Everything You Need to Know to Negotiate the Best Compensation Package

By: Jon Appino, Founder of Contract Diagnostics, the Nation’s Leading Physician Contract Review Firm.


About Us – Contract Diagnostics

At Contract Diagnostics, we exclusively provide services for physician contract reviews. We do not sell insurance or anything else; we exist to deliver physicians a unique service that ensures you sign the best contract possible. We have done nearly 10,000 reviews and have a simple, educational system that results in you approaching contract negotiations with the correct information and the option to enlist a trusted advocate.

Disclaimer:

Please note that this article is to educate the readers around essential clauses and sections in a formal employment contract. This paper is by no means intended to provide formal advice or legal counsel in any way. We recommend having your agreement formally reviewed by a professional and not solely rely on the information contained in this article.


Our Goals

Our goal at Contract Diagnostics is to balance the knowledge gap. We recognize and have heard that physicians receive no formal training for the business side of their professional life. This guide will provide you with crucial information concepts, instructions, and coaching to help you manage risk and make decisions with full knowledge.

Here is what we will cover:

  • Site Visit to Contract Negotiations
  • Section by Section Contract Review
  • Compensation Structures
  • Balancing Risk
  • Red Flags

Want to see the video version? Go here to view this content with slides.

Let’s dive in.


SECTION 1: Total process – from the site visit to contract negotiations

From Site Visit to Contract Negotiations

The process for physicians finding jobs can be a complex one. You search online, send out resumes, connect with colleagues and former mentors to see what they know, or begin sending out blind resumes and making cold calls to a geographic area you have an interest in. This is the starting process for securing a job – but there is so much more to applying and conducting your first site visit. 

There are two essential starting points for the negotiation process:

  1. When you apply to a new position
  2. When you visit a site for a new position

When applying to a position, you should make sure it has the opportunity you are looking for. Private practice with the potential for partnership or a standard employment position in a large hospital or practice? Smaller community or larger? One of many or the only person doing your craft in the market? 

All these items can be researched and decided on before sending your resume – so take the time and consider them to make the process efficient. Knowing if the position has been listed for years or is not listed may impact your negotiation capital. Understanding if this is the only job in your preferred city or one of many you will have offers for may also significantly affect how much you can negotiate. Either way, we believe the negotiation process starts with this background information and your due diligence on the position before you even are close to getting a contract.

A site visit is the next context in which to think about the negotiation process. What we don’t mean is that this is the moment to start talking about dollars. This is your first real opportunity to convey your interest and prove that you are a fit for the position.

Here are just a few questions you should ask yourself during a site visit to set you up for a strong position of negotiation:

  • Why is the position open? Are they busy, or did someone leave? Is their departure a red flag? 
  • What does the future of the group/hospital look like? Would the group get bought or sold?
  • What is the market in this specific geography like? What challenges does the group see coming in the next few years?
  • Does the site or hospital/clinic have what you need in terms of facility space and equipment?
  • How happy are the other employees or shareholders?
  • Does geography allow my interests to be served (religion, hobbies, spousal employment, schools, etc.)?

As you tour, take time to notice how services are offered, how the facility is structured, and anything else that you may want to ask clarifying questions about later. 

If information is provided or presented around your proposed compensation, you should be in the listening phase. Here is an essential piece of advice for anyone in this phase:

Don’t answer direct questions about compensation. 

Be vague and leave it open.

Here are some questions you may be asked:

  • How much do you want? What are you looking for in a salary?
  • What do you see in the market?
  • What are others offering you? 

Feel free to respond with something like this:

  • “I am sure you guys will come back with a competitive market rate.”
  • “I am sure what you offer will be in line with the other offers I’m receiving.”
  • “I am looking forward to having the agreement reviewed and evaluated for totality, not just pay.”

You are on an information-gathering mission to understand if this is a position you want and a place you want to work. Be gracious, but deflect any specific conversations until you are actually in official negotiations. Leave it open. Let them propose something. Then make your move.

If not, you risk delivering an on-the-spot number, which they may accept, and further assessment proves you need or want more. It is premature to make those decisions in a site tour, and you may regret doing so. 

Here’s what you absolutely can and should do to position yourself well:

⛔Get into dollars and cents conversations.

✅Discuss next steps.

These are your best options for gaining clarity on “what’s next”:

  • Inform them you have had a great time visiting and are impressed with what you have seen.
  • Ask candidly what the next steps are and when you will hear back.
  • Get clarity around their intentions and timeline.

Specifically, ask:

  • Will I have a letter of intent before the agreement?
  • Will I only have a contract?
  • Will it be in 2 days… 2 weeks?
  • Will there be a deadline for return?

If you have a few different options on the table, you want clarity on timelines with all opportunities. We like to respond to offers with, “I’m looking to decide by X date, so please have all your documents and details to me two weeks before that so I can have them evaluated and ask any questions I may have.”

It’s also a great idea to have your spouse tour the community while touring the facilities. Have the kids check out the parks! Make sure the community allows you to be happy as a family, not just you, at your new job.

To sum up, you should walk away from a site visit with:

  1. An understanding of the operations, people, and potential.
  2. A clear expectation for the next steps and timeline.

A Letter of Intent (LOI) may immediately follow a site visit, and this is the phase where the actual financial negotiations begin.

Letter of Intent

At Contract Diagnostics, we see a letter of intent in about 22% of all agreements. Considering the volume of physician contracts we review, this is a pretty high stat that indicates common practice.

What is it?

