When you were pulling all-nighters in medical school and working round-the-clock shifts during your residency, you probably never expected that once you had an established practice, you could face financial problems. Even if you were never in the medical field for the money, you may have dared to envision yourself living fairly comfortably.
However, if you’re a physician who’s considering bankruptcy, you’re not alone. Bankruptcies have become more common for doctors over the past decade.
Common factors behind medical practice bankruptcies
There are a variety of reasons for this, and every situation is different. The overall economy can play a role. Visits to doctors and elective procedures typically drop during recessions when more people are out of work and without health insurance. There are other reasons, including:
- Smaller reimbursements by insurers
- Larger malpractice premiums and lawsuit settlements
- The cost of equipment and other business necessities
- Student loan debt
- Nonpayment by patients
As doctors get increasingly behind on their bills, they can find that pharmaceutical companies and other vendors cut them off. This, of course, leaves them unable to properly care for their patients. If they’re practicing in an already underserved community, the effect of closing their practice on the people who live there can be devastating.
Chapter 11 vs. Chapter 7
Some doctors file Chapter 11 bankruptcy, which allows them to reorganize their debts and continue practicing. Others file Chapter 7 bankruptcy to liquidate the business and opt to work for a hospital or clinic or in someone else’s practice. Some decide to leave clinical medicine completely.
There are other debt-relief options that may be available without having to file for bankruptcy. It’s wise to discuss all of your options and what they entail with an experienced attorney to determine your best path forward.