The landscape surrounding physician employment has changed, and it has changed significantly. Where once physicians were largely self-employed and thus could enjoy earnings tied to each individual’s own level and choices of specialization and work, they now find themselves mostly employed by large health systems. And, as that new reality evolves, those health systems are finding that one of their most significant problems is recruiting and retaining highly skilled physicians.
Let’s consider that problem a bit, beginning with some obvious “solutions” that in fact probably don’t work.
The obvious solutions don’t work well
The most obvious solution to this challenge would seem to be cash compensation. If you offer someone more money, there is always a chance that you can hire them. But, if all you are giving someone is current cash, there is always someone out there that can give them more. The result: increased costs for all health systems in the affected geography. In other words, you’re solving one problem by creating another – inflating payrolls. We think that’s not a productive approach.
The solutions that fall into the category known as “work/life” also have some major flaws. Giving more vacation time creates a need for more physicians (compounding your recruiting problem). Flexible hours simply do not align with patient care needs. You cannot have a situation with nobody on call in the middle of the night. And putting a gym or day care in the hospital won’t move the needle.
Even traditional benefit programs don’t work as a solution. Giving better health benefits is not going to dazzle a physician. And physicians have the means, generally speaking, to ensure that they and their families are well protected against unforeseen circumstances like disability or death.
Retirement benefits have a unique appeal for physicians
What does that leave as an effective solution? We would suggest: retirement benefits. They are uniquely appealing to physicians for two reasons.
First, as a group, physicians are used to a fairly high standard of living. They’d like to be able to maintain that standard of living in retirement. That is clearly borne out by the evidence – both anecdotal and data-based.
Second, many physicians – with deep knowledge in their own very technical fields – are inexpert when it comes to preparing financially for retirement. And they know it.
Solving that problem for them will have obvious appeal and represents a creative way to get them in the door to your hospital. Once they are in, we think that same creative solution will help to keep them.
Key elements of a physician’s retirement solution
Here are the boxes we think should be checked by an “optimal” retirement solution for the modern physician:
- An amount sufficient to maintain the physician’s pre-retirement standard of living
- Lifetime income with continuation for a surviving spouse
- Ability to take part of the retirement benefit as a lump sum
- Inflation protection
- Professional investment of assets
- Some level of guarantees against adverse market conditions
- Portability of benefits in the event that the physician leaves the organization
- Returns on assets that are consistent with “what you can get in the market”
- An account that they can track, with the ability to see how much lifetime income it might buy
A 401(k) isn’t enough
At this point, we would guess that your current program doesn’t check all these boxes. If it’s 401(k)-driven, we are pretty certain that it doesn’t.
Consider the typical physician:
- Undergraduate degree at age 22 or 23
- MD by age 27
- Lots of student loans at that point
- Out of residency by roughly age 32 or 33
- Burnt out from a high-stress profession by age 60
- 401(k) deferrals limited to $19,000 – nowhere near enough to fund a retirement that maintains pre-retirement living standards.
A “richer” and more flexible benefit
Physicians need something different. They need plans that allow for larger deferrals, professionally invested assets with preservation of capital, the tax deferral and efficiency of a qualified retirement plan solution, and lifetime income guarantees. And the evidence (again partly anecdotal and partly data-based) suggests that many physicians are willing to give up some current compensation to ensure those results. Frankly, the older they are, the more they are willing to give up current compensation for future retirement benefits. Thus, the best solution is one where deferrals grow with advancing age.
Manageable system costs
Benefits cost money, and from the hospital system’s standpoint, funding benefits can be tough. Moreover, retirement benefits bring with them a myriad of compliance complexities.
So, let’s add some more boxes the retirement program needs to check.
- Manageable and predictable cost of benefits
- Cost of benefits less than cost of unwanted turnover
- No worries about benefits being considered discriminatory
- Benefits that work for relatively lower-paid primary care physicians as well as for higher paid specialists and surgeons
A better physicians’ retirement solution
If you as an employer of physicians could check all those boxes, would you consider it? If you could check all the boxes that your physicians want, would you feel more comfortable about recruiting physicians and retaining them? Instead of being the problem, let’s make your retirement program part of the solution.
We think that solving that retirement worry for them will get them in the door and keep them from leaving out the door before it’s time for them to retire. It will give them one fewer worry.
And, if they have one fewer worry, you may have one fewer worry as well.
There are programs that check all these boxes. Given the unique needs of physicians and the hospital systems that employ them, those programs – as a “better solution” to the physician recruiting problem – deserve your serious consideration.