A Letter of Intent is a document that provides high-level information about the position, usually including pay, signing bonus, relocation, benefits/time off, additional bonuses, etc. Sometimes you will see a malpractice insurance offer (if not scope or details) or non-competes/covenants. All of this means you are off to the races in terms of negotiation.

What do you do?

If you get a Letter of Intent, do NOT sign it! The letter of intent stage is when you need to get on the phone and start talking about pay and any other specifics included in the LOI. We will get into more of the nitty-gritty of what you can negotiate in a minute. Still, you want to come back with some counter-terms about pay, compensation structure, benefits, and anything else you feel should be higher. Again, know your market value and what is standard. We cannot impress enough not to sign the LOI without completely agreeing with the terms — this is a great time to seek professional help.

Two points of discussion

When you have a Letter of Intent in hand, you need to bring up discussions around two key areas:

  1. Risk – Insurance and non-competes may play into how much risk this contract represents. Sometimes, the salary number may be acceptable, but once you discover there’s a 50-mile radius for a post-termination restriction and you have to buy your malpractice tail insurance … now it feels unfair. You must assess the risk represented by the numbers in this letter and negotiate accordingly.

Risk equations are objective and can be calculated in absolute numbers to help you understand the actual risk you are taking outside of the compensation reward.

  1. Binding vs. Non-Binding – There is a wide range of scenarios here. Sometimes, you get a letter that just says “sign here.” Sometimes, you don’t sign anything. We have even seen Letters of Intent that say, “by signing this, you agree to sign the employment agreement” or that you “…are not in any other active discussions.” Know the requirements with what you are signing, and be cautious not to sign anything limiting your negotiating power.

How should these conversations happen? We feel a discussion on the phone is best. A good old-fashioned dialogue. Not an email saying ‘I would like X and Y’, but a conversation. How did you come up with these numbers? What is the potential like in year 2 or 3? What expectations would you have for me in the first or second year? What are the schedule expectations to produce those numbers? 

All of these are essential questions that should be asked during the contract review/negotiation process. We feel earlier vs. later is best to avoid wasted time and ultimate efficiencies in the process. Therefore, message them via text or email, let them know you are excited about the future and opportunity, and have a few questions. Know you (almost) have the same goals, and ask for time on the phone to discuss. Have a friendly conversation about the terms, ask many open-ended questions, take good notes, and have your asks. 

Think of it as an algorithm. If this, then that. If that, then this. We think an email follow-up is appropriate with what you discussed and a timeline for moving forward. 

Of course, each situation is different, and having the guidance of a professional who has been through this a thousand times could be valuable. You may even want to hand this process and discussion over to a pro. Either way, this is the time to start this process, as the Letter of Intent can be a big step in securing your position for the long term (or short term, if that is your intent).

SECTION 2: Common and vital section by section contract breakdown

Section-by-Section Contract Review

Whether or not you go the Letter of Intent route, eventually, you will get a physician contract in hand. We take great care to review specific sections, and you should know what you are looking at and what the terms mean. Keep in mind it’s not only what the agreement DOES say but what it does NOT say.

While each agreement is different, there are many nuances to each section. It is not possible to do a comprehensive article on every section that could pop up in your employment agreement; we will do our best in this article to cover relevant headings and topics that should be included in each physician employment agreement. 

Want an expert at physician contracts to look at your review? Contract Diagnostics has expert understanding. If you are already feeling overwhelmed, reach out to us to learn more. Either way, we want you armed with the information you need to make strategic, beneficial negotiations that win you the contract you deserve.

Term and Termination

Contracts should always include details about how the relationship can end. Here are the term and termination clauses you may see in your physician employment agreement:

  • Without Cause Termination – This is common in about 97% of the physician agreements we review at Contract Diagnostics. This is the easy ‘how to get out’ per se. The notices are usually 60-120 days by either party to terminate, without any specific reason. Anything less than the 60 days for an employment agreement may be considered a red flag. 

Having enough time (on both the physician and the employer’s end) is vital to ensure the proper transitions. For the physician, think through what has to happen if they let you go. You would need to wrap up your practice, search for a new position, interview and conduct a site visit, receive and negotiate a contract, then obtain all the needs for the job (licensing, credentialing, etc.). There may also be the sale of a home and even relocation clear across the country. We all know this cannot happen in 60 days, let alone less time. 

The ‘gold standard’ for this section of the agreement is 90 days. Now, anything longer may be a challenge for notice on the no-cause termination. If it is a challenging situation, you may not wish to stick around for longer than 90-120 days, should you be the one terminating the relationship. In certain conditions, there are lower notice periods that are acceptable such as an independent contractor situation that may be 30 days for the notice to leave. In other markets, such as a highly trained specialist in a rural market, we may find a notice period in the range of 180 days. 

However, anything out of that defined normal range of 60-120 days should be carefully evaluated and questioned for the no-cause termination. All this being said, most physician employment agreements are set up on an at-will basis. This means that either party can terminate at any time for no reason. Hence, your ‘3-year term’ may only be a 90-day guarantee, as the employer could terminate you on day one without cause, meaning you have a 90-day contract. 

TIP: Physicians on J-1 waiver agreements typically do not have no-cause terminations in their contracts. 

  • Immediate Termination – Some language will probably exist around immediate termination, which usually must be with cause. At the same time, this is commonplace in physician agreements. These sections need to be carefully reviewed. Note, if any are undefined, such as not following a policy (do you have the policies?) or something else that could be cured easily (a delay in your records). Often, certain items will (and should) have a remedy period to them. Of course, you are losing your license, getting kicked off the medical staff, losing the ability to collect from Medicare or Medicaid would be offenses that would be immediately terminable (you are no good to them as an employee).  

