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EP69 - Teaching Early Careerist Physicians Money Matters with Brent Lacey, MD

Trisha’s guest this week is Brent Lacey, MD,  who is a gastroenterologist with Texas Digestive Disease Consultants.  Dr. Lacey also consults with other clinicians on their personal finances, especially when they are considering opening up a private practice, through his business The Scope of Practice.

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In this episode, we talk about…

[2:11] What inspired Brent to become an entrepreneur

Brent never felt like he had a spark to become an entrepreneur.  He is, however, a teacher at heart.  He considers himself to be a physician by trade, but a teacher by personality.  He cut his teeth on financial coaching with Dave Ramsey’s Financial Peace University.  He taught these classes at his church several times over the course of a few years.  He really enjoyed seeing those light bulb moments when someone realizes how to dig themselves out of a hole.

Some people who went to Brent’s church also worked at his hospital.  They had him come talk to the staff about setting up retirement funds.  He was also in the military at the time, so some of the corpsmen (Navy equivalent of medics) asked Brent if he would talk to one of their clinics about finances.  Brent started to realize there was a huge need, and also that the financial questions were pretty similar from person to person – regardless of age, career status, wealth status, or income level.

Since he kept getting the same questions, he started to think about starting a blog.  He got on YouTube, looked up some tutorials, and put it all together.  People started reading and reaching out to him, and he saw the need for encouragement and education.  In addition to the blog, Brent now has a podcast, online courses, and financial coaching programs.  It all grew from that kernel of passion that comes from the heart of a teacher.

[5:03] How Brent supports other clinicians through The Scope of Practice

Brent’s clients are mostly clinicians, and he has narrowed in on supporting them with their finances as they operate their own medical practices.  His true passion is helping to turn physicians into the leaders that their companies need them to be.

When someone comes to him about opening a private practice, one of the first questions Brent asks is, “Why?”  It’s very helpful for him to have an understanding of the person’s motivation, and sometimes he finds that they need to be talked through.  Sometimes the person needs to be persuaded into it, and other times they need to be discouraged from it.  Some people are feeling burnt out in their current job, or frustrated because they don’t like their boss, team leader, staff, hours, or whatever else.  They think it would be so much better to go out on their own, and Brent has to let them know that the grass isn’t always greener on the other side.  You need to have something you’re running to, not just something you’re running from.

The second question he asks is where they see themselves 10-15 years from now.  A lot of people may be lured into private practice without really appreciating just how much work it takes.  Brent always tells people that it is going to be a lot of work.  It will be worth it, but you need to make sure you’re really motivated.  

By the time someone comes to Brent, they have usually been thinking about going into private practice for some time.  They may have a plan as far as who they want to work with, or they might even have gone so far as to pick out a piece of property or a location to lease.  Brent helps them to figure out where they are now, and how they can keep making progress.  They work through the nitty gritty: figuring out where to set up shop, who to hire, the equipment they need, and more.

[8:02] Developing a business plan as a potential physician owner

When they start developing a business plan, it’s really helpful to get down to specific numbers.  If you know what your monthly expenses are, you can figure out what your break even point is.  Once you know that number, then you have to translate that into, how many RVUs is that?  How many patient visits is that?  How many operations or procedures is that?  Once you start to break down the numbers, you can see what needs to happen in order to be making any kind of salary at all.

This is often eye-opening for folks, and sometimes they decide they aren’t as ready as they thought they were.  Brent uses the analogy of getting the boat close to the dock before you jump off it.  If you do it from a hundred feet away, you aren’t going to make it.  If you get closer to the dock, you’re more likely to succeed.  So if you’re thinking about moving into a private practice and you’re just going to start cold, that won’t work.  You aren’t going to quit your job one day and start seeing 30 patients a day in your private practice tomorrow.

There are, however, ways to ease into it.  Maybe you start without some equipment or staff. You just start putting out feelers to get some name recognition.  Maybe you go part-time in your job before you start moving over.  Maybe you’re doing local tenants some of the time, and building your practice the rest of the time.  There are lots of different ways to go about it, but it’s really helpful to have a thorough understanding of what you’re getting into before you start.

[10:29] The first staff member a physician should hire to allow them to continue to practice

Brent says the first person they need to hire is themselves.  That may sound strange, but it can lead to burnout if you don’t do it.  Physicians tend to have a natural inclination to want to take care of everybody else before us.  Doctors make the worst patients.  We’re so bad at taking care of ourselves, and I think that’s true in a business sense too.  

A lot of doctors will come in to see Brent, six months or a year into the practice, and they still aren’t making a salary.  Brent will look at everything and ask why they are buying equipment and other extra things.  The doctors will say they are trying to expand the business, or they are trying to offer more services.  That’s all great, but your kids need to eat.  You have to pay yourself something.  You need to get into a head space where you recognize the absolute necessity of paying yourself first, because if you don’t take care of yourself, you’re going to burn out so fast.  You’re not going to be able to take care of anybody else.

