What is tail coverage medical malpractice insurance? There are two types of main policies used in healthcare. A claims-made policy and an occurrence-based policy. If you have an occurrence-based policy, tail insurance is not necessary. It simply means a policy must be in effect when the malpractice event occurs. If you have a claims-made policy, it means a policy has to be in effect when the claim is actually made. It’s possible that you would be with an employer, the contract is terminated for whatever reason, you leave, and then there’s going to be a statute of limitations, which just simply means how long someone has to sue you. For most malpractice claims, it’s two years. And so, you would get a tail policy that covers the gap between when you leave the employer, and then the last day somebody can sue you. That’s what tail insurance is.
Now, why would someone get a tail insurance policy versus an occurrence-based policy? The answer to that is price. An occurrence-based policy is about one-third more expensive than a claims-made policy. Most of the time if you are employed by a hospital, hospital network, a physician-owned group, small physician-owned practice, or whatever type of practice you’re in, it’s not going to be up to you what type of policy you have. The employer is usually the one that, one, determines what type of policy they’re going to offer, and then two, they’re going to pay for your annual premium if you’re not an independent contractor. In that scenario, most of the time, you would have to pay for it. So, as an employee, you’re not going to be able to dictate what type of policy is offered.
And so, who pays for tail insurance is the key question when you’re looking into an employment contract for a healthcare provider. So, first, identify what type of policy it is. Is it occurrence-based or claims made? If it’s a claims-made policy, then you need to investigate the language, and usually, it’s going to be titled Professional Liability Insurance, Medical Malpractice Insurance, or something like that. And then, it is going to state in there who is responsible to pay for tail insurance once the contract terminates. Tail insurance is about twice what your annual premium is. Depending upon what healthcare specialty, it could be as low as $500 a year all the way up to $30,000 a year if you’re an OB-GYN. So, who pays for tail insurance is very important depending upon what specialty you’re in because it could be an extraordinary amount of money. Now, it is something that is negotiable. If your employer says, we’re going to put the burden upon you to pay for tail, well, it’s your opportunity to negotiate.
And some successful strategies would be if they’re not willing to pay for all of it, then base it upon how many years you’ve been with the employer. For instance, maybe every year that you’re there, your tail cost is forgiven by 25%. So, if you stay for four years and then leave, then the employer will pay for your tail. That’s one way that I find that some employers are willing to budge because if you stay for four years, then you’re obviously profitable and the amount of money you’ve made for the practice over time is so much larger than just paying at a one-time tail cost that many of them will kind of acquiesce to agreeing to pay for tail insurance.
If the employer doesn’t agree to pay for tail and you are completely responsible to pay the entire amount, there are other ways of mitigating whether you must pay for it or not. One, if your new employer pays your old tail, that’s called nose insurance. And so, getting them to pay your old tail can be thought of as like a quasi-signing bonus. That’s one way out of it. The second way usually only works for a smaller physician-owned practice. If you’re with a smaller practice and you stay with the same insurance company at your new practice, most of the time, they’ll just roll over your policy into a new one, and you won’t have to pay tail insurance at all.
Now, there’s no way to know when you start with an employer that your next job is going to have the same malpractice insurer. And it really varies from state to state. I’m in Arizona, and there’s one company that provides a large majority of the medical malpractice insurance for physicians here called MICA. Whereas in other states, there are dozens of alternatives, and there’s just absolutely no way to know if you’re going to have the opportunity to move with the same company. So, that’s what tail insurance is for medical malpractice.
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What is CME? CME stands for continuing medical education. And every healthcare provider is licensed through a licensing board, no matter what state you’re in. And let’s just take a medical board, for instance. Each medical board will have its own requirements as far as how much CME a physician will have to complete on an annual basis. And then some states will do it annually. So, the physician must complete 30 hours of continuing medical education in one year. And then others will have maybe a rolling average. For instance, I’m licensed in Indiana in addition to Arizona, where I live. And Indiana has a three-year rolling average that I have to get done, whereas, in Arizona, it’s just set at 15 hours per year.
