What I've Learned As A Hospital Medical Director

Long-COVID is also known as PASC (post-acute sequela of COVID). A study in this week’s JAMA found that 10% of people infected with COVID had symptoms lasting for more than 6 months. These symptoms negatively affect quality of life and can result in significant impairment. There is a need for hospitals to create specialty clinics for PASC patients.

Long-COVID symptoms

Development of long-COVID symptoms depends on several variables. For example, women are twice as likely to develop long-COVID symptoms after an infection than men. People with repeated COVID infections are more likely to develop long-COVID symptoms than those with a single infection. People infected with the Delta variant are more likely to develop long-COVID symptoms than those infected with the Omicron variant. The severity of the initial infection also affects the likelihood of developing long-COVID: infected persons requiring hospitalization or ICU care are twice as likely to develop long-COVID symptoms compared to those with milder infections treated as outpatients. Other risk factors for developing long-COVID symptoms are being unvaccinated, older age, smoking, pre-existing chronic medical conditions, and obesity.

Long-COVID is a heterogeneous condition and patients can have a wide variety of symptoms. Most of these symptoms are non-specific. Among those who develop long-COVID symptoms, the most common include:

• Post-exertional malaise (87%)
• Fatigue (85%)
• Brain fog (64%)
• Dizziness (62%)
• GI symptoms (59%)
• Palpitations (57%)
• Hearing difficulties (54%)
• Joint pain (42%)
• Weakness (42%)
• Sexual impairment (42%)
• Smell/taste impairment (41%)
• Headache/muscle pain (39%)
• Shortness of breath (36%)
• Cough (33%)

Long-COVID clinic structure

Because of the wide variety of symptoms that people with long-COVID can develop, the evaluation of patients should be tailored to the specific presenting symptoms. The key purposes of a long-COVID clinic should be (1) to measure quantifiable impairment, (2) exclude other conditions that mimic long-COVID, (3) prescribe treatments to relieve symptoms, and (4) direct rehabilitation efforts. The long-COVID clinic should in a location that has on-site EKG testing, phlebotomy for lab testing, and radiology for chest x-rays. It should also be in close proximity for schedulable tests such as pulmonary function tests and echocardiograms.

A full set of vital signs (including resting pulse oximetry) should be performed for each visit. The clinic should be able to refer patients for speciality consultation including cardiology, pulmonary, rheumatology, physical medicine, sleep medicine, physical therapy, occupational therapy, and dietary. Ideally, there should also be access to a pulmonary rehabilitation and cardiac rehabilitation program in the area. Because of their protocol-driven nature, long-COVID clinics are an opportunity for advance practice providers (nurse practitioners and physician assistants).

For most patients, symptoms of acute COVID infection can take many days or even several weeks to fully resolve. The majority of these patients do not require evaluation in a specialized long-COVID clinic. It is reasonable to set a threshold of symptoms persisting for more than 6 – 12 weeks as criteria for referral to a long-COVID clinic. The initial evaluation should include a complete history and physical examination with attention to symptoms during the acute phase of the COVID infection, severity of the infection, vaccination status, age, BMI, smoking status, and co-morbid medical conditions.

Special effort should be given to medication reconciliation at the initial visit. Patients who were hospitalized for acute COVID infection are particularly likely to have had previous medications discontinued during hospitalization and/or new medications started. Sometimes these changes were because a chronic medication was not needed during hospitalization. Sometimes a chronic medication was stopped or changed during hospitalization due to a prohibitory drug-drug interaction with a medication necessary to treat the COVID infection. Or sometimes a drug was changed during hospitalization because that drug was not on the inpatient hospital formulary. During medication reconciliation, attention should be directed toward eliminating duplicate medications, discontinuing unnecessary medications, and resuming maintenance medications held during the acute infection.

Symptom-directed diagnostic testing

The history and physical exam may dictate initial testing. For example, the finding of dry crackles on pulmonary auscultation may dictate pulmonary function tests and a high resolution chest CT. On the other hand, pedal edema, an S3, and moist crackles may dictate a BNP test and an echocardiogram. Sudden onset of dyspnea and pleuritic chest pain shortly after resolution of an acute COVID infection may dictate a d-Dimer test and/or a CT pulmonary angiogram. Diagnostic testing in other patients should be ordered based on the specific long-COVID symptoms each patient has:

Fatigue: Laboratory testing should include: CBC, TSH, chemistry panel, and LFTs. An EKG should be performed. Oxygen saturation at rest and during exercise should be measured (for example, using the 6-minute walk test). Because many of the risk factors of long-COVID are also risk factors for obstructive sleep apnea, patients with fatigue should be screened for sleep apnea (for example, using the STOP-BANG questionnaire). Patients who received corticosteroids as part of their acute COVID treatment should be tested for adrenal insufficiency.

• • • Mimics include: anemia, chronic kidney disease. chronic liver disease, sleep apnea, adrenal insufficiency, and hypothyroidism

Shortness of breath: Initial testing should include: BNP, CBC, TSH, chemistry panel, LFTs, chest x-ray, 6-minute walk test and EKG. If these tests are unremarkable, then additional testing could include a full set of pulmonary function tests (spirometry, flow-volume loop, lung volumes, diffusing capacity) and an echocardiogram. If these tests are also unremarkable, then a cardiopulmonary exercise test (CPET) should be considered. If post-inflammatory pulmonary fibrosis is suspected based on chest x-ray abnormalities (or crackles on pulmonary auscultation), a high resolution chest CT should be obtained. Patients with resting or exertion hypoxemia in the absence of radiographic abnormalities should be screened for thromboembolic disease with a d-Dimer test or CT pulmonary angiogram.

• • • Mimics include anemia, heart failure, hypothyroidism, chronic kidney disease, chronic lung disease (asthma, COPD, interstitial lung disease), pulmonary embolism, and vocal cord dysfunction

Cough: Initial testing should include a chest x-ray and spirometry with flow-volume loop.

• • • Mimics include asthma, gastroesophageal reflux, post-nasal drip, use of ACE inhibitor medications, and vocal cord dysfunction

Brain fog: Initial testing should include CBC, chemistry panel, LFTs, TSH, and 6-minute walk test. A screening test for cognitive impairment should be performed; in the past, this was typically the Mini-Mental State Examination (MMSE) but because that test now requires a fee to perform, the free SAGE test may be preferred. Another screening test for cognitive dysfunction is the Montreal Cognitive Assessment (MoCA); however completion of a mandatory 1-hour training program is required to perform this test.

• • • Mimics include anemia, hypothyroidism, chronic liver disease, hypoxemia, sleep apnea, and early dementia

Dizziness or palpitations: Initial testing should include CBC, BNP, EKG, orthostatic blood pressure measurement, and 6-minute walk test. If these tests are unremarkable, additional testing could include Holter monitor, echocardiogram, and tilt-test.

• • • Mimic include anemia, heart failure, orthostatic hypotension, and cardiac arrhythmias

GI symptoms: Initial testing should include CBC and LFTs. Patients with diarrhea should be tested for C. difficile if they received antibiotics or were hospitalized. Older age is a risk factor for both long-COVID and lactose intolerance.

• • • Mimics include C. diff gastroenteritis, lactose intolerance, and irritable bowel syndrome

Weakness or muscle pain: Initial testing should include chemistry panel, CK, TSH, and LFTs.

• • • Mimics include electrolyte disorders, drug side effects (statins), and hypothyroidism

Taste and olfactory dysfunction: These are common after COVID infection, particularly with the earlier Delta variants. There is no particular testing required but nutritional assessment may be useful in those losing weight due to altered diet resulting from abnormal taste and smell. Patients with smell dysfunction should be advised to have working smoke detectors in their homes.

• • • Mimics include chronic sinusitis

Chest x-ray abnormalities: Patients with pulmonary infiltrates at the time of the initial COVID infection should have a follow-up x-ray. If infiltrates persist beyond 12 weeks, a chest CT should be performed. It should be noted that 50% of patients hospitalized with COVID who have x-ray abnormalities at the time of initial infection will still have x-ray abnormalities 6 months after the infection. However, because older age and cigarette smoking are risk factors for both long-COVID and lung cancer, resolution of chest x-ray abnormalities must be confirmed.

• • • Mimics include lung cancer

Rehabilitation

Patients with severe impairment, particularly those with neuromuscular impairment, may require referral to a physical medicine specialist to direct rehabilitation. Patients with fatigue, mild-moderate exercise limitation, cardiac symptoms, and pulmonary symptoms can usually have rehabilitation efforts overseen from a long-COVID clinic. Prior to recommending a rehabilitation regimen, patients should complete diagnostic testing to exclude other medical conditions mimicking long-COVID and to identify any objective evidence of cardiorespiratory impairment.

Deconditioning is common following COVID infection. Patients are often sedentary for many days and often sustain weight loss and nutritional deficits during the acute COVID infection. In these patients, dietary guidance to restore body mass coupled with a regular exercise program can be very effective. There is not a single “best” exercise for patients with long-COVID symptoms, rather the best exercise is whatever exercise the patient will actually do consistently. In general, patients should be given a target of 150 minutes of weekly aerobic exercise (walking, stationary bike, treadmill, swimming, etc.). Patients with moderate or severe deconditioning may require several weeks to work up to 150 minutes per week. One of the barriers to aerobic exercise is the fear that exercise-induced dyspnea is a warning sign that the body is being harmed from exercise. A pulse oximeter can be very helpful to reassure patients that their oxygen level remains normal despite dyspnea and to help guide the heart rate during exercise. Patients should target keeping their heart rate during exercise at < 60% of their maximum predicted heart rate (maximum predicted heart rate = 220 – age).

Formal cardiac rehabilitation and pulmonary rehabilitation programs can be beneficial but Medicare will only cover these programs if there is objective evidence of cardiac or pulmonary impairment (some commercial insurance companies have less strict criteria for admission into these programs). For patients not eligible for cardiac or pulmonary rehabilitation, referral to a physical therapist can be useful, not only to define physical capabilities but for exercise guidance.

