Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Jan 6, 2012

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Due to increasing regulations, reduced insurance reimbursements, and rising business costs, doctors are finding themselves losing money at exponential rates. With half of all doctors in the in the United States owning and operating private practices, a medical crash could prove to be detrimental.


“A lot of independent practices are starting to see serious financial issues, said Marc Lion, a financial adviser for independent doctor practices, according to CNN Money.


In order to combat insolvency, many practitioners are turning to personal loans. Dr. William Pentz, a cardiologist who owns his own practice in the Philadelphia area, said it has not only been him who has turned to using his personal assets, but his partners had to as well. “And we still barely made payroll last paycheck,” he said in a CNN Money article. “Many of us are also skimping on our own pay.”


Pentz cites a drastic 35 to 40 percent cut in Medicare reimbursements for certain common cardiovascular services as the reason for his inability to keep current on his bills. “These cuts have destabilized private cardiology practices,” he explained. “A third of our patients are on Medicare. So these Medicare cuts are by far the biggest factor. Private insurers follow Medicare rates. So those reimbursements are going down as well.”


He concluded with an ominous prediction: “If this continues, I might seriously consider leaving medicine.”


A family physician from Nevada named Dr. Mike Gorman revealed that he took out an SBA personal loan in order to keep his practice afloat.


“It’s embarrassing,” he told CNN Money, “Doctors don’t want to talk about being in debt.” But in order to turn a profit in the future he said his strategy will be to see more patients, but to refuse to address multiple problems on the same visit. “If I do, insurance will bundle my reimbursement into one payment.”


Gorman admits this is not the way he wants to operate his practice. “This system pits doctor against patient, but it’s the only way to beat the system and get paid.”


But some experts believe doctor’s lack of profit and new reliance on personal loans isn’t due to the nation’s medical system, but rather due to medical professional’s lack of knowledge on operating a business. A private medical practice is exactly like a small business.

“The only thing different is that a third party, not a customer, is paying for the service,” said Lion. “Doctors are trained in medicine but not how to run a business.”


Dr. Neil Barth, an oncologist ranking in the top 10 percent of all cancer-treating doctors in his region, hasn’t taken a salary from his private practice in over a year. He fears his practice will be closed within six months.


“I love medicine. I will find a way to refinance my debt and not lose my home or my practice,” he pledged, hinting at the fact that personal loans were not only required to save his job, but that his mortgage loan was also in danger as a result of his practice’s insolvency.


Regardless, taking out personal loans over and over again while profit margins are dropping is not only bad for the individual doctor, but for all who rely on doctor’s services.


“I recently got a call from a divorced woman with two kids who is unemployed, house in foreclosure with advanced breast cancer,” Barth told a CNN Money reporter. “The moment has come to this that you now say, ‘sorry, we don’t have the capacity to care for you.’”