TIP: Make sure your disability language in the agreement lines up with standards or, better yet, your disability insurance (you should have it – click here if you do not). If there is language about termination for being disabled, the definition should be 90 consecutive days, or how your personal DI policy defines it. Anything less would be a red flag. 

  • Minimum Term Lengths – As mentioned above, most agreements have no-cause terminations saying either party can terminate anytime for no reason. You are just walking away. However, if there is a minimum term length, this may not be possible. 

We are beginning to see this more. A contract may state that termination can occur “after the initial term.” This is a vital piece that cannot be missed. If your physician agreement states the initial term is 1, 2, 3 years, you may not be able to terminate or leave the position until after that. It’s a small phrase that can dramatically impact your life. 

With all this talk about terminating the physician-employer relationship, do keep in mind that, for hospitals or medical facilities, the average cost of recruiting and hiring a physician can be anywhere from $100k-$250k. It is not typical for the goal of administrators to find small things to terminate physicians around. 

It’s essential to understand your obligations and how/why/when you could be let go, even if it’s unlikely to happen. So be very careful as you review this critical section in the agreement and understand how the relationship could end. While we want to be careful and not over-index this, it could play a crucial role in the future on how you transition out of the employer and what is marked on your permanent record.

Restrictions

Non-competes, non-solicitations, liquidated damages, and the like are a significant part of a physician employment contract. They induce risk and potential financial loss into the document and can affect your ability to work and earn income for your family. Understand these crucial clauses, or you could have substantial damages to your career.

Restriction clauses need to be:

  • State-Specific. Know the state you are going to. Some states allow non-competes, and some do not. Some states allow 24 months and others less. Some states enable mile radiuses, and others are county-specific. Acquaint yourself with the rules and regulations in a given region. Know that just because a court struck down a non-compete for someone in your state does not mean that your non-compete would be invalid. If the state allows the non-competition or any type of restrictive covenant, you would have to challenge it in the courts to know. This can be costly, timely, and risky. 
  • Time-Bound. Most non-competes we see at Contract Diagnostics are 12-24 months in length. We typically see longer non-competes in the northeast, so for a Physician Contract in New York, we may see up to 36 months. Other states are less. Physician Contracts in Texas usually contain a 12-month non-compete. Should your physician employment agreement have one of these restrictions, always make sure it is time-bound. The time should be appropriate for the state and length of the contract. 
  • Geographically-Bound. There needs to be defined geography for the restriction. Most of the time, it is a mile radius from a specific office or practice. In Kansas, a physician’s contract may include a 50-100 mile non-compete, while a New York physician’s employment contract may have a few blocks in Manhattan. Some states require county lists and not miles to avoid confusion. Of note: mile radius typically means ‘as the crow flies – so do not go to Google maps and find out the distance as that measures it as if you were driving a car! 

Non-Competes

A few notes on non-competes:

  1. For the defined location of the non-compete clause, you want it to specify the primary location only. If it is any location of the employer, the restriction could be vast and overreaching. Does the restriction open you up to a satellite location? Does it include affiliates or undefined places? Know all definitions!
  1. It should be fair for termination. Most agreements contain a no-cause termination. Suppose the relationship ends outside your control (no-cause termination, non-renewal, cause termination by the physician, etc.). In that case, you should not be bound by a non-compete or restrictive covenant clause. Think “what would be my fault” for termination, and that would be a reasonable way to enforce the non-compete from the employer’s end.
  1. Should the employer only offer a one-year contract, having a 2-3 year restrictive covenant may be out of bounds. Make sure the time-boundaries of the restriction line up with their commitment to you and your practice. 
  1. Many agreements contain liquidated damages. These can be tricky. You may be agreeing that breaching the non-compete will damage the employer to a specific dollar amount, usually 1-2x your salary. Should you breach the non-compete, which you can, you would just owe them that amount. Buying your freedom per se in this situation can be expensive! This can be negotiated; think about what would be reasonable based on your role and tenure at the facility. 

Here are some questions to ask about non-competes:

Has anyone ever breached the non-compete?

Have you ever had to go to court to fight it with a physician employee?
Is it the same non-compete for everybody? 

Has the non-compete ever changed?

Do you expect it to change at any time in the future?

How would telemedicine be handled?

What if the clinic I am working in is closed, or the practice is bought out?

A 2021 executive order by the Biden administration has the potential to change non-compete agreements. You need to be aware of rulings like this and the potential for industry changes before settling for terms that could severely limit your future. Upfront due diligence on a non-compete clause or any restrictions for your post-termination may seem like a waste of time (and even money for a review company to help you), but it is an excellent investment.

Malpractice Insurance

We have all heard of horror stories of the physician that did not know they had to pay out $185,000 for a tail policy. This section is vital that you understand. A non-compete invokes risk into the agreement, potential financial damages and may prevent you from leaving your employment altogether. Each state has specific limits for coverage (the most common is a $1,000,000/$3,000,000 policy meaning $1M per claim and $3M in the aggregate per year), and the institution may have additional requirements above the state minimums. 

There are two basic types of policies:

  • Claims-based – with a claims-based policy, claims are covered while the policy is in place. This means that any claims filed after the policy is terminated are likely not covered. In this situation, you most likely have a tail insurance requirement to cover you for claims that may be filed post-termination. This can be expensive (we have seen up to $180,000!) and is not usually something a physician employee can finance. 
  • Occurrence-based – with an occurrence-based policy, a malpractice claim is covered regardless of when the claim is filed. These are ideal yet more costly than a claims policy meaning most employers choose the lesser option and provide claims-made policies. 

