Lessons NOT Taught in Residency: Physician Contracts and Negotiations

It’s well known that Doctors aren’t stereotypically great at business – that’s what my Mom tells me at least. But, with the changes in medicine in the last 20 years as well as how we as Doctors interact with payers such as insurance, hospitals and large medical organizations, Business has become more a centerpiece of conversation. Most Doctors, after all, didn’t become Doctors to be poor; and, this probably applies even to the ones that went in pure of heart to ‘do good.’ I have been asked by many friends about my thoughts and recommendations on Contracts and Negotiations so I’ll lay out a little of what I’ve learned by being a Locum Tenens provider, attempting a negotiation of a Direct Hospital PRN/Per Diem and successfully negotiating a contract to do Permanent Part-Time work when the Locum world was low.

Disclaimer: I am OBVIOUSLY a novice at this, have no FORMAL business experience, and in NO way would ever consider myself an expert! These are just my experiences as well as what’s come from listening to my Contract Attorney, who I will leave unnamed in case anything seems contradictory to his advice, which it really shouldn’t be. I’m happy to provider a referral to him if anyone is interested, just contact me directly at TheNomadicPediatrician@gmail.com.

Basic Contract Components

Before touching my personal opinions on Negotiations, I think it’s important to have a BASIC understanding of how contracts for Physicians are designed. Basically if it’s NOT in writing IT DOES NOT EXIST.

