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Join us on this episode as we talk with Tod Stillson, a family physician and entrepreneur, who has successfully transitioned from traditional employment to becoming a high-earning independent contractor. Tod shares his journey, revealing the limitations of traditional employment models in primary care and how he broke free to thrive in a “third space” within the system. Learn about his innovative approach to monetizing professional services, optimizing office workflows, and strategically investing in real estate. Discover the unique opportunities he found practicing in a rural setting and gain insights into how you, too, can navigate the path to financial and professional success in today’s health care landscape.

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 discusses the KevinMD article, “Rewriting the rules: Achieving a million-dollar income in family medicine.”

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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 and entrepreneur. Today’s KevinMD article is “Rewriting the rules: Achieving a million-dollar income in family medicine.” Tod, welcome back to the show.

Tod Stillson: Kevin, it’s great to be with you and your audience again, and to share a little bit of my own personal journey today. Honestly, I’ve been a little bit careful about sharing the things that I learned, in particular about my income, because I was working. But now I retired about a month ago from my primary care practice, and I have a little more opportunity to share transparently about what I’ve learned.

Kevin Pho: Perfect, thank you so much. And Tod’s been on multiple times, go to KevinMD.com/podcast to hear his stories and wisdom. So today’s KevinMD article is “Rewriting the rules: Achieving a million-dollar income in family medicine.” For those who didn’t get a chance to read this article, tell us what it’s about.

Tod Stillson: Yeah, Kevin, what it’s about is basically an explanation of a playbook that I used to generate a higher income than what the average family physician makes. And I really consider myself fortunate to have discovered this playbook that has been very beneficial for me financially, but also professionally because of the autonomy I’ve gained from it.

And you know, like a lot of things in life, when you find something that’s really good and really cool, you often like to share it with others, right? Especially people that you care about. I care about our physician community and I really want all physicians to thrive and do well. That’s why I’ve actually formed SimpliMD. But my personal story in this, I think for a lot of doctors, can kind of uncover a playbook that can be easily replicated for them and help them to thrive.

Kevin Pho: Before going into this playbook, just tell us about your family medicine practice first, about what it was like, and then perhaps you could expand into this playbook.

Tod Stillson: So just so you know, about 15 years ago, well, go back ten years, but my first 15 years of practice I was a traditional employed doctor in a rural setting working for a hospital system. And quite honestly it was nice. I enjoyed rural medicine, that’s what I trained to do. I liked being in a small community and really helping the hospital and our health system to win and do well as I was doing well, and it was really a nice combination.

But what happened is, which happens to a lot of doctors who are employed doctors, I eventually ran into a situation that they were placing a ceiling on my income that I could earn, that they often do with their traditional employees, because they like to put caps on our total earnings in terms of what they think, the amount of work you can do.

I was very much outside of the normal bell curve, in part because I was in a rural setting doing a lot of procedures, a lot of inpatient care, doing a lot of the extras that you end up doing in a rural setting. And that was generating a lot of work RVUs, and it just didn’t fit into their model. So I was a high performing doctor who was breaking out of their barriers, and basically they wanted to underpay me for the work I was doing.

And it really caused me to begin to rethink, like, what’s going on here and why is this the case, when they’ve created a comp model for me that allows me to be paid just based upon the work I do, but yet they’re putting this false ceiling on it. And in the end they didn’t want to make any changes. I sought out all various options that I could to remedy it, and ultimately decided and discovered that becoming an independent contractor and working for them as a long-term independent contractor allowed me to navigate around those ceilings that they were placing on traditional employees, and it allowed me to really begin to earn what I deserve to earn in the marketplace rate. And that happened ten years ago, and it’s been a wonderful discovery on my part and has really allowed me to do well economically. Not getting paid more than my market value, but literally getting paid for what I’m worth.

Kevin Pho: So before getting into that, let me just ask, from a hospital standpoint, why would they cap your earnings in the first place? Because if you did more and generated more revenue for the hospital, wouldn’t it be to their benefit for you to be as productive as you could be, because the revenue that you generate is going to outweigh and outrace whatever increased earnings that you may get?

