Interview with Dr. Tod Stillson – Part 1 – 374
In this podcast episode, Dr. Tod Stillson describes how to win as a micro-corporation. For the past 10 years, Tod has been working under a professional services contract, rather than as a direct employee, providing him with greater autonomy and income.
Dr. Stillson shares his journey from a traditionally employed physician to an independent contractor. In this revealing interview, Tod introduces the concept of employment light and explains how doctors can negotiate better contracts with their current employers.
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The Rise of Corporate Medicine and Its Impact on Physicians
Corporate control of healthcare has led to decreased autonomy and increased burnout among physicians. Tod describes how arbitrary compensation caps and a lack of understanding from administrators have contributed to this problem.
He emphasizes the need for doctors to stand up for themselves and take control of their professional lives. And he describes the simple change he made to accomplish that goal.
Understanding the Employment Light Model
Tod explains the concept that allows physicians to work as independent contractors while maintaining a relationship with their current employer. This model offers increased professional autonomy, significant tax benefits, and an easier way to create multiple income streams. Some of the topics we cover in Part 1 of our conversation are:
- Preparing to become an independent contractor,
- Negotiating a professional services agreement,
- Creating the opportunity for multiple income sources, and,
- How to approach your employer about transitioning to this model.
Empowering Physicians to Win as a Micro-Corporation
Recognizing the lack of business education in medical training, Dr. Stillson created SimpliMD, a resource for doctors to improve their business acumen. He emphasizes the importance of understanding:
- The true value doctors bring to healthcare systems, including downstream revenue,
- How to negotiate fair compensation based on productivity, and,
- The power of business knowledge in preserving professional and personal autonomy.
Summary
In Part 1 of this two-part episode, Dr. Tod Stillson offers valuable insights for physicians looking to regain control of their careers and achieve a better work-life balance. Dr. Stillson's experience and resources provide a roadmap for doctors to navigate the complex world of healthcare employment and find success on their own terms.
Part 2 of this conversation follows in the next episode of the Physician Nonclinical Careers Podcast.
Links for today's episode:
- Dr. Tod Stillson's Website SimpliMD.com
- Free Subscription: Subscribe to the SimpliMD Blog.
- Dr. Tod Stillson's Book: Doctor Incorporated: Stop the Insanity of Traditional Employment and Preserve Your Professional Autonomy
- Employment Lite: Check out our Employment Lite landing page on why this hybrid model of employment and private practice is so appealing to many doctors.
- Free E-Books: Choose from a large menu of free E-Books that support your micro-business journey as a self-employed doctor.
- Professional Business Network: Our vetted and preferred network of small business professionals and resources that will support your professional micro-corporation journey.
- How to Save Healthcare, Satisfy Patients, and Fix Physician Burnout – 256
- Check out the 2024 Nonclinical Career Summit to learn about MORE unconventional career options.
Paid Resources from SimpliMD:
- $199 Course: Creating A Practice Without Walls.
- $99 Consultation: 1:1 Micro-Business Consultation.
- $500 Micro-Corporation Start: A Business Consultation + Connection to Legal Professionals to Start Your Professional Micro-Corporation.
- $99 ($10 for residents) SimpliMD Membership: Join our community of self-employed doctors and receive exclusive perks for members only
- $2000 SimpliMD Coaching: 1:1 holistic coaching with a small business focus.
Podcast Editing & Production Services are provided by Oscar Hamilton
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Transcription PNC Podcast Episode 374
Now Every Doctor Can Win As a Micro-Corporation
- Interview with Dr. Tod Stillson
John: All right, NonClinical nation. I think today's interview might potentially change your lives. Our guest today is going to explain how he was able to work in a fulfilling medical practice as a pseudo-employee while maintaining his professional autonomy and earning a much higher income. That seems like nirvana to me. So let's welcome Dr. Tod Stillson to the podcast. Hi, Tod.
Dr. Tod Stillson: Hey, John. It's great to be with you and I'm excited to share my journey with your listeners.
John: Yeah, I'm excited to hear this story from the horse's mouth, so to say. I mean, I've read about you and looked at some of the things you've done online, and this just sounds like an exciting option for some of the people out there that are unhappy in their practices.
Dr. Tod Stillson: It is one of many options that exist, and I tell you the beautiful thing about the marketplace today is although corporations strongly control it, there are lots of new developments happening for doctors to regain their autonomy and not feel like they have to end up as a corporate employee, or really what I call a high-paid factory worker, okay?
John: Yeah, that's definitely what it feels like. I mean, that's what I hear constantly. In lack of autonomy and overwork, they don't understand what a physician does.
Dr. Tod Stillson: Oh, yeah, 100%.
John: It's going to lead to the demise of the profession unless we do something.
Dr. Tod Stillson: John, you and I trained at similar times and have similar experiences as family doctors, and you're exactly right. It's the undermining of the professionalization of our great work as doctors that all doctors across the country do, but it has been eroded. I'm a fan for doctors standing up and saying, that's enough. Let's take control of this ourselves.
John: Awesome. Yeah. Well, tell us a little bit about your background and the mission that you have to educate physicians on how you have found a way to make things better, even if you're, "employed by a hospital system."
Dr. Tod Stillson: Yeah, and I'll tell you the short story, and then we can get into more details later if you want, but I grew up in the Midwest and did my training in Indiana and went out to Virginia to do my residency in family medicine as well as surgical obstetrics. Came back to Indiana and worked here basically in a primary care clinic in rural Indiana for nearly 30 years. And when I came back to this area to begin working, there was the opportunity to work as an employee of a hospital and really just receive a paycheck for it.