While there are two main types of policies, there are many variations to look out for:

  • Self-insurance policies. If a tail insurance requirement is not listed, you need to know how the employer will charge you.
  • State patient compensation fund policies. There are a handful of states (seven at present) that have patient compensation funds. They all have unique tail requirements you need to be aware of.
  • Claims made slot policies. These may not require a tail, but all depends on the policy terms and details.
  • Modified claims policy. Again these may not require purchasing a tail policy, but it is all contained in the details.

You would be shocked at how much money it can cost you if you do not fully understand what you are covered for, what you need to get coverage for, and what you are committing to in terms of malpractice insurance. It is worth enlisting a contract reviewer if these things are unfamiliar at all to you. One small word can throw the entire clause off. Watch out for policies that can change or language that includes ‘if’ as the section may not be clear on what is offered or provided and when or how it could change, with or without notice. These sections can be tricky!

Compensation Structures

Simply put, there are hundreds of structures in which physicians are compensated under. We could talk for days about compensation structures and physician compensation plans. The most common versions you are going to see are:

  1. Salary only
  2. Salary plus bonus (hundreds of combinations of this)
  3. Salary guarantee leading into production only
  4. Shift or hourly rate

Let’s look at some of the basics and nuances of how your physician compensation plan may be laid out.

Base Salary Only

Simple and to the point. You have a fixed flat salary and nothing else to worry about. Easy, right? Not always. Know how it could change over time. It may be possible to ask for documented raises in the first three years (Say $225,000, $235,000, and $245,000 in years 1-3). If it is a flat salary, you need to know your schedule and time committed. Being overworked and underpaid is not a good combination should there be no bonus for additional work or shifts/calls.

Relative Value Unit (RVU) Plans

Work relative value units (wRVUs) feed into the conversion metrics used by an employer to determine physician compensation. These have grown in popularity over the years as they are easier to track for employers on a physicians’ productivity, per se. 

Contributing factors to calculating this number by the employer may include:

  • Geographic cost indices
  • Malpractice costs
  • The training of the physician

These simple factors are input into a formula for how much the employer should pay per wRVU. It may be the same for a department or different for each physician. These structures can appear simple on the surface but intricate when considering how they are set and modified over time.

Here’s the #1 tip for this: make sure the math works out.

Here’s an example of how it may be stated:

“Physician shall be paid a Base Salary of $200,000 per year and $44 per wRVU performed over a threshold of 4,000 per year.”

This math doesn’t check out. $200,000 / 4,000 = $50 per wRVU. How can they pay you $50 per wRVU for the first 4,000 but only $44 for additional? This easily becomes a negotiation point for the candidate.

The numbers here in a simple wRVU physician compensation structure have many levers for negotiation. 

  1. Salary – you could ask for a higher salary if you would easily produce 5,000 wRVUs in the above example. 
  2. wRVU conversion factor or CF – the higher, the better for your income and production.
  3. wRVU threshold – the lower this number, the quicker you accumulate additional paid wRVUs (bonus dollars).

Having a tiered structure also may make sense. In the above illustration, maybe for $200,000, you agree to $44 for over 4,000, but if you produce up to 5,000, it goes to $48 per each after, or should you exceed all expectations and get to 6,000, it tiers up again to $54. There should be an incentive to work more hours, be more efficient, and help more patients.

Feel free to ask for some data from the potential employer:

  • Do I get a monthly report?
  • Can I see a copy of a monthly report?
  • What’s the average production in the department? What about this particular office?
  • What are your expectations for me in years 1,2 & 3?
  • Are there varying CF’s for the others in the department/location? 
  • How often is the structure revisited? What metrics are used?

Sometimes, we see structures where it’s unlikely for physicians ever to get a bonus. It may look terrific on paper, but there is minimal chance of it becoming a reality.

Understanding the wRVU physician pay structures is not easy, but asking the right questions and setting the right frame upfront will yield less stress in the future with understanding how you are compensated for your valuable time.

Then, we come to collections.

Compensation Based on Collections

Numerous factors impact a physician’s collections: local market dynamics, individual physician specialties, local payor mix, and many other inputs go into these collection-based physician compensation structures. Similar to our recommendation with RVUs, you need to understand what you will see each month for your production:

  • Is there a spreadsheet or some kind of document given each month with my numbers?
  • Does it come from electronic medical records?
  • What are the expectations on when you will begin collecting for me? 
  • What percent of the fees that you send out are unpaid?
  • How are costs split? 
  • What expenses can I control? 
  • What’s the average collection time? 
  • How is my pay determined for post-termination collections?

Understand what their specific structure is based on as it could be tricky definitions.

  1. Net collections – what is the definition? It could be as simple as collections for you minus any refunds, or it could be an entire page of definitions and calculations.
  2. Profitability – what is the definition? What expenses are in my control? How are general overhead expenses split? Know what all the expenses are. If you are paying rent and the other physicians own the building, is the rent expense appropriate for the market? If you are splitting administrative staff, are they paid appropriately? We have seen a physician spouse ‘office manager’ making $200k before! 

Understand what you can control in either situation:

  • What expenses can you control?
  • How is the payor mix different from location to location? 
  • How are cash-patients or Medicaid patients divided up among physicians in the practice?

Here is an example of how a collections-based structure may be stated in a physician employment contract:

  • “Physician shall be paid a base salary of $200,000 per year and 30% of net collections over $400,000 a year.”