Tod Stillson: Yeah, yeah. There’s two things in play here, my particular situation. I think this happens elsewhere in the country. Number one, I was in a rural setting and my company was more in an urban setting that was employing me. So they owned the rural hospital, but they had a larger urban hospital that they also owned. And compared to the physicians in that urban setting who are not doing all the stuff that I was doing, I was making a lot more RVUs, let’s just put it that way, than their standard family doctors in their system who weren’t doing surgical obstetrics, who weren’t doing inpatient care.

And so I became an outlier, a high-performing outlier in their system, and they just didn’t have the metrics to make it work. And so they wanted me to kind of be contained by the rest of the group. There’s this kind of almost like socialist groupthink system, like, we want you all to be the same. And high performers in those systems kind of get penalized in some regards, that you really sort of, in my opinion, sort of dumbed down to be sort of an average performer, because you don’t get much benefit to being a high performer.

The other part that they communicated at the time was, and I don’t know whether I believe this or not, but anyhow, at the time they said that by paying me as much as I deserve to be paid based on my RVUs, it caused them to be at risk to be flagged by the federal government, because they were paying a family doctor more than the market, more than kind of an outlier, more than they would expect, and it increased their risk for audits, yada yada yada. Which I consider was really more of an excuse than anything.

And so those are the two factors. One, being in a rural setting I was working harder, making more RVUs, therefore more income. And then the second is, they have a box that they wanted all the doctors to fit in, and when the doctor was not in that box it created difficulties for them. And they, like a lot of large corporations, they would rather standardize things and put us all in one singular box and make us, in my opinion, all average, than to allow for accommodations for outliers who are high performing.

Kevin Pho: So eventually you found yourself in a situation where you were an independent contractor to that hospital, and in your words, eventually you were paid what you were worth. So tell us more about exactly what you did and this playbook.

Tod Stillson: Yeah, so the playbook involved two things. One is, first of all, finding out what the MGMA compensation per work RVU was for a family doctor that was in my productivity level. I was blind to that. I kind of assumed that my hospital system knew that number and would always sort of pay me in that range. But in their compensation matrix, their compensation matrix was created around the idea that every family doctor was average. So their dollar per work RVU was in the average scale. They didn’t accommodate for more than average.

And so once I got out of that box, found out what the number was, basically just negotiated a fair market value dollar per work RVU rate based upon what that was and the work that I was doing. That’s really all I wanted, just fair pay for fair work. And in essence that led to about a $250,000 raise for the same amount of work that I was doing. OK, so that’s number one, so just getting paid fairly per work RVU was one element.

The second element of that playbook was really beginning to monetize all the work I was doing. As physicians we certainly recognize that direct patient care in the room, when you’re coding and doing all the work that you’re doing, is one element. But outside of that there were a lot of things I was doing, especially in a rural setting, that had value that were not being recognized monetarily, but were simply part of being, quote, a good corporate citizen.

That included taking unassigned OB call, that included taking unassigned newborn pediatric call, that included taking unassigned adult medicine call, that included nursing home work, sports medicine, nurse practitioner collaboration, surgeries, surgical obstetrics, medical education. I had residents that rotated with me, and medical students. Health system governance.

When you start to unpack, Kevin, all the stuff that we do as doctors and the value that we bring to a health system, there is tremendous value that goes beyond what we’re doing in the examination room. When I began to monetize all of those things and work with them, again as an independent contractor, not as an employee who was giving it to them as a corporate citizen, that again began to increase the amount of compensation that I was earning to really push me to a much higher level. Really in the end about $300,000 more a year, at a fair market rate, nothing more than that, just a fair market rate.