And this is way back in the day when it felt like everybody was in a win-win relationship, right? Where you were given a fair compensation. They still gave you a lot of autonomy in the practice. And as long as you know your downstream was good and everybody's working well, everybody wins. And it was very somewhat simple, but really great. Over time, though, as you know, the corporization of America really came into play. And even our little rural hospital began to lose its autonomy to a larger health system that began to take more control and try and crank out more money and in the process remove more and more.
It's the same script that we've heard from doctors all over the country, right? This just happens and happens and happens. And over time, for me, what happened was because I was a full-service family doctor, meaning I did inpatient care, newborn care, OB care, surgical OB, I really did everything in the hospital, okay? We were busy. I mean, in a rural place, any of those doctors out there that work in rural places you know back in the day, especially, you could be very, very busy. Consequently, I earned a lot of RVUs.
And I mean, I really cranked out a lot of money, if you will, and was paid fairly for it at the time for the hospital myself. They really still came out ahead because of the downstream, okay? But nonetheless, the hospital system that owned them came in and began looking at some of our rural family doctors' pay compared to the city people that were working. And they're like you guys are making a lot more money, and that just doesn't seem right. We're going to kind of level the playing field and we're going to put a ceiling on how much you can earn. Arbitrarily.
John: It sounds like my CFO when I was CMO of the hospital, you know?
Dr. Tod Stillson: Okay. Yeah, makes sense to them, right? Put a ceiling on this. How could a family doctor make that much money, right? And so, I'm like, all of us are like, "Wait a second, what are you talking about? We work hard for our community and for the sake of our hospital, and you want to just give us a pay cut and expect us to go, 'Oh, thank you very much. That's okay.'" So, the long and short of it is, as all these things kind of get dragged out, as they often do, our group of about eight doctors, we saw five of them leave, basically, over a year's time. They're like, "I'm not staying around for this." This left about three of us holding the balls up in the air, meaning we were working harder and doing more work, but still the ceiling loomed.
And eventually, we were just like, what are we going to do? Do we want to go out into private practice together here? Because none of us wanted to move. Do we want to just say, okay, thank you very much. I'll accept this contract or something else. I was wise enough to know, like most doctors are, I was business illiterate and also relatively financially illiterate. So one of the greatest moves I've made in my life was I reached out to some business consultants in healthcare and said, "Hey, this is the situation. What would you recommend to me to do?" And in the process, they unfolded this employment light concept to me that was newer and just coming out and people were using it in the marketplace.
And they proposed that model to me to take back to the institution I was working for. And lo and behold, because I was in a bit of a position of power, because I had a lot of patients, but number two, fortunately, my contract did not have a non-compete in it. And so, they knew that I had some power to take my 5,000 plus patients to any healthcare company that wanted a contract with me. And so, they were somewhat incentivized in that moment in time to say, "That's a good thought to make you an independent contractor that looks like you're an employee still, but really you're an independent contractor." And that's what employment light is.
And they agreed to that while I was in it and while the moment was in my favor, my business consultants also recommended you might consider purchasing a medical office building and having them lease it from you, wisely said and wisely done, they agreed to that. And so, and then really beyond that, I then negotiated an employment light agreement that is basically productivity-based, so compensation-based. If you remember, they wanted to have a ceiling for that productivity. But that was, here's the seat, that was for their traditional employees, their traditional employees they control, right?
Independent contractors, they have the freedom and liberty to form individual contracts. And so, I could then say, this is what the MGMA data is for what a family doctor in a rural area is doing. This is what I should be paid as work RVUs for that. And they agreed to it because they weren't forced to comply with the corporate employee model. Now, I have an individual one-on-one contract that quite honestly, John, I wasn't asking to be paid more than I was worth. I was just being asked, I was asking to be paid for what I was worth.
And they agreed to all that. And so, the long and short of that was the rest is history. That was over a decade ago. I've loved every minute of that decision. And that's led me to SimpliMD because that experience and my wonderful experience of seeing how that revitalized my professional autonomy is the message I have to doctors all over the country. This is possible. You can do this. It's not visible. It's not seen. Employers are not telling people about it, but it's possible. And that's the story I have.
John: That's awesome. Let me ask you a couple of questions that pop into my mind. And as I said as a CMO, I was sometimes, actually, I was doing a lot of the negotiating for contracts. And that was the thing, the contracts need to be somewhat consistent.
Dr. Tod Stillson: Sure they do.
John: But I think I've heard you speak in other settings about sometimes even given that if you're really producing a lot of RVUs because you're doing certain things that maybe the other doctors aren't, they want to put that cap on what you mentioned earlier.
Dr. Tod Stillson: That's correct.
John: So I guess my two questions, did you still somehow have any kind of a cap that affected you once you had made this change number one? And how do you avoid burnout? Because there's still the incentive, I think, is to work your tail off in a way. Maybe that's two questions.
Dr. Tod Stillson: That's a fair question. Spoken like a true doctor about the burnout side. So number one, I had no ceiling in it. And so I negotiated that in the contract, no ceiling. And in fact, I normally, and it's called the professional services agreement. You know that from being a CMO. By the way, for your listeners, professional service agreements are traditionally where locums are seated. Okay. If you want to think of it in a simple way, that's often what locums do, that's contracted labor, and that's often called the professional services agreement.
Employment light that I'm talking about, in my experience, is also a services agreement. So that's the big box that it goes into. And in my professional services agreement, it's a three-year agreement that renews. But we renegotiate at the end of every three years. And I had an elevator for my work RVUs in it as well. So I didn't just get paid a dollar value per work RVU per year. Each year that went up. Okay. And so because, right, because we have issues like we're all experiencing right now, inflation, right? So numbers tend to rise. And if you keep it static, you're going to end up on the backside of that. And a lot of physicians don't understand how that works.
