Reasons Why Doctors May Face Future Financial Problems Practicing Medicine

Let us get back to financial aspect of being a physician. My blog is after all called InvestingDoc.

One of the worse investments you can make is wasting time. Arguably, the second worst investment you can make is putting all your eggs into one basket with no back up plan. It can be difficult as a physician not to put all of your eggs in one basket since many of us work 50+ hour weeks at our main job.

This post is meant to highlight some of the potential financial problems in medicine that face practicing doctors in the near future. It is also meant to help inspire others to start looking outside of medicine. Medicine is just a job. Don’t forget that.


Inflation can have a double negative effect on physicians’ salaries.

You will spend more money on items you need to operate your practice and effectively make less money in medicine with inflation.

How can a physician make less money with inflation? Well, insurance contracts are often on a three-year cycle. Reimbursement rates are fixed for 3 years.

Let us take this past year inflation (2021) of 5% per year. Let us make one more assumption that inflation rate continues for 2 more years.

Since insurance contracts are often on a 3-year cycle, you are not able to re-negotiate your contract with the insurance company early. With 5% compound inflation over those 3 years that means that your effective income due to inflation is more than 16% less than when you signed the contract 3 years earlier.

If you think this means you will be taking a 16% pay cut, that is not the full story.

Keep in mind that as above, with inflation you are paying 16% more for your goods. You effectively have 16% less spending power due to inflation. This leads to even more financial losses for physician business owners.


Let’s say that your medical practice makes $100,000 per month in gross income.

Overhead is often around 50% for most clinics in today’s market. So, $50,000 of that goes to overhead.

With our above example, the cost of goods going up 16% means that the $50,000 now costs you $58,000.

Your Net Profit is now: ($100,000 – $58,000) $42,000 per month. However, remember that your dollar is worth 16% less than it was 3 years ago. Making the effective net pay about $36,000 in 3 years ago money.

Your net effective drop in pay is about 28%!

Competition Problems In Medicine

Competition helps consumers often pay lower prices or obtain better services/good or maybe even both.

In the 1990s more than 60% of practices were private practices. That number stands at less than 50% of practices today.

Your competition is no longer the guy or gal down the street with similar income to you to advertise or attract patients.

Your competition is now a multibillion-dollar company listed on the stock exchange who has way more power and negotiating skills with insurance companies. Add on top of this the rise in ability for non-physician providers to be able to practice independently in some states, and private practice is going to be squeezed from both the high end and the small competition.

CVS has the power to buy an insurance company and do full vertical integration to keep as much money in house as possible. You do not even come close to having that type of power.

Non Physician Providers

Let’s just get this one out of the way since that is a hot topic.

The rise of non physician providers has been staggering.

In the early 2000s, there were about 6,000 new nurse practitioner graduates per calendar year. In 2019, there were more than 36,000 nurse practitioner graduates that calendar year.

According to the US Bureau of Labor and Statistics, there were 198,000 new nurse practitioner graduates between 2010 and 2019.

According to the AAMC, there are just under one million practicing doctors in the united states.

A bit mind blowing to think that of all active practicing physicians, that 20% of that number is newly practicing as a nurse practitioner and entering into the workforce. Keep in mind that this does not account for physician assistants also.

Your competition might be not only other doctors, but online tememed companies or non-physician providers with less debt than the average medical student graduate.

Physician-Patient Barrier Breakdown

With the boom of the patient portals, has come a new phenomenon. Patients simply messaging into their doctor’s office thinking they can get an answer without a visit.

For example, recently I received this is a message I received via my portal:

“Hi, attached is my BP log after starting the lisinopril 4 weeks ago. As you can see, my blood pressure is in the normal range, and I don’t feel that I need to follow up since it is normal. Please call in a refill and I will see you at the next annual visit. Thanks, have a good day.”

This type of message happens all the time. Pictures of their foot with a cut. “Can you please call in some antibiotics, thanks!”

