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Are any Doctors Billionaires?

by Dr.Sal MD on author

Rich Doctors

While few people dream of a net worth of one thousand million dollars, fewer yet attain the elusive distinction of billionaire status. Those who do are largely accidents with no foresight of their coming fortunes before it is bestowed on them. Yet in this exclusive club, a few accidental doctors are to be found.

At time of writing, I am aware of four such Masters of the Universe. While doctors in name, it might well as be a misnomer, for a day in the life one of these fantastic four has about as much in common with the life of a regular practising physician as a luxury yacht resembles an outboard motorboat. Each of these billionaire-doctors owes their opulence to jumping careers from practising medicine to providing value while mastering market forces. Here are their brief bios in order of increasing wealth:

Dr. G. Michelson ($1.4 billion) - you might refer to him as the “Spine Whisperer” as he holds in excess of 250 U.S. patents on devices and interventions related to disorders of the spine. In 2005 he won a court settlement for $1.5 billion from the medical tech behemoth, Medtronic, for copyright infringement.

Dr. P. Frost ($2.4 billion) - you could consider him a legitimate “Drug Lord” of the nice kind. After building a pharmaceutical company based on his patents, it was later sold for $950 million, proceeds of which he astutely used to acquire other companies he consolidated into Ivax Pharmaceuticals, later sold to Teva Pharmaceutical Industries for $8.6 billion.

Dr. T. Frist ($4 billion) - you might call him a “Hospital Magnate” (or magnet) as he co-founded the Hospital Corporation of America which owns 165 hospitals and 115 surgical centres boasting annual revenue of around $34 billion. He is the groups majority shareholder.

Dr. P. Soon-Shiong ($8 billion) - you might call him the “Cancer Czar” after he invented the cancer drug Paclitaxel and funded its development himself through loans to launch American Pharmaceutical Partners. He has acquired several companies since, that he hopes to be able to coordinate into a service that analyzes the genome of patients stricken with cancer within 24 hours and provide oncologists with treatment options in the same time frame.

If Doctors are so Smart, why aren't all Doctors Rich?

A doctor’s income resembles a Russian doll. You have to strip away overhead, education loans, taxes, insurance, continuing medical education, and professional fees to see the effective income. That diminutive doll at the end is what the doctor has left to spend, not the big doll reported in the news and Bureau of Labor Statistics (with alarm), as their salary.

Overhead typically runs at 30-40% of gross billings for family doctors. At my present practice of five doctors and two nurses, this base rate pays salaries to five support staff, rent for a building in a high traffic location, all of our clinical supplies, office equipment, leases, purchases, and servicing costs.

Our education is also very expensive - perhaps the most expensive course of study you can take at a University. We step out of our graduation ceremony holding in one hand our degree, and a bill from our university for $150 000 in the other. But what you cannot see is the even greater loss of unrealized income we missed for the period of study. The decade or more that we devote to study is time away from paying jobs - medicine is not offered part-time. We are thereby double charged for the privilege of our training.

Orbiting around each doctor is not one insurance policy but typically several. There is mandatory malpractice insurance and disability insurance (in the event of your demise the clinic collects on your misery), and then personal life, home, and vehicle insurance for our families.

Continuing medical education (CME) is a new expense category. In the golden days, or shall we say the olden days of medicine, once a doctor graduated, formal training was over. It was up to them to stay apprised of advances in the field. Consequently some doctors nearing retirement were still prescribing derelict drugs or defunct treatments or neglecting new treatments. This led to a recent reformation. Governing bodies mandated that physicians would be required to conduct self-paced lifelong learning. This amounts to a set amount of hours of study per year through correspondence courses or live lectures. At the end of each five year cycle a doctor, to maintain their licence must submit these hours. CME is costly, e.g. I spent about $1000 last year on this activity.

Then there are mandatory professional fees garnered by our medical associations and colleges. Mine runs at over $3000 a year. Ouch.

Finally, we come to retirement. In my area, doctors are considered as self-employed agents. That means we are not eligible for social security at retirement and we are responsible for making our nest egg. Some doctors do not prepare adequately, and others have been wiped out of their savings during perturbations in the stock market. I spoke with one guy who's father was a well known family doctor in the area. His father thought he could make up a nest egg by working harder near the finish line. But it cost him a heart attack putting his family in financial distress. His son that I was talking to, not surprisingly, sells insurance. The point I am making here is that our retirement savings are built into our pay unlike other jobs where it is subtracted from your quoted income and stashed away for you. That further inflates what it appears like we are being paid.

Of my gross income per year, 30% escapes out of my expense column to cover office overhead, followed by another 35% in income tax on the remnant, and a further Goods and Services tax of 15% on everything I purchase using the remnant of the remnant, of that remnant. The way I look at my income is that I work from January to May 1st each year for my office, then from May 1st to September 1st to cover taxes, four and half days for my professional “union” dues, three and a half days for malpractice insurance coverage, three and a half days for my accountant, two and a half days for my college, and a quarter day to maintain my corporate registration (tax by another name). So two thirds of my working year is for someone else, and one third is working for myself.

With all the above subtractions, a Gulliver sized income on paper is melted down to a Lilliputian size in practice. That’s not to say you need to reach for your military bugle and blow a round of Taps for us. We arrive at a comfortable income but are by no means “rich”. We may be “richer” than those reporting on our activities but in the vast firmament of financial compensation, we are vastly eclipsed by CEOs, hedge fund managers, performing artists, sports personalities, and doctors who switch from lab coats to suits to pursue commercial interests like the billionaire-doctors profiled above.

 


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