So anyhow, I had that built into mine and there was no ceiling, and it was just fair compensation for the work that I was doing. Now, I will tell you this much, the moment that I turned that on and began doing the same number of work RVUs I'd been doing the prior year, I made a couple hundred thousand dollars more. I mean, literally apples, apples, not doing more work, not doing anything more, literally just being paid fairly, it led to a couple hundred thousand dollars difference in pay annually.
Now, to answer your second question though is, is there some challenges with that that you get into when it comes to, do you sometimes incentivize yourself to work harder than you need to, right? And I think any self-employed doctor, especially if you've ever been in private practice or ran your own practice in any way will ask themselves that question. And you have to guard yourself from going into that rabbit hole.
All right. Do the work you enjoy, do it at a pace you enjoy, do to the rhythm you enjoy, meet the expected requirements that that pseudo employer has for you, if you will, at least be a mid-level performer, if you will. And let it fall from there. I took five weeks of vacation every year. Okay. And by the way, in the model that I worked in, today's where people always talk about pay time off, right? PTO, all that business. Nope. In my model, when I was working, I got paid.
If I wasn't working, I didn't get paid. And I know what that opportunity cost was for me. If I took a week off, it was going to cost me about $14,000 of income. Just that's what it was. But you know what, for my own sense of well-being and my own sense of sustainability in it, it was very important to take that time off because indeed, I was a high-performing doctor, did a lot of obstetrics and was available a lot. But that was a rhythm and pace that I enjoyed. So your listeners, if you do get engaged in a contract like this, you definitely want to guard yourself from overworking because you're sort of incentivized by that carrot. Find that sweet spot, so to speak.
John: I'm going to have a series of questions here now to put you on the spot. But because I'm going to do that, I want to early in this game here, remind our listeners that you do teach other people how to do this in a variety of ways. And so tell us about, before I get into my laundry list, SimpliMD and everything you're doing to help physicians learn more about this.
Dr. Tod Stillson: Yeah, I'm glad to do that, John. One of the fundamental problems in my story that you heard was I had business illiteracy. Most of us go through our medical training and unfortunately, there's not a lot of financial or business literacy that exists, right? Now, we have a lot of organizations that have been populated out there for doctors to become financially literate, and it's for doctors, things like White Coat Investor, et cetera, that are really nice resources that are filling some gaps that exist in helping physicians. And I love that that's happening.
The reality, though, is there's not a lot of business or micro-business resources like that for doctors. And so I chose to develop SimpliMD as a micro-business competency website that would help doctors flourish and thrive by understanding their business powers and really understanding that doctors are a business individually. And so I have a whole bunch of resources and assets from courses, to consultations, to coaching, to free eBooks that can be found at simplimd.com, and that's spelled S-I-M-P-L-I-M-D.com. And so your listeners are more than welcome to go to that, take a look at the various products that exist.
They can look at the header and find everything. I love helping doctors. I just love helping them learn from what I've discovered and learning how to thrive through the preservation of their professional and personal autonomy. So it's a really powerful idea. And I can tell you at SimpliMD, I don't want to go too far around this rabbit hole, but pretty much the system is rigged against doctors. Yeah, I don't know if you know this yet or not, okay?
John: Yeah, it is, pretty much.
Dr. Tod Stillson: Systems rigged against doctors, okay? And it's because the corporatization of medicine has really stolen that autonomy we have. And then they funnel us all into W-2 workers, right? And then the federal government, who's the other force at play here, they love hiring doctors, hiring taxpayers like doctors who are W-2 employees, because they got no place to turn, right? And that we literally are the targets that they are looking at and saying, oh, you guys are the ones that make a lot of money. We're going to be happy to take all that from you as a W-2 earner.
And so there's not a doctor I don't talk to that doesn't say taxes are killing me. They're horrible. So whether it be burnout or taxes, doctors are having all of this erode that deep sense of when you and I became doctors. We're like, you know what? I don't need to be a gazillionaire, but I certainly look forward to the good life of a doctor, where I have some professional autonomy, where I have some personal autonomy, where I can make a good living and not feel like I'm being picked apart day by day. That's what doctors are looking for.
In today's world, there's so many forces that push back against them. And what SimpliMD is about, and some of the work you're doing I know as well, John, is all about re-empowering doctors in the marketplace to say you don't have to give into those two things. And there is a different path and a different space you can go into. That's what I talk about at SimpliMD.
John: A couple of things I wanted to say. First of all, reflecting again back to the day when I was working at the hospital as an executive the CMO, well, not CMO, the CFO, the CEO, the COO, they're going to want to get out as much as they can from their physicians. They want them to be productive. They want a bottom line. They're driven by that. And they actually, they really do not understand a physician's life. I mean, I actually had to do a lecture for the team explaining to them that when we go home at five o'clock, if we go home at 5:00, that's not the end of our day.
Dr. Tod Stillson: That's correct.
John: We could be busy doing records and answering phone calls, being on call, coming back, going to the nursing home, so many other things. And they just, they don't get it.
Dr. Tod Stillson: No, they don't.
John: So when you were talking about that, it really rang true for me.
Dr. Tod Stillson: Yeah. So there's two things to keep in mind and you understand this as a CMO. Number one, what the work you do in the clinic or face-to-face with patients, your professional services, so to speak, that's just a little, that's a small part of the bucket of what that hospital system is really looking at. They're really looking at the downstream revenue of what your work produces and it's the churn. In business world, we call that the churn, right? The churn of what you produce for them and every doctor who's in an employee situation, you need to know what your churn is. That is exactly what the real value is to your health system to them. And that is that downstream revenue.
