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What If Your Income Was Cut By 75%?

Even Medicine Isn’t Immune To Market Sweeps

As physicians we tend to feel quite protected from drastic wage cuts or job loss. After all, there aren’t a whole lot of us, about 930,000 for the entire US population of 318,000,000. Half of it primary care and half specialists. We aren’t in competition with any other external systems and disease isn’t going away anytime soon.

In this post I would like to share thoughts on how physician income could be adversely affected by market changes and again stress the importance of at least thinking through the possibility that one day we may not be able to command such a high income. Such an exercise is important in order to prevent wiping out our savings and having to start over from scratch.

Other Industries Suffered, Why Not Medicine?

Physicians are a group of professionals just like any other employment group, teachers, lawyers, cops, dentists, bankers, software engineers, realtors, taxi drivers and hotel owners.

You probably caught the pun with those last few professions. The dust hasn’t even settled on the blitzkrieg of AirBnb, Uber, and Netflix. None of the victim industries saw it coming, and even if they did, there wasn’t a whole lot to be done.

That said, it was a little over 15 years ago when the tech-bubble took place, so maybe tech will implode once again? Unlikely. The 2001 dot-com bubble had more to do with stock speculations running wild than with the infrastructure of technology implementation.

So why do physicians feel so secure in their jobs? Even colleges, universities and traditional teachers are recognizing that with one single legislative wand wave, their existence and job security would be threatened.

Truck drivers and truck driving schools can read the writing on the wall, and though the industry representatives are in denial about it, the demand will be driven by the consumer who would rather see a $40k retrofit of a truck than a $50k salary paid year-after-year to a person driving it.

Once our economy’s currency inflates, I figure few people will want to pay $50 to have their Amazon gadget delivered.

Yes, But…

Of course, I get it, it’s medicine, it’s different. It’s an art, a robo-probe can’t feel up that prostate the same way my delicate finger can. Yet at some point we’re going to have to admit that radiology as a field won’t exist in the next decade. Would a large HMO rather buy a $30 million dollar software that will read all sorts of images or run a staff of radiologists? Do doctors have unions to protect themselves against such changes? Nope.

Of course there are specialties which technology doesn’t stand a chance to replace anytime soon: surgery, psychiatry, emergency medicine and primary care. But sudden inflation, or hyperinflation or a long-lasting epidemic could cause many to skip the psyche sessions, to skip the knee replacement and even forgo the angiography.

The mentality is as follows, “No way! We doctors will not stand for technology replacing our jobs!” or “Patients would never want technology over the human touch!” or “It would never work, how would software suddenly replace me? It couldn’t be implemented!”.

Patients Interacting With Technology

You might think that patients would prefer a human physician over a robodoc but look at how technology is already seeding in healthcare.

Large medical groups are doing as much as 25% of their care through virtual visits.

Patients are able to schedule their own appointments through more intelligent scheduling software.

The patient is entering their symptoms and past medical history into Artificial Intelligence programs instead of talking to a nurse.

Computers are managing medication administration through IV pumps instead of the nurse coming in and running a manual drip.

If you tell a patient that they don’t have strep, they still are going to push for a strep test. If you tell them that their abdominal pain is likely a benign cutaneous nerve entrapment, they are still going to want that CT.

MRI’s only cost as much as they do because their demand is still low, because too many humans have to be involved in setting up, completing and deciphering an MRI.

How It Actually Works In This Economy

What AirBnb and Uber have done is illegal, in the sense of the word: against-the-laws-that-exist. They cloaked themselves as something else to circumvent major industry laws which had kept the taxi and hotel markets quite lucrative and monopolized.

But that’s okay, cuz “It’s ‘merica! Get more lawyers than the next person and either you’ll bankrupt them or you’ll get more investors and can bankroll your own sub-industry.

As the cost of healthcare is increasing there is more and more attention on physician salaries. You’re worried about hospitals making too much money? But dear, they are all “charitable organizations”. To this day, nobody has been able to explain to me how I made $300,000/year as a family medicine doctor while my employer’s website was kp.org. 

Patients are pissed that we stand between them and the medications they want, that they have to wait for hours in an urgent care or wait to see their own primary care doctor 2 months into the future. They are tired of waiting a week to get their lab results and they find it ridiculous to have to wait 2 months before they can get scheduled for their first chemo.