The special case of athletes

Vaccine skeptics often point to vaccine-induced myocarditis as a reason to avoid vaccination. However, a 2022 study found that people are 11-times more likely to get myocarditis from a COVID infection than they are from a COVID vaccination. Moreover, previous vaccination cut the chances of getting myocarditis after a COVID infection by half. Fortunately, most people who develop myocarditis (from either infection or vaccination) go on to have complete recovery. Nevertheless, those who have myocarditis at the time of their initial COVID infection should undergo cardiology consultation prior to resuming athletic activities.

Long-COVID can be devastating for a young athlete. Missing one season of their sport can mean an end to their high school or college athletic career. It is especially important to evaluate young athletes with long-COVID symptoms for exercise-induced bronchospasm and vocal cord dysfunction since these conditions can be readily treated. This should start with spirometry before and (if obstructed) after a bronchodilator to screen for asthma. A flow-volume loop should also be performed and if inspiratory notching is observed, vocal cord dysfunction should be suspected. In athletes with exertional cough and normal spirometry, a bronchoprovocation study should be performed. If available, a eucapneic voluntary hyperventilation study is the preferred test to identify athletes with exercise-induced bronchospasm. If unavailable, then a methacholine challenge test is an alternative.

If there is no evidence of asthma or vocal cord dysfunction in athletes with persistent dyspnea on exertion following COVID infection, a cardiopulmonary exercise test should be considered. This is an under-utilized test that can be extremely helpful in the evaluation of unexplained dyspnea.

Long-COVID disability determination

For some patients, impairment from long-COVID symptoms can be disabling. Most organizations require objective evidence of impairment before granting permanent disability. In general, subjective symptoms such as fatigue and pain must have objective correlates on diagnostic testing to qualify for disability. Patients with cardiac symptoms, such as chest pain, palpitations, dizziness, or dyspnea should undergo appropriate cardiovascular tests to determine if there is objective evidence of impairment. These tests could include echocardiograms, tilt tests, or cardiac stress tests.

Patients with pulmonary symptoms such as cough or dyspnea on exertion should undergo appropriate pulmonary diagnostic tests to determine if there is objective evidence of pulmonary impairment. These tests should include pulmonary function tests (spirometry, lung volumes, diffusing capacity). If these are normal and disability is still being considered, a cardiopulmonary exercise testing (CPET) should be performed.

Patients seeking disability for brain fog should be evaluated for objective evidence of cognitive impairment with neuropsychological testing.

Long-COVID prevention

The best way to prevent long-COVID symptoms is to prevent COVID infection. All persons should be recommended to get a bivalent COVID vaccine. Not only does vaccination reduce the chance of becoming infected in the first place but those who get infected despite being vaccinated are less likely to develop long-COVID symptoms than those who were never vaccinated. Those with risk factors for long-COVID such as being older, obese, or smokers should continue to take precautions against acute COVID infection including wearing masks in crowded indoor settings and avoiding contact with other people with acute infections. It is important to emphasis that recovery from a previous COVID infection is not protective because repeated COVID infection is an independent risk for developing long-COVID symptoms.

Long-COVID is very real and very common. But by listening to our patients and by using a symptom-driven approach to evaluation and rehabilitation, we can improve their lives.

May 26, 2023

During the COVID pandemic, working from home was mandatory for many workers. But now that the pandemic is fading, working from home is becoming optional. In our hospitals, some employees could not work from home, for example: nurses, respiratory therapists, pharmacists, radiology technicians and lab technicians. But other jobs could be done remotely, for example: scheduling, revenue cycle, customer service, and finance. Should these workers now return to work in the hospital?

In many industries, remote working has now become the norm. Historically, the U.S. average office space vacancy rate was 12.5%. In the first quarter of 2023, that rate is now 18.5%. New office construction has plummeted and many downtown office buildings are being converted into apartments. 39% of American workers have “tele-workable” jobs that can be done remotely. During the height of the pandemic, 55% of these workers with tele-workable jobs did work from home. Currently, 35% of these workers continue to work from home. Overall, 22 million Americans work from home all the time and many more have “hybrid” work, meaning that they work from home some days and work in the workplace building other days.

Advantages of working from home

Every job is a little different and some jobs have more benefits from working remotely than other jobs. There are benefits to both the employer and the employee to working from home. For the employer, advantages include:

• Reduced need for office space and conference rooms
• Reduced need for parking space
• Reduced utility expenses
• Reduced need for security staff and janitorial services
• Reduced use of sick time by employees who are either on COVID isolation or have other infections with only mild symptoms
• Reduced use of personal time-off by employees to stay home with a sick child
• Improved employee satisfaction
• Ability to draw workers from a larger geographic area

For the employee, there are even greater advantages:

• Reduced commuting transportation costs
• Elimination of daily commute time
• More time with family and pets
• Reduced expense of commercially-prepared food (lunches, coffee, snacks)
• Reduced cost of work attire
• Potential for fewer work-time interruptions by co-workers
• Greater flexibility of working hours
• Flexibility of living location
• Greater flexibility to take care of errands and appointments
• Reduced exposure to infected co-workers (not only COVID but also influenza and common colds)

Disadvantages of working from home

As the pandemic has been winding down, many employers are requiring their employees to return to the office, at least some days of the week. The reason is that for many employers, there are disadvantages to remote working that out-weigh the advantages. Some of these disadvantages to the employer include:

• Potential for some employees to not work the expected number of hours per week
• Potential for worker distraction by children, spouses, pets and other temptations of home
• Reduced ability to have group “brainstorming”
• Reduced spontaneous interactions with other employees
• Potential for communication errors from inability to pick up on non-verbal communication
• Reduced mentoring of junior employees by more experienced employees

For the worker, there can also be disadvantages, including:

• Reduced access to mentoring by senior employees
• Reduced visibility to company leaders for promotion consideration
• Reduced networking with other employees outside of one’s own department
• Social isolation and loneliness
• Elimination of on-site work perks such as office supplies, coffee, company fitness centers
• No daily change of scenery
• Expenses such as computers and video equipment

So, who should and who should not work from home?

Every year, the senior leaders of our hospital would get together for an all-day retreat. We would set our goals for the upcoming fiscal year as well as the strategies and tactics we would use to achieve those goals. Part of that process included succession planning for hospital managers and directors. We would identify not only those employees who we thought had potential for promotion in their own department but also those employees who demonstrated skills that predicted success in a different department. The workers who were most typically considered were those who we knew from interpersonal interactions in the hospital or who we had been able to directly observe at work. Working from home can put the employee at a disadvantage when senior leaders do succession planning and consider employees for promotion.

Working from home is a trade-off of advantages and disadvantages. The balance between those advantages and disadvantages will differ between different employers and departments; it can also differ between different employees in the same department. Every employer and every department within the employer needs to determine where that balance lies in order to decide about continued utilization of working from home. For most employers, offering the option of working from home can insure access to highly qualified employees who, because of geographic location or personal preference of remote working, would otherwise not consider working for that employer. For the employee, choosing to work from home may be preferable at a time in their life when their priorities are the flexibility of work hours and time savings from the lack of a commute. However, for employees who need the benefit of workplace visibility and mentoring for promotion and career advancement, working in the workplace is often preferable.

Work from home is not a one-size-fits-all proposition. Most employers (including hospitals) should neither require all employees to come to work in the workplace nor require all employees to work from home. Just because someone can do their job working from home does not mean that they should do their job working from home. The U.S. unemployment rate is currently 3.4%; the last time the rate was lower was in 1953. With the unemployment rate at a historic low, employers experience stiff competition for the best employees. By not offering a work-from-home option, employers restrict the pool of job applicants and risk resignation of some existing employees. But by not offering in-workplace options, employers miss opportunities for professional growth of their employees which in the long-term can stifle innovation and expertise development.

The COVID pandemic has showed us that working remotely is possible for our hospitals. With the worst of the pandemic behind us, we now must decide which jobs can be performed remotely and which employees are best served by working remotely. Hospitals and employees also need to realize that the short-term advantages of working from home can sometimes come at long-term costs.

May 21, 2023

This month, public attention is focused on the banking crises, the Federal debt ceiling, and inflation. But people investing for the long-term should be thinking about taxes. Specifically, how paying more in taxes this year and next will save a lot more in taxes in the future.

We are currently living in an era of historically low federal income tax rates. The Tax Cuts and Jobs Act of 2017 had major effects on federal income taxes for nearly all Americans beginning in 2018. Specific provisions of the law included:

• Across the board decreases in federal income tax rates
• An increase in the standard deduction amount
• Elimination of the personal exemption and reducing the advantages of itemizing deductions, including charitable deductions
• Limiting deductions for state income taxes, local income taxes, and property taxes paid
• Limiting the mortgage interest deduction
• Reducing the number of Americans subject to the alternative minimum income tax

The law was time-limited and expires at the end of 2025. Unless it is renewed or replaced with new legislation, then the federal income tax system will revert to the pre-2018 tax system and this will have a significant impact on most Americans.

The Tax Cuts and Jobs Act of 2017 had the biggest impact on high income families. Taxpayers in the 95th to 99th income percentiles (those with income between about $308,000 and $733,000) received the biggest benefit with an average tax cut of about $11,200 or 3.4% of after-tax income. Although we all love tax cuts, they come with a societal cost and it is estimated that if the law is extended for an additional 10 years, the federal deficit will increase by $3.7 trillion between 2033 and 2042. It is impossible for anyone to predict at this time whether the the law will expire, be renewed, or be replaced. This will depend on the economy, the future federal budget, and which political party controls the legislature and presidency. But for now, there are some steps that you can take today to prevent an enormous surge in your federal income tax in 2026.

Do Roth IRA conversions in 2023, 2024, and 2025.

The best time to do a Roth IRA conversion is when your taxes are lower today than when they will be when you are in retirement. Because it is not possible to predict income tax rates that far in the future, your best bet is to have some money in Roth accounts (Roth IRA and/or Roth 401k) and some money in tax-deferred retirement accounts (401k, 403b, and/or 457). That way, you can selectively take money out of your Roth accounts when tax rates are high in retirement and selectively take money out of tax-deferred accounts when tax rates are lower in retirement. If the Tax Cuts and Job Act of 2017 does expire, then the next three years will be optimal for doing Roth conversions while federal income tax rates are lower. There are two ways to do a Roth conversion. Either convert money already in a traditional IRA (or other tax-deferred retirement account) into a Roth IRA or do a “back-door Roth IRA” by first contributing post-tax money from income this year into a traditional IRA and then immediately converting that money to a Roth IRA. Because any money converted into a Roth IRA is considered taxable income on the year of the conversion, you have to be careful how much you convert from an existing tax-deferred retirement account since the more you convert, the higher your total taxable income will be for that year. As your taxable income increases, so does your marginal income tax rate so you don’t want to convert too much or the increase in this year’s federal and state income taxes could offset the long-term benefit of the Roth conversion. A reasonable strategy is to do smaller Roth conversions in 2023, 2024, and 2025 to avoid an excessively high income tax rate during any one year.

