Can an Employer Make a Physician Pay Back a Signing Bonus? | Physician Contract

Hi, I’m attorney Renee Osipov with Chelle Law here in Scottsdale, Arizona, and we draft physician employment agreements. One question we frequently get from employers is can they make a physician pay back their signing bonus? And the short answer is yes. Signing bonuses are a great way to entice physicians to apply or become employed at your practice. Especially if a physician is straight out of residency or they’re going to be moving to a new community. Typically, they would receive that bonus upon signing the agreement or their first paycheck. 

Types of Payback Provision for Signing Bonus

When talking with employers, including a payback provision for those signing bonuses is essential. And it’s typically done one of three ways: The first way we would include it is by simply stating that if the physician were to terminate the agreement within 12 to 24 months. They would have to pay back the signing bonus. The second way to include it is to say that if they terminate the contract within 12 to 24 months, they would have to repay the signing bonus. However,  at a prorated share for the entire time of their employment. And then lastly, it’s a little bit rare that the physician would have to pay back the signing bonus if they didn’t give proper notice upon their termination. 

Most contracts insist that a physician give 60 to 90 days’ notice upon termination of the agreement. If they did not stay for those 60 to 90 days or give proper notice, they would have to pay back their signing bonus. Our contact information is also on there, and we’d be happy to set up a consultation with you. We can discuss signing bonuses, payback provisions, and how best to address them in your employment agreement. Thank you.

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How to Negotiate a Physician Salary | Negotiation for Physicians

How can a physician negotiate a better salary? As an initial matter, I don’t personally believe that the salary should be the driving factor in a decision for a physician. Suppose there’s an enormous gap, a hundred thousand dollars, maybe 50. But if it’s $10,000 just going with the job that offers the most when maybe the benefits are different. The work environment is different. The ability to learn, have a good mentor, a good teacher. I think all of those things are probably more important than just the absolute base salary amount, but it certainly is important. And so when someone asks me, all right, what do I do?

Physician Compensation Negotiations to Take

How do I get a better salary? There are a couple of ways of doing it. One, you need to know your worth. How does a physician find out what’s a reasonable salary? Well, there’s data. The MGMA medical group management association is the industry standard regarding compensation numbers. It is not the be-all and end-all of whether something is fair or not. They break it down into regions: West, East, Midwest, Southwest, and those quadrants have different salary numbers. But the base salary could be great or not be great. That depends on whether there’s productivity compensation in the agreement or the potential for partnership. So, there are many scenarios where a physician is out of training and given a two-year, three-year agreement.

Physician Contract Salaries

That’s probably below what’s a reasonable or average amount for someone just coming out of training. With the carrot on the stick, if you take below market for these two or three years, you’ll get away above-market. Once you become a partner, be careful of the situation. Do you need to find out how many people are partners? How many people have they not offered partnership to? And then what will you make once you’ve become a partner? That’s certainly important. Now, as far as the MGMA numbers go, you can Google around and find them. I would say data from maybe a year or two old. I found that people are relying on 2020 numbers. They’re in trouble due to COVID. 

Some of the RVU compensation factor numbers are way out of whack. Some of the comps are just way out of whack. I would not use 2020 data. 2019 is probably the safest and most reliable number we have right now. 2021 wasn’t out yet while I was making this video. So, Google around. You can try and find some numbers. I’d say the best way to do this is to go out there and find multiple job offers and see what your initial offer is. And then also, anyone in training has other people in their specialty that are also looking for jobs. Talk to your colleagues and the people you’re training with. What offers have you received? Where have you been offered this? One difficult thing is that some people automatically think that they’re in a high-cost city and that they’ll make more.

Salary Income Rate in the City

And that’s not the case. It’s almost the opposite. Suppose you’re looking for a job in a city that’s a desirable location. The salaries are usually, or at least sometimes the salaries will be depressed. I live in Scottsdale, Arizona, which is a great place to live. And when I speak to physicians who are moving into the area. They get surprised sometimes because the salaries may not be adjusted to the cost of living in the area, California as well. Suppose you’re in San Diego or LA or even in San Francisco. In that case, the cost of living and housing is very high, but the salaries are not commensurate. You need to be aware that just because you’re in a bigger city with a higher cost of living doesn’t mean you’ll be making more. It’s the opposite.

How Doctors Negotiate

If you’re in a rural location that’s hard to recruit, you will almost always make more money in those scenarios. So, if money is the bottom line you’re looking for. Then it would help if you looked in the smaller cities that are difficult to recruit. You will make more money on average if you’re going to a small rural community. That’s a fact. Once you have a number in mind, what do you do with the employer? You ask them for more. If the offer is 300 and you want 325, don’t ask for 325. You ask for more than that. So if they offer 300 and you want 325, then ask for 350, easy arithmetic, try to meet in the middle. 

Now there is a point where you will look either greedy or potentially just dumb if you’re asking if you received an offer of 300. You ask for 450. They’re going to say, well, that’s ridiculous for, it may even yank the offer.

