The nation's financial woes in the last few years have been a triple whammy for physicians. And as a result, many doctors fear for their future.

As with most investors, physicians took a hit to their portfolios during the downturn, watching helplessly as a decade of savings vanished and retirement plan goals became as fleeting as Brigadoon. At the same time, demand for many medical services soared, but payments for procedures and office visits shrunk as government programs and private insurers cut reimbursement rates.

Then, last year, Congress passed and President Obama signed into law the Patient Protection and Affordable Care Act, which aims to provide better medical benefits for more Americans. The law will overhaul the way medicine is practiced in America, consolidating patient care into group entities. Many of the nation's 960,000 doctors - even those who support the law - fear the changes will mean further cuts to their paychecks and more burden on their already packed workday.

As a result, many financial planners say their physician clients are fretting that they won't have enough money saved to retire on schedule, and that their savings won't hold through their elderly years. One doctor in his sixties confessed to his planner that retirement woes had robbed him of sleep.

"He was taking Ambien to sleep at night,'' says John Grande, a certified financial planner with Grande Financial Services in Oakhurst, N.J., which is part of the Raymond James network. His client, an eye surgeon, had substantial savings, but was convinced that his goals to retire at age 65 and live well were gone.

"All he did when he went home was watch CNBC and listen to all the bad news. With the economic tsunami that we've been given, many are thinking that they can never retire and others are just paralyzed with fear,'' Grande says.



Financial planners say they are reworking their clients' portfolios, protecting more of their assets through tax-free shelters, and urging them to invest heavily in liability and long-term-care insurance. In some cases, planners have recommended that physicians in private practice consult with practice management specialists to see if the doctors could become more efficient and wrest more income or savings from their workplaces.

Mostly, financial advisors say, they've had to counsel their clients about their expectations for living lavishly once they stop working. "I think a lot of the concerns are coming from the uncertainty out there,'' says James Holtzman, a certified financial planner with Legend Financial Advisors in Pittsburgh. "We're finding doctors leaving a little bit earlier than anticipated, which results in a need to revise the retirement pace. "We also find doctors with their own practices who want to stay on longer, and some doctors are ready to throw up their arms and give up on it at this point,'' Holtzman adds.

Retirement, though, may not be the panacea that doctors once longed for. "People are coming to us and they're saying, 'Look, I lost 40%, 50% of my net worth in 2008,' " Grande says. "Retirement is a very scary thing for physicians because they're not going to earn another paycheck, so they have to depend on their own resources. How do they know [a downturn] won't happen in retirement? ... People fear they're going to run out of money.''

For decades, doctors tended to follow a minimalist retirement strategy: Work as hard as you can and save as much of your income as you can. That method became trickier, planners say, as more doctors felt squeezed in the last decade, though not because they had less work.

Many physicians earn less than in the past for each procedure because private insurers and government programs, such as Medicare and Medicaid, have cut reimbursements for everything from routine office visits to cardiac surgery. At the same time, medical costs have surged with the creation of more complex pharmaceuticals and medical devices, as well as the cost for safety mandates such as those dictating standards of office laboratories. National health spending per capita climbed nearly 66% from $4,870 in 2000 to $8,080 in 2009, according to the Kaiser Family Foundation. That means to earn what they made a decade ago, many doctors must see more patients.

Many physicians worry that the new federal health care law, with major provisions beginning in 2014, will further limit their earnings as they work. The law requires that the parties involved with patient care - family practitioners, specialists, hospitalists, nurses and social workers - coordinate care decisions. The teams will be expected to improve the quality of care and deliver that for less than projected costs to millions more Americans who are expected to be covered. Billing will be coordinated, too, so that providers will be paid not for conducting more tests, but for keeping people healthy. Every step will be precisely documented; doctors will be expected to keep and share computerized records.

Medical centers are expected to play dominant roles in orchestrating that care. Doctors, once the lead in the medical show, could be relegated to the chorus. That coordination could cut doctors' income, physicians and planners say, while the billing and records requirements will increase costs for doctors.

"If you polled them, their expectation is their incomes are going to go down,'' says Michael Lewellen, director of financial planning at OJM Group in Cincinnati. "Many would say they wouldn't be expecting to make in 10 years what they're making today.''

Planners say they are urging physician clients to reevaluate their portfolios. "You've got all this uncertainty. You've got clients who spent 30 years building up assets, and yet they are taking on way too much risk in this environment,'' Holtzman says. "Nothing like a drop [in the markets] to clear out 30 years of hard work, especially if client income is starting to slow down. I think the portfolio evaluation is critical at that point.''



Lewellen and Grande have recommended that physicians in private practice hire consultants to ensure that the practice is running as efficiently as possible and to see how the doctors might bring in more income. Deron Bibb, who is president of practice management consulting group Paradigm Management in Elizabethtown, Ky., says he diagnoses what ails practices and why they aren't making more money.

The most common problem, Bibb says, is that doctors have lost revenue over time because of payer cuts. A family practitioner may see 25 patients a day, but reimbursements per visit have dropped 15% among his clients, while operating expenses have stayed the same.