Defer charitable contributions until 2026

The Tax Cuts and Jobs Act of 2017 resulted in charitable deductions no longer being tax deductible for most Americans. Each year, taxpayers can either take the standard deduction or itemize deductions, whichever value is higher. In 2022, the standard deduction was $12,950 for individual filers and $25,900 for joint filers. Most families have less than $25,900 in itemized deductions so most end up taking the standard deduction instead of itemizing. By giving to charity only on every other year or every third year, you can build up the amount of charitable deductions so that your total itemized deductions exceed the amount of the standard deduction. By doing this, you will have a larger total income tax deduction. If your annual contributions to charity are typically in the $10,000 – $15,000 range, then you would be best off deferring your planned 2023 contributions to charity until January 2024 and then making your planned 2025 contributions to charity early in December 2024. The result is that you would have little or no charitable contributions in 2023 and 2025 but a very large charitable contribution in 2024, thus pushing you over the standard deduction limit for 2024. Without congressional action, in 2026, the standard deduction will revert to the previous values which in 2018 were $6,350 for single filers and $12,700 for joint filers at which time, many Americans may find it more advantageous to itemize deductions each year rather than take the standard deduction. If the Tax Cuts and Jobs Act of 2017 does expire, then it may be more advantageous to defer 2025 (and potentially even 2023) charitable contributions until January 2026.

Pay your property taxes January 2026

The Tax Cuts and Jobs Act of 2017 put a cap on the amount of state, local, and property taxes that can be deducted from your federal income taxes. Prior to 2018, the amount that could be deducted was unlimited but after the law, the maximum amount of state, local, and property taxes that is deductible is $10,000. This amount is considered one of the itemized deductions so if your itemized deductions are less than $25,900 (filing jointly), then you must take the standard deduction and cannot deduct your state, local and property taxes. In most communities, property taxes are paid semiannually or annually in arrears. That means that you pay your 2022 property taxes in 2023, for example. The property tax bills are usually sent out in December and then you have until the end of January to pay that tax. If the Tax Cuts and Jobs Act of 2017 does end up expiring, then do not pay your property tax in December 2025 when you get your tax bill – instead wait until January 2026 when you will be able to apply your property taxes paid to your itemized deductions, thus reducing your 2026 taxable income when the marginal tax rates increase.

Pay your mortgage installment in January 2026

Mortgage interest is also considered to be an itemized deduction.  Most mortgage payments are due on the first of the month. If possible, make your monthly mortgage payment on January 1, 2026 rather than in late December 2025. This will add to your itemized deduction in 2026 when you will get a better tax benefit from itemized deductions. If you plan to cluster your 2023, 2024, and 2025 charitable deductions all in 2024 as described in the earlier section of this post, then use this same strategy for your December 2023 mortgage payment and then also pay your first mortgage payment in 2025 (due on the first of January 2025) a few days early in December 2024. This will maximize your itemized deductions in 2024 thus allowing you to have a higher amount of itemized deductions than the standard deduction in 2024.

Beware of the alternative minimum tax

Prior to the Tax Cuts and Jobs Act of 2026, the alternative minimum tax (AMT) was a shackle on many taxpayers – more than 50% of people with an income of greater than $200,000 per year had to pay AMT. When a person pays AMT, they no longer use the usual income tax brackets to determine their marginal income tax rate but instead use two brackets: 26% and 28%. This resulted in a much higher total income tax paid under the AMT than under the usual income tax schedule. The AMT was mysterious and had many different variables that together could push you into the AMT. Frequently, taxpayers would not know if they had to pay AMT or the lower usual tax amount until they actually sat down to fill out their federal 1040 form in the spring. For this reason, the AMT was uniformly hated by Americans who had to pay it. The Tax Cuts and Jobs Act of 2017 greatly reduced the number of taxpayers who were susceptible to AMT and this substantially reduced the federal income tax for those people who previously paid AMT. When the law expires in 2026, then if no new legislation is enacted, expect to see many more people paying AMT than pay it today.

The triggers that push you from the usual tax system into the AMT are complex and depend on many different variables. Some of the most important are total taxable income, exercising stock options, mortgage interest paid on a second home, high state income tax amounts, and high local income tax amounts. Fortunately, income tax preparation software (such as Turbotax) will do all of the calculations to determine whether you will be hit by AMT. For many years prior to 2018, I was subject to AMT and it added thousands of dollars to my annual tax bill.

Its not too early to start tax planning now

2026 seems like a long way off but for the long-term investor, particularly one investing for retirement, taking the right tax-related steps over the next two and a half years can save a great deal of money in the long-term. The most important steps are (1) to carefully analyze your financial position to determine if you should do Roth conversions and (2) to determine if you would be better off clustering two or three years of contributions to charity in a single year. In two years, we should have a reasonably good idea how economic and political forces will affect the expiration of the Tax Cuts and Jobs Act of 2017 and whether or not it will be replaced with some other tax legislation. Be watching to determine how that will affect the timing of your 2025 property tax and mortgage payments.

As responsible citizens, we should all pay the full amount of taxes that we owe. But, we should not fall prey to paying more than we legally have to.

May 5, 2023

Certified registered nurse anesthetists (CRNAs) are advanced practice nurses who deliver anesthesia. In 2025, the training requirements to become a CRNA will change and require that all new CRNAs have a doctorate degree. In the past, a 4-year bachelors degree followed by a 2-year masters degree in nurse anesthesia was required to become a CNRA. This is similar to other advanced practice providers such physician assistants, nurse midwives, and nurse practitioners. In 2009, the Council on Accreditation of Nurse Anesthesia Educational Programs (COA) voted to require all nurse anesthesia educational programs to transition to 3-year doctoral programs. The deadline for conversion from masters to doctoral programs is 2025. Therefore, after 2025, all newly graduated nurse anesthetists will have doctorate degrees. In order to meet that deadline, beginning this year in 2023, all students enrolling in CRNA programs must enroll in a 3-year doctorate program.

There are six possible doctoral degrees that a nurse can pursue in becoming a CRNA:

1. DNP (Doctor of Nurse Practice): a degree for a clinical career
2. DNAP (Doctor of Nurse Anesthesia Practice): a degree for a clinical career
3. PhD (Doctor of Philosophy): primarily a degree for a career in academics
4. EdD (Doctor of Education: primarily a degree for a career in education
5. DNS (Doctor of Nursing Science): primarily a degree for a career in research
6. DMPNA (Doctor of Management Practice in Nurse Anesthesia): primarily a degree for a career in administration

The vast majority of new CRNAs will have either a DNP or DNAP degree. Both are 3-year programs that require a previous bachelors degree, usually a BSN (Bachelors of Science in Nursing). Both require one year of prior clinical work practice as an RN in a critical care setting but some individual programs may require 2-years of practice as an RN. Both have similar curricula but there are minor differences between the two types of doctorate degrees.

DNP versus DNAP

Doctor of Nurse Practice (DNP). This is a doctoral degree offered at a school of nursing that is accredited by the American Nurses Credentialing Center (ANCC) which is a subsidiary of the American Nurses Association. There are many specialty pathways within the DNP program and a student choosing to become a nurse anesthetist would enroll in the the CRNA pathway. A DNP is considered a “terminal degree”, meaning it is the highest degree that can be obtained in a field. Terminal degrees are usually required for university faculty members seeking tenure.

Doctor of Nurse Anesthesia Practice (DNAP). This is a doctoral degree specially designed for nurse anesthetist students at a training program approved by Nurse Anesthetists Council of Accreditation (NACA). Unlike the DNP, the DNAP is only for nurse anesthetists and not other nurse practitioner specialties. Some, but not all universities consider a DNAP to be a terminal degree; therefore it may not be appropriate for someone who plans to pursue an academic career at a university in order to ensure universal eligibility for faculty jobs.

For the hospital, both the DNP and DNAP programs can be considered equivalent from a training standpoint.

A certification exam is required after training

After graduating from an accredited nurse anesthetist program, individuals must then take the National Certification Exam (NCE) administered by the National Board Certification and Recertification for Nurse Anesthetists (NBCRNA). In 2022, the pass rate for first-time takers of the exam was 83.4%. After passing the certification exam, individuals must then apply for CRNA licensure in their state.

After initial certification, CRNAs are required to be re-certified every four years. Recertification involves having 100 hours of continuing education credits and completion of one core module from each of four core areas: airway management, pharmacology, human physiology & pathophysiology, and anesthesia technology (the core modules provide 60 of the required continuing education credits). CRNA licensure is state-specific and individual states can have additional requirements to practice as a CRNA.

