But is medical school the first part of a good business plan?
A quick case study. Background material first.
From my entrepreneurship course, week one, topic one: Where do prices come from?
Scenario 1: you set your own prices. Your product or service is good enough, and the market (customers care enough to pay more, the information somehow reaches them) is sufficiently conducive to pay you a premium for innovation, or better results, or just plain good service. The results: high margins and profits that can be plowed back into the business and used for further innovation and growth.
Your time and savings, or borrowed money, can be good investments in scenario 1. Now write your business plan and convince yourself.
Scenario 2: the market dictates your price. Charge more and no one will buy from you. Charge less and you may not cover your costs. In scenario 2 there are no excess profits to funnel back into the business for growth and further innovation. The only way to increase revenues is to produce more.
There are two type of scenario 2: 2a is a competitive, commodity-type marketplace where a lot of companies provide the same, undifferentiated product or service. 2b is where an outside agency uses a formula of some type to set prices, independent of market demand or your costs of production. The outside agency is usually the government.
As an entrepreneur, you have to be cautious in committing years of your life to this type of business, and you should avoid going into debt to finance one (assuming a lender would finance you-- most would turn you down.)
If you have scenario 2 pricing, either from a competitive, commodity-priced market or from government (or insurance company) price-setting, but you assume scenario 1 pricing and the resulting profits, your business plan will fail.
Write your business plan -- it will convince you.
Now back to medical school and medical practice:
Medical practice has gradually evolved from scenario 1 to a scenario 2. Without a special loan program, few people would have access to the debt financing needed to finance four years of school; the uncertain future cash flows from take-it-or-leave-it pricing (pricing that does not respond to the rising costs of running a practice or allow for higher prices for differentiated and innovative care) make these loans too risky without a government guarantee of some sort. The existence of student loan programs make paying for school within reach of anyone with a pen and an acceptance letter.
The loan programs do not, however, make medical school part of a good business plan.
Huge upfront debt + four years of foregone earnings + uncertain future cash flow projections = a questionable business plan.
It pains me to write this. No one needs to tell me that medicine is a calling, and that there are sublime, soul-nourishing aspects to being a doctor that transcend dollars and cents, and that medical practice is one of the unique professions where much of what is produced is absolute, unequivocal good.
The intangible benefits of being a doctor are easy to recognize. But they can make the long-term costs of what may be an imprudent business plan easy to ignore.
Dedicated doctors are a gift, but medicine is not a priesthood. There is a limit to how much well-intentioned people should have to pay for a higher calling trapped in a bad business model.
part 2: possible solutions to come