Doctors' 5 Most Common Financial Blunders

Dennis G. Murray, MA


December 02, 2013

In This Article

Hard Decisions That Are Important

4. Failing to Bill Properly

It's hard enough to stay competitive these days, but if your front-office staff isn't billing correctly for the work you do, chances are you're leaving thousands of dollars on the table each year.

To be sure you aren't, use your billing software to run a "practice analysis report," which shows a breakdown of your charges, payments, and adjustments by provider, procedure code, payer, and a range of posting dates. "I would say that 95% of the practices we call on either don't run these reports, or their billing software generates them automatically but no one in the practice looks at them," says Judy Bee, a principal with Practice Performance Group, a management consulting firm based in La Jolla, California.

A simple report -- such as a monthly analysis of procedures by CPT code -- can allow you to see a pattern of office-visit charges that reflects your patient mix. "A common problem among physicians is that they tend to undercode because they're afraid of being audited by Medicare," Bee says. "So they may be seeing a fair amount of complex cases, involving patients with lots of comorbidities and lots of chart notes, but they're not billing to the appropriate level."

To make sure those dollars don't slip away, Bee's advice is unwavering: "Do a thorough job, document everything you do, and bill appropriately. If you do all that, you'll be fine."

5. Not Saving for a Rainy Day

Among the biggest financial mistakes doctors tend to make is living too much for today. "One of our clients, a surgeon, bought a Ferrari recently," says Karen Altfest. "Yes, he can afford it, but we would have rather seen him put more money into savings and spend less on a vehicle."

A good rule of thumb, most financial advisers agree, is to stash 6 to 9 months' worth of take-home pay in an emergency fund, in case a crisis forces you to stop practicing for a while. And don't think it can't happen: Your office building could suffer damage in a flood or a fire, an accident or illness may sideline you, or you may need to take time off to help care for a sick relative. Any of these scenarios could keep you from seeing patients for weeks or months at a time.

While disability insurance can help in certain situations, most policies pay only around 60% of your pre-tax salary, though additional coverage is usually available.

"An internist who is a client of ours is having trouble with his eyesight as well as some other physical problems," Matthew Kelley says. "He's probably going to have to reduce his hours significantly in the coming months, which will put pressure on his finances. He's going to need an emergency fund to draw on."

If your spouse or partner earns a good income, or you practice in a specialty that's in high demand, you may not need more than a few months' worth of take-home pay in an emergency fund. The same goes for a physician who has a lot saved in taxable, nonqualified retirement investments. "Someone who has $500,000 or more in diversified taxable accounts doesn't need to keep a cash reserve," says Kelley.

For everyone else, though, it makes sense to have enough money saved to keep making mortgage, car, and credit card payments, as well as to put food on the table and cover all other bills. A lot of physicians -- and plenty of other people as well -- err in thinking that their retirement savings can serve as an emergency fund. You can certainly tap these funds, but withdrawals are taxable, and if they're made before age 591/2, they are subject to an additional 10% in penalties (with some narrow exceptions). "You never, ever want to do this," Kelley says.


Do you see yourself in any of the 5 scenarios described here? If so, now's the time to regroup and redirect yourself, with the help of a savvy financial adviser if need be. There's no shame in taking a fresh look at your financial decisions, especially when not doing so could harm you where it hurts the most -- in the pocketbook.


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