Spoiler alert, that's usually worth anywhere from $2 to $5 million, depending on your specialty per doctor. Now translate that $2 to $5 million churn that you're creating for them, not just seeing patients in the clinic, but the whole churn and they're micromanaging every click of the mouse that you have in that clinic space and all the while are making a whole bunch of money on that churn that exists for you downstream. That's what burns out doctors. And that's where you begin to feel undervalued, uncared for, and misunderstood.
So understanding that you do have a downstream revenue beyond what you're doing in the clinic is an important part of the business model that when you become an employee, you're engaged in. And you're exactly right. The administrators don't fully respect and understand what it's like to live under that microscope that you are churning out for them and the difficulties and challenges of it, because they're really looking at you as a number on the spreadsheet.
You're an impersonal number on the spreadsheet. And here's how it looks. Physician labor, expense, period. Okay. That's your salary plus your benefits and anything else that you're doing to create money, to make the system pay for you. Okay? And then the, what you're doing in the clinic plus the downstream revenue. And that's the equation. And you need to understand the dynamics of how those things interplay and the power you have as a doctor to stand up for yourself and say, wait a second, you're undervaluing me and you're underpaying me.
John: Yeah. Now, the other thing I wanted to mention before we move on to my next question is that I did look thoroughly at your website and I felt like I was in a YouTube thing because, not because there's all videos, really, it's a lot of blogs, but the titles and the questions you're answering there are so damn interesting. You know, it's like, damn, I wish I knew that 10 years ago. Damn, I wish I knew that when I was in practice. So I mean, there's a ton of free information and it really gets to all these issues and it addresses maybe some of the questions I'm going to continue to ask you here in a minute, but I really recommend people go and check that out.
Dr. Tod Stillson: And I appreciate that, John. And I will say, I'm so thankful you said that, because to be honest, I created that website and that business with just that in mind. What would my younger self like to know and what can I communicate and share with the rest of my physician tribe that the younger version of myself, now I'm 30 years into practice and so forth, that I wish I would have known.
And part of that, John, and I really write about this in my book, Doctor Incorporated: Stop the Insanity of Traditional Employment and Preserve Your Professional Autonomy. That book was written, a little bit of my website was written with my son in mind. He's currently a third year family medicine resident in Dallas, Fort Worth with John Paul Smith Residency Program. I just was thinking, and it's really what inspired all of those, what's the best advice I can give my son to thrive in the marketplace? And all of that really somewhat began to inspire the whole work that I did with the book, SimpliMD. So intentionally, you're right. That's exactly for the viewpoint that I write those, getting those resources that can make their life better, if I would have known that 10 years ago or earlier.
John: All right. I'm glad you did it.
Dr. Tod Stillson: Yeah, thanks.
John: That's very interesting. And even though I'm never going to be practicing again, once I fully retire. Okay, here's a question. You're in the setting as a physician of being employed, you're subject to all these issues, you're burned out or what have you. I can imagine that it's not necessarily an easy conversation to say, okay, guys, I don't want you to get worried that I want to leave. I don't want to leave, but I don't want to be employed by you anymore. And I don't want to go into private practice. So I have this idea. So you help people work through that I think.
Dr. Tod Stillson: I have.
John: How do you approach that?
Dr. Tod Stillson: So there's a couple of things about it. This is important for your listeners to know. Number one, a professional services agreement and employment light, virtually every hospital knows about it. And here's why they know about it. That's because this is the pathway and the bridge they use to bring private practice doctors into their safe harbor. This is the same pathway they use. They use it virtually every year, all the time. And it's that bridge, but they want to make it a one-way bridge. They kind of want to go, well, this is what we do to engage private practice doctors to come in and become employed doctors. And this is the pathway for it.
But if you're already employed with them, it's like they've got this big kind of bar in front of them and go, you can't go the other direction with this. The reality is that they know about his existence, but it's in what I call the hidden drawer. Let me just use a real Midwestern analogy with you. I like going to the dairy queen. We've got a great dairy queen in our little community. And the day went that my wife and I went to the dairy queen and we both are going to order peanut buster parfaits. And so I order peanut buster buffet with the fudge and all that stuff was really good.
And my wife got up and she said, "I want the peanut buster parfait, but I want peanut sauce substituted for the chocolate." Okay. And I looked at her, I'm like, "Well, that's not on the menu." And she's like, "Oh, but it's on the secret menu. You have to ask for it. And as soon as she said it, they just like, "Okay, we can do it." Well, secret menus exist in all restaurants just as an FYI. Okay. But number two, secret menus exist for all employment contracts.
And the first drawer that they're going to pull out for you is the boiler plate traditional employment contract for every doctor. That's what they're going to go first. And they're going to make you think that is your option. And you have to have enough savvy to say, number one, you know there's some other contracts in your drawer there that we could also talk about. And my preference is to be considered an independent contractor, not an employee. So you have to have the business awareness and your own self-awareness to say that.
Now, if you're a doctor who's been traditionally employed and then your contract's coming up for renewal, or you want to have a conversation with your CMO, again, you got to have the awareness that this is one of the contracts that you would potentially talk about transitioning to. You're like, and here's how I coach doctors to say it. And this is exactly how I said it to my CMO.
I said, "Look, I like wearing our team jersey. I'm all for wearing our team jersey. I want to see our organization succeed, but I want to do it in a little bit different way than what we've been doing it before as a traditional employee. And I think we can do this in a win-win relationship where I'm an independent contractor that still does all the same work, still produces all the same downstream, still gets all the fair compensation from you. But what I gain from that, Mr. CMO, is A, a little more professional autonomy, and then B, an amazing amount of tax efficiency. I have now added a whole bunch of tax tools to my kit that I no longer am targeted as a just a sole W-2 employee. Now I can save 10% to 15% of my income, which for a doctor is a lot of income annually, in that model.
