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Join Tod Stillson, a family physician and entrepreneur, as he shares his journey from traditional hospital employment to forming a micro-corporation. Discover how Tod regained professional autonomy and boosted his net worth through this transition. We delve into the challenges physicians face in the health care system and the importance of taking control of your career. Tod offers valuable insights on alternative employment options for physicians and how you can empower yourself in your career. Don’t miss this opportunity to explore new possibilities and take charge of your professional journey with Tod’s inspiring story.

Tod Stillson is a family physician, entrepreneur, and Amazon best-selling author of Doctor Incorporated: Stop the Insanity of Traditional Employment and Preserve Your Professional Autonomy. He can be reached at SimpliMD.  Follow him on Facebook, Instagram, and X @DrInc9, or join his Facebook community for doctors, Every Doctor Is A Business.

He discusses the KevinMD article, “I discovered the Holy Grail for doctors.”

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Transcript

Kevin Pho: Hi, and welcome to the show. Subscribe at KevinMD.com/podcast, and get CME for this episode by clicking on the CME link in the show notes. Today we welcome back Tod Stillson. He’s a family physician, entrepreneur, and author of the book “Doctor Incorporated: Stop the Insanity of Traditional Employment and Preserve Your Professional Autonomy.” Today’s KevinMD article is “I discovered the Holy Grail for doctors.” Tod, welcome back to the show.

Tod Stillson: Kevin, it’s great to be with you and to share some thoughts with your audience.

Kevin Pho: So Tod’s been on several times. Go to KevinMD.com/podcast to search for his name, hear his story, and look for his prior episodes. Today we’re going to talk about “I discovered the Holy Grail for doctors.” So Tod, for those who didn’t get a chance to read this article, tell us what it’s about.

Tod Stillson: Yeah, so Kevin, this particular blog post is just about the idea that a lot of doctors feel like their autonomy is being encroached upon in today’s world. And so they feel a little bit stuck. And because the majority of doctors are now choosing traditional employment, they feel even more stuck because of that loss of autonomy.

And I started out my career, 15 years as a traditionally employed doctor. About 10 years ago I made a change in my life, and when I did that, to become more self-employed as a long-term independent contractor, I discovered some things that made my life so much better. And it’s what I would call the Holy Grail for physicians.

Kevin Pho: So when you say that physician autonomy is being reduced, what are some specific examples of that?

Tod Stillson: Well, by definition employment means control. That’s what the United States Department of Labor uses to describe what an employee is. And that means that the employers get to determine how, when, where, and what you do.

And medicine is not just cookbook. I truly believe in the art of medicine and the individuation of how the principles that we learn in medicine are applied to each individual patient. And there are times when physicians just feel like their employers are reaching into their world and placing restrictions on them in terms of how they apply the principles of medicine to each individual patient, and then try and hold them accountable to something that really isn’t valid.

I would also say that physicians feel like their schedules are micromanaged sometimes as well, in terms of how many hours they’re in the clinic or in the hospital, what they’re doing with their time. Almost feel like it’s being time stamped in a way that requires uber accountability.

And then on top of that, to make them efficient or proficient, we’re impaired by things like the electronic medical record and chronic understaffing. And so all of these things make a physician feel like they’re a bit out of control in terms of what’s happening in the environment they’re working in, and can lead to a lot of frustration and ongoing just sense of burnout.

Kevin Pho: So you mentioned that you were an employed primary care physician at one time. With all these restrictions and loss of autonomy, how did that make you feel personally as a physician?

Tod Stillson: Well, how it made me feel was that I was undervalued at the end of the day. I didn’t feel like I was appreciated or really loved by the people that were employing me. What I recognized was, they loved the money that I made for them, both the money I made in the clinic working for them, but then the downstream income that I produced by being aligned with them as an employee. They absolutely loved that.

But when it came to how they were concerned about my personal life and how I was flourishing or not flourishing professionally, I felt like they didn’t care about that. They cared about what was happening with the economic structure.