Again, there are three levers for negotiation here:

  1. Base salary
  2. Bonus threshold
  3. Percentage of net collections over that threshold as a bonus

But, that’s not all. There are a few additional areas you could negotiate here. Find out what they are by asking questions like this:

  • How is it defined?
  • Is it prorated for a partial year?
  • Is it paid as of my last day, or are there post-termination collections I will be paid for?
  • What is the average collection time?
  • What types of reports are given? Can I see one?
  • What types of items can I control? Payor mix? Expenses? 

Having details on collection structures are essential. Again, similar to RVUs, we like tiering structures. Putting different thresholds in place will ensure the structure rewards you for working more. While each physician specialty and market are very different, these are common structures for private practice employment. There may be many moving pieces in these common physician compensation structures. They require a lot of due diligence (and potential changes to the agreement) by the physician candidate to arrive at an understanding and a satisfactory agreement.

Value and Quality Bonuses

We see a lot of value and quality metrics in physician contracts as of late here at Contract Diagnostics. Many employers are shifting from solely production-based to a share of compensation related to value or quality. While it may not be the majority of a physician’s compensation, even a small percentage or flat amounts for value-based metrics or quality pay may be part of the physician’s compensation structure.

Here are the aspects of this you need to understand:

  • Are the goals departmental based or for the individual physician?
  • What are the metrics? 
  • What is the timeline for establishing the plan? 
  • Are partial years paid, or what is the eligibility?
  • What is the average capture rate of the plan?

Here is an example of how it may be stated:

  • Physician shall be paid a quality bonus of $30,000 per year based on metrics determined by the employer from time to time.”

Immediately, you should have questions about this:

  • What are the metrics?
  • Are they the same for everybody?
  • Is this a new program, or is it well established?
  • What’s the average capture rate?
  • What reports will I get to showcase how I am doing over time?

It may start to sound like you will have endless questions about every clause. But remember that your goal is fair pay. These evaluations are meant to provide a reasonable, mutually beneficial outcome and healthy compensation for the value you bring.

Fair Pay: Evaluating YOUR Pay

A few expert insights on evaluating fair pay:

  • The public data is almost always wrong. Medscape surveys and many other open-source online platforms are just inaccurate. Physicians on both the low end and high end of compensation numbers are not taking public surveys, so the data is skewed and unreliable. Bottom line: do not use that data to inform decision-making.
  • Each situation is different. Specialties, regions, local markets, group context and dynamics, roles and requirements, types of employee or independent contractors – there are just endless inputs into a situation that makes up what is ‘fair.’
  • Options create options. More offers generate more opportunities for negotiations. If you look in a specific market and get five offers, they may or may not line up. Median numbers may indicate what the market bears, but disparate numbers should drive you to dig deeper into terms and structures. $250k per year is not always better than $225k per year.
  • It is not all about salary or even compensation. Your base pay is one aspect; the potential bonus is another, but consider the overall risk discussed in these articles before deciding whether the salary is or is not fair. 

TIP: do not be scared or nervous to ask questions on the pay, or even for a higher salary or different compensation numbers. Employers are expecting this conversation. Having it proves that you are engaged.

Here is an example of how two situations can be very different – each has its own ‘fair’ number.

  • A General Surgeon joins a group of 5 other Surgeons in Austin, Texas. They have hired one per year for the last two years, and someone is retiring in two years.
  • A General Surgeon joins one other Surgeon in Abilene, Texas. They have had two other Surgeons there over the past three years, and both have left for ‘family’ reasons. The job has been posted online for two years.

Both General Surgeons in Texas, right? So, look up the pay for Surgeon – Texas, which will tell you what is fair. As you know, this data is not accurate. Having a professional on your side evaluate the situation for ‘fair’ is recommended in all situations, including both of these.

A Few Questions to Ask Around Compensation

Go in armed with relevant, intelligent questions:

  • How do you set pay?
  • What are the metrics used when it is fixed?
  • How often does the structure change?
  • When was the last time it changed?
  • What are the ranges for production for the department?
  • What types of reports are provided? Can I see an example?
  • Do you use MGMA? Sullivan Cotter? AMGA? Tri-blended data?
  • Is the compensation structure the same for everybody in my department?
  • How was COVID-19 handled?
  • What would I be paid on termination?
  • What are your expectations of me for production?
  • What is the process for renegotiation? 

Notice: not one of these questions is “can I have more money?”

If you have the proper discussion in the right way, the opportunity to ask for more will come up naturally and be very easy.

You can ask plenty of questions around pay without directly asking for more unless, of course, you want more or you deserve more. It is an art on how to ask! The decision to ask for more money is entirely up to you, but you have relevant information and data to back up your request. 


Also, remember: pay gaps exist. They are real and negatively affect physicians. Pay gaps are why you have to discuss compensation, even if it is more money than you make now or you are content making. Your advocacy plays a vital role in setting precedents for the professional community at large.


Additional Physician Income Streams

Physician pay is not just limited to active practice and your contract. Many medical professionals have additional streams of revenue, which may include:

  • NP/PA supervision
  • Medical directorships
  • Administrative time
  • Research/academic work
  • Teaching residents, fellows, and students
  • Side gigs
  • Telemedicine
  • Partnership
    • Real estate investments
    • ASC’s
    • Ancillaries
    • Labs

This may add complexity but can change the trajectory of your financial future.

Schedule? Duties? Shifts? Hours?