Implications for hospitals

The result of the new requirements is that newly trained CRNAs will have one additional year of training than CRNAs trained in the past. However, because that one year will be nurse anesthetist-specific training, the net result will be a 50% longer training in anesthesia than previously. The additional training should result in greater anesthesia knowledge. The implication is that hospitals may change their utilization of CRNAs:

• Ability to start cases independently at night. CRNAs are required to work under the supervision of a physician – in Ohio, the “supervising physician” does not have to be an anesthesiologist. The rules on CRNA scope of practice are state-specific but in most states, CRNAs can start surgical cases without a physician anesthesiologist present in the OR area. However, many individual hospitals have rules over and above state regulations and require the presence of an attending anesthesiologist for the CRNA to start a case. This has relevance to cases at night when there can be a delay starting emergency operations while waiting for the anesthesiologist to arrive. Hospitals may find that it is more practical to have in-house CRNAs at night to expedite cases. In this situation, the surgeon would become the CRNA’s supervising physician rather than the anesthesiologist. However, because emergency cases at night are often some of the most physiologically complicated and high-risk, hospitals may still want to have attending anesthesiologists on call from home at night for back-up purposes.
• Endoscopy sedation. In the past, sedation for colonoscopies and other procedures performed in hospital endoscopy suites was administered by the gastroenterologist or surgeon performing the procedure. In recent years, procedural sedation has increasingly been administered by anesthesiologists. The new requirements may give hospitals more comfort in having CRNAs perform procedural sedation without the physical presence of a physician anesthesiologist in the endoscopy suite area. In this situation, the gastroenterologist or surgeon would become the “supervising physician”.
• Emergency airway management. In the past, hospitalists were routinely trained in intubation and airway management, such as occurs in the intensive care unit or during cardiopulmonary resuscitation. Because intubation is no longer required during internal medicine or family medicine residency, many hospitalists no longer perform intubation, leaving airway management to critical care physicians, emergency medicine physicians, anesthesiologists, and respiratory therapists. The new training requirements may give hospitals more comfort in designating CRNAs to be responsible for emergency airway management, particularly at night.
• But, be prepared to pay more. The U.S. Bureau of Labor Statistics reports that CRNAs have a median hourly wage of $97.64 per hour. This equates to an annual income of $203,090 per year. There is considerable variation between different states. For example, the median annual income for CRNAs in California is $246,510 whereas in Oklahoma, the median income is $168,470. Here in Ohio, CRNA income is at about the U.S. average with a median income of $197,630. In contrast, the MGMA reports that the average income for a physician anesthesiologist in academic practice is $407,681 and in private practice is $468,106. In other words, a CRNA costs half as much as an anesthesiologist. However, as the length of CRNA training increases, CNRA incomes are likely to rise in the future.

The trend throughout healthcare has been to increasingly utilize advance practice providers (such as nurse practitioners and physician assistants) to perform services historically performed by physicians. Because these advance practice providers are less expensive than corresponding physicians, they can reduce healthcare costs. The new requirement of a doctoral degree to become a CRNA will likely result in an expansion of the use of CRNAs for anesthesia, sedation, and airway management.

May 3, 2023

A recent study in JAMA Internal Medicine showed that the number of hours physicians work per week has fallen significantly over the past 20 years. The data was derived from the U.S. Census Bureau’s Current Population Survey that included 87,297 monthly surveys of physicians between 2001 and 2021. During this 20-year period, the average number of hours worked per week has steadily fallen.

In the study, respondents were asked how many total hours they worked at all jobs during the previous week. The average weekly work hours from 2001 – 2003 were compared to average weekly work hours from 2019 – 2021. Overall, the average physician worked 52.6 hours per week in 2001 – 2003 and this number dropped to 48.6 hours per week in 2019 – 2021. When only physicians working full-time were included, the work hours decreased from 55.6 hours per week in 2001 – 2003 to 51.1 hours per week in 2019 – 2021.

There has been a change in work hours by physician age. In the time period 2001 – 2003, the youngest physicians (age 35 – 44) worked the most hours per week, followed by middle aged physicians (age 45 – 54), and then older physicians (age 55 – 64). In the more recent time period of 2019 – 2021, the opposite was true – older physicians (age 55 – 64) worked the more hours per week than younger physicians.

On average, male physicians currently work more hours per week (49.7 hours) than female physicians (46.8 hours). However, this gap has been narrowing with a gender difference of 5.3 hours per week in 2001 – 2003 versus a gender difference of 2.9 hours per week in 2019 – 2021. Differences in the percentage of women in different specialties may be responsible for some of the gender difference in hours worked per week. Other physician demographic variables did not differ significantly in the current number of hours worked per week including race, country of origin, urban vs. rural, and dual household earners versus single household earners.

The 2023 Medscape Physician Compensation Report surveyed 10,011 physicians between October 7, 2022 and January 17, 2023. The report found that there is substantial variation in physician work hours among different specialties. Hospital-based specialties that tend to involve patient care at night and on weekends work the most hours per week including critical care, general surgery, cardiology, and nephrology. On the other hand, outpatient specialties that generally do not require seeing patients at night or on weekends had the lowest work hours per week including allergy, dermatology, and ophthalmology. Emergency medicine also had a low number of hours worked per week, owing to the shift work nature of the specialty.

A problem with the Medscape survey is that all of the information is self-reported and thus susceptible to either over-estimation or under-estimation. Furthermore, the survey is voluntary and the physicians who choose to report data may not be truly representative of the population of physicians as a whole. Nevertheless, the recent Medscape data for work hours by specialty are remarkably similar to a 2011 study published in the Archives of Internal Medicine.

At the onset of the COVID-19 pandemic (during the 2nd quarter of 2020), the average number of hours physicians worked per week fell as elective procedures were canceled. However, weekly work hours quickly rebounded by the 3rd quarter of 2020 as shown in the graph below derived from data from the recent study in JAMA Internal Medicine. Notably, over the the 24 quarters from 2016 through 2021, the overall trend has been for physician work weeks to become shorter.

Do work week hours correlate with income?

Intuitively, one might assume that specialties with longer work weeks also have higher incomes. However, the 2023 Medscape Physician Compensation Survey indicates that there is little relationship between the number of hours worked per week and the annual compensation by specialty. The graph below shows average number of hours worked per week in red and annual compensation in blue for 29 specialties.

By combining the data from the two graphs above, we can calculate the average income per work-week hour. Note that this is not same as hourly compensation – that would require dividing the income per work-week hour by the number of weeks worked per year. The Medscape Physician Compensation Survey did not report the number of work vs. vacation weeks per year by specialty so true hourly compensation cannot be determined. The graph below shows that plastic surgeons, orthopedic surgeons, dermatologists, and radiologists have the highest income per work-week hour. Infectious disease specialists, family practitioners, pediatricians, and general internists have the lowest compensation per work-week hour. Notably, family medicine, pediatrics, and general internal medicine have shorter residencies (3 years) than the other specialties.

As stated in a previous post, the data for infectious disease is particularly alarming. Physicians specializing in infectious disease have the lowest income per work week hour of all 29 specialties in the Medscape Physician Compensation Survey. In order to become board-certified in infectious disease, a physician must first complete a 3-year internal medicine residency and then complete a 2-year infectious disease fellowship. However, infectious disease specialists have both a lower total annual income and a lower income per work week hour than general internists. The implication is that an infectious disease specialist is financially penalized for doing a 2-year fellowship after internal medicine residency. As a result, many infectious disease specialists are either supplementing their income by working part-time as hospitalists or are leaving the specialty of infectious disease altogether to work as general internists or hospitalists. Because of the nature of physician billing and RVU determination, it is not possible for infectious disease specialists to increase their income by professional billing alone. There is an urgent need for U.S. hospitals to financially supplement their infectious disease specialists in order to preserve the infectious disease physician workforce.

Physicians are working fewer hours but are they happier?

The Medscape Physician Compensation Report found that 73% of physicians would choose medicine again if they were just now starting their career. However, the Medscape survey five years ago found that 77% of physicians would choose medicine again, indicating that physicians are less satisfied with their careers now than five years ago.

Undoubtably, the COVID pandemic has had an impact on physician job satisfaction. During the pandemic, many physicians retired early or left the workforce for other jobs. In 2019, there were 989,684 clinically active physicians practicing in the United States. In 2021 that number fell to 923,419, a 6.7% decrease. Hopefully, as the pandemic winds down and the practice of medicine gets back to normal, the exodus of physicians from the profession will slow.

The continued creep in paperwork and administrative tasks is a dissatisfying factor for many doctors – physicians reported spending an average of 15.5 hours per week on these chores, of which 9 hours are for electronic medical record documentation. Advances in artificial intelligence technology offers hope that the use of electronic medical records will be streamlined in the near future, giving physicians more time to engage in direct patient care. Over the past decade, there have been increasing concerns raised about the extent of physician burnout. Long work hours have been suggested to be a cause of physician burnout but the data suggests that physicians are less satisfied despite working fewer hours than in the past.

What about nurse practitioners and physician assistants?

The large number of retiring physicians coupled with reduced physician work week hours indicates that the overall supply of physician services is declining. Over the past decade, this has been offset by an increase in nurse practitioners. It is far less expensive to train a physician assistant or nurse practitioner (6 years education post-high school) compared to a physician (11 to 16 years education post-high school, depending on specialty). Many services traditionally performed by physicians can be equally or near-equally performed by PAs and NPs. However, specialized medical care and complex procedures still require the additional training and experience of physician specialists and so there is a limit to the degree that PAs and NPs can substitute for physicians.

Are the numbers good or bad?

The reduction in physician work hours is both good and bad. It indicates an improvement in a profession that has historically been seen as arduously time-consuming. But it also implies reduced availability of physician services to the general population. In the future, reduction in administrative and paperwork time coupled with strategic utilization of NPs and PAs could allow physicians to enjoy a good lifestyle while still ensuring that Americans have access to the best possible healthcare.

May 2, 2023

Managing death is a normal part of internal medicine and family medicine practice. The one thing that all of our patients have in common is that they eventually die. When death is expected, due to a terminal condition, hospice is an option. Hospice is popular – over the past 20 years, hospice use by Medicare beneficiaries who are nearing death has increased from 22.9% in 2020 to 51.6% in 2019. However, too often we either refer patients to hospice too late in their disease or do not refer them at all. For 30 years, I specialized in the care of patients with idiopathic pulmonary fibrosis, a disease with a life expectancy of 3-5 years unless a patient could get a lung transplant. Hospice referrals were commonplace in my practice. Recently, former president, Jimmy Carter, entered hospice and this has rekindled the public conversation about hospice.

American’s preferences about death

A 2017 Kaiser Family Foundation survey found that there is a discrepancy between how Americans want to die versus how they actually do die. 71% of Americans believe that “helping people die without pain, discomfort, and stress” is the most important priority whereas only 19% believe that “preventing death and extending life as long as possible” should be the top healthcare priority. However, only 37% of Americans believe that the current healthcare system places the right amount of emphasis on these priorities. When it comes to hospice care, 70% of Americans report knowing at least a little about hospice and of these, 85% have a positive opinion about hospice.

When asked about the importance of different factors regarding death, Americans prioritize quality over quantity. Most important is ensuring that family members are not financially burdened by one’s healthcare. Least important was living as long as possible. However, there are notable racial/ethnic differences: only 18% of White Americans believe that “living as long as possible” is extremely important whereas 28% of Hispanic Americans and 45% of Black Americans believe that “living was long as possible” is extremely important. These differences can affect how different racial/ethnic groups view hospice and their willingness to enroll in hospice.