And so as that goes on over time, and you feel undervalued, impersonalized, you begin to just kind of lose some purpose and meaning in terms of what you’re doing. And it becomes just sort of a transactional relationship. I get my paycheck, I do my work, and you get what you want out of it. And if that goes on for a long time, I think it just begins to reduce the real sense of purpose that we have in what we do as doctors.

Kevin Pho: So within that W2 construct, do you feel that there is no wiggle room? Do you feel that the only option is perhaps to make a career transition to more of a micro corporation, 1099 lifestyle? Do you think that those who are under W2 structures are doomed?

Tod Stillson: I don’t know that they’re doomed, but I do think you need to go in with your eyes wide open.

I mean look, Kevin, over one out of two doctors right now will say that they’re burned out, and that has a lot to do with the majority being traditionally employed. There’s a cause and effect relationship in my mind that goes on there. The system is broken, and that’s why I use the term in my book, stop the insanity. Einstein said that insanity was defined by doing the same thing over again and expecting different results.

Well, I think a lot of physicians who come out of training think, well, I’m going to become a traditional employee but I’m not going to get burned out. But the fact is that one out of two of them will. And so if you don’t go into that open eyed, knowing that you’re entering into a space where a lot of people didn’t think they’d get burned out but do, you are making a mistake.

And so you need to do some things as you enter that space that will provide the margin that allows you to maintain or control or preserve at least part of your autonomy, if not all of it. So it doesn’t have to come down to an all or nothing event. You don’t have to choose just self-employment or just traditional employment. You can choose something in between that makes more sense for you but that allows you to hold on to more of that autonomy.

Kevin Pho: So tell us exactly what you did. You mentioned that you were traditionally employed and then you decided to make a change. What happened?

Tod Stillson: Yeah, so for me, first of all, because like a lot of physicians I was business illiterate, we don’t get a lot of training in business in our medical training, I met with some consultants, business consultants, to help me kind of elucidate what my assets were and what my options were with my employer to bring about a change. They brought forth to me some ideas that I didn’t even know existed. And I think that’s true for a lot of doctors, they don’t know these options existed.

And the primary option they brought forth to me was the idea of me forming a micro corporation, a single member corporation that I owned, and then contracting with my hospital in a business-to-business contract with them, through what’s called a professional services agreement, or often is called employment light agreement. That allowed me to become a long-term independent contractor through my own corporation, to do the same work that I was doing with them, but as a contractor, not as an employee.

So they still got what they want, which was the financial transaction. They got all of the work that I was doing in the clinic and in the hospital, on the downstream. But what I got was greater professional autonomy, both for myself, which I could do what I wanted then with my own professional time and space, including side jobs, but I also at the same time got some huge tax benefits related to being an independently operating corporation that you don’t have as a W2 employee. So it was a really big win for me on both ends.

Kevin Pho: So we’ll get to the financial benefits later on, but in terms of your day-to-day professional life as an independent contractor, did that change in terms of how many patients you were seeing, your call, your professional day-to-day life as a physician? How did that change?

Tod Stillson: So what changed for me was not the amount of work that I was doing. I’m in a rural location, I’m a family doctor, do it all, deliver babies, do C-sections, inpatient work, et cetera. And none of that work really changed.

But what changed is some of the other components that I was doing for free before, like call, now became sort of a negotiable concept, not just a thing that an employee did out of being a good citizen. Now I began to look at how I was compensated for call.

I was a team physician for the local high school, and I was doing that for free, just funneling all the services to our local hospital, and I began to organize that as an independent contracting experience, as an example, among other things outside of the hospital system, that included working for nursing homes and doing other work outside of even our geographic area.

So it allowed me to kind of begin to comprehensively look at the work that I was doing and break it down into, how was I being compensated for that work, or was I giving it away for free? And in my particular case, and I think this happens for a lot of physicians, we end up just kind of giving it away for free because we just think it’s part of our responsibility and workload. But when a business person began to look at what I was doing, they helped me break it down into those pieces. As an employee, the hospitals get all of that from you. As an independent contractor, you can break it down into separate silos and spaces. And I think that’s an important element that physicians can look at as well.

Kevin Pho: How did those negotiations go, switching from an employed contract to an employment light contract? Did it go smoothly?

