The way it is Part 1

[KHE]

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Members….

There is now someone new on these forums running optometry down and discouraging students from pursuing optometry. We have seen these people before. I have been one of them, and to some extent still am. Yet we also have contributors who are very upbeat and encouraging about the future of the profession. Can both sets of these people be correct? Well, the answer is YES.

I’m going to try to spell this out once and for all for everyone on here….and I’m going to repost this in the optometry mentors forum as well. Of course…this is all just my humble opinion but I think it’s pretty non-biased and I think you’re going to find that most contributors who have been out a while and who own a practice are going to agree with me:

The fact is….to make any money in this profession you really have to be the owner. If you want to work as an associate in either private or commercial practice….you WILL make decent money. You’ll never starve. You’ll never eat out of a dumpster and you’ll never default on your student loans. However, your salary will essentially max out right at the start. Over time, you may make slightly more as your production increases, but you’ll never make the “big bucks.” Let me start with commercial practice….

Just so that we’re all on the same page here, there are really 3 different ways of working in commercial practice such as Lenscrafters, Walmart, Eyeglass World, Pearle, Sears etc. etc. etc.

1: You can own the “lease.” As a lease holding doctor, you lease space from the commercial entity and run a small practice within the confines of the larger commercial space. In theory, you are independent but in reality you can be limited in the sense of what you charge, what contact lenses you use, what hours you are open and other important things. The level of control that the commercial entity exerts over you varies from region to region. The truth is that if the optical is doing well and the commercial location is making good money…they pretty much leave you alone. If the optical however is not doing well, or not doing as well as they would like….you will find yourself being asked to “recommend” different lens options more….or to be open later, or to reduce your fees which are probably already quite low. Failure to comply may result in your lease being terminated and another doctor being brought in who is more willing to comply with their requests. Being the lease holding doctor can be very lucrative but usually only if you lease multiple locations. Most lease holding doctors take home in the low 6 figures. However, if the location you are leasing from is “slow” it can be very unlucrative because if you see no patients, you make no money even though you sat there all day waiting for patients to come in.

2: You can work as an employee for the lease holding doctor. Most commercial leases require a doctor to be onsite 7 days a week or for very long hours. Naturally, most doctors don’t want to work that much so they may hire other doctors to see patients at the commercial location. In this situation, you are employed by the lease holding doctor and are paid from them, NOT the commercial establishment. Compensation packages vary wildly. Some are flat rate…some are based on production. There are obviously pros and cons of each which we can discuss in another thread. The commercial location doesn’t have direct control over you per se….but they do your boss. So if you are difficult and won’t play by the commercial locations rules…then a simple talk with your employer (the lease holding doctor) is all that’s needed to send you packing.

3: You can be an independent contractor. Some commercial locations are not busy at all and only want a doctor to be present on certain days, or for certain hours. They also don’t want to have a formalized contract because the needs of the location or the doctor can change suddenly. In these arrangements, you enter into an informal relationship with the location in which you agree to come in and provide exams for a certain period of time, and you are paid directly by the patient. You keep whatever you collect. So if you charge $100 for an exam, and you see 10 patients, you go home with $1000. If you see zero patients, you go home with zero. Sometimes the commercial location asks for a small percentage, but usually that is reserved for a true “lease” arrangement.

One of the common misconceptions about commercial practice is that patients get crappy care there. I have never found that to be the case. Many doctors (particularly young ones or new graduates) do outstanding exams in commercial locations. But that’s actually a big problem. Because by doing a full blown, highly competent professional exam on a hypertensive diabetic with macular degeneration for $49, you have reduced the value of that service to exactly $49. I mean cmon folks…most people pay more for a hair cut or an oil change.