Only 11% of all Americans report discussing end-of-life care with their physician; for Americans over age 65, that percentage only rises to 22%. On the other hand, 92% of Americans report that they would feel comfortable discussing end-of-life care with a doctor or other healthcare provider. Overall, 27% of Americans have written end-of-life directives; for those age 65 or older, 51% have written advance directives. Regarding where we prefer to die, 71% of Americans would prefer to die in their own home; 9% prefer to die in a hospital, 7% prefer an inpatient hospice, and 1% prefer a nursing home.

In reality, most people do not die in their preferred location. A 2019 study in the New England Journal of Medicine found that for the first time in over 100 years, more Americans die at home than in a hospital. However, only 30.7% of Americans died at home, meaning that more than half of the people who wanted to die at home died somewhere else. The study found that 29.8% of Americans died in a hospital, 20.8% died in a nursing home, and 8.3% died in a hospice facility.

What does hospice do?

A patient’s hospice benefits depends on their health insurance coverage. Because 72.5% of Americans die after age 65, most deaths occur when people are covered by Medicare. For people younger than age 65 covered by commercial health insurance policies, accidents, suicide, homicide, and COVID cause the majority of deaths and as a result, relatively few deaths in people with commercial insurance are amenable to hospice care. However, commercial insurance policies often provide very different hospice benefits compared to Medicare. For example, Anthem Blue Cross & Blue Shield allows enrollment in hospice for up to 12 months prior to death (compared to 6 months for Medicare) and allows concurrent use of disease-modifying treatments (not allowed by Medicare).

Medicare’s hospice benefit falls under Medicare Part A. To qualify for hospice under Medicare, patients must meet 3 criteria:

1. Two physicians (both the patient’s regular physician and the hospice physician) must certify that the patient is terminally ill and expected to live less than 6 months.
2. The patient accepts that the care will change from curative care to palliative care.
3. The patient signs a statement agreeing to accept hospice care instead of other forms of Medicare services for the terminal condition.

The patient’s costs of hospice under Medicare are generally lower than the patient’s cost of usual medical care. Secondary insurance can provide additional coverage. Specific to Medicare:

• There is no cost to the patient for hospice care.
• The patient has a 5% co-pay for outpatient medications (including those for pain and palliation).
• The patient has a 5% co-pay for respite care.
• Regular Medicare benefits cover the cost of treating medical conditions not related to the terminal condition.
• Hospice does not cover regular nursing home costs for those patients who already reside in a nursing home.
• Once in hospice, Medicare will no longer pay for other services such as:
  • Treatments and prescription medications intended to cure the patient’s terminal condition.
  • Care by any physician or provider not set up by the hospice team. The patient can still see their regular doctor or nurse practitioner if the patient chooses him or her to be the attending medical professional to supervise their hospice care.
  • Emergency department care, inpatient care, or ambulance services unless these are arranged by the patient’s hospice provider.

Medicare’s hospice benefit is quite comprehensive and covers many services that most physicians are unaware of including:

• Doctors’ services.
• Nursing and medical services.
• Durable medical equipment for pain relief and symptom management.
• Medical supplies, like bandages or catheters.
• Drugs for pain and symptom management.
• Aide and homemaker services.
• Physical therapy.
• Occupational therapy.
• Speech therapy.
• Social services.
• Dietary counseling.
• Spiritual and grief counseling (for both the patient and their family).
• Short-term inpatient care for pain and symptom management.
• Inpatient respite care up to 5 days per stay (respite care allows  the usual caregiver, such as a family member or friend, to have a rest from providing care).
• Other pain and palliative treatments as determined by the hospice providers.

Selecting a hospice provider

In many smaller communities and rural areas, selecting a hospice is easy since there may only be one option. In larger communities, there are many different hospice providers to chose from. One resource is Medicare’s Hospice Compare website that lists Medicare-approved hospices in your area and includes a star rating based on previous family caregiver CAHPS surveys. Often, patients will prefer a specific hospice based on past experiences of family members or friends. When enrolling a patient in hospice, there are several questions for the physician to ask himself/herself:

Will I be the hospice physician of record? There are generally 2 options, either be the physician responsible for hospice care or transfer care to the hospice medical director. There are advantages and disadvantages to both options. Being the hospice physician of record allows you to continue your doctor-patient relationship and the patients often prefer to have their hospice care overseen by a physician that they know and trust. However, this role comes with a great deal of responsibility. You have to be comfortable prescribing medications used for pain and palliative care and you have to be available by phone 24 hours a day/7 days a week. Generally, the hospice will have its own standard hospice admission orders, including medications and standard dosing; however, conditions change frequently and although hospice nurses and pharmacists are often very good at recommending medication changes, the responsibility for them ultimately resides with the ordering physician. In addition, the hospice nurses who are on-site at the patient’s home do not want to have to call an answering service and wait for a rotating on-call physician to call them back. When I have been the hospice physician of record for my patients, I gave my cell phone number to the hospice nurses and was on call every night and weekend for that patient while in hospice. On the other hand, having the hospice medical director assume attending physician responsibilities relieves you of having to be available at all times and usually, the medical director is more experienced with the use and dosing of pain and palliative medications. Even if you defer the hospice medical care to the hospice medical director, you can still see the patient for medical conditions unrelated to the terminal condition; however, you must attach the GW-modifier to the CPT code when billing for the encounter.

Will your medical malpractice insurance policy cover you? Physicians in private practice who purchase malpractice policies from a commercial insurance company usually have few or no restrictions regarding where they practice medicine. But hospital-employed physicians are frequently covered by hospital self-insurance plans. These plans often restrict coverage to medical care provided at hospital-owned or affiliated locations. As an example, my malpractice insurance was provided by our hospital, that was self-insured. I had to get special approval from our hospital’s insurance administrator to see patients for home visits, including home hospice care as the hospice attending physician of record. Malpractice insurance coverage for other locations, such as respite facilities or inpatient hospice facilities, may also be required.

Who is the hospice medical director? Frequently, the medical director of a hospice and the other hospice-affiliated physicians will have done pain and palliative medicine fellowships. However, this is not a legal requirement and consequently, some hospice medical directors do not have formal training in palliative care. All to often, physicians just write an order to “Consult hospice” without thinking about the physician who will be responsible for overseeing medical care for the patient. You should find out who the hospice physicians are for the hospice organization that you consult and then use the same judiciousness that you would use if you were consulting any other physician or medical group.

For-profit versus nonprofit hospices. In 2020, 73% of hospice organizations in the U.S. were for-profit. Although many for-profit hospices are excellent, the literature shows that on aggregate, there are some important differences between for-profit and nonprofit hospices. Overall, for-profit hospices tend to have a narrower range of services, less comprehensive bereavement services, lower staff:patient ratios, and less professionalized staff. A study in this month’s JAMA Internal Medicine found that for-profit hospices had significantly lower patient and family satisfaction scores than nonprofit hospices. The profit status of a hospice should never be the sole determinant in choosing a hospice for a patient but it may at least be worth checking the star rating on Medicare’s website when considering a specific for-profit hospice.

Where is respite care provided? Home hospice supplements care from family and friends but does not replace that care. As patients become more incapacitated from a terminal disease, the care demands on family members can be overwhelming at times. Respite care allows those family caregivers to have a break for several days by temporarily admitting the patient to an inpatient hospice facility, nursing facility, community center, or adult daycare center. If the hospice is affiliated with a poorly run respite facility, then respite care can paradoxically increase the stress on family members if the patient has a bad experience while in respite care.

What inpatient hospice care is available? For some patients, care in the last days of a terminal illness simply cannot be effectively provided in the home. This was frequently the case with my patients transitioning from being inpatients in the intensive care unit directly to hospice where death was expected within two or three days. Some hospitals have on-site hospice units but if a given hospice organization is not affiliated with that particular unit, the patient may have to go to an unfamiliar facility, sometime even in a different community. This can result in the patient spending their final few days far away from family and friends.

What medications and treatments will be discontinued? When a patient enters hospice under Medicare, treatments intended to cure the terminal condition are discontinued. This includes chemotherapy medications for patients with cancer. Some commercial insurance companies will permit these medications to be continued. Hospice providers are paid a per diem rate by Medicare and that per diem rate includes covering the expected cost of pain and palliative care medications. Hospice does not cover medications for other co-morbid conditions, such as diabetes and hypertension. These medications are covered by the patient’s co-insurance or Part D plan. However, the hospice physician or pharmacist will generally try to eliminate medications when possible in order to avoid detrimental consequences of poly pharmacy. For example, drugs to prevent osteoporosis or to lower cholesterol are generally no longer necessary when a patient has weeks to live. In my practice, drugs used to treat idiopathic pulmonary fibrosis typically cost about $100,000 per year and Medicare-covered hospices will not pay for these medications as the cost of the medications exceed the total per diem that the hospice receives for all hospice services. Therefore, patients dying of pulmonary fibrosis need to understand that these drugs will usually be discontinued in hospice, similar to chemotherapy drugs for patients with cancer. This can sometimes be tricky when patients are enrolled in hospice for conditions such as end-stage heart failure: are the ACE inhibitor, beta blocker, and diuretic being prescribed to treat the underlying terminal condition or are they being prescribed to relieve shortness of breath? Be sure that there is a clear understanding of what drugs the hospice will discontinue up front so that there are no surprises for the patient later.

Timing the hospice referral. Too many people (and physicians) consider the role of hospice as only providing care in the final days of life. Although this is an important role, hospice is also designed to give patients the best quality of life in the time that they have left. Hospice services such as physical therapy, occupational therapy, speech therapy, and dietician counseling can greatly improve a terminally ill patient’s quality of life in the weeks and months before death. In addition, durable medical equipment provided through hospice can improve the comfort and safety of the patient’s home environment. Simple items such as bedside commodes, shower seats, hospital beds, and oxygen concentrators can be invaluable to terminally ill patients and their families. I can’t remember ever referring patients to hospice too early but I have referred them to hospice too late. In the United States, 50% of hospice patients die within 3 weeks of enrollment and one third die within 1 week of enrollment. These patients do not get the full benefit of hospice. Ideally, hospice referral should be made when you estimate that the patient’s life expectancy is about 6 months. If the patient rallies and improves or stabilizes during that time, then hospice care can be put on hold for a period of time.