But Kevin, that’s what, unfortunately at the beginning of this article I point out that the Doximity data from this past year shows that family doctors make $300,000 a year. Kevin, that’s a good income. I’m thankful that we earn as much money as we do for the work that we do. But I want to point out that in the traditional employment setting you’re not going to exceed that very much. But if you begin to get outside of the traditional employment setting, in this playbook that I’m talking about, your real market value is brought to bear. Not just a box that a traditional hospital system puts you in, but your real market value begins to bear out. And then typically that’s going to be at a higher price, at a greater rate, and we’ll track with you each year as that value grows. And so quite honestly, doctors are leaving a lot of money on the table by choosing to be traditional employees.

Kevin Pho: Now, if you were a traditional employee, why were they willing to move on a dollar per RVU rate, for instance?

Tod Stillson: Well, in my particular case, number one, because wisely and fortunately I had no non-compete clause in my contract. Therefore my 5,000 patients could be taken anywhere I wanted them to, in terms of yoking up with another health care corporation. So they knew, in a small rural setting, they were at risk with losing a large portion of their market share if I moved. So I had a little bit of control in the situation that allowed them to have to work with me. And so circumstantially that was a very powerful move.

But the second part of this is, for a hospital system, if they’re paying you fair market value rates, there’s really no loss to them. I mean, they’re simply paying you what the market is. And that physician labor expense is just that, physician labor expense, right? It’s a pass-through to them. And so there’s little risk with that, there’s not a whole lot involved. You’re not, again, this is not about negotiating a higher than market value rate because of a shortage, because of a need, because of you think you’re a superstar, whatever it may be. It’s really about just getting paid fairly for what the market is bearing. And for any hospital system that’s a real honest number, that’s part of their physician labor expense.

So at the end of the day they’re compelled to get you in the box because it will reduce their expense by keeping you in the box. If you get outside of the box, they’re just going to pay you the fair market value. And there probably is some minor cost savings for them to keep you in the box, if you will. But honestly it just depends on the circumstances you’re in, the size of the hospital system you’re in, and how willing they are to look at you as a valuable service line that they need.

Kevin Pho: So there are a couple of things that are unique to your individual situation. Number one of course, your rural setting. Number two is that you did not have a non-compete. Now I know that you counsel a lot of physicians through your business at SimpliMD. What are some lessons that physicians who are not in your circumstance can apply? For instance, physicians who are not in rural medicine, or physicians who do have non-competes. What kind of lessons from your story?

Tod Stillson: First of all, I would just point out to you that due to geographic arbitrage in terms of rural settings, there’s massive opportunity right now for doctors in the rural setting. There’s a health care shortage everywhere in the country, but in the urban setting there’s a lot more workforce available. In the rural settings there is huge opportunities for doctors to enter into those spaces right now and make more money by doing the same amount of work as you would in the urban setting, just by being in the rural setting.

There’s a huge demand. I mean, it’s economics 101. If the people who are wanting your services are in a certain location, if you go to that location, you’re going to be busy by default. It will take you much less time to build a practice and grow the workload, because the workload is sort of built into that rural setting.

And that’s also the profile of hospital systems and corporations that are willing to also view you as an independent contractor. Those smaller places, they know they have to be nimble to compete with larger urban settings, so they’re willing to be very creative and do, quote, whatever it takes to land you as a physician in those areas.

So one thing I want to point out to your audience is, a lot of doctors are turning their backs on rural areas. There’s a great economic opportunity that exists in those places, and you don’t have to be there forever, and you could also be there in a very nuanced way. So sort of live in an urban setting but travel to that locality to do your work. So there’s a lot of these things that exist that are opportunities for doctors when it comes to the economic forces involved.

Non-competes, as you know, this has been a hot button going around the FTC. I think they just recently extended their timetable for when they’re going to make their decision. But a lot of states are already reacting, and on a state-by-state basis there are some elimination of non-compete contracts that exist, depending on the state that you’re in. But non-competes also play a role for doctors both in rural and urban settings, because it provides you with professional autonomy to really have greater mobility to move away from a corporate contract you may have.

