Indepdentent Contractor vs Employee

[vitriol102]

Greetings! Will be entering the workforce soon and have some questions. It is a very open ended question and would appreciate any advice on how to approach this subject. Pros/Cons. This would most likely benefit many of us. Also, for those of you who are graduating soon, what are you thoughts on this? Thank you.

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[RUOkie]

Independent Contractor:

Pros: Eat what you kill, more potential for higher income, good for hard workers who are self starters, more control over time off/work hours etc.

Cons: No income guarantee (sometimes you can get one for year 1), bad if you need to be told what to do, need to concentrate on expenses instead of just being a doctor, no predictability on paychecks

Salaried Employee:

Exactly the opposite


When I took my first job, I was salaried for 2 yrs then a IC for the next two (then I left that practice). When I was salaried, I made a decent living, but left 20% of my collections on the table over those 2 yrs. But I did not have to worry.

Once I was a contractor, my income increased significantly. But during that time, a local HMO went bancrupt in late November, and halted ALL physician payments. No one in our practice (except the employees) received a paycheck for the months of December and January, since we were upside down. Once the settlement happened, we got a HUGE paycheck, but that was like 6 months later. I had just bought a house, and luckily, my wifes income could cover the mortgage.

Personally, I prefer working for myself, and that is what I do now. But it is not for everybody. If you don't want to worry, and just show up, go to work, and get a paycheck. Then become salaried. It will be better for your mental well being.

 

[Jitter Bug]

A lot of people will work 1-2 years to get the hang of being a employed doctor before trying to be an IC. I was an employee and am now am independent contractor.

Pros/Cons Employee: You get a payroll, so check, benefits, usually an employer matched IRA contribution. You have specified vacation and time off. Often you sign a contract specifying you can't work for anyone else for extra doctor $.

Independent contractor: You get paid cash, so you need to set up a structure for payroll: LLC, S corp etc. You'll need an accountant. There's definitely some startuop education required. I ended up taking a few accounting classes at my local technical college. No benefits, so you'll need to set up your own malpractice, disability, medical, dental, IRA, etc. No paid vacation, but you can generally have more control over how much time off you take and the hours you work. Can be financially advantageous for tax purposes. Generally can do other medical work (hospital coverage, chart reveiws, IME, EMG's etc) on your own time.

Some practices have all the docs as IC's so you can feel like an employee. Some practices also can have 100% of salary based on RVU so you feel like "eat what you kill". Most employed physicians don't get paid based on A/R because your actual share of money netted by the practice is guarded like nuclear launch codes, lest you figure out your worth and ask for a raise. But I am an independent contractor and I have no idea what my A/R is either, for the same reason.

 

[PMR 4 MSK]

Also:

Employed - you have less say over what you recommend and prescribe for your patients. Your boss, CEO, admin, whoever, wants you to do whatever benefits them or the company the most. Given a choice of 2 treatments, they want you to do whichever has the best profit margin, regardless of EBM. You be put in a position of compromise. This is true of 100% of employed physicians. You give up your autonomy for a steady paycheck.

Indep Contractor - You have almost zero negotiating power with insurance. Take-it-or-leave-it contracts. You need to have business knowledge, which is difficult to learn, except"the hard way" - i.e. by losing money, you learn what you did wrong.

 

[vitriol102]

Thanks for the responses. Must admit it only makes me wary. Being a fresh grad, I'd prefer the conservative approach, take a salary learn the medicine and the business then start out on my own. Problem is I'm looking in the deep south and there's mostly IPC work.

For me and others looking at IPC, are there any resources out there? websites, books etc?

 

[Jitter Bug]

If you go independent contractor I highly recommend you spend money on two things. 1. A good contracts lawyer to help you understand what you are getting in for before you sign. 2. A good accountant in the area who has experience setting up docs as LLC/S-corp etc and can do/teach you payroll. Both will teach you what you need to know, for a fee. So get good ones. Your future partners can give you accountants names, and this forum or your residency folks can give you contract reviewer names.

I looked around to teach myself when I went IC and couldn't find much for physician specific resources. Most education I found was for the trades, guys who want to be sole proprietors or run a small shop. I took a class in small business accounting and my classmates were a carpenter, a plumber and a general contractor.