There is definitely some major writing on the wall and I hope that medicine always stays this lucrative for selfish reasons but I have my doubts. The next economic downturn will have some of the bravest lobbyists swearing up and down that healthcare alone has crippled this nation. That we must cut costs, that Dr. Mo should not be making $300k as a family medicine doctor when he can’t even see his patients in time.

Just like the FDA can somehow fish out a rapid approval out of their ass as soon as Ebola comes on the scene, the medical device companies will suddenly have a software that reads all EKG’s, interprets all MRI’s and interprets all labs better than any MD/DO.

Oh Yea, What If Your Salary Was Cut By 75%?

I got sidetracked. The point of this post was to ask you what you would do today if tomorrow your salary was cut by 75%? Fine, you don’t believe in the robotic invasion of medicine but get creative, what would you do if all hospitals went bankrupt or a major epidemic swept across this country, crippling elective medicine?

  • What could you cut?
  • Where else could you generate income?
  • How could you optimize the efficiency of your household?
  • Would life suck because you can’t have a fancy home?
  • Would you hate living because you couldn’t afford to dine out anymore?
  • Does the thought of having to give up your fancy sports car give you hives?

Developing the right mentality is as important as curbing our budgets. Not intentionally, but perhaps by habit, we associate our quality of life with what we’re able to spend on elective categories.

Think back to college, most of us couldn’t get the nicest gadgets, the fanciest cars and clothes. We took trips but often economic ones, usually local. We were so busy with projects and interacting with new friends that we didn’t need lavish lifestyles to produce happiness.

Friendship, learning, adventure and dreaming about the future could damn near feed us, clothe us and get us the best night’s sleep. Perhaps we’ve been chasing those aspirations with our spending ever since.

Avoiding Financial Annihilation

When 2008 happened and the housing market crashed, the realtors who were living high on the hog lost all their income stream. Their lifestyles were likely reflecting an income of well past $200k, not an easy overhead to manage when you have no income.

You see, when we get used to a certain kind of income then we plan around it. And that’s where the fault lies. It’s needless to say that our happiness has shit to do with how much we’re spending. With that out of the way, we shouldn’t be looking at how much we make and decide where to spend that income, but instead we should look at what we need to live a safe/comfortable/realistic lifestyle and plan how to support it with an income.

In this latter method we can divert any excess income towards securing our financial future. Sure, you can spend it on charities or rescuing 3-legged dogs, but I would say the world would be better off if we had more financially secure households. Once you have reached a level of financial independence then you are in a position to help others, especially when times get really tough.

Financial annihilation occurs when you have to make that transition from 100% income to 75% income. Inevitably, the majority of us will be in denial, embarrassed that we now make less than some cops. To save face we’ll keep up the pretences and spend out of our savings.

By the time our industry recovers and we once again find high-paying jobs, we’ll have wiped out a ton of our savings, accumulated more interest on our student loan debt and have shitty credit from months of late payments.

Adapt Quickly Or Change Your Lifestyle Now

The first option you have during a sudden income-drop is to immediately sell your home, rent a small apartment, get rid of the fancy cars, prepare your own meals, delete all unnecessary subscriptions and figure out ways to defer student loan payments. You would need to do this quickly because if you wait until everyone else is trying to do the same then some crappy law will get passed to “protect” the student loan companies and that window will close.

The second option is for you to reevaluate your lifestyle now. As a physician it’s almost a cruise-control mentality to go and buy a couple of nice cars, start buying nicer clothes and experience fine dining regularly, immediately after residency.

Though we have gargantuan student loan debts, few of us bat an eye at doubling down on our debt by buying a house. Then starts the “I’m already $900k in debt, what difference does it make if I spend $5k on a boob-job!?”. And folks, that is exactly why I didn’t get a boob-job, I’m investing that $5k because I don’t know if a boob-examining robot is somewhere out there, waiting to get deployed to take my job away.

Where should you start? You start by budgeting. By systematically cutting all expenses. You lean down like a marathon runner until all your debt is paid off and you have a solid investment portfolio built up. You maximize your income in your early years after residency and you get yourself a good financial adviser.

More and more physicians are now employed, so could such a headline be truly that farfetched: “Mass physician layoffs plaguing the healthcare scene!”

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