  1. Duties, Obligations and CALL
    1. Medical Roles and Procedures – Is the job Clinic only? Inpatient only? Does it require ER/other inpatient consultation? Is it Clinic AND Call? Are there certain procedures you’re expected to perform? That it’s OK if you don’t perform?
    2. Non-Medical Roles – Administration? Resident teaching? Speeches/lectures? Community involvement?
    3. Hours, Call Schedules and Overtime – Will you be roped in to a 1:3 call where you have to worry about phone calls in the night time at least 2 times/week? How does weekend coverage work or rotate? Is there overtime or a bonus for being on call or getting called to physically go in on call?
      1. What is considered Part-Time or Full-Time? Where are you on this?
    1. Patients: Census and Kind – What are the average number of patients you’re expected to see? What kind of patients will be seen? (Eg: At one locum job, I was told I would be hired as a Pediatric Hospitalist… But then they told me they wanted me to cover PICU Patients)
    2. Non-Compete Clause (aka Restrictive Covenant or Covenant to Not Compete) and Work Restrictions – While a non-compete typically describes the DISTANCE and the TIME from which you aren’t allowed to work in a geographically or temporally nearby job, there can be nuances.
      1. For example Let’s say a clinic stipulates that if you leave their practice, you can’t work within a 20 mile radius for the next 3 years. Well, maybe that sounds ok to you, until you find out that they’re part of a larger group and that the non-compete extends to EVERY clinic location and all of a sudden you can’t work anywhere near the city you want to live in for the 150 miles – based on a true story of someone I know.
      2. Maybe you want to moonlight or work per diem elsewhere on your time off, is this allowed? Does your contract specify if you earn money at another job that your primary employer is privy to a share of it?
      3. Is the AREA of medicine impacted? Maybe you’re Med/Peds and can’t work at an Internal Medicine Clinic nearby but does that extend to Inpatient Pediatrics at a neighboring facility?
    3. Location – Will you be at one physical space, hospital or clinic? Will you be required to float to different institutions?
    4. Employee vs. Independent Contractor – More important to delineate as a PRN/Per Diem/Part-time worker, but definitely important
  2. Compensation/Salary (How Much and How Often?)
    1. “Triangle Contract” – Is your contract directly with a hospital or a contractor group? Are there different responsibilities between the two and who is paying who? At one job I did, I worked through a locum agency as an independent contractor –> Through a contractor group –> That contracted with a hospital. I was a contractor for a contractor group for a hospital – it was a headache to understand at orientation.
    2. How will you be paid – Hourly? Salary? Based on fees billed vs. collected?
    3. Performance incentives – Revenue/profit sharing?
    4. RVUs – Relative Value Units = PRODUCTIVITY
      1. Components – 1) Physician work, 2) Practice expense, 3) Malpractice expenses
      2. Time – Can be per visit and per hour
      3. Geographic Pricing Cost Index (GPCI) – Basically how Medicare adjusts for the variation in costs, expenses and earnings in various parts of the country. (Aka things and cost of living are gonna be a lot more in New York City then middle of nowhere New Mexico)
      4. Calculation – Basically the GPCI is multiplied by the Components above to produce a value that is your RVU
    5. Raises – How often and by how much can your compensation go up? What influences this?
    6. Income Guarantees – I remember a Doctor in Medical School explain to me how RVUs had drastically altered the groups practice but they were able to negotiate for an income guarantee regardless of how the RVUs affected them so they wouldn’t go hungry at the least.
    7. Fair Market Value (FMV) – So, I have a very poor understanding of this and would recommend asking your (or my) lawyer. But I basically understand this to be a regulatory move to make sure that doctors aren’t paid TOO much or TOO little compared to the general market for their services.
      1. Specific related questions are to HOW often a fair market value review occurs and WHAT can trigger the review to occur.
  3. Bonuses, Extras and Frills
    1. Signing Bonus – Is there one? Don’t forget it’s TAXABLE
    2. Relocation/Living/Transition Bonus – Is there one? Is there any stipend provided if you’re in a really expensive area? (I remember interviewing at Children’s Hospital of Oakland for Residency and the fact that the average living situation was 5 times what I saw in Texas, so they provided a little help)
    3. Pension – Are you at a state or federally funded entity where this applies?
    4. Loan Repayments – Will they help with loan repayments directly? Is your institution a NON-PROFIT and does that help with any loan repayment programs?
    1. Professional Dues and Fees, Licensing, Subscriptions, Seminars and Certifications – Will they pay for your renewal of licensing or certifications? For example, one facility agreed to cover the fees for my Medical License renewal while another didn’t want to cover my CPR recertifications
    2. CME – From credits to conferences, is there any stipend given?
    3. Travel Expenses/Reimbursement – Even as a permanent provider this is something you can discuss; my contract for my permanent specifies that they’ll cover hotels, flights and rentals for me. Some cover mileage reimbursement as well.
  4. Benefits
    1. Retirement – Is there one? If there is, will they match it? Is it a 401(b) or a 403(b)? Are there stock options?
    2. Health/Dental/Vision Insurance – What’s included? Is it an HMO or a PPO? How much is covered? Spouse, dependents, family? (This is something you should understand or learn to understand as a Physician to do your job in the first place honestly)
    3. Disability Insurance – Is there a GROUP Plan? Should you purchase an Individual Plan? Is there portability?
    4. Malpractice (aka Professional Liability) Insurance – Is this covered? What’s the maximum per claim vs. ocurrence vs. aggregate? IS THERE TAIL COVERAGE? Does it extend to you if you are doing work NOT at your primary location?
    5. Time Off – Vacation, sick leave, maternity/paternity, accrual of time off, jury/military duty?
  5. Credentials, Privileges and Evaluation
    1. Privileges – Will someone help you to obtain them for the hospital? Sometimes a corporation will own an individual hospital and the paperwork and specifics of navigating this correctly can be not only a hassle, but privy to errors if not careful enough.
    2. Credentials – What’s needed? Where/when do you need them? How soon do you have to obtain them?
    3. Evaluation – How are you going to be evaluated on your performance? This largely ties into salary; but, are you paid based on patient volume? Patient outcomes or quality of care provided? Patient SATISFACTION? RVUs (Relative Value Units described above)
  6. Contract Terms, Mediation and Termination/Severability
    1. Length – One reason I chose Locums was to NOT get roped into a 3 year contract; luckily, I negotiated for a 1 year contract with my permanent facility
    2. Autorenewal – Is there one? If it’s not noted, there isn’t, but be sure.
    3. Termination and Notification Time Periods
      1. WITHOUT CAUSE (Preferable) – Within that 1 year contract I also negotiated for a 90-day NO CAUSE termination, if things don’t work out on either end for me or my employer, we can peacefully walk away with a 90 day notice; some aren’t so lenient, some aren’t so easy.
      2. WITH CAUSE – Are the causes clearly defined?
      3. Compensation tied to Termination – If you terminate will any bonuses/productivity be required back to the employer? Will they still be paid to you at termination? Can premiums you owe be deducted from money owed?
    4. Disputes/Mediation – Is there an Alternative Dispute Resolution (ADR) clause? Basically, if there’s a problem, can you resolve it OUT of court? This saves on costs, may be more expeditious, have flexibility and confidentiality
      1. What is the WORST case scenario? How will things play out? What is the governing law in that location?
    5. Is there an Injunction/Injunction Relief – Basically a mechanism by which an employer can go to court to stop YOU from doing something while it’s determined whether or not YOU actually violated a rule. It does NOT necessarily mean you automatically lose or are subject to a lawsuit, but the employer has the right to put a preliminary pause on what YOU are doing while the court determines whether or not it’s valid (I think)

