Financial literacy has never been more important for practicing surgeons. Billing and reimbursement have become increasingly complex, with both governmental and private payors creating complicated mechanisms of hospital and physician payment. Shifting trends in surgeon employment within medical systems versus private practice are altering traditional income potential and expectations. And, perhaps most concerning, ballooning educational debt (the median indebtedness of graduating medical students rose to $195,000 last year, according to the Association of American Medical Colleges [AAMC]) is now affecting not only specialty and practice choices, but also contributing to the physician burnout epidemic.1
Yet many physicians—particularly residents—are ill-equipped to manage the financial challenges specific to most young surgeons. Last year, a study at Barnes Jewish Hospital, Washington University Medical School, St. Louis, MO, highlighted these shortcomings. In a cross-sectional survey, 422 residents demonstrated low financial literacy but carried high amounts of both personal and educational debt. Of these respondents, 48 percent owed more than $200,000 in student loans, and 32 percent expected to carry over into the following month $10,000 in credit card debt. Of particular concern, high debt correlated with lower job satisfaction, even among these early-career physicians.2 This finding echoes findings from other studies that have demonstrated the impact of indebtedness and poor financial planning on career satisfaction among residents and junior faculty.3,4
Despite these deficits and their documented effect on the surgical workforce, financial education for surgical residents remains critically deficient. The Accreditation Council for Graduate Medical Education Program Requirements for Graduate Medical Education in General Surgery do not require teaching of personal or practice finance, and the Surgical Council on Resident Education curriculum lacks information on these topics.5
The authors of this column have experienced firsthand how lack of education can result in poor financial decision making, which can affect surgeons throughout their careers. To prevent these often simple mistakes, we created a trainee-driven, modular mini-curriculum on financial literacy targeted to the general surgery resident, titled Financial Literacy: Making Money and How to Manage It. This four-part series uses industry, academic faculty, and institutional financial resources to educate surgical residents on four essential topics. The primary objective of this curriculum is not to provide comprehensive financial education or personalized advice to residents. Instead, the goals are as follows:
- Highlight the importance of saving money, even as a resident
- Provide basic education regarding low-cost, efficient investment options
- Demystify disability insurance and the details of contract negotiation
- Expose the differences between typical academic and private practice payment structures and what they mean for surgeons
Basics of saving, investment, and taxes
The foundational pillars of financial stability are planning and adequate saving that maximizes the benefits of compounding interest over time. Yet physicians, and especially young surgeons, have many unique considerations. How much is appropriate to save as a resident in light of significant salary increases after training? How much debt should one pay down now versus in five years? How do tax implications affect which savings vehicle is best for you? The answers to these questions are complicated, personal, and variable, depending on each individual’s financial picture and goals. Clearly, no single lecture or general coursework can adequately answer each question for each individual resident.
To get some generally applicable advice, we partnered with a local financial advisor to host a 90-minute discussion on investment and savings vehicles, tax considerations for high-income earners, and basic savings strategies with high future income in mind. After a brief 15-minute introduction to critical terminology, the remaining time was devoted to answering questions from participants. This flexible structure allowed all residents to benefit from the conversation, regardless of their prior experience. Recognizing that some people feel more comfortable working with a financial advisor, we allocated time to discuss important considerations when seeking such a partner.
Protecting your income: Disability and life insurance for the surgery resident
Our internal financial literacy survey showed that few residents have personal disability insurance policies, despite high interest in purchasing coverage. Further investigation revealed significant confusion and uncertainty regarding available products and optimization of policies for surgical trainees. Because residency is an optimal time to purchase disability insurance, we felt this knowledge gap was critical. Obtaining experienced advice is paramount to successfully teaching this complicated topic.
We again partnered with a local industry expert to provide a lecture on optimal insurance coverage. The discussion focused on key elements of a strong policy, namely true “own-occupation” coverage that honors claims for any disability that prevents a physician from practicing his or her specialty (even if the physician can still perform other work or practice another specialty), cost-of-living adjustment riders, gender-blind policies for women, and preferred underwriters. Finally, the importance of owning disability coverage was stressed.