But the real problem with all types of commercial practice is that even if you make good money, eventually it just eats away your soul. I’m sure not a single one of you in school, or entering school, or thinking of entering school is fantasizing about spending all that money for a quality education only to spend it working evenings and weekends at the mall or Walmart. Well after seeing your 30th patient of the day who only wants to renew their acuvues or is getting an exam because they are pissed off that the optical wouldn’t make them a new pair just by reading their Rx off of their 7 year old pair of glasses, you can get a little jaded. After a year or two, you’re going to realize that you’re getting screwed and that your exam IS worth more than $49 and that YOU are worth more than $49. I think that is what is happening to our new friend here….

Many people enter commercial practice with the intention of working there for a “few years” to “pay of debt” and then maybe start or buy a practice. That’s a fine idea in theory, but in reality it almost never works…and here’s why:

When you come out of school, with a huge student loan debt people often take the commercial job out of fear. They work there for a little while, maybe pay down some debt, but then they buy a house, a car, get married, have a kid or start to take on the major financial responsibilities of adulthood. Then, when the desire to open or buy that practice comes along, they can’t make that leap because they are beholden to that higher commercial salary. One of the criticisms of young doctors is that they expect everything handed to them on a silver platter, or expect to make huge money right out of school. I disagree with that. I don’t know any young doctors (myself included) who are driving fancy cars, taking exotic vacations, buying big houses, or living high off the hog. But even if you’re not living high off the hog, it can become easy to get bogged down with a bunch of debt other than student loan debt.

The key to all of this is CASH FLOW. I recommend that every student take out whatever loans they need, but then pay them back over the LONGEST POSSIBLE PERIOD OF TIME ALLOWED. I agree…it is very scary to come out of school and look at that first statement and see that GIANT number at the bottom showing how much you owe. But the fact is that student loan is “good” debt. It is an investment in YOURSELF. And even at today’s’ higher interest rates, it is still much lower than virtually every other loan out there AND it’s tax deductible for those below a certain income threshold.

So….if you have $1.00 and you put it towards your student loan and earn 8.5%, or 4.5% (or whatever interest your loan is at) you will essentially earn an 8.5 or 4.5% return on your investment. (actually less because you will lose the tax benefit.)

OR….you can take that $1.00 and invest it in a retirement account, a non tax deferred investment, or a PRACTICE which you can grow over time to eventually earn you MUCH MORE money than you would in commercial practice but also give you something of value that you sell at the end.

Many people worry that their new practice won’t make enough money to pay them in the early lean years, and to pay off the loan. That’s not really true…when you are devising your business plan for your new practice, or the one you purchase then BUDGET IN a salary for yourself AS PART OF THE LOAN. Then over time, as the practice grows you pay the loan off and then you make even MORE money each month.

Working for someone else is never going to get you anywhere in optometry. Your “experience” isn’t going to get you anywhere outside of an institutional setting. As a practice owner, why do I want to hire someone with 10 years experience for $100000 when I can hire a new graduate or someone out of school for a year or two for much less than that? Unlike in most other fields, as you get older and more experienced, you really aren’t worth anymore to any potential employer than a new graduate.

The fact is that the ONLY way to make real good money in this field is to be the owner. So how does one become the owner?

Stay tuned for more of my brilliant pontificating on this subject....

 

[still_confused]

Unlike in most other fields, as you get older and more experienced, you really aren’t worth anymore to any potential employer than a new graduate.

i agree with everything you said except this part. experience is still worth something. diseases management and vision therapy gets easier (and more efficient) with more experience. now whether you get paid more is another question, but as far as "worth" the experience should add to it. if anything the employer will feel more comfortable hiring the experienced optometrist because they probably think they have been doing it longer and has some idea what they are doing. getting paid for being more valuable is the difficult part.

 

[posner]

i agree with everything you said except this part. experience is still worth something. diseases management and vision therapy gets easier (and more efficient) with more experience. now whether you get paid more is another question, but as far as "worth" the experience should add to it. if anything the employer will feel more comfortable hiring the experienced optometrist because they probably think they have been doing it longer and has some idea what they are doing. getting paid for being more valuable is the difficult part.

