A physician decides between private practice and academic job offers

Heather, a 34-year old neurosurgeon, has just finished her neurosurgical fellowship after a grueling 7-year residency and is ready to settle down in her forever city with her husband.

She’s dedicated nearly 13 years to learning her craft and is deservingly fielding multiple job offers.

These offers vary widely, but she's narrowed down her decision between 2 offers:

1. a private small group practice with operating privileges at a nearby hospital, versus

2. an academic neurosurgery positions with focus on clinical research.

The compensation packages also run the full gambit. Her interviews conclude with talks of pensions, expected equity buyouts, 401k matching, and projected salary increases.

We’ve created a TachiFigures outlining two different positions she’s most interested in.

Job Offer #1: Private Equity-Owned Practice Offer

• Salary is variable and depends on total practice’s revenue share

• There are currently 18 physicians and they do not expect to increase this personnel count. One person out, one person in

• Practice’s revenue consists of $350K of insurance billing and $650K of ancillary services per physician

• Salary of $1.0-1.2 million before buyout. This includes employee compensation (billing from insurance) and ancillary services. This is probably 300-400k for insurance billing and rest was ancillary

• 52% of equity was sold so now they all make 400-700k

• They all got a buyout of some undefined amount and had to reinves 30%. There are 22 equity shareholders. Sounds like they all made 7 figure buyout. Each partner gave up about 500k in salary but received a lump sum in compensation (of which 30% goes to reinvestment)

• New partners have to pay 400k to invest in the private equity deal and they expect a turn around of 5x 400k. To start they only pay 300k, and once you are partner you get 250k towards investment and you have to contribute 150k

Job Offer #2: Academic Institution-Affiliated Job Offer

• Salary of $350-400k to start, with the expectation of an increase to $500-700k mid career

• The academic institution will match 8.5% with a 6.6% contribution

TachiFigures Assumptions

• An interest rate of 5%

  • The interest rate is used to calculate the present value of future salary payments. Read here for an explanation of why we apply an interest rate to arrive at a current value of future cash flow

• A 401k returns rate of 6.5%

  • The average 401K returns rate is 5-8% so I took the average of this range

[Watch this video] for a walkthrough of the spreadsheet analysis below.

Note: Formatting in the spreadsheet follows the following standard: black = formula, blue = hardcoded, green = linked from another tab.

Download this spreadsheet

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The TachiFigures recommendation for Heather

Over a 28 year period Heather stands to make ~$12.5M at the private equity-owned private practice vs ~$18.1M at the academic institution. For a decision purely based on monetary outcomes, Heather stands to gain a higher compensation from the academic institution position.

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Are you a physician looking to choose between job offers? Feel free to download the spreadsheet, edit the assumptions (blue font cells), and make any other adjustments to fit your own situation!