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    Tips for handling the business side of medicine

    Michael L. Stark, JD, touches upon the three major phases in a physician’s career and how they should plan accordingly

     

    Stark: I will tell you the moral first, which is that a physician has to decide if he is capable of making of his own decisions or if he needs advisors. And if he gets advice, is he going to ignore it or follow it? The third possibility is that he becomes so close to one or more of his advisors that he basically turns over all decision-making to them, which isn’t good either. This anecdote involves the last category.

    So, about 20 years ago, I was representing a physician who had a local CPA handle his accounting, taxes, and investments. The doctor followed the CPA’s recommendations blindly. One of the investments the CPA came up with involved a group that was selling land in Alaska based on photographs alone. They would sell it with the promise that once the buyer owned the land, the seller would dig for gold or other minerals, which would enhance the value of the land so it could be resold at a profit. It was a scam.

    Eventually the CPA was arrested and found guilty of fraud. He was sent to a federal penitentiary in Minnesota. About two years later, I got a call from that doctor. He said his CPA was doing his tax return and he needed me to send him some information. And lo and behold, he gave me the name of the same CPA and his address was in prison. The CPA was doing tax returns in prison, and not just for that doctor, but for several other doctors, too.

    Dr. NOREIKA: What about the wind-up stage, what we call the going-to-the-beach stage of a career? This involves exiting a practice, probably one in which a physician has some equity. What advice do you have for this phase of their career? 

    Stark: With retirement, you have plenty of time to plan, at least. The big problems are the things that you cannot plan—death, disability, or personal things such as divorce. I have had several physicians over the years go through some pretty serious divorces and as a result they ultimately did retire from the practice, almost involuntarily.

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    I have never seen an amicable divorce. I often hear physicians say that they are getting a divorce but they have decided to remain friends and divide everything equitably. They think they do not need an attorney until they are ready to go before a judge. But it never happens like that. Before it is over with, they will both have attorneys. If you have had an attorney for your business for a long time, he or she has probably done work for your spouse too. If so, they cannot get involved in that divorce proceedings because they have a conflict. You will need two new attorneys.

    As for death and disability, you should have insurance, but you also should have an agreement about what will happen if you step down or die. It should spell out how payments will be made or what will happen to your stock if it is in a corporation. There also are a lot of tax implications involved. What happens to your share of the retirement plan? Are you going to leave it there or have it transferred to an IRA? Do not wait until the last minute to plan these things. 

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