Contract negotiation for junior faculty
For senior residents and fellows, negotiating the contract for their first position posttraining is an intimidating process fraught with uncertainty. Few young surgeons have experience deciphering practice contracts, understand the implications of particular components, or even know that much of the contract is negotiable. Yet, as with any contract, changes can both improve a surgeon’s quality of life and ensure the young physician has the resources and protections needed to successfully achieve his or her clinical or academic goals. When done well, negotiations yield a “win-win” for both parties.
To expose residents to both the importance of negotiation, as well as some of its critical components, we dedicated an hour of the weekly resident educational conference to this important topic. We invited an outspoken proponent of physician contract negotiation, Joseph V. Sakran, MD, MPA, MPH, FACS, to deliver his condensed curriculum, “The art of negotiation: Strategy for success.”6 Dr. Sakran’s approach highlights the importance of negotiating any contract, the need for preparation and consideration of the entire contract package (instead of simply base salary), and strategies for removing emotion from the process.
Payday: Typical compensation structures
Understanding surgeon reimbursement and the differences in salaried versus volume-driven structures is critical for all trainees. Information about national payment trends is available from a variety of sources including the AAMC; however, few residents have direct exposure to compensation plans beyond traditional academic business models. The department of surgery at Washington University includes a number of surgeons who have practiced in both academic and private practice settings.
Capitalizing on this institutional resource, we concluded the curriculum with a roundtable discussion focused on several personal experiences with different practice types. Importantly, we also included senior departmental leadership in the discussion to provide an administrative perspective on division of resources, relative value unit targets, and components beyond clinical practice that can generate revenue in the academic setting.
Financial stability equals workforce stability
A number of financial pressures threaten modern American medicine. Rising costs of medical education, reduced reimbursement, and increasingly complex payment structures all contribute to high debt and financial instability, both of which have been shown to increase risk of burnout and lower quality of patient care. These systemic problems require complex, systemic solutions. Unfortunately, such wide-ranging changes to educational and reimbursement structures are unlikely to materialize in the near term.
However, efforts to improve how physicians save, protect, and allocate their resources can reduce debt, enable financial independence, and protect against burnout—and can be quickly implemented. Empowering residents to attain financial stability may reduce the significant workforce challenges facing today’s surgical community. In our experience, a focused curriculum that addresses tax-efficient saving and investing, income protection, compensation structure, and contract negotiation provides young surgeons with the basic skills needed to start their journey to financial independence.
- 2017 AAMC medical school graduation questionnaire. All schools summary report & individual school report. Association of American Medical Colleges. July 2017. Available at: aamc.org/download/481784/data/2017gqallschoolssummaryreport.pdf. Accessed June 2, 2018.
- Ahmad FA, White AJ, Hiller KM, Amini R, Jeffe DB. An assessment of residents’ and fellows’ personal finance literacy: An unmet medical education need. Int J Med Educ. 2017;8:192-204.
- Steiner JW, Pop RB, You J, et al. Anesthesiology residents’ medical school debt influence on moonlighting activities, work environment choice, and debt repayment programs: A nationwide survey. Anesth Analg. 2012;115(1):170-175.
- Dahle JM. Physicians are financially illiterate and it’s time for that to change. com. Available at: www.kevinmd.com/blog/2017/03/physicians-financially-illiterate-time-change.html. Accessed June 1, 2018.
- Program requirements for graduate medical education in general surgery. Accreditation Council for Graduate Medical Education. July 1, 2017. Available at: acgme.org/Portals/0/PFAssets/ProgramRequirements/440GeneralSurgery2018.pdf. Accessed June 2, 2018.
- Sakran J. The art of negotiation: Strategy for success. ACS Surgery News. October 13, 2015. Available at: mdedge.com/acssurgerynews/article/103489/practice-management/art-negotiation-strategy-success. Accessed June 1, 2018.