First, identify how much is required by the licensing board. Now, on the employment side of things, if you are employed by a hospital, medical group, small physician-owned practice, or whatever it is, the practice should pay an amount for your continuing medical education every year in addition to providing some time off. As far as the amount provided, 3,500 is about the average that an employer would provide for continuing medical education for a physician on an annual basis.
Some places are a little bit more, and some places are a little bit less. I’d find that the larger healthcare networks and hospitals are probably on the higher side. A physician-owned group might be on the lower side, but you shouldn’t accept less than 3,500. As far as how much time off is provided, this would depend on the time-off structure of the employer but receiving anywhere between three to five additional days of time off would not be uncommon for continuing medical education.
So, when you think about time off, there are usually four factors. You have a vacation, holidays, sick days, and then CME. Some employers will just group all of that into one pot of time off. And so, no matter what you do, if you’re not there, you’re taking time off of that pot. Whereas others will break it down and say 15 days of vacation, five days of sick days, six or seven federal holidays, and then three to five days off for CME. So, that’s what continuing medical education is. Look at your board to see how many you need per year, and then look to the employer to see how much they’re going to pay for you to complete CME, and then also look to see how much time off you’re going to get to complete those.
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Who pays for tail coverage? If you’re reading this blog, you’re very likely a healthcare provider, and perhaps you have a contract that involves who must pay for tail insurance. First, if you’re a healthcare provider, you’re going to have an employment agreement or even perhaps an independent contractor agreement. And in that agreement, it’s going to state who pays for the annual premium for your coverage, which should be the employer if you have an employment agreement. And then, under an independent contractor agreement, most of the time, the provider is going to be responsible for that annual premium. However, sometimes if you’re working as an independent contractor for an organization, they still are going to pay your annual premium. That’s the first thing.
Second, what type of coverage do you have? In this scenario, it’s going to be either occurrence-based coverage or claims-made coverage. In the claims-made policy, you do need tail insurance, and the contract is going to state who is responsible to pay for the tail insurance once the contract ends, or at least it should. So, that is the very simple answer. Who has to pay for tail insurance is dictated by the language in the contract. Now, if you’re working for a large healthcare network or hospital and they’re self-insured, then you’re not usually going to have to worry about tail at all. If you have an occurrence-based policy, tail insurance is not necessary. The only time the provider has to pay tail is if they work with a smaller provider-owned group.
If it’s like a two-provider practice, you’ll almost always have to pay for your own tail. What’s important is the details, as always. First, do you have to purchase tail insurance from the company that is providing the underlying coverage? You can shop for tail insurance, and you could theoretically find a better price somewhere else. So, you want to have other options available. Now, how much does tail cost? A good rule of thumb is tail is about twice what your annual premium is. The underlying annual premium varies, I guess, widely from specialty to specialty. Maybe a nurse practitioner would be $2,000 a year, whereas you could have an OB-GYN who’s paying 80. It really can fluctuate greatly between specialties.
You need to find out what your annual premium is, and then that way, you’ll be able to get a quote for what the tail cost would be if you are responsible. It is not a yearly payment; you just have to pay it before the contract ends. And then the contract may even state if you have not secured tail coverage before your last day of employment, the employer can withhold money from your last paycheck to cover the tail cost, which most people would not prefer. So, make certain that the language is favorable to you and that it does say, if you have not secured the coverage by your last day of employment, they still can’t withhold anything from your wage or potential bonus or something like that, so you aren’t getting screwed if you are responsible for paying for tail, especially in that smaller practice scenario.
There are a couple of other things to think about. One, there is what’s called nose coverage. And that’s when your new employer pays your old tail. You can think of that as a quasi-signing bonus. And many times, if you stay with the same insurer, let’s just say you’re with one company. Then you leave a practice and move to another practice that utilizes the same insurance company. Most of those will just roll over your old policy into a new one, and you won’t have to pay for tail at all. So, that’s who has to pay for tail insurance. It’s simply dictated by what the language states in the employment agreement or independent contractor agreement. That’s it.
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How long does malpractice tail insurance last? So, if you’re a healthcare provider and you need malpractice insurance which you’re going to need, there are three types of coverage.