Tod Stillson: They went relatively smoothly. Again, I would say I chose not to do that negotiation on my own, representing myself. I hired a lawyer to help me with that process as a third party to represent me, as well as the hospital’s own legal department that were representing them. That made it go much smoother. They could speak one to another the same language, and he could advocate for me as much as they could advocate for them. And in that process, that really depersonalized it a bit, made it go much smoother and made it work out much better for me.

I liken that to what we see with professional athletes, right? Their agents or their legal representatives who work with the organizations that they’re going to work for, and they work out all the details of the contract. And at the end of the day you have to approve it as the individual person, but it’s better to have somebody who represents you and understands what value you are to that hospital, or any other agency that you work for, to represent you in that process. And so I can say it went pretty smoothly because I chose to go that route, and that’s what I’d recommend for all physicians.

Kevin Pho: Any downside to doing that?

Tod Stillson: I didn’t find any downside myself to doing that. I personally negotiated a compensation program that was based purely on productivity, RVUs per month, that I was compensated an MGMA based fair market value for that. And once we reached that kind of satisfied number for the core compensation I was getting, not the call and not the other side jobs that I was doing for them, I felt very, very good about that.

And at the end of the day, once that was negotiated for me, quite honestly, that brought about an additional $130,000 in income for me into my life, by doing the exact same amount of work. Because now the work that I was doing was valued in a different way, and once you broke it down into channels, what work I was doing, it provided additional income.

Now, I do not want your listeners to think that’s the reason to make this conversion. It’s not always going to work out that way, and in fact, working apples to apples, I don’t think you have to get paid more money necessarily. But in my particular case, I discovered that I was so undervalued that it led to quite a bit of income that was coming my way.

Now layer into that, Kevin, I’ll add in the $70,000 per year in retained income that changing my business structure from an individual to a micro corporation led to. About $70,000 in tax and other retained income options for me. The net for me was a couple hundred thousand in income every year that I gained by making that transaction.

Kevin Pho: Now, what about benefits? Did you have to find your own health insurance, malpractice insurance, disability and life insurance, because those weren’t available anymore as an employed physician?

Tod Stillson: That’s correct, I did. I sourced those myself, which by the way is not overly complicated. There’s plenty of malpractice brokers throughout the country who are very willing to help you find the right malpractice insurance, and as a deductible business expense, by the way, when you have a micro corporation. And the same thing with health insurance, I used my state medical association to obtain health insurance.

And really begin to create what I would call a personalized benefit package. And again, done the right way, you can build into your micro corporation a fringe benefit package that makes sense from a tax advantage standpoint, but makes sense from what your household needs, to really all add together to really have no fluff, just really what you need when you need it. But the beauty of it is, as a self-employed physician it is totally tax deductible when done properly. And that’s again part of the win, and part of the retained income amount that I mentioned, that was worth about $70,000.

Kevin Pho: So I know that you guide physicians to go through perhaps a similar journey to an employment light contract. Do you ever encounter hospitals who say no, and, you know, if you don’t like your work conditions, you can quit and we could just hire someone else? So what do you say to hospitals perhaps not in a rural area, that have access to more physicians and probably have a little bit more negotiating power in those situations?

Tod Stillson: Yeah, so that does happen, and I would say probably on a weekly basis I speak to physicians who want to convert to an employment light who encounter that less than favorable response from employers. And the fact of the matter is that in certain areas of the country, especially in urban areas, the employers do have access to larger physician labor, and so they do not have to make that transition necessarily, to help you transition from employment to long-term independent contracting, self-employment. So they may say no, and then you’re stuck.

But I would say you’re not stuck in that case. And here, let me just pause for a second and say, if your employer says no, we aren’t willing to do that, my next response to you would be, well, consider reducing your current workload from a 1.0 full-time equivalent to something more like 0.7 or 0.8 full-time equivalent, if your employer is willing to let you do that, which is becoming more and more common in terms of the physician recruitment and retention world. They’re very willing to let you reduce your hours.

And when you do that, that creates margin or space in your professional services world that now you can take and translocate into independent contracting or self-employment world with side jobs. And you can gradually begin to shift from being solely aligned with one single traditionally employed employer to maybe a combination of what I call job stacking. And so if a physician feels like, and they find out that their employer is unwilling to do it, my next recommendation is to consider that alternative step.

