Contract negotiation may not be easy. Hopefully, this information will help you during the contract negotiation process. What I plan to cover will be a little about basic negotiation information and then information pertinent to the items of a doctor contract that may be negotiable such as the compensation, responsibilities and benefits.
Contract negotiation is something to prepare for. It is something to practice. Don’t feel alone if you have anxiety about contract negotiation, here is one doctor’s comment about negotiation, “The most intimidating thing I did during my residency and fellowship training had nothing to do with patient care. It was negotiating my first employment contract” wrote a physician
“Good agreements establish good relationships.” According to Mr. Nicastro, a healthcare attorney. It also “provides a blueprint for a rational separation”. The point of reviewing a contract is to make sure it contains everything you were promised verbally. Make sure it satisfies all your expectations and that it prevents any surprises from happening down the line so you can be sure to know what’s expected of you.
You need to plan your contract negotiation. What are your negotiations goals? What must you have and what are you willing to concede? “If you don’t know where you are going, you will probably end up somewhere else.” According to Lawrence Peter, which is why preparation is so important.
Start being contract negotiation-conscious. Practice it when the opportunity presents itself in life. Negotiation consciousness describes a willingness to be assertive and challenge items presented to you.
Per the President of the CA PMR Society who is a physiatrist and a lawyer, your first contract is your most important because it sets the base of your compensation so the higher it is, the higher hopefully it will be at the end of your career. By the time you’re negotiating your second contract, you probably have a wife/husband, kids, a mortgage, a car, etc. and can’t negotiate as well. He also said to know your goals whether it’s to serve the patient community, make money, etc. and that you can’t get it all
Most physicians require at least 4 practice contract negotiation simulations to get up to speed.
Things to Remember When Preparing for Your Contract Negotiation
Look at the contract discussion from the employer’s perspective. Ask yourself “How can I help this employer feel satisfied with the contract?” Per a SC physiatrist, understand that you may be negotiating with an administrator, not a doctor, someone who is business-minded and used to negotiating
Compensation can be a straight salary, salary plus incentive or RVU’s. If the compensation is based on salary minus expenses, find out what the expenses are? Do they include new ventures of certain physicians in the practice or an above average rent price? The incentive is usually based on productivity.
In regard to RVU’s, the Medical Group Management Association has RVU benchmarks. The RVU is based on practice ownership, group type, geographic region, demographics, number of partners and call responsibilities. If someone had the job before you, you can ask the employer the RVU. You should know how much the payors pay for each time you see a patient and any service is provided.
The sad fact is that any attempt to calculate your income will never give you the exact amount. Each employer uses a unique and quite complicated mix of base salary, productivity, patient satisfaction and quality benchmarks.
Is the salary you’re being offered competitive? Check it against the AAPMR Salary Survey figures, ask your peers and compare it to the Medical Group Management Association figures.
Is the compensation based on your collections or are the doctor’s collections divided evenly, even if you see more patients? See how your income may be affected when you take Paid Time Off. The base amount may be hard to change in ensuing contracts.
You may want to make sure the base salary is guaranteed for as long as possible without adjustment. Contracts that are heavily production- or collections-based are not always a good idea for new physicians because it can take time to build up a practice. The salary could be generous but then after the first-year guarantee, the productivity basis might not be.
You should get specifics on all the activities and metrics regarding compensation e.g. productivity, quality, cost. Obtain an understanding of how your compensation data will be collected and submitted.
Higher pay may mean more work such as extra calls, rounding in the hospital or driving to remote locations. Understand that driving time will take away from your productivity. If the contract doesn’t include these items, you may use these items to get more pay. Read the fine print of the contract regarding your responsibilities before the contract negotiation.
Regarding a sign-on bonus, ask for it. But be aware that you might have to repay if you leave early. The same applies to moving expenses and student loans.
In terms of benefits, the basic benefits are: CME ($1,500 – $2,500/year), health insurance, malpractice, 3 weeks vacation, license fees and medical staff dues. Additional benefits can be life insurance, professional dues, relocation (typical $5,000). Comprehensive benefits include car allowance, sick leave, journal subscriptions, dental insurance, profit sharing, parking, flextime and loans. More employers are combining vacation, CME time and sick leave into a “paid time off (PTO)” concept. Find out when the benefits start.
When considering the Responsibilities section of the doctor contract, do not agree to language that says call requires you to “reside locally as per the current and past policies of the practice”. This language is too vague. Do not agree to language that says the “New physician will share work and call duties with the employees of the company.” Again, this language is too vague and would be better revised to say “the physician will be on call one weekend per month.” Do not agree to language that says “full-time work” or “ the employer will decide the call arrangements.”
The contract should spell out: patient appointment hours, hospital rounds, office duties, review of blood work and lab results, telephone calls, medical record documentation, availability of nurses and support staff, coverage, CME requirements, the number of hours you have to work, the number of patients you have to see, weekend and holiday work.
Find out how the patients will be assigned? You don’t want to do all the work while the partners reap the financial benefits. Check the work responsibilities and hours. Who will your patients be? How will patients be assigned? They shouldn’t be assigned based on payor type with you handling all the uninsured or underinsured patients particularly if you will be paid based on collections.