Set patient expectations. The proximate cause of death in patients with cancer, COPD, dementia, or idiopathic pulmonary fibrosis is often not the underlying terminal condition but instead an infection, such as pneumonia or urinary infection. When discussing hospice referral with a terminally ill patient, it is important to discuss how patients die with a specific disease so that family members do not panic and call the emergency squad when a dying patient develops a cough and fever in their final days. For example, patients with lung cancer do not all die exactly the same; some will gradually become comatose and die but others will suddenly have a pulmonary embolism, a cardiac arrhythmia, pneumonia, or a stroke. Patients and family members often have preconceived ideas about how people die from movies and TV and if the patient’s condition does not match those ideas, then it can cause confusion and fear.

Palliative medicine consultation can help. Physicians specializing in palliative medicine are often affiliated with hospice organizations but they can do much, much more. They can often provide counseling and treatment long before a patient’s disease advances to having only a 6-month life expectancy. Palliative medicine specialists can also help patients and families understand hospice and help with the timing of hospice referral. There is more to palliative medicine than just pain management.

Final thoughts

Referring a patient to hospice is not about giving up on the patient. It is about redirecting care from curative intent to palliative intent. Not all hospice organizations are equal and the best hospice provider for one patient may not be the best for a different patient.

April 27, 2023

Physicians earn high incomes but those incomes come at a cost of investing between 7 and 12 years of education and training after undergraduate college. This post will examine the most recent physician compensation report and what it indicates about the relationship between income and the years of training required for each specialty.

Determining average physician incomes by specialty turns out to be a lot more difficult that it would seem. There are many physician compensation surveys and each of them reports compensation a bit differently with the result that it is difficult to accurately know how much the average specialist actually earns per year. Some of the most common surveys include:

1. AAMC – American Association of Medical Colleges. This annual survey reports physician compensation from 153 U.S. medical schools and > 400 teaching hospitals that serve 124,000 physicians.
2. MGMA – Medical Group Management Association. This annual reports surveys 3,400 U.S. medical practice administrators that serve 142,000 physicians and advanced practice providers. These group practices are largely mid-sized groups (typically 6 – 50 physicians).
3. AGMA – American Group Medical Association. This survey represents 380 medical groups from large-sized groups (with > 100 physicians).
4. Doximity. This survey is of self-reported total compensation from 31,000 full-time U.S. physicians.
5. Medscape. This survey is of self-reported total compensation from 13,000 U.S. physicians.
6. Various physician search firms and consultation firms. These are typically of small numbers of physicians and often limited to compensation reports of individual physicians that they have helped with job placement and physician groups that they have consulted with.

I tend to rely mostly on the AAMC and MGMA reports because they sample the largest number of physicians and have stricter methodology regarding what is (and is not) included in total compensation. For academic physicians, the AAMC survey is more comprehensive and generally reports higher incomes for academic physicians than the MGMA survey. For non-academic physicians, the MGMA report provides comprehensive data. For this post, I will use the 2022 MGMA physician compensation report. Total compensation is defined as salary and bonuses as well as physician contributions to retirement plans, health insurance, and life insurance. Notably, the reported compensation does not include employer contributions to retirement plans, health insurance, life insurance, or malpractice insurance.

This is particularly important when comparing academic from non-academic physician compensation since most academic jobs come with lucrative employer contributions. As an example, the Ohio State University contributes about $25,000 per year to their physician faculty member’s State Teacher’s Retirement Plan, life insurance, disability insurance, and health insurance. OSU also pays for medical malpractice insurance – the U.S. national average cost for a critical care physician’s malpractice premium is $20,215 per year. In other words, a typical OSU physician has a total of about $45,000 per year in fringe benefits as an academic physician that they would otherwise likely not have had if they were in a private medical practice. One of the reasons that the MGMA reports that academic physician compensation is much lower than private practice physician compensation is because these employer contributions provided by academic institutions are not included in the total compensation listed in the MGMA reports. If you were to factor in these employer contributions into total compensation, academic physicians’ compensation is closer to that of non-academic physicians.

The MGMA breaks reported compensation into mean, median, 25th percentile, and 75th percentile. For academic physicians, the MGMA additionally breaks down compensation by academic rank: instructor, assistant professor, associate professor, and professor. Other metrics of compensation and productivity are also included such as average total RVUs, average work RVUs, and total compensation per RVU for each specialty. Caution must be exercised when interpreting these data. For example, the mean compensation will include all non-academic physicians in a specialty, regardless of seniority. Physicians in their first years of practice after completion of training are less efficient, less productive, and less highly compensated than physicians in practice for 10, 20, or 30 years. Therefore, a newly-trained physician should not expect to earn the mean or median compensation for a specialty. Conversely, experienced physicians with many years of practice generally earn more than the mean or median. However, for simplicity purposes, this post will focus on the mean total compensation for various specialities for non-academic and academic physicians. The total compensations are summarized in the tables below:

Non-Academic Physician Compensation

This graph illustrates the mean total compensation for non-academic physicians reported by the MGMA in 2022, similar to the table above (to enlarge this graph, click on it to open it in a new window and then click on it again to enlarge). The most highly-compensated specialties were neurosurgery ($947,030), cardiovascular surgery ($829,072), cardiology electrophysiology ($747,947), orthopedic surgery ($715,399), and interventional cardiology ($702,019). At the low end of the compensation spectrum were pediatric specialties: pediatric hospitalist ($237,530), pediatric endocrinology ($239,072), general pediatrics ($252,575), and pediatric infectious disease ($256,364). In fact, of the 9 lowest compensated specialties, all but one (geriatrics) was a pediatric specialty.

Academic Physician Compensation

This graph illustrates the mean total compensation for academic physicians reported by the MGMA in 2022. The most highly-compensated specialties were cardiovascular surgery ($718,802), neurosurgery ($694,605), pediatric surgery ($588,934), thoracic surgery ($581,387), and plastic surgery ($525,215). At the other end of the compensation spectrum were again pediatric specialties: pediatric endocrinology ($184,479), general pediatrics ($189,178), pediatric infectious disease ($201,607), and pediatric hospitalist ($204,661).

In every specialty, academic physician total compensation was lower than non-academic physicians (academic pediatric-internal medicine compensation was not reported). The specialties with the greatest difference between non-academic and academic compensation were cardiology electrophysiology ($293,318), neurosurgery ($252,425), gastroenterology ($244,091), hematology/oncology ($237,720), and orthopedic surgery ($231,973). The large difference between academic and non-academic incomes explains why it has been so difficult for medical schools to keep gastroenterologists and oncologists since they can earn a quarter of a million dollars more per year in private practice. The lure of that much money is just too much for even the most noble of academic teachers and researchers. Specialties with the least difference between non-academic and academic compensation were pediatric hospitalist ($32,869), pediatric nephrology ($44,281), pediatric critical care ($47,283), and pediatric hematology/oncology ($53,152).

Compensation per work RVU

Physician work effort is often measured by the number of RVUs (relative value units) produced. Every physician service and procedure is assigned an RVU value by Medicare and then Medicare pays the physician based on the number of RVUs billed. Currently, Medicare pays $33.89 per RVU. Commercial insurance companies generally pay a higher amount per RVU and Medicaid pays a lower amount per RVU. The RVU is composed of three subunits, the work RVU (wRVU), practice expense RVU, and malpractice RVU. Of these subunits, the wRVU is most commonly used to measure physician productivity. Note that anesthesiology does not use RVUs and anesthesiologist productivity is instead measured by anesthesia units (1 unit = 15 minutes of time).

Physicians who earn a high dollar amount of compensation per wRVU generally require subsidization from hospitals.This is typically done either when the physician performs procedures that are highly lucrative for the hospitals (such as open heart surgery) or when the physician performs a lot of non-compensated work essential to the function of the hospital (such as hospitalists who take night-call). On the other hand, physicians earning a low dollar amount of compensation per wRVU have less (or no) hospital subsidization. These are usually outpatient specialties whose physicians are less often employed by a hospital.

Non-academic physicians with the highest compensation per wRVU are pediatric surgeons ($148/wRVU), pediatric hospitalists ($138/wRVU), pediatric infectious disease ($123/wRVU), neurosurgeons ($113/wRVU), and pediatric hematology/oncology ($112/wRVU). Those specialties with the lowest compensation per wRVU are pediatric/internal medicine ($54/wRVU), endocrinology ($59/wRVU), ophthalmology ($59/wRVU), family medicine ($62/wRVU), and general pediatrics ($62/wRVU).

For academic physicians, the specialties with the highest compensation per wRVU are pediatric hospitalist ($179/wRVU), pediatric surgery ($133/wRVU), internal medicine hospitalist ($123/wRVU), hematology/oncology ($117/wRVU), and infectious disease ($114/wRVU). The high compensation per wRVU for academic infectious disease physicians may reflect the impact of the COVID-19 pandemic when academic infectious disease specialists were called on to perform a great deal of administrative duties (subsidized by hospitals) in addition to their regular clinical duties. Academic physician specialties with the lowest compensation per wRVU are dermatology ($48/wRVU), neonatology ($50/wRVU), pathology ($51/wRVU), radiology ($55/wRVU), and interventional radiology ($55/wRVU). The MGMA survey did not report data for academic pediatric/internal medicine or for pediatric infectious disease.

Compensation per year of residency & fellowship training

Residency and fellowship can be viewed as an investment in a physician’s career. In theory, the longer the period of training, the greater the knowledge and skill of a physician in any given specialty. Residents and fellows do get paid but the average annual income is modest, starting at $61,000 for a first year resident (i.e., an intern) and that amount increases by about $2,500 for each additional year of residency and fellowship. During this time, residents and fellows are also required to start paying back student loans (payments averaging $4,000 per year during residency). As a consequence of residency and fellowship training years, most physicians finally enter the workforce when they are in their 30’s. The total duration of residency varies from the shortest at 3 years (internal medicine, pediatrics, and family medicine) to the longest at 7 years (neurosurgery, pediatric surgery, and interventional radiology). Fellowship training after residency further extends the total duration of training, for example, cardiology electrophysiology requires 8 years of training (3 years internal medicine residency, 3 years cardiology fellowship, and then 2 years cardiac electrophysiology fellowship). Longer residency/fellowship durations also equate to a shorter working career. The general internist with a 3-year residency will typically work 35 years before retiring at age 65 whereas the cardiology electrophysiologist will only work 30 years before retirement at age 65. Thus, the cardiology electrophysiologist sacrifices 5 of their lifetime income-earning years to do fellowship training after their internal medicine residency.