So guess what, Mr. CMO? I want to see you guys win. I want to see me win, and we can do this in a cost-neutral way so that everybody wins. How about it? Let's have a conversation, talk about this, and let's pull that secret menu contract out of your drawer, and let's talk through this." And honestly, it's that simple. Now, there's a couple of caveats here I want to bring forth to your listeners, John.
Number one, to be considered an independent contractor, you can't have that hospital work that you're doing as your sole contract, okay? Because the IRS is going to look at the hospital as like, hey, you're just trying to avoid FICA tax by employing this person as a contractor rather than as an employee, and they get a lot of penalties, and that's where hospitals get really uptight about these things, right? So they're like, wWell, we can't do that because we could get in trouble from the feds," and dah, dah, dah, dah, dah.
So it's very simple, right? How many doctors do you know that don't do some side hustle of some type? I mean, gosh, the studies show 40% to 50% of doctors do. I mean, it's very common. But to be considered an independent contractor, you'd want to have that primary contract and then a job stack, a secondary work that you do as an independent contractor. It could be nursing home assistant director.
It could be taking call. It could be doing telehealth. It could be, in today's world where there's physician jobs that are location independent, like gobs of them, there's all sorts of things you can do. And it's really not so much about the amount of money that you're making in those independent positions. It's that you're doing it. So in other words, you can demonstrate to the IRS and to the employer that you indeed are doing more than one job, okay?
That's the definition of an independent contractor, all right, you're doing more than one job. So that's an important caveat, but it all begins with you going to your superior and saying, "I'm interested in a win-win conversation, okay? This is not me against you. This is not me getting away from you. This is about us doing this together.
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Transcription PNC Podcast Episode 374
Now Every Doctor Can Win As a Micro-Corporation
- Interview with Dr. Tod Stillson
John: All right, NonClinical nation. I think today's interview might potentially change your lives. Our guest today is going to explain how he was able to work in a fulfilling medical practice as a pseudo-employee while maintaining his professional autonomy and earning a much higher income. That seems like nirvana to me. So let's welcome Dr. Tod Stillson to the podcast. Hi, Tod.
Dr. Tod Stillson: Hey, John. It's great to be with you and I'm excited to share my journey with your listeners.
John: Yeah, I'm excited to hear this story from the horse's mouth, so to say. I mean, I've read about you and looked at some of the things you've done online, and this just sounds like an exciting option for some of the people out there that are unhappy in their practices.
Dr. Tod Stillson: It is one of many options that exist, and I tell you the beautiful thing about the marketplace today is although corporations strongly control it, there are lots of new developments happening for doctors to regain their autonomy and not feel like they have to end up as a corporate employee, or really what I call a high-paid factory worker, okay?
John: Yeah, that's definitely what it feels like. I mean, that's what I hear constantly. In lack of autonomy and overwork, they don't understand what a physician does.
Dr. Tod Stillson: Oh, yeah, 100%.
John: It's going to lead to the demise of the profession unless we do something.
Dr. Tod Stillson: John, you and I trained at similar times and have similar experiences as family doctors, and you're exactly right. It's the undermining of the professionalization of our great work as doctors that all doctors across the country do, but it has been eroded. I'm a fan for doctors standing up and saying, that's enough. Let's take control of this ourselves.
John: Awesome. Yeah. Well, tell us a little bit about your background and the mission that you have to educate physicians on how you have found a way to make things better, even if you're, "employed by a hospital system."
Dr. Tod Stillson: Yeah, and I'll tell you the short story, and then we can get into more details later if you want, but I grew up in the Midwest and did my training in Indiana and went out to Virginia to do my residency in family medicine as well as surgical obstetrics. Came back to Indiana and worked here basically in a primary care clinic in rural Indiana for nearly 30 years. And when I came back to this area to begin working, there was the opportunity to work as an employee of a hospital and really just receive a paycheck for it.
And this is way back in the day when it felt like everybody was in a win-win relationship, right? Where you were given a fair compensation. They still gave you a lot of autonomy in the practice. And as long as you know your downstream was good and everybody's working well, everybody wins. And it was very somewhat simple, but really great. Over time, though, as you know, the corporization of America really came into play. And even our little rural hospital began to lose its autonomy to a larger health system that began to take more control and try and crank out more money and in the process remove more and more.
It's the same script that we've heard from doctors all over the country, right? This just happens and happens and happens. And over time, for me, what happened was because I was a full-service family doctor, meaning I did inpatient care, newborn care, OB care, surgical OB, I really did everything in the hospital, okay? We were busy. I mean, in a rural place, any of those doctors out there that work in rural places you know back in the day, especially, you could be very, very busy. Consequently, I earned a lot of RVUs.
And I mean, I really cranked out a lot of money, if you will, and was paid fairly for it at the time for the hospital myself. They really still came out ahead because of the downstream, okay? But nonetheless, the hospital system that owned them came in and began looking at some of our rural family doctors' pay compared to the city people that were working. And they're like you guys are making a lot more money, and that just doesn't seem right. We're going to kind of level the playing field and we're going to put a ceiling on how much you can earn. Arbitrarily.
John: It sounds like my CFO when I was CMO of the hospital, you know?
Dr. Tod Stillson: Okay. Yeah, makes sense to them, right? Put a ceiling on this. How could a family doctor make that much money, right? And so, I'm like, all of us are like, "Wait a second, what are you talking about? We work hard for our community and for the sake of our hospital, and you want to just give us a pay cut and expect us to go, 'Oh, thank you very much. That's okay.'" So, the long and short of it is, as all these things kind of get dragged out, as they often do, our group of about eight doctors, we saw five of them leave, basically, over a year's time. They're like, "I'm not staying around for this." This left about three of us holding the balls up in the air, meaning we were working harder and doing more work, but still the ceiling loomed.