What staff resources will be provided? Will you have sufficient resources to assure your success of the responsibilities and hence the compensation?
Don’t focus too heavily on the base and gloss over the details of how the incentive works. Is it attainable? It may be set too high. Watch out for contract provisions that include the ability of the compensation committee to cancel or prospectively revise the incentive plan or the need for the office to “break even” before the plan takes effect. Find out the precise calculation of the physician incentive and the definition of key terms like positive net income, negative variance, percentage and gross revenue.
It’s better to have the bonus based on gross income rather than on net income, as net income is more subjective and easier for business owners to manipulate. If they say that everyone gets an incentive, then great, suggest that they just make it a guaranteed incentive in the contract.
Always go into a contract negotiation assuming you won’t get your productivity bonus. Make sure your base salary by itself is adequate for your needs. You don’t want to hear these words at the end of the first contract year, “Sorry you must have misunderstood how the productivity bonus worked.”
You may not worry about the restrictive covenant/non-compete clause because at the start you have no intention of competing with your employer but it ultimately may be important. The general consensus is that these clauses are unenforceable, but you will have legal fees to fight them. NY and NJ have strict limits on their use. Pay attention to the length of the term. The geographic limitation depends on the area. The area will be larger in rural areas. Suburban areas may have fairly large non-compete areas as the territory considered may be a several mile radii from each of the hospitals you work. If a non-compete clause is more than 10 miles that might be an issue.
There may be contract provisions for an exception to the non-compete provision such as for teaching or working for an insurance company.
You may be able to negotiate the radius or reduce its length of time. Even if the employer drops the restrictive covenant, he/she may make it hard for you to leave by forcing you to pay your own tail or return your signing bonus or moving stipend. The bottom line is to consider whether you can live with the restrictions.
It’s easy to get swept up in the excitement of a lucrative contract with a great bunch of people and not consider what happens when the contract is terminated. Sometimes things don’t work out and knowing what happens gives you options. If something does happen, always try to leave on the best possible terms.
Employers can terminate you for any cause. Pay attention to the definitions section. Perhaps the contract will say that you “may be terminated for professional misconduct” See how professional misconduct is defined. What events trigger a termination? Is it 90-day notice by the employer or by either party? Can you be terminated for any event the employer deems to be detrimental such as suspension of privileges, including license suspension or “material” breach of contract? The contract may say you could be fired for any behavior “contrary to the best interest” of the organization. Be aware whether the termination of an employment agreement also terminates your privileges at the hospital. Per a TX physiatrist who took a job with a spine surgeon out of residency and thought it was a good offer, only to find out if he left early that he would owe the doctor $50,000
Additional income may come from the following items: honoraria for lecturing, royalties for writing articles, consulting work, testifying as an expert witness, inventions, patents, copyrightable works, discoveries or other intellectual property.
Regarding the code of conduct and conflict of interest contract provisions, ensure that the definitions and standards in these policies aren’t so loose that they could be abused by a supervisor who really wants to get rid of you because they don’t like you. Don’t inadvertently breach your contract by engaging in potentially competitive activities.
Definitions of malpractice terms for Contract Negotiation
Occurrence policy– This is the best because it covers you regardless of when the patient sues, during or after your term of employment.
Claims made policy– With this malpractice coverage if an incident occurs while you were working at the employer, but the suit is filed after you leave, it won’t be covered by the employer’s policy. It is the most typical type of insurance.
Tail coverage– This can be very expensive to buy individually, upwards of $10,000 – $55,000. Negotiate it such that your employer pays it if they fire you, but you pay for it if you quit. Or you could compromise and offer to pay two-thirds of the tail in the first year with your employer paying two-thirds in the second year and the full premium in the third year and beyond. A doctor told me, the most economical way rather than purchasing a tail is to make your coverage with the new job retroactive to the last date of your current work.
Need to Know Aspects of Term of the Contract for Negotiation
Regarding the term of the contract, find out if it is renewable and by whom is it renewable? What are the terms of renewing? Is it self-renewing? Is it renewal by mutual agreement or by the employer based on their choice? Is there automatic renewal without your consent? Will the contract expire in the event of a buyout of the practice?
Understanding Partnership in Your Contract Provisions
Regarding partnership, some practices can deliberately make it hard to reach partner level. Many contracts don’t spell out partnership terms. A partnership usually means buying into the practice. The amount you pay should cover fixed assets, such as real estate and equipment, but not soft assets, such as goodwill, like the estimated value of the patient panel. The amount you pay should be based on outside financial analysis.
In conclusion, Prepare, prepare, prepare for contract negotiation. Practice negotiation skills. Success is an attitude so feel confident and positive while negotiating. There are many items of the contract that can be negotiated such as the compensation, incentive, benefits, responsibilities. Other items may be standard contract language not able to be negotiated such as the restrictive covenant, termination, additional income terms and the code of conduct. Be aware of the language for the malpractice, term of the contract and partnership. Best wishes to a successful contract negotiation!