Do more years of residency/fellowship translate to higher incomes? One way to answer that question is to express physician compensation per number of years of training required for that specialty. In a completely free labor market, there would be a direct relationship between income and duration of training: every additional year of training for any given specialty would result in a predictable increase in annual income. In other words, the return on investment in terms of years of training should be constant across all specialties. This turns out to not be the case in reality.

For non-academic physicians, there is a wide variation in compensation per year of training. The specialties with the largest amount of total compensation per year of residency/fellowship are orthopedic surgery ($143,080 per training year), dermatology ($140,439 per training year), cardiovascular surgery ($138,179 per training year), neurosurgery ($135,290 per training year), and emergency medicine ($124,239 per training year). These specialties have a very high return on their investment of training time. At the low end are pediatric endocrinology ($39,845 per training year), pediatric infectious disease ($42,727 per training year), pediatric hematology/oncology ($43,808 per training year), pediatric nephrology ($44,756 per training year), and pediatric hospitalist ($47,506 per training year). These specialties have a low return on investment of training time.

The spread of total compensation per number of years of residency/fellowship training for academic physicians was similar. Specialities with a high compensation per year of training were cardiovascular surgery ($119,800 per training year), emergency medicine ($102,326 per training year), anesthesiology ($101,900 per training year), neurosurgery ($99,229 per training year), and thoracic surgery ($96,898 per training year). Once again, the least compensated per year of training for academic physicians were all pediatric specialties: pediatric endocrinology ($30,747 per training year), pediatric infectious disease ($33,601 per training year), pediatric hematology/oncology ($34,950 per training year), pediatric pulmonary ($35,946 per training year), and pediatric nephrology ($37,376 per training year). The MGMA survey did not report on pediatrics/internal medicine.

Several subspecialties were particularly noteworthy because their total compensation was less than their parent specialties. For example, pediatric hospitalists require 2 additional years of fellowship after completion of a pediatric residency and pediatric endocrinologists require 3 years of fellowship after pediatric residency. However, both non-academic pediatric hospitalists and non-academic pediatric endocrinologists make less money than non-academic general pediatricians who only completed the 3-year pediatric residency. Similarly, to specialize in geriatrics or endocrinology, a physician must first complete a 3-year internal medicine residency followed by a 1-year (geriatrics) or 2-year (endocrinology) fellowship. However, non-academic physicians specializing in geriatrics or endocrinology make less money than non-academic general internists who only completed the 3-year internal medicine residency.

In academic practices, there are even more specialities where subspecialty fellowship results in lower total compensation than the parent specialty. Academic pediatric endocrinologists make less than academic general pediatricians. Academic geriatric, rheumatology, endocrinology, and infectious disease specialists all make less than academic general internists. In these subspecialties, not only does the additional years of fellowship training not result in greater income, but the those physicians are actually financially penalized for their additional years of training by making less money than if they had just stopped after their pediatric or internal medicine residency.

It is noteworthy that there are more factors to consider than just years of training when comparing total compensation between different specialties. Some of the specialties with the highest compensation per year of training are also those with the most grueling on-call schedules, such as cardiovascular surgery, anesthesiology, emergency medicine, and neurosurgery. It is entirely appropriate that the neurosurgeon who has to take trauma call every 4th night for his/her entire life makes a high income. In addition, the cost of medical malpractice insurance premiums varies significantly. The average general internist pays $16,000 per year in malpractice premiums but the average neurosurgeon pays $92,000 per year for malpractice coverage. Once again, it is entirely appropriate that the neurosurgeon has a high income in order to cover the high overhead malpractice insurance expense inherent in that specialty.

What is the solution to these compensation disparities?

In a free labor market, a worker’s income is determined by the supply of workers and the demand for that worker’s services. So, on the surface, it would appear that there is a shortage of heart surgeons and neurosurgeons whereas there is a overabundance of general pediatricians and pediatric endocrinologists. However, American medicine is not a simple free market economy. Hospitals make the most money from procedures and surgeries: the financial margin on a surgery is much greater than the margin on a medical admission. That margin is highest for inpatient surgeries such as cardiovascular surgeries and neurosurgeries. Because of this, hospitals are incentivized to subsidize specialists who perform these high-margin procedures. Furthermore, many of these surgical subspecialists have much more rigorous on-call schedules – a neurosurgeon or interventional cardiologist is much more likely to be called into the hospital in the middle of the night to manage a patient with head trauma or with a myocardial infarction than an endocrinologist or rheumatologist whose practice is largely outpatient and limited to Mondays through Fridays during the daytime. Therefore, in order to provide 24-hour trauma or cardiac care, hospitals must pay these subspecialists substantial on-call pay.

A central problem with physician reimbursement is that it has not kept up with inflation and has, in fact, fallen over the past decades. In 1998, Medicare reimbursement per RVU was $36.69 and 25 years later, in 2023, the reimbursement per RVU had fallen to $33.89. By contrast, if the RVU reimbursement had merely kept up with inflation, then the $36.69 rate in 1998 should be $70.45 today! Physicians have made up for the reduced payments per RVU somewhat by spending less time with each patient in order to see more patients per day but that alone has been insufficient to maintain a constant income. The solution has frequently been for physicians to become employed by hospitals with the hospitals subsidizing their income. This has resulted in physician income becoming untethered from physician work productivity. The effect has been that physician income is increasingly determined by the value of the physician’s specialty to the hospital’s finances more than the physician’s actual patient care work effort.

It has been proposed that the solution would be to pay low-compensation subspecialists more. This would work in a pure free market economy but would not work in our current system of physician reimbursement. Physician services are categorized by CPT codes and then reimbursed by the number of RVUs associated with each of those CPT codes. Non-procedural specialties all use the same CPT codes for the evaluation and management services that they provide. Thus, the endocrinologist or geriatrician bills the exact same CPT codes as the general internist and gets reimbursed the exact same amount per RVU as the general internist. Because of this, the “cognitive” subspecialties of pediatrics and internal medicine (i.e., those without associated procedures) have no chance of generating more RVUs than the general pediatrician or internist. Indeed, the amount of time and effort to see a 10-year old with uncontrolled type 1 diabetes in the pediatric endocrinology office is considerably more than that required to see an otherwise healthy 10-year old with an ear infection in the general pediatrics office, even though the payment is the same for both patients. As a result, for many of these subspecialties, the reward for more years of training is a lower income. Because these pediatric and internal medicine subspecialties do not generate significant margins for hospitals, there is little incentive for hospitals to subsidize them.

It is notable that pediatric subspecialties dominate the low compensation specialties. One of the driving reasons for this is Medicare/Medicaid. Nearly every American over age 65 qualifies for Medicare so older adults are by and large all insured. Children are not eligible for Medicare but are instead covered by CHIP and Medicaid programs (or have no insurance at all!). In most states, Medicaid pays considerably less than Medicare (in Ohio, Medicaid payments for primary care services are only 57% of the Medicare amounts). Consequently, pediatricians of all subspecialties have an inherently worse payer mix than physicians who care for adults. Similarly, pediatric hospitals also have a worse payer mix than hospitals caring for adults.

So, how do we fix this? There are several tactics that can be considered:

• Increase residency positions in some specialties. This will work only for those highly compensated specialties where there is truly an insufficient supply of physicians for current demands.
• Re-align RVUs assigned to different procedures and services. The current RVU assignments have been affected by intense lobbying from subspecialty physician organizations and in many cases, the most RVUs have been given to the loudest lobbyists.
• Increase physician reimbursement for Medicaid and CHIP patients. In an ideal world, a physician would get paid the same for a patient with Medicare, Medicaid, or CHIP. This would help correct the low compensation for pediatric specialties.
• Increase the RVU conversion factor. The current conversion factor of $33.89 per RVU is too low for the vast majority of physicians to earn a living from professional billings alone with the result that most physicians require hospital subsidization. This has eroded free market effects on physician compensation.
• Normalize the relation between years of training and income. It is entirely appropriate that the interventional cardiologist who trains for 7 years has a higher income than the general internist who trains for 3 years. But it makes absolutely no sense that the endocrinologist who trains for 5 years makes less than the internist who trains for 3 years.
• Strategic expansion of advance practice provider utilization. We have to face the reality that income disparities in some specialties will eventually result in fewer physicians entering those specialties. Hospitals should start training nurse practitioners, physician assistants, and pharmacists to perform some of the work done by these specialists. For example, advance practice providers can often effectively replace most of the daily inpatient diabetes management currently done by endocrinologists.
• Embrace AI. The heart surgeon will not do a coronary artery bypass surgery faster using artificial intelligence but AI may allow the general internist to more efficiently evaluate a patient with chest pain. Similarly, AI may speed up the time required for an infectious disease specialist to come up with a diagnosis based on a patient’s presenting history and lab findings. It can help the endocrinologist select the most effective diabetes treatment based on a patient’s co-morbidities. It can shorten note and order-writing time for patients performing E&M (evaluation and management) services. Artificial intelligence has the greatest potential to improve productivity of physicians in cognitive specialities, which are also the specialties that are the most under-compensated.

The forces that affect physician incomes are complex. But if we do not begin to take corrective action soon, we will find ourselves without endocrinologists, geriatricians, and pediatric endocrinologists in the near future. Because of the structure of American healthcare, we cannot rely on free market forces alone to solve this problem.

April 9, 2023

The U.S. stock market and U.S. bond market are both down 18% since December 2021. Neither are showing any signs of recovery. On the other hand, money market accounts are doing quite well with rising annual yields. This has caused many people to invest new money into money market accounts. An advantage of these accounts is that they are covered by FDIC insurance, giving investors a sense that their money is secure. But investors need to research their money markets carefully because not all of them are actually insured by the FDIC.