And eventually, we were just like, what are we going to do? Do we want to go out into private practice together here? Because none of us wanted to move. Do we want to just say, okay, thank you very much. I'll accept this contract or something else. I was wise enough to know, like most doctors are, I was business illiterate and also relatively financially illiterate. So one of the greatest moves I've made in my life was I reached out to some business consultants in healthcare and said, "Hey, this is the situation. What would you recommend to me to do?" And in the process, they unfolded this employment light concept to me that was newer and just coming out and people were using it in the marketplace.
And they proposed that model to me to take back to the institution I was working for. And lo and behold, because I was in a bit of a position of power, because I had a lot of patients, but number two, fortunately, my contract did not have a non-compete in it. And so, they knew that I had some power to take my 5,000 plus patients to any healthcare company that wanted a contract with me. And so, they were somewhat incentivized in that moment in time to say, "That's a good thought to make you an independent contractor that looks like you're an employee still, but really you're an independent contractor." And that's what employment light is.
And they agreed to that while I was in it and while the moment was in my favor, my business consultants also recommended you might consider purchasing a medical office building and having them lease it from you, wisely said and wisely done, they agreed to that. And so, and then really beyond that, I then negotiated an employment light agreement that is basically productivity-based, so compensation-based. If you remember, they wanted to have a ceiling for that productivity. But that was, here's the seat, that was for their traditional employees, their traditional employees they control, right?
Independent contractors, they have the freedom and liberty to form individual contracts. And so, I could then say, this is what the MGMA data is for what a family doctor in a rural area is doing. This is what I should be paid as work RVUs for that. And they agreed to it because they weren't forced to comply with the corporate employee model. Now, I have an individual one-on-one contract that quite honestly, John, I wasn't asking to be paid more than I was worth. I was just being asked, I was asking to be paid for what I was worth.
And they agreed to all that. And so, the long and short of that was the rest is history. That was over a decade ago. I've loved every minute of that decision. And that's led me to SimpliMD because that experience and my wonderful experience of seeing how that revitalized my professional autonomy is the message I have to doctors all over the country. This is possible. You can do this. It's not visible. It's not seen. Employers are not telling people about it, but it's possible. And that's the story I have.
John: That's awesome. Let me ask you a couple of questions that pop into my mind. And as I said as a CMO, I was sometimes, actually, I was doing a lot of the negotiating for contracts. And that was the thing, the contracts need to be somewhat consistent.
Dr. Tod Stillson: Sure they do.
John: But I think I've heard you speak in other settings about sometimes even given that if you're really producing a lot of RVUs because you're doing certain things that maybe the other doctors aren't, they want to put that cap on what you mentioned earlier.
Dr. Tod Stillson: That's correct.
John: So I guess my two questions, did you still somehow have any kind of a cap that affected you once you had made this change number one? And how do you avoid burnout? Because there's still the incentive, I think, is to work your tail off in a way. Maybe that's two questions.
Dr. Tod Stillson: That's a fair question. Spoken like a true doctor about the burnout side. So number one, I had no ceiling in it. And so I negotiated that in the contract, no ceiling. And in fact, I normally, and it's called the professional services agreement. You know that from being a CMO. By the way, for your listeners, professional service agreements are traditionally where locums are seated. Okay. If you want to think of it in a simple way, that's often what locums do, that's contracted labor, and that's often called the professional services agreement.
Employment light that I'm talking about, in my experience, is also a services agreement. So that's the big box that it goes into. And in my professional services agreement, it's a three-year agreement that renews. But we renegotiate at the end of every three years. And I had an elevator for my work RVUs in it as well. So I didn't just get paid a dollar value per work RVU per year. Each year that went up. Okay. And so because, right, because we have issues like we're all experiencing right now, inflation, right? So numbers tend to rise. And if you keep it static, you're going to end up on the backside of that. And a lot of physicians don't understand how that works.
So anyhow, I had that built into mine and there was no ceiling, and it was just fair compensation for the work that I was doing. Now, I will tell you this much, the moment that I turned that on and began doing the same number of work RVUs I'd been doing the prior year, I made a couple hundred thousand dollars more. I mean, literally apples, apples, not doing more work, not doing anything more, literally just being paid fairly, it led to a couple hundred thousand dollars difference in pay annually.
Now, to answer your second question though is, is there some challenges with that that you get into when it comes to, do you sometimes incentivize yourself to work harder than you need to, right? And I think any self-employed doctor, especially if you've ever been in private practice or ran your own practice in any way will ask themselves that question. And you have to guard yourself from going into that rabbit hole.
All right. Do the work you enjoy, do it at a pace you enjoy, do to the rhythm you enjoy, meet the expected requirements that that pseudo employer has for you, if you will, at least be a mid-level performer, if you will. And let it fall from there. I took five weeks of vacation every year. Okay. And by the way, in the model that I worked in, today's where people always talk about pay time off, right? PTO, all that business. Nope. In my model, when I was working, I got paid.
If I wasn't working, I didn't get paid. And I know what that opportunity cost was for me. If I took a week off, it was going to cost me about $14,000 of income. Just that's what it was. But you know what, for my own sense of well-being and my own sense of sustainability in it, it was very important to take that time off because indeed, I was a high-performing doctor, did a lot of obstetrics and was available a lot. But that was a rhythm and pace that I enjoyed. So your listeners, if you do get engaged in a contract like this, you definitely want to guard yourself from overworking because you're sort of incentivized by that carrot. Find that sweet spot, so to speak.
