How Much Will I Earn Throughout My Career?

(This is a repost from SoloBuildingBlogs.  Here is a link to the original article).

Although the practice environment, the hiring physician’s character, location, work hours, scope of practice, vacation time, etc. are all important criteria in evaluating job options in private practice, starting compensation will be THE first item of scrutiny for most people. A high starting salary is indeed quite appealing to the forever starved former medical student and soon-to-be former resident/fellow. After all the years of sacrifice grinding away at the hospital for less than minimum wage, you feel like the day has finally come to get paid! 

Well, hold on there for a minute. Don’t fall into the trap of taking the highest paying job offer without looking at the whole picture. It may not be all it seems. You have to remember that your medical career will most likely be a 30 year marathon. Getting a fantastic start in the race doesn’t necessarily mean you will finish in first place, or even finish at all. If getting a head start means that you will have to run with a 10 lb weight strapped around your ankles, or that the course may abruptly change or even get longer in the middle of the race, you might not necessarily be excited about your initial “advantage.”

You should only take a job with a high starting salary if there is potential for staying or growing power. You want to be able to accept living with any potential compromise this starting salary might require of you during your career. What’s the point if you start out at $275,000 if your ceiling is $300,000? You also won’t be happy if a $300,000 starting salary entails seeing 60 patients a day off the bat and performing 1,000 cataract surgeries a year. Yes, you are indeed making a very good income, but you are also making your employer a much much better income. What if the buy in for partnership ends up being $1 million? What if this practice is looking to be acquired, and you will be asked to take a pay cut or work harder for the same amount of pay? What if there is no bonus structure baked into the contract, and you won’t be rewarded for your productivity? What if your bonus is structured to be near impossible to attain? What if your employer is just a plain asshole? What if you are working under a community college graduate manager/administrator that constantly pressures you to put in Panoptix lenses when your practice consists of 99% advanced glaucoma patients? These are just a few reasons why two thirds of graduating residents and fellows don’t stay at their first job within the first 3 years of practice.

You have to read the fine print and comb for red flags before you sign on the dotted line. You are now entering the world of business and capitalism. No one will ever hire you out of the goodness of their hearts. Your employer will not be like your academic mentors who have your best interests in mind, and have a passion to mold you into a competent ophthalmologist. Everyone will want to be paid for their time and efforts. Having said that, there is nothing wrong with that… as long as it’s a fair deal to both parties. You will be receiving something in return for the sweat equity you pay to your employer. It’s just that the leverage is generally heavily weighted toward the hiring practice and not the job applicant. They know more than you, and often times, you will need them more than they need you. A very tempting scenario for anyone looking to exploit new hires. Because of this fact, you absolutely must do your due diligence to make sure that you are applying to a practice that has a true interest in promoting growth for its new hire. Of course, all the while making some profit off of you for a short period of time. We will go over the types of questions you should be asking to help distinguish a nurturing practice from a predatory practice in another post.

I’ve digressed a bit, but back to this post’s topic. Exactly how much should you expect to earn throughout the life of your career. I’m going use general ophthalmology for this example. Of course results may vary, but these would be the typical figures. Retina, refractive, and plastics will obviously be different.

ASSOCIATE POSITION (w/partnership)

In the first scenario, let’s just assume that you will be guaranteed partnership after 3 years.  Let’s also assume:

Year 1:  $200,000
Year 2:  $225,000
Year 3:  $250,000
Partnership buy-in:  $450,000 (taken out of salary for the next 5 years)
Year 4 and beyond:  $375,000.

If you do the math, you make $675,000 in years 1-3. Because you’ll have $90,000 taken out of your salary for 5 years, you will make $285,000 a year in years 4-8, or a total of $1.425 million.  For the remaining 22 years, you will make $8.25 million.

That gives you a grand total of:  $10.35 million over 30 years and $450,000 equity in practice (most practices don’t appreciate, and let’s ignore inflation in our examples)


ASSOCIATE POSITION (who’s been around the block, but eventually given partnership)

You have about a 60-70% chance of being in this category if you join someone’s practice.

Year 1:  $200,000
Year 2:  $225,000
Year 3:  $200,000 (quit job and start at new practice)
Year 4:  $225,000
Year 5:  $250,000.
Partnership buy-in:  $450,000 (taken out of salary for next 5 years)
Year 6 and beyond:  $375,000

You make $1.1 million in years 1-5. You will make $1.425 million in years 6-10. You will make $7.5 million in years 11-30.

Grand total:  $10.025 million over 30 years plus $450,000 equity.


ASSOCIATE POSITION (low starting salary, guaranteed partnership with higher partner income)

Year 1:  $150,000
Year 2:  $165,000
Year 3:  $180,000
Partnership buy-in:  $600,000 (taken out of salary for next 5 years)
Year 6 and beyond:  $500,000

You make $495,000 in years 1-3. Because you’ll have $120,000 taken out of your salary for 5 years, you will make $380,000 a year in years 4-8, or a total of $1.9 million.  For the remaining 22 years, you will make $11 million.

So, in 30 years, you would make $13.4 million. I’m not sure if anything like this exists, but just giving you this example for demonstrative purposes.


HMO POSITION

Starting salary will be higher but ceiling on income will be lower.

Year 1:  $275,000
Year 2:  $300,000
Year 3:  $325,000
Year 4 and beyond:  $350,000

Grand total:  $10.35 million plus pension (if the HMO model stays solvent for 30 years). I would guess that pension will be worth $1-1.5 million.


SOLO PRACTICE (slow start)

These are real numbers by the way.

Year 1:  -$34,000
Year 2:  $73,000
Year 3:  $180,000
Year 4:  $220,000
Year 5:  $295,000
Year 6:  $275,000
Year 7:  $390,000
Year 8:  $505,000
Year 9 and beyond:  $600,000

30 year total:  $15.1 million and 100% ownership of practice


SOLO PRACTICE (fast start)

Another real person’s numbers.

Year 1:  $73,000
Year 2:  $207,000
Year 3:  $380,000
Year 4:  $510,000
Year 5 and beyond:  $700,000

30 year total:  $19.37 million and 100% ownership of practice


As you can see, a high starting salary means absolutely nothing unless it comes with the assurance of growth and staying power. The most important thing in evaluating a job,  in terms of compensation only, is your peak annual earning potential and how fast you reach it. It has completely nothing to do with starting salary.