Litigation vs Healthcare
America has become, perhaps, the most lawsut happy nation in the history of the world. Nobody is more aware of that fact than a physician. The cost of becoming a doctor is high from a financial point of view. After an undergraduate education, post-grad, medical school, internships and residencies, the typical medical graduate begins his or her career in a deep hole. But after that, it's easy street for them, right?
Well, maybe not. After all, with five attorneys chasing every ambulance, running class-action lawsuits against pharmaceutical companies and medical practices, even years after the procedure was done, it's not inconceivable that a physician could build a successful practice and then see it destroyed in a courtroom. I myself once sat on a jury where damages were being sought against an OB-GYN physician years after the baby was born. Every day for three weeks that doctor sat in the courtroom, and eventually was acquitted. Do you think the quality of care she delivered during that three-week period suffered? Of course it did.
The point I'm trying to make is that the threat of being sued is one of the largest concerns that a physician has. They are keenly aware that one mistake can erase everything they've ever worked for? How would you like that deal in your career?
Asset Protection: A Reasonable Defense
Doesn't medical malpractice insurance solve these issues? Actually, it may serve to attract them. Lawyers are not stupid, and would usually prefer going after low-hanging fruit rather than pursuing lawsuits where the physician's asset base may be limited.. The knowledge that the doctor won't personally have to pay is the oil that "runs the system." In addition, the cost of malpractice insurance is also skyrocketing, and in many states doctors are being forced to lower coverage limits in order to afford it, sometimes to as little as $100,000. I can tell you that the suit that I was a juror on was for a lot more than that.
A good asset protection plan can lift the fear that doctors have of being sued from their shoulders. This doctor won't have to overtest everything, or second-guess every decision. He won't have to make surgery (which has the highest risk of being sued) the last option, when it may be, in fact, the best one. The physicians quality of life goes up as the patient's quality of care does. Everyone wins!
Here are three areas of asset protection that you need to know about:
1. Investigate co-ownership of assets. Technically speaking, co-ownership can help protect some assets, but there can be problems associated. For example, owning an asset through "joint tenancy" will do very little to protect you, while another form such as "tenants by entirety" may. It's important to understand the quirks and limitations of each one.
2. Set up corporate entities that you can place assets inside. Sole proprietorships and partnerships are the least safe, from a legal protection point of view. LLC's as a general rule will provide the best protection. One of the great strengths of an LLC is the fact that the legal remedy is known as a "charging order." The charging order, without going into the nuts and bolts of it here, makes it very difficult for creditors to get their money. Keeping in mind that attorneys like to go after "low-hanging fruit," realize that LLC's are not that fruit. This discourages lawsuits upfront because litigants will be advised that you'll be more trouble than you're worth to pursue.
3. Get guidance on using other vehicles such as trusts, closely-held insurance companies, and offshore corporations. Recognize that each of these solutions may be expensive, and complicated to set up.
The three points mentioned above, of course, should also be supplemented with a healthy dose of malpractice insurance.
Note: None of the above should be construed as legal advice. While a good financial planner may act as a part of the team, any recommendations and implementation should be verified by an attorney knowledgable in the subject of asset protection.
See also Asset Protection
You Can Get the Monkey Off Your Back
Imagine running your practice free of the fears of litigation! You may remember why you went into this highly honorable field in the first place....to bring healing to the sick, and to enhance their quality of life. You can bring the joy back into what you do by taking some common-sense steps to keep the legal wolves away from your door. If you've never looked into protecting yourself and your personal assets from the threat of litigation, perhaps it's time you did.
Until next time,
Are you a serious investor? Like to keep up with what's happening on Wall Street. Take a look at our commentary on what's happening in the market. Delivered weekly to your in-box!