Basic Negotiation

So, negotiation is a little difficult for everyone the first time, in my opinion. You want to be confident and hold your ground, but don’t want to be overbearing or unrealistic. I was able to negotiate a large 5 figure raise but it only worked in that specific situation for the specific job I was applying for; however, there are things that ARE and are NOT negotiable to be aware of.

  • What’s the least you’re willing to accept?
  • The Contract is about MORE THAN MONEY! This is very important to understand and think about.
  • Before you negotiate ask yourself:
    • What’s important to you? Salary, life-work balance, benefits? Demographic of patients or time you can spend with them?
    • Are you looking for career advancement? To be a partner someday? Time off?
  • What IS generally negotiable – Compensation, term length, sign-on bonuses, relocation bonuses, non-compete clauses, termination rules, schedule
  • What is NOT generally negotiable – Large company policies, generally contracts with non-profit/academic institutions
  • NOT all contracts are the same – Obligations may vary depending on who controls who in the organization
  • How negotiable is a contract? Depends on personality of the employer, NOT necessarily the size of the group. The most negotiable contract I’ve had is with a small regional hospital; another larger one I thought would be fairly flexible wasn’t willing to even have a conversation; yet, another is a combination somewhere between of both.
  • Be Realistic – Think about WHAT you have to offer and WHY you’re asking for what you’re asking for
    • If the average salary for your profession is $150,000, don’t go walking in asking for $600,000 – it’s probably not going to fly
    • Just because a hospital is small does NOT mean it doesn’t have money – the vice versa is also true – both factor into the success of your negotiations
    • Do market research in: 1) The compensation for others in your field, 2) The compensation for others in your field in the specific job roles required of you, 3) The compensation for the area
    • If you’re going to be the only provider in a small town and working on call 24 hours a day, you’re likely able to negotiate for a different situation than a provider working with a large group in a preferable larger town to live in
  • Focus on larger problems or interests vs. blame on individual people
  • Ask questions about what may or may not lead you to a mutually agreed upon deal
  • Remember that this is a back and forth! It is a conversation! Not just a one-and-done kind of black and white argument. Be polite but hold your ground and be reasonable.

Remember that a contract for work is much like a relationship, it’s best to put all your cards on the table on both ends and make sure there is clarity and transparency before you sign. Read every word carefully and every statement in context. CONSULT WITH A CONTRACT ATTORNEY! Do NOT rely on your own skills; they may be great enough, but it’s worth the few hundred dollars to be SURE.

The White Coat Investor: BATNA
Comphealth Contract Negotiation
Do I Need an ADR?
Fair Market Value and Physician Compensation

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