Most physicians want to talk about the income they are making. It is usually the first section they go to when they get the agreement! Yes, it is a lot of money; however, it is not free. You will give your time for it and never get that time back. We all have our ‘time for money’ equation, and you must understand your time obligations just as well as the income you will be making. It does not matter if you are paid salary only, wRVUs, collections-based, or a blend of something else. You need to understand your time commitment clearly. Contracts are for expectations, and we feel this expectation should be clear to avoid any future arguments or disagreements.

Any agreement you sign should very clearly delineate how you are trading your time for money:

  • How much time are you giving? Is this clear and understood in the document?
  • How much money are you getting? Is this clear and understood in the document?
  • How detailed is your schedule, and do you have any control?
  • How detailed is your location, and could it change?
  • How does the call work, and can it change pending the actions of others?
  • What happens if a colleague leaves or steps away on leave?
  • Would you get paid for additional hours or commitments?
  • Is administrative time built into your day or separate and blocked?

We spend a lot of time and get very granular when we review contracts at Contract Diagnostics. You must understand an employer’s expectations and your responsibilities.

We prefer:

  • Clear hours or averages per week/month. ‘Patient contact hours’ in a week are popular.
  • Clear shifts (if applicable) for days/nights or block schedules or not.
  • Defined location(s).
  • Mutual agreement to change the above.
  • Defined call, with permission required from the physician for more (paid as well).

We dislike:

  • Minimum hours or shifts.
  • Open and uncapped call obligations.
  • Unclear location(s) or one that can change without the permission of the physician.
  • Generic language is the same for a clinician and surgeon alike.

You are allowed to demand details, but of course, the reality is that the medical profession isn’t a “punch in/punch out” schedule, most of the time. It can be challenging for employers to use specific language in a contract, but you can ask for clarity on expectations.

Benefits

As much as 15-30% of your pay can be tied up in benefits. This is not a section to gloss over for sure. Are they negotiable? Maybe or maybe not. However, you must understand them. 

Your benefits will likely include some or all of the following:

  • Health insurance with the possibility for dental and vision insurance as well
  • Life and disability insurance
  • Retirement plan(s)
  • Vacation, sick, CME time, holidays, or other PTO hours
  • Continuing Medical Education funding
  • Fees and dues reimbursed
  • Perks?

That is the “what,” but your more significant concern may be the “how” or “when”:

  • When do benefits start?
  • When can I participate in the retirement plan?
  • How is the retirement match calculated or vested?
  • How does reimbursement for fees work?

Life and disability insurance are areas you will most likely have to supplement coverage out of pocket. What is more, those types of insurance are not portable. If you leave the employer, you cannot take them with you. Should you have a health issue during your employment, you will be paying more for these in the future or have conditions that are excluded. Buy physician disability insurance and term life insurance early in your career – preferably before you finish training.

It is critical to know that you have options. We have seen people opt out of all of the benefits and take a monthly stipend instead. There may be some flexibility depending on the nature of the employer and what you want.

1099 or independent contractor? There may not be benefits, so your pay should be higher. Know the value of an employee benefits package and make sure your salary is commensurate with what is or is not offered.

These are the primary areas of a contract that you will want to review carefully: 

  • Term and Termination
  • Compensation
  • Restrictions
  • Malpractice Insurance
  • Schedule and Location
  • Benefits

The list is not close to being exhaustive as Physician Employment Contracts are complex. In addition, each situation is different. If you have entered this overwhelming process, there is guidance available from contract specialists.

SECTION 3: Balancing Risk and Negotiating Your Agreement.

Balancing Risk

Every agreement has a certain level of inherent risk, so let us just accept that upfront. The goal is to balance that (or outweigh it) with benefit. Taking a calculated risk for a certain amount of benefit is all right. There are many ways to look at risk in your Physician Employment Agreement. Below are just a few examples of common trade-offs you may make in your physician contract:

BALANCING RISK

Lower base salary
1099 income 
Forgo medical insurance
No restrictive covenant
Better retirement options
Monthly stipend
Required to buy your tail insurance
Tail insurance paid 
No restrictive covenant
Retention bonus end of year 2
Less guaranteed salary
Less guaranteed pay
Lower base salary
Less call burden
Higher base salary
More vacation time
Less Base salary
Higher production threshold
Heavier schedule/call
Less pay initial two years
No bonus pay
Faster track to partnership
Less cost to partnership
Pre-paid partnership
Lower bonus threshold
Scribe hired for you
Sign a contract 24 months out
Lower base salary
Less monthly income
Have a monthly stipend

Your choices here depend on your values and your risk tolerance, as well as your individual story. 

  • Do you not plan on staying in the area? Accept the non-compete and negotiate a benefit because of it.
  • Want to be a partner faster? Take less money – ask them to treat it as your buy-in (no taxes if not earned income!).
  • Want to have more work/life balance? See if you can opt-out of the call pool for less pay.
  • Have a spouse that can provide health insurance? See if you can opt-out of it and obtain additional monthly pay.
  • Need to buy your tail insurance? Ask them to buy an occurrence policy and lower your salary.
  • Do they want you to start two months earlier than you want? Ask for part-time during those two months for a defined hourly rate.
  • Do they only offer a 30-day no-cause termination? Ask for 90 days of retention pay.

You sign what you want to with terms you can live with based on your individual story and what the employer is willing to do.