Legally, the portal offers a written timeline of all the advice given. If something happens it is not just my word vs theirs, but now we have a documented back and forth about treating medicine via messaging.

This has led to a lot of patient frustration and patients taking up staff time trying to get out of follow up visits. We now have a staff member who basically only monitors the messages since we get so many of them during the day. We have created a generic response to these patients that this is a visit, but having these patients call in to argue with my staff about why the doctor just cannot call it in takes time / money.

Rise Of High Deductible Plans

In the past 5 years there has been over a 300% rise in the number of high deductible plans in some states.

This puts the burden on collecting money owed to the doctor’s office, on the doctor’s office. It takes time to check eligibility. It also significantly delays payment if you do not collect payment up front.

Patients will sometimes try to skip visits to minimize having to pay their deductible. Or they will come in for a “physical” and have 10 problems to address thinking that everything is a free visit, leading to more frustration.

There is also a cost to collect these high deductible payments. Factoring in credit card processing fees, you are looking at 2.5% to 3% cost to collect those payments. Insurance payments via ACH are at no cost to direct deposited into your bank account.


I am being judged on metrics to extremes.

I sent the patient to the wrong lab for their a1c that does not link with the insurance payer. So, I have to pay a staff member to go into the patients account, print out the A1c report, fax it to the insurance company along with a form that they have to fill out for the patient. What.A.Waste.Of.Time.

It takes so much time to meet these metrics that it is hard to enjoy seeing these patients.

I failed a metric in a patient because this one payer wants every diabetic to have YEARLY dopplers of the arteries of the legs to ensure no peripheral arterial disease. My documentation of a good pulse, no lack of sensation, normal mono filament testing, and good capillary refill is not enough.

These annual wellness visits are now spent on simply filling out the paperwork their insurance company wants.

It is hard to keep a doctor motivated when they feel like a scribe checking boxes that yes, they did indeed ask their 95-year-old patient yet again annually if they want to be screened for hepatitis c or HIV. Hello burnout.

A Way Out

Most practices are going to develop strategies to mitigate these losses.

I’ll make some predictions about 2022 and trends that we will see going forward to mitigate these issues. Some of these are ways that we are helping avoid these annoyances.

  1. Subscription plans. Many practices are starting to add a yearly fee to stay a member or have some premium perks to being a part of their practice. Have a high deductible plan and want to pay $200 a year to have “free” telemed visits for UTI’s or birth control refill? I expect many practices to either add a subscription or consider adding a subscription to their business.
  2. Automation. With the rise in metrics and patient portal, we have switched to a new EMR where we can automate everything that we can automate. Our office has been on an automation bender, looking into automating everything and anything that we can in an effort to minimize staffing costs.
  3. Side-Deals. I expect large payers or groups will make deals for preferred status. For example, if you own a GI group that is quite large, I expect that you might to start negotiating with a large local employer and insurance company to say….send us all your screening colonoscopies and we will do them at this discounted rate. Patients then can get a free colonoscopy with this group or can pay extra to get it done elsewhere. I expect to see more and more carveouts as time goes on for preferred venders.
  4. Utilizing telemedicine. Overhead such as staff costs are much less for telemed visits. Those quick med refills should be looked at possible quick in between visits telemedicine visits. As a result, practices should start looking at ways to maximize efficiency with telemedicine from a staffing and overhead standpoint.

2 thoughts on “Reasons Why Doctors May Face Future Financial Problems Practicing Medicine

  • January 3, 2022 at 6:25 AM

    Great points on all the issues physicians face. Everyone assumes we are making bank and don’t realize that those days are long gone. Throw in Medicare reimbursement cuts, which private insurance companies quickly replicate, and rising medical school tuition costs and future docs are going to be screwed.

  • January 9, 2022 at 10:46 AM

    Those e-mails, asking for meds without a visit….it reminds me of a mentor’s statement: I am not a gumball machine.


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