small… Read more »