What is a money market account?

A central tenet of any financial plan is to have an emergency fund that can cover at least 3 and preferably 6 months of household expenses. This emergency fund should be held in “cash”. From an investment standpoint, cash means an account that is secure, non-volatile, and immediately available. The three types of accounts that are considered as cash accounts are (1) checking, (2) savings, and (3) money markets. These are often called “transactional accounts“. Although some financial experts also consider certificates of deposit to be cash accounts, they are better considered to be low-risk investments because the money deposited in them cannot be accessed for a set number of months. Because of this, money in certificates of deposit cannot be used in an emergency. The Federal Reserve reported that as of 2019, the median amount of money Americans held in transactional accounts was $5,300 however the mean amount was much higher, $41,600. This discrepancy is due to a small number of Americans holding a very large amount of money in transactional accounts, resulting in the average being skewed.

Most financial experts recommend maintaining 1-2 months’ worth of expenses in a checking account and 2-4 months’ of expenses in savings or money market accounts. Money market accounts and savings accounts are very similar but there are several important differences. Money market accounts often come with check-writing and debit card options, unlike savings accounts. Money market accounts generally pay higher interest rates than savings accounts to depositors. However, money market accounts usually require a much larger initial deposit than savings accounts with the interest rate varying depending on the amount deposited and held in the money market account.

Checking accounts generally earn little to no interest; indeed, many banks charge a monthly fee to checking account owners. Savings accounts do earn interest but it is minuscule – currently, savings accounts at large national banks typically only earn 0.01% annual interest. For the past several years, money market accounts also had very low interest rates that were about the same as savings accounts but in the past 6 months, these interest rates have risen to 3 – 4% annualized.

When a person deposits money in a money market account, the bank then uses that money to invest, typically in short-term bonds and treasury bills. The bank makes its money off of the interest on those investments by making the interest it pays the depositor slightly lower than the interest rate on the bank’s investments. As an example, at last week’s auction by the U.S. Department of the Treasury, the annualized interest on treasury bills ranged from 4.22% on 4-week bills to 4.70% on 26-week bills. Last week, my bank was offering money market accounts with a 3.50% annualized yield. So, if the bank uses money market deposits to buy treasury bills, it can make a net profit of about 1%. Banks can also use money deposited into money market accounts to make bank loans, such as mortgages, car loans, and business loans. The interest the bank charges on these loans is even higher than treasury bill interest rates. Banks assume that there is a predictable amount of money being deposited and withdrawn by money market account owners and assumes that everyone does not decide to withdraw all of the money market funds all at once.

What does being FDIC-insured mean?

An advantage of transactional bank accounts is that they are insured by the Federal Deposit Insurance Corporation (FDIC). The FDIC is a United States government corporation created in 1933 in response to runs on banks that contributed to the Great Depression. Banks that are members of the FDIC pay the FDIC annual fees that are similar to insurance premiums. The FDIC then uses the proceeds of these fees to build up its reserves in order to insure the checking accounts, savings accounts, money market accounts, and certificates of deposit at member banks. Importantly, the FDIC is self-funded, meaning that it is not supported by public funds and does not depend on congressional appropriations.

Each individual’s total of all transactional accounts at a single bank is insured up to $250,000. That means that if you have a checking account, savings account, and money market account at an FDIC member bank, if the sum of all three accounts is less than 250,000, you are insured. Any amount over $250,000 deposited in an account is not insured and can be lost if the bank goes under. The FDIC’s reserves are currently $1.28 billion. In the event of massive bank failures, the FDIC also has a line of credit of an additional $100 billion from the U.S. Treasury Department. Because of this, FDIC-insured transactional accounts are considered the safest of all types of investments.

Money market funds are not FDIC-insured

Money market accounts are issued by banks. Money market funds are issued by investment companies. Although these two types of money markets are similar, there are important differences, the most important being that money market funds are mutual funds and are not insured by the FDIC. However, that does not necessarily mean that FDIC-uninsured money market funds are less safe than FDIC-insured money market accounts. As is often the case, the details are in the fine print.

When you deposit money in a bank’s money market account, the bank leverages that money to make loans and investments. The bank does not just keep that money in a vault somewhere. This creates a problem if there is a run on the bank by depositors because the bank does not have enough cash on hand to pay off all of the depositors at once. If this happens, the bank can become insolvent and go under, such as happened with Silicon Valley Bank recently. Unlike banks, investment companies do not make loans so all of the deposits in a money market fund are used for investments, typically in short-term U.S. government bonds and treasury bills. As an example, the Vanguard Cash Reserves Federal Money Market Fund has 99.5% of its funds held in cash or U.S. government securities (U.S. government bonds, treasury bills, and U.S. government securities repurchase agreements). The yield that a money market funds pays to its investors is directly related to the interest that the fund is getting from the government securities it buys. This week, Vanguard’s money market fund has an annualized yield of 4.55%. This is higher than the annualized yield of bank money market accounts but slightly lower than the current interest on 26-week treasury bills. Other money market funds offered by investment companies may be invested in municipal bonds, making the yield tax-exempt to depositors. High-risk money market funds may invest in corporate bonds or foreign currency certificates of deposit.

Money market funds also differ from money market accounts by check-writing and debit card privileges. These are not typically offered by investment companies to money market fund depositors. It also takes longer to withdraw money from a money market fund than a money market account. Generally, it takes 2-3 days (and up to 7 days) for money to transfer from a money market fund in an investment company into a checking account at your bank. However, most money market accounts held by your bank can transfer funds immediately into a checking account held in that bank.

When you invest money in an investment company’s money market fund, you are purchasing shares of that fund. The fund managers generally keep the price per share at $1.00. When the fund makes money, it pays you in dividends (not interest). So, when you make income off of the money invested in the money market fund, the price per share does not change but you end up with dividends. Usually, those dividends get reinvested in the money market fund resulting in you owning more shares of that money market fund. During the 2008 financial crises, the price per share of most money market funds dropped to $0.97, so investors lost 3% on their money market fund investments.

When depositing money in a bank’s money market, it is important to read the details carefully to be sure that the bank is offering an FDIC-insured money market account. As an example, Chase Bank does not offer a money market account through its regular banking services but it does offer a money market fund through its affiliated investment company, JP Morgan Asset Management. The current annualized yield on this money market fund is 4.47% but it is not FDIC-insured.

Caveat emptor

Nowhere does the phrase “Let the buyer beware” apply more importantly than investing. In this time of financial uncertainty with bank failures and the impending U.S. debt ceiling, it is essential that all investors be sure of the details of their investments. Money markets are currently highly attractive because they are generally safe and currently paying annualized yields that are better than can be had with stocks or bonds. Here are some of the considerations to take into account when considering a money market:

1. Is your bank a member of the FDIC? If it is, then money market accounts offered by the bank are likely FDIC-insured. There are a few banks in the United States that are not insured by the FDIC so be sure that yours is an FDIC member bank. Credit unions are not insured by the FDIC but are insured by the equivalent National Credit Union Administration (NCUA).
2. Is the money market offered by your bank insured by the FDIC? If your bank is an FDIC member and offers a money market account directly, then the money market is insured. But you do need to be careful because many banks will link their websites to their sister investment companies, often called “asset management” or “wealth management” companies with a similar name as the bank’s. These money market funds are generally not FDIC-insured.
3. How much money are you putting in a money market? In general, you should avoid putting more than $250,000 in any single money market account. A common scenario is buying a new house. Let’s say you sell your current house for $500,000 and you are buying a new house for $500,000 but the closing date for purchase of your new house is two months after the closing date for sale of your old house. So you need to park $500,000 somewhere safe until you close on your new house. It is better to split the money into two $250,000 money markets – either into one owned by you and one owned by your spouse at a single bank or into two money market accounts in two different banks.
4. Money market account versus money market fund. The deposits in an FDIC-insured money market account will be slightly safer than deposits in a non-insured money market fund. However the money market fund will probably pay a higher annualized yield than the money market account. You will need to weigh the risk versus reward associated with an account versus a fund.
5. What is the money market fund invested in? If you do decide to deposit money into a money market fund, be sure that you read the details of how the fund manager uses those deposits. A money market fund that is totally invested in U.S. government securities is safer than a money market fund invested in municipal bonds. A money market fund that is invested in corporate bonds or foreign currency certificates of deposit is considerably riskier.
6. How fast will you need to move the money? You can wire money from your bank’s money market account immediately but it can take up to a week to transfer money from your investment company’s money market fund into your checking account.
7. Do you want to write checks on your money market? Although every bank and investment company has different rules, most banks will allow you to write a check or use a debit card to access cash in your money market account. Most investment companies do not offer check-writing or debit cards to withdraw cash from money market funds.
8. Know your tax implications. Money market accounts will pay you interest, which is taxed at your regular income tax rate. Money market funds will pay you dividends, instead of interest. Dividends come in two types: ordinary dividends and qualified dividends. Qualified dividends are taxed at the dividend tax rate of either 0%, 15%, or 20%, depending on your taxable income. For most people, the dividend tax rate is lower than their regular income tax rate. Ordinary dividends, on the other hand, are taxed at your regular income tax rate, just like interest is taxed. Most money market funds will pay out ordinary dividends and not qualified dividends. Money market funds invested in municipal bonds are generally tax-exempt.
9. When to consider treasury bills instead of a money market. Every week, the U.S. Treasury Department auctions federal securities. Treasury bonds mature in 20-30 years, treasury notes mature in 2-10 years, and treasury bills mature in less than 1 year. For some people, purchasing a treasury bill directly from the Treasury Department can be a good alternative to a money market. Treasury bills are similar to a certificate of deposit in that the money cannot be accessed until the bill matures. The advantage of a treasury bill is that it generally pays a higher rate of return than money market accounts at a bank. Just be aware that if the federal government reaches the debt ceiling without congressional action, you may not be able to get paid once a treasury bill reaches its mature date. Currently, treasury bills with mature dates of 4, 8, 13, 17, and 26-weeks are available for purchase. The most recent annualized rates range from 4.22% for 4-week bills to 4.70% for 26-week bills.

The good news is that both money market accounts and money market funds are generally safe and currently offering better annualized yields than other common investments. Just be sure you know what you are putting your money into before you hand over your cash.