"Medicare pays less, Medicaid pays less, Blue Cross pays less,'' he says. "But your expenses could stay the same. Many of them worked hard and the money was there because they worked hard. Now they have to work smart,'' Bibb says.

"We can provide them with assistance on compliance issues and help them with changing their basic economic model to become more efficient,'' he adds. One idea he suggests for some clients: Establish a process to ensure they are reimbursed, such as hiring a billing service.

Lewellen is working with one oncologist in his 30s who has seen his income drop 30% in the last 18 months, primarily because insurance reimbursements have plunged. The retirement plan targets that Lewellen created for the doctor three years ago may not be practical, they realized.

Linda Gadkowski, a certified financial planner with Beacon Financial Planning in Centerville, Mass., urges her clients to be debt free, "which is contrary to the idea most of them have,'' she says. The wife of a doctor, Gadkowski pushes clients to pay off second homes and sink their children's college money into 529 plans "so they can afford whatever's coming down the pike,'' she says.



Because of the costs of running a solo or small medical practice, coupled with the onerous workdays and the uncertainty of the new health law, many doctors are choosing to sell their practices and work directly for hospitals. They are trading independence for reliable paychecks and retirement packages. Hospitals are eager to sign up successful doctors - and lay claim to their pool of patients - to ensure the hospitals' dominance as they face competition.

John Aitchison, vice president with the Planning Group in Scottsdale, Ariz., says one client, a 60-year-old neurosurgeon, recently chose to sell his practice and work directly for a hospital on salary. Aitchison helped the doctor and his wife put money in a defined benefit plan when the man owned the practice.

"Because of their age, the age-weighted plan allowed them to put away the most money on a per-year basis where they can't get taxed,'' Aitchison says. "Their other investments I tried to do in a more tax-efficient way.'' Aitchison sought out investments that wouldn't throw off capital gains such as life insurance policies.

Several planners say they urge doctors to invest significant sums in long-term-care and health insurance. Some advisors recommend stashing as much as $300,000 for health costs, not including Medicare supplement plans, Holtzman says.

"We use 15% insurance premium inflation,'' he says. "You run those numbers out in retirement, they're scary.'' Stick with the big carriers, he warns. Smaller ones are more fragile and could become insolvent.

Another idea Aitchison's suggests exploring: privately held real estate investment trusts, which may be less volatile. He says doctors in Arizona have invested in a trust that is buying up buildings that they believe will be in demand when the new health care law revs up and more hospitals seek office space.

Lewellen advises physician clients to think hard about what they would sacrifice in quitting their practices and becoming hospital employees. "For some older physicians, I don't want to call it a golden parachute, but in their last three years of practice, they sign a contract where they have a guaranteed income,'' he says.

"But at the end of the day, you give up lot of independence not having a practice. You lose your tax planning. Working for a large hospital, you have no control over your retirement plan ... you're a straight W-2 employee,'' Lewellen says. Doctors also would have little say over group retirement benefits.


It's not easy for many doctors to find successors to take over their practices, Bibb says. Much of what the practices are worth rests on decisions that will be made by insurance companies and the government. "What you're buying today, tomorrow it could look very different,'' he says.

Holtzman urges doctors to develop succession plans for their practices. Will they groom one or two people to take over the practice? Sell it outright? Switch to part-time work before retiring completely?

Carrying out such a plan could take as many as 10 years to fulfill, he advises. With no one fully understanding what will shake out in the health care industry, clients must start planning earlier than in the past, he says.

Grande also says it's important for planners to create an investment policy statement as a guide for their physician clients. "When it comes to money ... it seems to be like a left-brain/right-brain [issue] and they just have no understanding that you can't retire and spend $150,000 a year if you have a $1.5 million portfolio,'' Grande says.

"You can either retire at 65, or you're going to have to work longer. An investment policy statement takes out all the emotion,'' he adds. "And it tells you what to do. You're forced to take profits when they're there and you're forced to reallocate your portfolio and get into the market when you don't want to.''

For his sleep-deprived client, Grande reworked the retirement plan, shrinking the doctor's exposure in equities, making sure he had liability insurance and long-term care-insurance, and adjusting the amount the doctor would live on annually in his retirement years. Together, they designed a portfolio that will be reviewed every six months, putting in hedging strategies and money managers who strive to make money in down markets.

Some planners say it's important for colleagues to craft retirement projections that doctors can work with no matter what way the health care law is carried out. "We've always done very flexible planning,'' says Howard Hook, a certified financial planner and principal with EKS Associates in Princeton, N.J.

His firm advises that if clients believe their incomes will be squeezed over the next few years, they should raise money through teaching or achieving cost efficiencies, such as slicing office expenses. One client recently joined an established practice, which provides all the administrative and backroom operations. Because he doesn't have to oversee billing and staffing, the obstetrician is able to see the same number of patients weekly, but take off Friday afternoons, Hook says.

Whatever the new health care law brings, that client is ready. "If the laws don't work out the way they're supposed to, you're not herded in one direction,'' Hook says. "The law never turns out to be what people think it is.''


Suzanne Sataline,a former health care reporter at The Wall Street Journal, is a freelance writer in Brooklyn, N.Y.

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