Now, having said that, some employers are more than happy to allow you to make that transition to long-term independent contracting, because at the end of the day they need the physician labor. That long-term independent contracting contract is not going to cost them any more money for the physician labor, in fact costs a little bit less, because their employment taxes aren’t being paid by that hospital. And so it’s really a win-win all the way around. But having said that, not everybody is favorably disposed to it.

But coming back a little further from that, that’s why I strongly encourage young physicians who are getting ready to graduate to form a micro corporation before they graduate, before they sign that first contract, and engage with an employer in a business-to-business contract at the beginning. Because all that organizes the relationship into one that’s business to business from the beginning rather than individual to business from the beginning. Because the converting is harder. If you start out the relationship as a business to business from the beginning, well, that’s a whole lot easier to manage.

And so when you go fishing, or go looking for a job, if you say to the recruiter, I only want positions in which they will allow me to come into the relationship as a micro business, that’s what you’re going to source from the beginning. And if physicians begin to assert themselves and empower themselves in that way, they actually can redefine what the market space looks like, because now they are the needed asset that those corporations need, and they can define the terms of the relationship. Does that make sense?

Kevin Pho: Yeah. So give us a before and after of Dr. Tod Stillson. What was your life like before micro incorporating, and what’s your life like now?

Tod Stillson: Yeah, my life before micro incorporating was, I was enjoying rural practice and really doing a lot of things to benefit the community, and I enjoyed what I did. But what I hated was the increasing micromanagement and additional workload and burden, and feeling undervalued by my hospital that I was working for. And it basically led to nearly a burnout situation. I was just really tired and felt undervalued.

So when I made that transition about 10 years ago, still working in the same community, still seeing the same patients, still working for the same hospital, if you will, it enlivened me, because now I had control over my professional life. And it allowed me to diversify the income channels, allowed me to really put a value on the global work that I was doing, and allowed me to say yes or no to the work that I was doing. And it also frankly, in my case, added a couple hundred thousand in income. And when you’re doing the same work and all of a sudden you’re getting a couple hundred more thousand dollars of income, you do feel like, OK, now I’m getting what my true value is. That helps your sense of well-being financially. And the autonomy that I gained was just amazing.

So I’m getting ready to retire in about four months. Because of all those changes I made, it allowed me to accelerate my net worth tremendously. It allows me to now retire from that day-to-day clinic job, and now I’m going to enter the world that’s truly not a long-term independent contractor but a short-term independent contractor, doing locums and doing a host of other entrepreneurship things like SimpliMD that I do, that are passion projects and things I want to spend my time on.

That all happened, Kevin, because 10 years ago I made that change. I began to understand the power that I had as a corporation, as a micro business, and then that exposed the whole business world to me in a huge way, that allowed me to now reach the point where I am now, where I have nine businesses and enjoying the fruits of being an entrepreneur.

Kevin Pho: We’re talking to Tod Stillson. He’s a family medicine physician, entrepreneur, and author of the book “Doctor Incorporated: Stop the Insanity of Traditional Employment and Preserve Your Professional Autonomy.” Today’s KevinMD article is “I discovered the Holy Grail for doctors.” Tod, as always, we’ll end with your take-home messages to the KevinMD audience.

Tod Stillson: Yeah, so my take-home message is this, that is, physicians, you do not have to work as a traditional employee only. You have the power to enter the marketplace as a micro corporation, whether that be in a blended fashion as a traditional employee, or as a totally independent fashion. And the power of that is the preservation of your professional autonomy.

And if you don’t understand how important that is now, as you move forward in practice you begin to understand how important professional autonomy is. And when you can do everything you can to preserve that professional autonomy, in addition to enhancing your financial outcomes through the growth of your net worth, you’re suddenly going to find that life is enjoyable and you can thrive as a physician.

Kevin Pho: Tod, thanks again for sharing your story, time, and insight, and thanks again for coming back on the show.

Tod Stillson: Thank you for having me, Kevin. I love speaking with you and sharing my experiences with you.