So really there’s opportunities that exist for doctors in multiple places, multiple settings. One of the things that I’ve talked about before on your podcast is the idea of job stacking, and this is just another example of it. Depending on where you’re at, you can have a primary job that may be a traditional W-2 job, but you may also stack independent contracting work on top of it, that can range from the things that I talked to you about that I monetize in my particular case, from call to other sorts of professional services to medical education to governance to consulting, to all sorts of things that get layered in on top of it. In fact, studies showed that 40 to 50 percent of doctors have these kind of side gigs that they’re doing. So job stacking is another way for doctors to look at putting themselves in these places as contractors, but also potentially as W-2 employees.

Kevin Pho: So I know we’ve talked about this in prior episodes, but the transition from a traditional W-2 employee to an independent contractor, maybe in 30 seconds or so, just give us the pros and cons, and the types of situation or the type of physicians who may be amenable to that.

Tod Stillson: Yeah, well first of all, most physicians are not amenable to it, because we have no business education through our training processes, so it scares them to death. And so unless you have some exposure in the past, you’re kind of going to lean towards being a W-2 employee.

But running a micro-corporation is much different than running a private practice. You’re the sole employee. As an independent contractor you have total control over the resources. You can choose how to work out your professional services that are contracted to others, and it allows you to really have great autonomy over the control of the work that you’re doing, in the locations that you want to practice it. And it really is location independent nowadays with the advent of telehealth and other things. So really the door is wide open.

But it just comes down to overcoming that fear of, I don’t know enough to go into, quote, business on my own, and afraid of the marketplace irregularities and how you manage it. And what I try and encourage doctors is to view themselves as a small micro-corporation as the initial step. That allows them to enter the marketplace individually as a business rather than as an individual. And when they do that they can empower themselves in great ways. And what we do at SimpliMD is help doctors with that business education process.

Kevin Pho: We’re talking to Tod Stillson. He’s a family physician and entrepreneur. Today’s KevinMD article is “Rewriting the rules: Achieving a million-dollar income in family medicine.” Tod, as always, we’ll end with your take-home messages to the KevinMD audience.

Tod Stillson: Well, a couple things I want to point out to you as well that I think are important for physicians. One is that optimizing workflow in their office is also one way that you can improve your efficiency and productivity. And that’s one of the challenges I think of traditional employment. I hear it from doctors over and over again who are traditionally employed, when I speak to them at SimpliMD. They feel understaffed and under-equipped by their health care employer, kind of like it’s this dual mantra of work harder but do it with less, right? And that’s very frustrating. And when you put yourself in a position of self-employment, you gain a little more control over even things like that when it comes to optimizing workflow.

Then the other element that I chose to do in my model was, I invested in real estate and asked the hospital to rent my medical office building from me, in part as part of my equation, which again created a passive income process for me, which is another option that physicians have in the marketplace.

So to kind of summarize, Kevin, you know, I realize I’m a little uncommon in that I’m a family doctor who’s making a million dollars a year, and that doesn’t happen very often. But what I realized was there was this playbook in place that can be replicated, that includes being an independent contractor rather than a traditional employee, monetizing all of your work, choosing the location where there’s high demand, optimizing your workflow, and then layering in passive income opportunities like real estate that connect to the practice that you’re pursuing. And so that’s a playbook, quite honestly.

And now a doctor can choose, in summary, to go, you know what, I’ll take my $300,000 a year, I’ll be a W-2 employee and I’m happy as a clam, and that’s what I’m going to do. Totally fine. That’s a good life, a good gig, and works well. But for a lot of doctors out there, after they’ve done that for a while, they realize, man, it’s painful and it’s hard, and it sort of steals the joy of medicine and you get burned out in the process. And self-employment provides a new option, a new opportunity for doctors. That’s not private practice self-employment, it’s more independent contracting, that can be economically beneficial but also from a professional autonomy standpoint very beneficial. And I just want to bring that forward in today’s podcast, to say there is hope, doctors. There is an option, there is an opportunity for us to do something that helps you thrive, that’s different than what the status quo is now.

Kevin Pho: Tod, as always, thank you so much for sharing your story, time, and insight, and thanks again for coming back on the show.

Tod Stillson: Thanks, Kevin. It’s great to be with you.