So, the first person they need to hire is themselves.  They have to think of themselves as worthy of being paid.  After that, it depends a bit on what type of practice you’re starting.  If you’re starting a surgical practice, one person isn’t enough.  You’re going to need nurses or techs, MAs, front desk, medical records, all these things.  But a good initial cadre of people to have would be a medical assistant and an administrative person.  That’s a pretty good core if you’re starting out really small.  The administrative person can handle reception, medical records, and bill paying early on.  As you grow and expand, that job becomes more than one person can handle. Then you might split it so one person does reception, phones, and scheduling, and another person does medical records, insurance, and billing.  

As you continue to expand and add services, you start to create new jobs.  Allow the expansion to happen organically.  Brent points out that physicians can be prone to stepping in the bear trap and thinking that debt needs to be a way of life.  They start right away with hiring a bunch of people, buying lots of equipment, or leasing a big space.  They think going into debt is okay, because they are doctors and they can pay it back.  Brent thinks the profession is numb to the idea of debt because they spend a decade or more with student loans hanging around their necks.  They start to think of debt as the way of life, or even as a tool they should use.  Brent encourages people not to feel bad about starting from humble beginnings.  It’s okay to start small and then grow as you need to.

[14:11] How to approach deciding where to practice and selecting a space

When deciding on a location, Brent will start with a ten thousand foot view.  He will ask his clients where they want to practice – what region of the country? What city? It may not be the place where they’re currently living.  A lot of people don’t think about this, and they default to the city they’re already in.  That’s fine; there’s nothing wrong with that. Maybe you have really deep roots there, and that’s where you want to be.  Other people may want to go somewhere else, and the world is their oyster.  You need to consider where you want to live, as well as the cost of living.  It’s going to be a lot harder to make enough money to open a new business and cover expenses in Orange County, CA, then it’s going to be in Texas, Florida, or Tennessee.  

Once you have figured out your desired region of the country, you have to consider how close you want to be to a hospital.  Your commute has to be taken into account.  You may need to think about proximity to a good school district.  At this point, Brent recommends enlisting the services of a professional – especially if you don’t know the area very well or you’ve never really searched for real estate. It’s okay to need help from someone who specializes in this kind of thing. You’re about to buy a six to seven figure asset – don’t play around with that.  Make an informed decision.

[17:31] Buying a building to occupy versus leasing

Early on, Brent thinks it makes a lot of sense to lease.  As a long-term solution, he recommends owning.  It’s very similar to his attitude toward residential real estate.  When people are in residency, fellowship, and early career, he advises renting.  It frustrates people, and they feel like they’re throwing money away.  They want to start building equity.  Brent reminds them that, given the amortization schedule, they’re not going to be building equity for a long time.  They’re losing a little bit of investment returns or equity buildup, but they’re gaining flexibility.  That’s what you want early on when you’re growing and expanding.  You want choices, and you want to be able to make some big moves.

If you start off with just you, and then three years later you have four partners and a staff of 20 people, you’ve outgrown your space.  If you’ve owned that space for three years, you’re probably not going to end up making a whole lot of money after closing costs.

Another great thing about leasing early on, is that it really helps you figure out what you want.  Just like when you live in rental houses for several years before buying a home. You can make a more informed decision because you know what you like and what you don’t like.

Looking toward ownership as a long-term solution is really valuable because you will make more money over time.  It’s a great investment in yourself, especially if you’re going to build a space and then lease it to yourself.  Brent loves that move and has done it several times.  It’s also then worth a lot to a real estate investment trust because they have a long-term tenant.

[20:25] The hassle factor for physicians in different phases of their careers

Using Brent’s example, I wondered if it would be beneficial if someone wanted to sell, but then put their share of the proceeds back into the building because they know the practice will be there for a long time.  They then become a passive real estate investor, but they still get the benefits of owning a smaller portion without having to actively manage the property.

Brent thought it would depend on the hassle factor you’re willing to put up with. If it is a proven owner that has done this before, though, in general he thinks it is a good investment.  It also takes some of the uncertainty out of the situation.  If you’re going to put a different tenant in an office building, it’s hard to know what will happen.  But if the quality of your work is high and your business is profitable, you’re a solid tenant and you know you’ll be getting rental income as a steady passive income stream.  That is so valuable, especially as you start thinking about situations like the COVID shutdown or recessions, when things change suddenly.  Diversifying your income streams can be tremendously valuable.