Additional Considerations

There are a few additional areas where physician contracts may go into very practice or facility-specific terms. These may include:

  • APP supervision
  • Standard contracts (negotiable or not?)
  • Reports and data
  • Signing out 1-3 years

APP Supervision

Many contracts state you will supervise the employees of the employer. Make sure you understand your expectations on this! If you will be required to supervise Nurse Practitioners or Physician Assistants, can you opt-out? Can they assign multiple to you? Are you going to be compensated for this work? We suggest asking yourself if they are a benefit to your production or not.

For example, a surgeon may get to stay in the OR doing what she loves to do (and get paid more for) vs. going back to the clinic if their PA can cover their clinic for them. Hence, compensation may not be warranted in this area. However, in a clinic setting, the FP or IM physician that needs to be pulled into a room a few times a day for a patient or advice, then check off on the charts of the NP at the end of the day, delaying their time getting home should be compensated in some form. Always set the expectations on this critical request or requirement from the employer in the agreement.

Standard Contracts (negotiable or not?)

Many organizations have gone to a standardized agreement for all their physicians. A standard arrangement makes it easier for the employer to know what each physician’s agreement states, knowing that nobody has any different language. However, it can be challenging with the generic language in these types of standardized physician agreements for the schedule of a Hospitalist being worded the same language for a Surgeon. 

These documents still need professional review to understand what the agreement states and what your obligations are. Will they change the agreement? Are they ‘negotiable’? Maybe not. However, they may offer a side-letter with your expectations and requests if you ask. They should be able to answer all your questions on obligations and expectations in the future. Standardized Physician Employment Agreements are more common but still need to be understood and discussed with plenty of questions as the physician does due diligence on the position and opportunity. Remember, not everything needs to be a negotiation, clarification in these agreements is just as important.

Reports and Data

If your employment agreement contains any additional paid metrics outside a base salary, you should have access to reports. Production bonus with wRVUs or collections? Value-based incentive pay? Extra pay for the additional call? Physicians should be asking if they can see what the report looks like. They should be asking how all metrics are tracked and presented back to them. Monthly? Quarterly? How are they calculated at termination? 

These considerations can be vital, and transparency is essential for the employer to have with the employee. It can be challenging if a physician does not feel they are paid what they are worth yet does not know their production numbers, or worse, when a bonus is deposited into your bank account, and you do not know what it is for. Get transparency with the employer to be a key component of your due diligence on your contract!

Signing Out 1-3 Years

Graduating physicians used to look at jobs starting in December for when they finished 6-7 months away. They would interview between Thanksgiving and Christmas, obtain contracts in the first quarter, review and sign them to start in July. While that still happens, many physicians (and employers) want to establish their contracts much earlier. Employers want to plan for new offices, retirements, and physician shortages. Physicians want to plan their future and homes and have this vital thing ‘off their list’ of to-dos. 

However, signing a contract 12, 18, or even 24+ months out from your graduation date poses a risk. You will likely have many other offers, maybe more lucrative in a better location with a better schedule and more long-term earning potential. Signing out early means you must delete all those emails, stop the recruiter calls, and be happy with your commitment. 

Suggestions for those that wish to sign years early from their start date include financial considerations like monthly stipend payments from the employer, signing bonuses paid while training, compensation language that remains flexible to changing market dynamics (do not get locked in at current rates if they are going to be higher when you start working, you could be paid less than your peers when you start) and house-hunting trips or even mortgage assistance to build a home. They can both change and change significantly over the next 1-3 years as you train. Knowing how this could impact your life and future career is vital. Due diligence is critical! Other considerations should also be given to the leadership in the organization and the peer group you will be working with. 

SECTION 4: Contract Negotiations

Contract Negotiations

When it comes down to the actual face to face negotiations (or phone to phone or email to email as it may be), here are some of the steps you need to think through:

  1. Have everything reviewed. Physicians are intelligent, but they don’t know contracts. While this is a guide on a few of the topics and principles you need to consider when you look at your deal, it is by no means comprehensive to all individual situations and contracts. Remember, it is not only what the agreement states but what is missing or left out. One small word in the agreement could mean you cannot leave or are obligated for hundreds of thousands of dollars. One word can have this impact. Therefore, have everything professionally reviewed. There could be Employment Agreements and Recruitment Agreements. There could be PSA’s and PRA’s. There could be Promissory Notes or Call Stipend Agreements. Anything you sign could impact your future. See below for how to have your contract reviewed.
  1. Be comprehensive in your discussion with the employer. Having one initial conversation with the potential employer on your physician contract to get your points across is best. Try not to ‘drip’ them out over time. Have everything you wish to accomplish, clarify, and negotiate and discuss this all the same time. If you were on their end, you would want everything upfront to know where you stand and what it would take to land you as their next employee. You are asking for honesty and transparency from them so give it to them as well. Good, clear communication is critical here, so be upfront with them on what it would take to get you to sign. 
  1. Know your best alternative. The BATNA, as many call it (Best Alternative To a Negotiated Agreement), is your ‘what if this doesn’t work out?’ plan. If you have five offers, your BATNA is strong. You only want to work in this one community for this one practice; then, you may not have much negotiating capital. If you do not have to sign this particular deal because you have other options, more time to look, or something else, it can be suitable for negotiating your deal. Their ‘sign it or leave it’ allows you to leave it; the reverse is also possible (you say ‘change it’ or I walk). Know your BATNA should it not work out.
  1. Be Reasonable. Just because your friend had a $100k signing bonus does not mean you will have one too. The situations could be very different and if the opportunity you are starting with is offering $5k, asking for $100k is unreasonable. Most employers will not remove a non-compete in total, and private practices are unlikely to cover your tail insurance for any reason unilaterally. However, if your requests are more reasonable and ‘fair’ for both parties and accompanied by context from you on why this change makes sense, there is a higher probability that the request will go through. 

