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Editorials: Editorial

Understanding the Impact of Debt on Graduating Residents' Employment Decisions

Lubarsky, David Alan MD, MBA

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doi: 10.1213/ANE.0b013e3182570155
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It was simpler back when I was training more than a quarter of a century ago. You worked hard, lived in the hospital, and graduated into the arms of a grateful populace to whom you brought lifesaving skills. Now, preferences, trade-offs, life-work balance, and ballooning student debt1 have forced their way into our lexicon. Steiner et al.2 provide a glimpse into how burdens of medical school debt influence decision-making by residents. The concepts encountered here are not new, but refreshing to see in the anesthesia literature as the science of decision analysis is not at the forefront of the medical community's usual discussion list.

In this study, Steiner et al. document that those graduating from anesthesia residency training programs with substantial (greater than the current average of $150,000) debt will more likely pursue a career in private practice (more money than academics) and that they would look favorably upon a group with a debt repayment plan.

The feeling of security is an emotional bulwark against external stressors (such as going out into your first job), and such emotions help define the utility of a particular decision. The utility of a particular decision is not necessarily purely economic or linear. For example, the value of a fee for service practice where income could vary from $200,000 to $400,000 per year (with an average “likely” outcome of $300,000 per year) based on available locum tenens work might be less desirable than an academic salary of $200,000 per year plus a $30,000 debt repayment plan. This is because the lower end of the salary range ($200,000 as a locum minus $30,000 after tax dollars to pay down debt) would leave insufficient funds for the lifestyle upgrade planned. Over many such decisions in a population of trainees, the rational economic approach is to take the locums job, which, on average for the population yields more money. However, for any individual, the lower end of the range may not be acceptable. It is not just 25% less than the academic salary; it is 25% less plus a choice between continued delay of material gratification or a destruction of credit ratings if earnings are in the lower range. So that latter outcome has infinitely lower utility, to be avoided at any cost. What debt repayment plans offer is the security of knowing that no matter what happens year to year in a salary, the debt is covered. Peace of mind is achieved. The total salary, although lower, may be the easy choice with which to live. Again, rather than pure dollars and cents, one has to consider the sense of psychic gratification and further amplification of one's skill sets in the academic setting as part of the utility of a particular decision. Don't forget to include self-worth along with the message of net worth!

What about a private practice salaried job at $250K progressing by $100K per year versus an academic position? Although the private practice job is routinely a higher-paid position, some graduating residents may not readily perceive how they are going to manage their new salary and new repayment demands. A debt repayment plan along with a smaller academic salary may have greater utility than the larger salary and personal budget-management headache. Even a comparatively lower academic salary can have a higher utility as it is clearly a big raise from fellowship, with no complicated financial management required. In this case, suppose the salary progression in an academic department's base salary is usually $220, $250, $270K over 3 years. Combined with a promise to pay the $150K in debt, the department can delay the usual increase and keep the new graduate at a $220K salary for 5 years, and then assume the normal progression. Everyone is happy; the new graduate actually makes as much as he would in private practice to start and gets his big raise, but ends up paying back the $150K in loans ($270K − $220K = $50K per year = $150K in years 3–5, plus $250K − $220K = $30K in year 2). (NB: The $180K in total is not a profit; it is approximated to the likely interest accumulating over the 5-year time period. Round numbers have been used; an Excel spreadsheet can calculate an exact amortization schedule.) In the end, a little flexibility has allowed the academic chair to recruit the fellowship-trained anesthesiologist who would have otherwise left.

It is wise for anesthesia chairs (and all executives who hire physicians) to explore this concept further, develop an understanding of the value of debt load repayment guarantees and how the value of that changes with debt load, and to use that knowledge to craft reimbursement packages that attract the best and brightest, while lifting a load of worry from the minds of many newly graduating physicians.

DISCLOSURES

Name: David Alan Lubarsky, MD, MBA.

Contribution: This author wrote the manuscript.

This manuscript was handled by: Franklin Dexter, MD, PhD.

REFERENCES

1. Greysen SR, Chen C, Mullan F. A history of medical student debt: observations and implications for the future of medical education. Acad Med 2011;86:840–5
2. Steiner JW, Pop R, You J, Hoang SQ, Whitten CW, Barden C, Szmuk P. Anesthesiology residents' medical school debt influence on moonlighting activities, work environment choice, and debt repayment programs: a nationwide survey. Anesth Analg 2012;115:170–5
© 2012 International Anesthesia Research Society