[22:39] Investing in healthcare properties

When you’re first starting out, there’s an element of the unknown no matter what sector of real estate you’re investing in.  There may, however, be some validity to the idea that physicians may feel more comfortable investing in the healthcare space simply because of familiarity.  We are more familiar with the typical turnover rate, the likelihood the practice is going to stay, typical profit margins, etc.  We understand what kind of investment is required and what kind of returns are likely.  

You can also look into these kinds of details by reading books, listening to lectures, or listening to podcasts like this one.  Brent encourages physicians to learn about it, because it is definitely worth it from a financial perspective.

[24:23] Brent’s decisions to become a physician and to specialize in gastroenterology

Brent went to college as a business major, and he was planning on going into marketing.  He has also always loved writing, which is probably what drew him to writing the blog and creating the podcast.  During his freshman year of college, he went on a medical mission trip to Mexico as a translator.  That week, he really felt God was calling him to the medical field.  About two weeks later, after thinking about it, praying about it, and talking to his parents about it, he changed his major to pre-med.  Brent crammed four years of pre-med into the last three years of college.

His decision to specialize in gastroenterology came about because it has been an area of interest for him since his first year of medical school.  He found the diseases fascinating and the liver infinitely interesting.  He takes care of really sick people and has opportunities to do some real good.  

[25:55] Brent’s outlook: In 20 years, will more physicians be employed or in private practice?

The ratio shifted to be majority employee physician in 2018, which was the first year it went over 50%.  If you include things like local tenants, concierge practice, and direct primary care, Brent thinks it will start tilting a bit toward private practice in the next few years.  What will be interesting is whether or not the private practices will be able to withstand the way hospital organizations and big healthcare companies are buying up the little practices and absorbing everybody.  That will be the real challenge – it’s not so much individual physicians wanting to start private practices, it’s existing private practices that get bought up and absorbed into corporate health care.

It’s going to be hard to stop that corporate shift, but Brent says he will fight the good fight and encourage people to go into private practice.  He loves the autonomy and flexibility, and he thinks that if more physicians understood how attainable that goal is, more of them would do it. 

[27:41] What Brent would change about healthcare to improve it

Over the last 20 years, healthcare has started to be thought of as a commodity.  Brent thinks that is true to a certain extent, but the extension that has happened that he does not like is that people start to think of all healthcare as being the same.  That is a mistaken world view, in Brents opinion, that has the potential to cause some unfortunate policy moves and has probably caused some unfortunate policy moves in the last 20 years.

For example, Brent says there are probably several realtors in my city that I would never send people to.  They aren’t very good, they’re not knowledgeable, they’re swindlers, or they’ve made stupid mistakes.  The truth is, it’s the same in healthcare.  Not all physicians are the same level of quality. Not all hospitals are the same.  Not all private practices are the same.

Brent sees the conflation of healthcare as a universal good with the idea that there is universal good.  “Non-varying levels of excellence is mistaken and wrongheaded,” he says.  It could lead to some very nasty changes as we start to see people demand various levels of service that cannot be provided at the cost that people want.  That is probably the biggest change Brent would make, outside of ending all disease forever.

[29:41] Brent’s first job

Brent’s first job was a soccer referee in high school.  He was also on staff at a boy scout camp.

[30:18] What Brent would be doing for a living if he was not a physician

It is Brent’s dream to open up a miniature golf course.  He loves miniature golf, and prefers it to regular golf.  Put him in front of a windmill, and he’ll get the shot every time!

[30:52] What Brent is reading and watching for news, information, and inspiration

Brent tries to read at least one leadership or business management book a month. He recommends reading anything by Jim Collins.  He wrote Good to Great and Built to Last, which Brent says are pivotal books that every business owner needs to read.  Simon Sinek’s Start with Why is really motivating, and Brent also suggests reading The 21 Irrefutable Laws of Leadership by John Maxwell.

As for news?  Brent says, “I try not to watch the news.  I mean, if I want deep, dark, depressing thoughts of nothingness and sadness, I watch Martin Scorsese movies.”

[32:07] Brent’s healthy self-care

Brent’s number one priority is to spend time with his kids and his wife.  When he gets home from work, his cell phone goes in the drawer, his doctor hat comes off, and he’s a dad and a husband.  

[32:44] Whether a person is born with the desire to heal or trained to desire to heal

As far as physician motivation goes, Brent thinks it’s more a desire to help.  Physicians seem naturally inclined to be helpers, and to be teachers to a certain degree.  Healing is kind of an extension of that.  Brent has also found that many times, physicians have had some kind of experience that really motivated them to the medical field.  To a certain extent, our desire to heal is probably shaped by our experiences but Brent believes that all physicians are inclined toward helping and toward service.

Links to resources:

The Scope of Practice:

Texas Digestive Disease Consultants:

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