TIP – Do not let any employer push you to make a quick decision. If a contract is delivered with a deadline of a few short days to sign, this could be a red flag. Any reasonable employer should want you to understand the contract fully (with plenty of time to hire someone to review it with you), have time to ask questions, and be clear on all expectations. Do not let them push you into signing with a quick turnaround! 2 weeks is the minimum for a deadline.  

So HOW Do You Negotiate Your Physician Employment Contract Once You Have It Reviewed?

Simple right? Just email them, and then they make the changes, and you sign the changes.  Oh, we wish it were that easy. After the professional contract, review and collect your talking points with your wants/needs/wishes/etc. While emails are easy on this and create documentation, we feel a phone call is best. We suggest emailing the potential employer that you are excited about the opportunity and have had the agreement reviewed is essential. 

They know you have invested time and money in moving forward. Ask them for time on the phone to discuss the questions and points you now have after having it reviewed. During the call, go to overall points, making mental notes beforehand on which are more important. Anticipate objections they will give and have counterpoints. Be kind yet honest, and document as best you can. 

Know it is just like an algorithm for treating patients. They have this symptom. You have this treatment or test. If the symptom is different, you go another way. This discussion with the employer is the same thing.

They answer open-ended questions a certain way, and you change your follow-up or ask/request. Have it all planned out? It can be one of the most important discussions you may ever have on your employment. Before the phone call ends, make sure you know the next steps and timelines for how long it will take to get answers or make the changes.

TIP – Do not look at the negotiation process as a winner/loser when it comes to a point. Seek to understand their perspective, make good counterpoints and requests. They may or may not change a provision, but it does not mean you lost. Sometimes understanding their point and being clear on yours is a victory in itself.

Follow up the phone call with an email summarizing the discussion and points and any changes they would make (or they would ask the decision maker if so). This provides a level of documentation on both ends. Be sure to have them confirm they have received the email and confirm the following steps and timelines from the call. 

Hopefully, it is a smooth process from start to finish. They change what you wish them to change, and you sign and celebrate! 

TIP – If you have multiple offers, be sure to balance the timing on them. A physician can be in a tight spot if they have a deadline to sign from one group by next Friday but are waiting on a letter of intent from another place. Be sure to tell all potential employers you want to sign an agreement by a specific date and wish to have all their documentation with plenty of notice before (say 10-14 days) to decide on your future. 

SECTION 5: Look for Red Flags

Red Flags in Physician Employment Agreements

A contract with no ‘red flags’ is still not perfect; however, if you have ‘red flags,’ you need to pause and evaluate, question and understand, and have them removed as best as you can.  This doesn’t mean you should not sign the agreement but simply that you have more due diligence to do. You should be on high alert if you see or hear any of the following things at any phase of this process:

  • Your compensation arrangement is not clear or defined.
  • Malpractice details are missing, such as type, limits, or how an extending reporting endorsement is purchased (tail insurance).
  • The termination of the agreement is not transparent or unfair. No-cause terminations should be at least 60 days and be available to both parties at the same time.
  • The restrictive covenants are not transparent, defined, or fair on termination.
  • The potential employer is unwilling to answer questions or concerns you have on the agreement.
  • The agreement references benefits, malpractice, or compensation policies, and the employer does not have them or is unwilling to share until you sign.
  • The employer pushes you to sign quickly without sufficient time to have it reviewed and ask questions. 

Even if something looks and sounds like a good opportunity, it merits review every time. You should not be rushed into a decision. Take your time, do the work, learn the details, and make informed decisions. Your future depends on it.

SECTION 6: How To Take Action Today

How To Take Action and Get My Contract Reviewed

Physician contract reviews require specialized knowledge and skill. Remember that the goal is to understand the expectations of the agreement thoroughly. What are you going to do for them, and what are they going to do for you? How can it end? What is my risk? 

It is essential to have a physician contract lawyer or a professional firm review all documents. Be cautious of paying per hour or retainers, be aware of hidden fees or charges. Understand just like your time is valuable, so is theirs, so the cheapest person or company likely is not the best (nor is the most expensive always the best). 

You should ask yourself or the company a few great questions when choosing who will help you understand these essential documents. 

  • Know how many reviews they do in a year specific for physician contracts.
  • Be sure they have compensation data and understand trends. 
  • Know they are familiar with your specialty. A Cornea Surgeon’s agreement will be much different than a Hospitalist’s agreement. 
  • A law firm may not be the best way to go – they will not be specialized and may have conflicts of interest. The document was likely written by an attorney licensed in the state you are legally bound to. 
  • Be aware of companies that do not do the work themselves. Many companies simply outsource your review and use your information to market financial and insurance products to you personally.
  • Pricing should be upfront and straightforward—no hidden charges.
  • Signing up should be easy and straightforward for your busy schedule. Review times should be reasonably available, but anyone that can do the same or the next day for cheap is likely available and inexpensive for a reason (nobody else is using them!). 

TIP – Going with the lowest bidder or fastest turnaround in this process is not the way to go. Think of it as the care you as a Physician gives. The best Physicians are booking weeks or months out for appointments. Patients do not want that surgeon to go as fast as possible but provide quality work well.

We recognize that this is a complex exercise that may require assistance. That is why Contract Diagnostics exists: to help you navigate the nuances, language, clauses and negotiate the best terms to support your career and financial goals. Please let us know if we can help with anything related to your physician contract or compensation structure. Contact us to learn more.