R.E.S.T. for Family Practitioners
In March of 2020, the Coronavirus turned the American economy on its head with repercussions that continue to persist today. Small businesses have struggled to stay afloat; the unemployment rate spiked to almost fifteen percent that April; and in more than half of the states, over one in five households was behind on rent the following July.
The lasting significant economic ramifications affected family medicine physicians as well. Practices lost much of their income because patients following CDC guidelines opted to stay home or avoided making appointments. In fact, approximately eight percent of doctors who shut their practice in 2020 were primary-care physicians. Many family practices that were initially able to stay afloat did so by foregoing their own paychecks or making the difficult decision to furlough their staff.
The country relies heavily on the help of these front-line health care workers. After the number of sacrifices that family medicine physicians have made, they deserve to take a moment to ensure they are financially protected heading into a potentially more difficult environment with today’s higher interest rates. Family medicine physicians deserve to REST.
R: Reassess Cash Flow & Debt Management
Only about twenty two percent of family medicine physicians use a formal, written budget regarding income and expenses to follow. Utilizing a budget is a fundamental asset to tracking your financial history. It is imperative for physicians during this time to create a new budget by accounting for their reduction in pay. Noting this change in influx can help physicians calculate how to live below their means during the time in which their pay will be reduced.
Once the new income is assessed, monthly expenses can be ordered by importance. Statistically, the largest expenses for family medicine physicians are mortgages, car loans, and personal student loans. Calculating what it would take to continue making timely payments can prevent you from falling behind and accumulating additional debt.
After calculating numbers to create a basic budget, risk tolerance should be added into consideration. Some helpful, guiding questions include noting what financial stress is most important for you to unload, and what you hope living below your means will allow you to achieve. These answers will help create strategies for achieving this purpose within the confines of new income restrictions.
E: Exposure
Family medicine practices could experience more exposure to the economy than feels safe because of its reliance on fee-based services through insurance providers. Having an accessible emergency fund could help shield the business without the risk of foregoing a paycheck.
An emergency fund is an account, most commonly a savings account, that allows one to place a certain amount of money aside for times when their monthly budget cannot fund unprecedented expenses. The most commonly suggested amount to maintain in this account would equal approximately three to six months’ worth of expenses. This emergency fund can be used to pay office bills, employee paychecks, or supplement personal income when ends will not meet.
S: Scale Practice
There is strength in numbers, especially for family practices. Family medicine physicians can assess how to proceed with their business based on current income, projected income, and potential income if their practice were to be scaled. If the business is projected to close, it might be wise to consider a merger or acquisition.
Merging with another practice may be an option for family medicine physicians who are struggling to keep their business open. They have the leverage of negotiating maintaining ownership status in the business while also creating supplemental means of income for the practice.
Acquisition may also be smart in one of two ways. The first way is if the practice is projected to, most likely, close. These physicians may have the opportunity to be acquired by another family practice willing to take on their staff as employees in an effort to expand their business. While the struggling practice may no longer keep their titles, they will keep their patients and continue working in the field.
The second way is if the practice is financially stable enough to acquire another struggling practice. These physicians would have the opportunity to gain more clients through the acquisition while also adding new staff to help on their team.
T: Transfer of Risk
After these three assessments, family medicine physicians should understand the risk mitigation strategies achievable throughout this pandemic. Another way of protecting the business from risk is by transferring it onto an insurance company.
Life insurance and Disability Insurance policies have riders that allow physicians to transfer additional risk from themselves. These two types of insurances are pivotal risk mitigation during a global pandemic that has startled the health of the country.
Disability and Life Insurance has riders catered to business owners that protect their business. For example, the Key Person rider supplements business income when an essential employee can no longer work for the business owners. Additionally, the Business Overhead Exposure rider for Disability Insurance covers essential business expenses when a disability cuts off the profit the company uses to pay their bills.
Additionally, a Buy/Sell Life and Disability policy protects business owners in the event of death. This policy would allow owners to insure each other, when signed by all parties, to protect their business partnership. The death benefit of this policy would act as a lump sum to buy out the late owner’s portion of the company from their “next of kin”. This is a helpful investment to protect personal income if the insured’s passing or disability causes a loss of business.
Conclusion
Family medicine physicians have given up an invaluable amount to help this country brave through the worst of the Coronavirus pandemic. As front-line health care workers, they have put aside their own needs for others. Taking a few minutes each day to REST can catapult these physicians out of financial hardship and into financial wellness.
Author: Andrew Pelletier
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