John: I'm going to have a series of questions here now to put you on the spot. But because I'm going to do that, I want to early in this game here, remind our listeners that you do teach other people how to do this in a variety of ways. And so tell us about, before I get into my laundry list, SimpliMD and everything you're doing to help physicians learn more about this.
Dr. Tod Stillson: Yeah, I'm glad to do that, John. One of the fundamental problems in my story that you heard was I had business illiteracy. Most of us go through our medical training and unfortunately, there's not a lot of financial or business literacy that exists, right? Now, we have a lot of organizations that have been populated out there for doctors to become financially literate, and it's for doctors, things like White Coat Investor, et cetera, that are really nice resources that are filling some gaps that exist in helping physicians. And I love that that's happening.
The reality, though, is there's not a lot of business or micro-business resources like that for doctors. And so I chose to develop SimpliMD as a micro-business competency website that would help doctors flourish and thrive by understanding their business powers and really understanding that doctors are a business individually. And so I have a whole bunch of resources and assets from courses, to consultations, to coaching, to free eBooks that can be found at simplimd.com, and that's spelled S-I-M-P-L-I-M-D.com. And so your listeners are more than welcome to go to that, take a look at the various products that exist.
They can look at the header and find everything. I love helping doctors. I just love helping them learn from what I've discovered and learning how to thrive through the preservation of their professional and personal autonomy. So it's a really powerful idea. And I can tell you at SimpliMD, I don't want to go too far around this rabbit hole, but pretty much the system is rigged against doctors. Yeah, I don't know if you know this yet or not, okay?
John: Yeah, it is, pretty much.
Dr. Tod Stillson: Systems rigged against doctors, okay? And it's because the corporatization of medicine has really stolen that autonomy we have. And then they funnel us all into W-2 workers, right? And then the federal government, who's the other force at play here, they love hiring doctors, hiring taxpayers like doctors who are W-2 employees, because they got no place to turn, right? And that we literally are the targets that they are looking at and saying, oh, you guys are the ones that make a lot of money. We're going to be happy to take all that from you as a W-2 earner.
And so there's not a doctor I don't talk to that doesn't say taxes are killing me. They're horrible. So whether it be burnout or taxes, doctors are having all of this erode that deep sense of when you and I became doctors. We're like, you know what? I don't need to be a gazillionaire, but I certainly look forward to the good life of a doctor, where I have some professional autonomy, where I have some personal autonomy, where I can make a good living and not feel like I'm being picked apart day by day. That's what doctors are looking for.
In today's world, there's so many forces that push back against them. And what SimpliMD is about, and some of the work you're doing I know as well, John, is all about re-empowering doctors in the marketplace to say you don't have to give into those two things. And there is a different path and a different space you can go into. That's what I talk about at SimpliMD.
John: A couple of things I wanted to say. First of all, reflecting again back to the day when I was working at the hospital as an executive the CMO, well, not CMO, the CFO, the CEO, the COO, they're going to want to get out as much as they can from their physicians. They want them to be productive. They want a bottom line. They're driven by that. And they actually, they really do not understand a physician's life. I mean, I actually had to do a lecture for the team explaining to them that when we go home at five o'clock, if we go home at 5:00, that's not the end of our day.
Dr. Tod Stillson: That's correct.
John: We could be busy doing records and answering phone calls, being on call, coming back, going to the nursing home, so many other things. And they just, they don't get it.
Dr. Tod Stillson: No, they don't.
John: So when you were talking about that, it really rang true for me.
Dr. Tod Stillson: Yeah. So there's two things to keep in mind and you understand this as a CMO. Number one, what the work you do in the clinic or face-to-face with patients, your professional services, so to speak, that's just a little, that's a small part of the bucket of what that hospital system is really looking at. They're really looking at the downstream revenue of what your work produces and it's the churn. In business world, we call that the churn, right? The churn of what you produce for them and every doctor who's in an employee situation, you need to know what your churn is. That is exactly what the real value is to your health system to them. And that is that downstream revenue.
Spoiler alert, that's usually worth anywhere from $2 to $5 million, depending on your specialty per doctor. Now translate that $2 to $5 million churn that you're creating for them, not just seeing patients in the clinic, but the whole churn and they're micromanaging every click of the mouse that you have in that clinic space and all the while are making a whole bunch of money on that churn that exists for you downstream. That's what burns out doctors. And that's where you begin to feel undervalued, uncared for, and misunderstood.
So understanding that you do have a downstream revenue beyond what you're doing in the clinic is an important part of the business model that when you become an employee, you're engaged in. And you're exactly right. The administrators don't fully respect and understand what it's like to live under that microscope that you are churning out for them and the difficulties and challenges of it, because they're really looking at you as a number on the spreadsheet.
You're an impersonal number on the spreadsheet. And here's how it looks. Physician labor, expense, period. Okay. That's your salary plus your benefits and anything else that you're doing to create money, to make the system pay for you. Okay? And then the, what you're doing in the clinic plus the downstream revenue. And that's the equation. And you need to understand the dynamics of how those things interplay and the power you have as a doctor to stand up for yourself and say, wait a second, you're undervaluing me and you're underpaying me.
John: Yeah. Now, the other thing I wanted to mention before we move on to my next question is that I did look thoroughly at your website and I felt like I was in a YouTube thing because, not because there's all videos, really, it's a lot of blogs, but the titles and the questions you're answering there are so damn interesting. You know, it's like, damn, I wish I knew that 10 years ago. Damn, I wish I knew that when I was in practice. So I mean, there's a ton of free information and it really gets to all these issues and it addresses maybe some of the questions I'm going to continue to ask you here in a minute, but I really recommend people go and check that out.