I would agree with your statement that experience is worth something. However, as an owner of a successful group practice, it doesnt mean I am going to necessarily pay you more for your experience. In previous interviews with potential new associates I am always amazed at how often residency trained ODs feel they deserve more money. I did a residency myself, and while I learned alot, it didnt make much difference when I went to find a practice. If you want to work in an academic setting, then go ahead(although you still wont make more money). Sadly, in optometry, with time the OD feels as if they are worth more but in reality most new graduates can perform the same procedures(since there are not that many that we do in private practice any way) and in many cases may actually have better training than seasoned ODs. In the case of surgery, there is no substitute for seasoned surgeon. In primary care this is just not the case.

Posner

 

[WoodyJI]

KHE, this is a great post. I found it very helpful, and I appreciate the time you put into it. I look forward to the rest of the series!

Your description of the "golden handcuff" trap is exactly what greed-susceptible people (aren't we all?) in OD school need to read/hear. Human nature is such that no matter how "financially disciplined" someone manages to convince themselves that they are when they're considering going corporate "just for a while," most will be stuck needing the job to pay for their new standard of living. One of our professors sums it up nicely like this: Live like a student now, and then like a doctor forever. Live like a doctor now, and you'll live like a student forever.

Could you elaborate on your stance behind "cash flow" and selecting the longest possible loan period? This is a tough concept for me to feel completely comfortable with... How can I convince myself that it's O.K. to live with debt for 30 years and not just "be free" in 10? If I get out as quickly as possible, I'll have that stone off of my neck and won't end up paying so much more than I borrowed because of interest.

Also when you say "budget your salary into the practice-buying loan" what do you you mean exactly? Are you saying that you'd figure the length of the loan, then take [your future salary * length of loan + the rest of the budgeted expenses = total loan amount requested]? This seems to work b/c it's like getting several years worth of salary to sit in the bank/CD/etc. to grow interest, but that's only true if you can out-pace a higher interest rate from the lender (if the rate goes up as the borrowed amount does). Being only a 2nd year student, it's sort of hard for me to see all of the things that are going to be on the table when I go out into the financial real world.

 

[WoodyJI]

Ah, so I see I'm not the only one with this question...more in Part 3. I'll bring myself up to speed quicker next time, but at least I can take refuge in the fact that I didn't just pm you and was willing to put myself out there 😉.

 

[Elfego Baca]

I would agree with your statement that experience is worth something. However, as an owner of a successful group practice, it doesnt mean I am going to necessarily pay you more for your experience. In previous interviews with potential new associates I am always amazed at how often residency trained ODs feel they deserve more money. I did a residency myself, and while I learned alot, it didnt make much difference when I went to find a practice. If you want to work in an academic setting, then go ahead(although you still wont make more money). Sadly, in optometry, with time the OD feels as if they are worth more but in reality most new graduates can perform the same procedures(since there are not that many that we do in private practice any way) and in many cases may actually have better training than seasoned ODs. In the case of surgery, there is no substitute for seasoned surgeon. In primary care this is just not the case.

Posner

Posner is definitely correct. There is very little premium paid by employers to employees who are experienced vs. those who are a year or two out of school. Someone with NO experience is likely to be somewhat slow and mistake-prone, and thus is less attractive to an employer and will probably be paid a bit less. Beyond that, there's not much more that an experienced primary care OD can offer an employer compared to a young one, and thus very little incentive to pay a premium to have an experienced OD as an employee. The sad fact is that if you're an employee, your salary is not going to increase much beyond what you started at (except for increases due to inflation). It may be different if you are a specialist in a particular area with a premium skill set that a specialty ophthalmological practice requires, such as working with a strab surgeon or a corneal specialist. Residency training in ocular disease isn't going to count for much because most non-residency trained recently-graduated OD's possess the skills that an employer/MD is looking for -- most of them do the exotic stuff themselves.