Personally I love being an IC because I have more control and a better understanding of the cost of doing business. But I'm not sure I would have had the time or motivation to tackle this right out of residency.

 

[RUOkie]

Thanks for the responses. Must admit it only makes me wary. Being a fresh grad, I'd prefer the conservative approach, take a salary learn the medicine and the business then start out on my own. Problem is I'm looking in the deep south and there's mostly IPC work.

For me and others looking at IPC, are there any resources out there? websites, books etc?

Are they at least offering a salary guarantee for year 1?

Otherwise, you may want to keep looking (unless you have a nest egg). It is unlikely that you will see much in terms of collections from Medicare for the first 3 months of practice because of delays in processing of the applications (which is almost 100pages long).

When I moved offices, my money was held for 6 months!

 

[avatar]

Greetings! Will be entering the workforce soon and have some questions. It is a very open ended question and would appreciate any advice on how to approach this subject. Pros/Cons. This would most likely benefit many of us. Also, for those of you who are graduating soon, what are you thoughts on this? Thank you.

I

I'm sure everyone here has a unique set up, so take all the advice into account, but remember that YMMV.

I am a new attending as well, out in practice 2.5 months. I am technically an employee at an ortho group for now, with partnership potential. I have a guaranteed base salary that is decent, plus 50% of my collections. My partners are (I think) transparent with regards to what I bill and collect thus far. I have paid vacation, sick leave, benefits, malpractice. As the first physiatrist in an ortho group, I also pretty much have free reign over my own practice, and they treat me as if I am already one of the partners. They don't tell me what to do, what treatments to offer, how to run my practice unless I ask for guidance or advice. I do have to fill a need, which is why they hired me. That means I have to do a lot of EMGs and Injections (which is what you want anyways) and some chronic narcotic management (take the bad with the good). At less than 3 months in, I am surviving entirely on internal referrals from my orthopods, half busy, and billing more than enough to meet my production bonus and then some. They give me time and guidance on how to market myself to the community referral base, often drag me along with them to such meetings at hospitals and clinics.

I'd say for my first year out, I have what I consider to be an ideal situation = guaranteed base salary, high production bonus, great benefits, excellent built in referral base, freedom of practice, room for growth, and great mentorship. I prefer this at this point in time to being entirely independent contractor. I suggest trying to find this kind of position within an ortho group, which I feel to be a naturally symbiotic relationship.

 

[vitriol102]

To answer some questions, yes there is an income guarantee.

Avatar, that is exactly the gig I am looking for. Not a big fan of EMG's but I'm gonna have to find a way to like them.

What's the best way to learn to be an IPC?

 

[RUOkie]

Practice

During the year of your income guarantee, pay attention to your collections, expenses etc. Get a detailed report monthly. If your group just gives you a bunch of graphs of expense ratios, ask for the detailed numbers. Be wary if they can't provide them.

Some doctors never pay attention to this stuff. We have a local ortho group (3 physicians) that had an office manager who built in a 10% raise to herself every year for 15 yrs. They never noticed that she was making $120K/yr until one of the docs looked.

 

[specepic]

These discussions often remind me of people discussing the pros and cons or single life vs. marriage. You have 'freedom' with the former and 'security' with the latter, etc. I think it ultimately comes down to the individual circumstances and being on guard for the pitfalls of both scenarios.

It does appear that every year cuts occur that likely affect the 'little guy' more than hosp (though both are feeling the cuts).

 

[vitriol102]

These discussions often remind me of people discussing the pros and cons or single life vs. marriage. You have 'freedom' with the former and 'security' with the latter, etc. I think it ultimately comes down to the individual circumstances and being on guard for the pitfalls of both scenarios.

It does appear that every year cuts occur that likely affect the 'little guy' more than hosp (though both are feeling the cuts).

LOL. Yes I do feel like it's a marriage. I've seen what happens when the administration and the employee don't mesh well. This is why I am cautious about working for someone else. I've met some "interesting" and hopefully rare personality types during medical school and residency

ROUkie you are dead on , I am worried about going into an IPC. There is a nest egg, but I'll take your advice and keep looking.

Just wanted to say thank you to everyone for your input. I'll look for a place which is employed and is a good fit.

 

[RUOkie]

Just remember, that taking a job out of residency is not forever. Most physicians change jobs/locations at least twice in their careers.