Negotiation Based on Leverage

You need to know your value, and then specialty is also a big part of what kind of leverage you have. Leverage as the basis in any contract negotiation. Do you have it, or do you not? You have more leverage if you’re in a specialty that’s hard to recruit or in high demand. If you’re in a specialty that is plentiful or saturated in the market that you’re looking in, your leverage is less. So, you need to take that into account as well. Suppose you’re switching jobs in the community and bringing your patients with you. Then you’re worth more than someone coming into the community, like peds or primary care, that has to build up a patient base that takes time. 

Actions to Take With Unworthy Offers

Those are tips on getting a better salary and where to start. Contacting an attorney and getting a feel for the area might be helpful.

It’s fairly specialized in people that focus on physician contracts. You may not find somebody within the area you’re looking at, so maybe do a broader search. But anyway, the last point is that some employers will not negotiate. They’ll say it’s a take it or leave it to offer. You’ll then have to be willing to walk if you’re unhappy with your salary, but there are just simply people out there that say, no, we’re not negotiating. We’re offering what we offer, and I wouldn’t be offended by that. That’s just kind of the tech that they’re taking as far as employing somebody. 

So, don’t be surprised if you have an employer that says no, but if you’re unhappy with an offer, you need to be willing to walk as well. Accepting a deal that you think is well below your value is never a good feeling. Don’t just accept that because you need a job. Find the right job.

Will I Be Paid My Bonus if I Terminate the Physician Contract Early? | Termination of Contracts

The first question is, what type of bonus is the physician thinking about? Like bonuses when you sign the contract, productivity bonuses are involved once the contract is ongoing. Let’s take the signing bonus first. Almost any physician will receive a signing bonus and relocation assistance when signing an employment agreement. Let’s say there’s a $20,000 signing bonus, and then the employer will provide up to $10,000 for relocation. Normally, there would be language that states if the physician leaves before the initial term ends.

The initial term is just how long the contract lasts. Let’s say it’s a two-year term. Normally, there would be language that states that if they leave early, they must pay back a prorated portion of that amount. Monthly is probably the most standard way of doing it. Let’s say the physician lasted a year, and then they have one year left on that two-year term, then they’d owe back half of whatever the bonus was. So, they’d have to pay back 15,000 in total. 5,000 for the relocation assistance, and 10,000 for the $20,000 signing bonus. It can be quarterly. Some places do it yearly. From the doctor’s perspective, the shorter forgiveness period and the shorter interval are more advantageous. If you stay for 11 months, then leave, and it was yearly forgiveness, well, you’re out of luck.

What Are the Productivity Bonuses of Physicians?

You just missed out on that whole year of forgiveness. Whereas if it’s monthly, no matter where you leave, it’s about as up-to-date as it can be. So, that’s one way of not getting your bonus. If you leave early, you have to pay a portion of that back. Now, the other bonuses are productivity bonuses that a physician would receive. There are different types of productivity bonuses, and there are different types of compensation models. The two most common productivity models are net-collections for private practice and RVU-based compensation, used mainly by hospital networks. Let’s say a physician had a contract for RVUs, and it said, any RVU generated over 6,000 in a year, you’ll make $45 per RVU, but it’s a yearly bonus. 

There’ll be language that states the physician has to be employed when the bonus is paid. So, there’s a possibility that there might be a window where the physician earned the bonus towards the end of the year they give notice. Then the contract is terminated before they receive the bonus and out of luck. The physician wants to ensure there’s language that essentially states the bonuses. If they earn a bonus, they will receive the bonus no matter whether the contract is terminated early or in some way. It would help if you really thought about that. If it’s net-collections, usually, that would be a hybrid where there would be a base salary. Then the physician would get a percentage of what the practice collects. Let’s say a physician has a $240,000 base.

The Benefit of Getting a Paid Bonus Earlier

One normal way of doing it would be the practice states, alright, after you’ve collected $20,000 monthly, which covers your base salary. You would get a percentage of net-collections after that. In that scenario, a normal percentage will be somewhere between 15 to 25%. And then it would state to pay within this many days of the end of the month, or perhaps it’s quarterly. It’s rare for it to be annual. But if it is, you want to make certain. 

Once again, just like with the other bonuses, the shorter period where you get paid protects you if you leave early. If you have a yearly bonus, as I said, and then you leave in month 10, even if you earn that bonus, if there’s no language there, you’re not going to get it. So, you want to tighten that interval. Preferably, it would be a monthly payout. You’d set the interval or whatever the level is where you’ll get paid so that you receive a monthly payment.

And that way, you insulate yourself from amassing a bonus but not getting it. So, those are the two main productivity ways. The RVUS, and net collection. And in the agreement, it’s going to have a termination section, and this will state what happens in the event either party terminates the agreement. 

What Happens to Payment Upon Termination?

And normally, there’ll be a section at the end of the termination section that states what happens to payment upon termination. You need to pay attention to that language. It will most of the time dictate if/when and how the physician will receive those bonuses. As I stated before, their timing is whether they get it at all, even if it’s earned but not paid out before they leave.

It would help if you gave specific attention to that section. I find some places try to kind of screw the doctor out of the money. This is because the doctor doesn’t understand the timing of the payment or how to earn the bonus. So, it’s something to think about. I mean, it feels bad to work hard, earn a bonus, and then, due to timing, not actually receive it.