Dr. Tod Stillson: And I appreciate that, John. And I will say, I'm so thankful you said that, because to be honest, I created that website and that business with just that in mind. What would my younger self like to know and what can I communicate and share with the rest of my physician tribe that the younger version of myself, now I'm 30 years into practice and so forth, that I wish I would have known.
And part of that, John, and I really write about this in my book, Doctor Incorporated: Stop the Insanity of Traditional Employment and Preserve Your Professional Autonomy. That book was written, a little bit of my website was written with my son in mind. He's currently a third year family medicine resident in Dallas, Fort Worth with John Paul Smith Residency Program. I just was thinking, and it's really what inspired all of those, what's the best advice I can give my son to thrive in the marketplace? And all of that really somewhat began to inspire the whole work that I did with the book, SimpliMD. So intentionally, you're right. That's exactly for the viewpoint that I write those, getting those resources that can make their life better, if I would have known that 10 years ago or earlier.
John: All right. I'm glad you did it.
Dr. Tod Stillson: Yeah, thanks.
John: That's very interesting. And even though I'm never going to be practicing again, once I fully retire. Okay, here's a question. You're in the setting as a physician of being employed, you're subject to all these issues, you're burned out or what have you. I can imagine that it's not necessarily an easy conversation to say, okay, guys, I don't want you to get worried that I want to leave. I don't want to leave, but I don't want to be employed by you anymore. And I don't want to go into private practice. So I have this idea. So you help people work through that I think.
Dr. Tod Stillson: I have.
John: How do you approach that?
Dr. Tod Stillson: So there's a couple of things about it. This is important for your listeners to know. Number one, a professional services agreement and employment light, virtually every hospital knows about it. And here's why they know about it. That's because this is the pathway and the bridge they use to bring private practice doctors into their safe harbor. This is the same pathway they use. They use it virtually every year, all the time. And it's that bridge, but they want to make it a one-way bridge. They kind of want to go, well, this is what we do to engage private practice doctors to come in and become employed doctors. And this is the pathway for it.
But if you're already employed with them, it's like they've got this big kind of bar in front of them and go, you can't go the other direction with this. The reality is that they know about his existence, but it's in what I call the hidden drawer. Let me just use a real Midwestern analogy with you. I like going to the dairy queen. We've got a great dairy queen in our little community. And the day went that my wife and I went to the dairy queen and we both are going to order peanut buster parfaits. And so I order peanut buster buffet with the fudge and all that stuff was really good.
And my wife got up and she said, "I want the peanut buster parfait, but I want peanut sauce substituted for the chocolate." Okay. And I looked at her, I'm like, "Well, that's not on the menu." And she's like, "Oh, but it's on the secret menu. You have to ask for it. And as soon as she said it, they just like, "Okay, we can do it." Well, secret menus exist in all restaurants just as an FYI. Okay. But number two, secret menus exist for all employment contracts.
And the first drawer that they're going to pull out for you is the boiler plate traditional employment contract for every doctor. That's what they're going to go first. And they're going to make you think that is your option. And you have to have enough savvy to say, number one, you know there's some other contracts in your drawer there that we could also talk about. And my preference is to be considered an independent contractor, not an employee. So you have to have the business awareness and your own self-awareness to say that.
Now, if you're a doctor who's been traditionally employed and then your contract's coming up for renewal, or you want to have a conversation with your CMO, again, you got to have the awareness that this is one of the contracts that you would potentially talk about transitioning to. You're like, and here's how I coach doctors to say it. And this is exactly how I said it to my CMO.
I said, "Look, I like wearing our team jersey. I'm all for wearing our team jersey. I want to see our organization succeed, but I want to do it in a little bit different way than what we've been doing it before as a traditional employee. And I think we can do this in a win-win relationship where I'm an independent contractor that still does all the same work, still produces all the same downstream, still gets all the fair compensation from you. But what I gain from that, Mr. CMO, is A, a little more professional autonomy, and then B, an amazing amount of tax efficiency. I have now added a whole bunch of tax tools to my kit that I no longer am targeted as a just a sole W-2 employee. Now I can save 10% to 15% of my income, which for a doctor is a lot of income annually, in that model.
So guess what, Mr. CMO? I want to see you guys win. I want to see me win, and we can do this in a cost-neutral way so that everybody wins. How about it? Let's have a conversation, talk about this, and let's pull that secret menu contract out of your drawer, and let's talk through this." And honestly, it's that simple. Now, there's a couple of caveats here I want to bring forth to your listeners, John.
Number one, to be considered an independent contractor, you can't have that hospital work that you're doing as your sole contract, okay? Because the IRS is going to look at the hospital as like, hey, you're just trying to avoid FICA tax by employing this person as a contractor rather than as an employee, and they get a lot of penalties, and that's where hospitals get really uptight about these things, right? So they're like, wWell, we can't do that because we could get in trouble from the feds," and dah, dah, dah, dah, dah.
So it's very simple, right? How many doctors do you know that don't do some side hustle of some type? I mean, gosh, the studies show 40% to 50% of doctors do. I mean, it's very common. But to be considered an independent contractor, you'd want to have that primary contract and then a job stack, a secondary work that you do as an independent contractor. It could be nursing home assistant director.
It could be taking call. It could be doing telehealth. It could be, in today's world where there's physician jobs that are location independent, like gobs of them, there's all sorts of things you can do. And it's really not so much about the amount of money that you're making in those independent positions. It's that you're doing it. So in other words, you can demonstrate to the IRS and to the employer that you indeed are doing more than one job, okay?
That's the definition of an independent contractor, all right, you're doing more than one job. So that's an important caveat, but it all begins with you going to your superior and saying, "I'm interested in a win-win conversation, okay? This is not me against you. This is not me getting away from you. This is about us doing this together.
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