Types of Insurance Coverage
One, if you work for a large hospital or healthcare network, many times they’re self-insured, so you’ll fall under their self-insurance policy, and it’s very unlikely tail insurance would need to be purchased by the provider. The other two will apply if you work for a small physician-owned group or even a solo practice. It’s going to be either occurrence-based coverage or claims made. With occurrence-based coverage, you do not need tail insurance. It simply means a policy has to be in effect when the event occurs.
Occurrence-Basedand Claims-Made Policy
The difference between occurrence and claims made is price. Occurrence-based coverage is usually about a third more expensive than claims made. Now, if you have a claims-made policy, then someone is going to need to purchase tail insurance, which will be listed, meaning whose responsibility it is to purchase tail insurance will be in the employment agreement. It will state explicitly. Upon the termination of the agreement, either the employer will cover the cost of tail, or the provider will be responsible for covering the cost of tail. Tail insurance is about twice what your annual premium is. Let’s say you’re a primary care physician. $6,000 is an average amount for your annual premium. If you had to pay for tail, it would be about twice that. So, $12,000.
Tail Malpractice Insurance
Now, how long does tail insurance last? It depends upon the type of policy that you purchase. In most states, the statute of limitations on a medical malpractice claim is two years. Meaning the person who had the event happen to them has two years from where they know or should have known of the malpractice event. And if they miss that window, they cannot sue the provider. There are some exceptions for minors, and they can sue until they reach the age of maturity, but I’m not going to get into that right now. You’ll have the option to determine how long you want the tail to last. For most policies, it would be a minimum of at least the statute of limitations period in the state. So, two years. However, it makes sense to extend it because what could happen is you’re responsible for tail, you buy that two-year policy, and maybe, as I said before, if it was a minor or something happened, they could sue you all the way up until they’re 18.
And then you get a claim 10 years down the line, there’s no coverage for it, and you are out of luck. So, I suggest buying the largest length of time, and you can buy an indefinite tail policy. Just to make sure you have peace of mind, if something did happen well down the road, you’d still be covered. Now, it will be more expensive, and as I said before, on average, it’s around twice what your annual premium is. The longer you extend the period, the more expensive the tail will be. Let’s say you had an indefinite tail period. Well, what will go into that cost would be your claims history and then, obviously, how much it costs to insure you on an annual basis.
It’s a one-time cost, so you don’t have to pay for it every year, meaning if you got an indefinite tail policy, you don’t have to pay every single year for tail. You only pay one amount upfront, and then you’re covered for as long as the tail policy lasts. It may be a little bit more expensive to get coverage that lasts longer, but I can promise you it is well worth not having to worry about any claims in the future. So, that’s a little primer on how long tail insurance lasts.
How Long Does Tail Coverage Last? | Tail Insurance
How long does tail insurance last? When reviewing a contract with a physician, the medical malpractice policy and potential payment of tail insurance, if necessary, is always a big discussion point. Let’s briefly go through what scenario a physician would be responsible for tail insurance, the cost of it, and then how long it lasts. There are two main types of medical malpractice insurance. You have the occurrence-based and claims-made. In a claims-made policy, a policy must be in effect when the claim is actually made. A physician can leave an employer and then be sued two years later. And since they are no longer employed and that policy has ended. They need a gap policy covering the last day they saw a patient with the employer, and then the last day they can be sued.
In most states, the statute of limitation is two years. However, there are some exceptions that we’ll get into as well. If it’s a claims-made policy, someone must pay for tail insurance. And in an occurrence-based policy, no tail coverage is necessary. It just means a policy must be in effect when the malpractice occurs. The main difference between claims-made and occurrence is that occurrence is usually about a third more expensive. The physician or the employer must decide whether to pay a third more per year for malpractice or pay a little bit less but then have a big chunk on end for tail insurance. Let’s say a scenario where the physician is responsible for paying tail insurance. The contract ends with the employer. The physician is responsible for purchasing the tail insurance policy.
Considering How Long Does a Tail Coverage Last
A good rule of thumb is that it’s usually around twice the annual premium for the physician. The annual premium is how much money must be paid each year to ensure the physician for medical malpractice. Just multiply that by two, and that’s usually a good ballpark of what the physician will have to pay for tail insurance. Now, a couple of considerations as far as how much it costs. One is the length of the policy. Once again, most states have a two-year statute of limitations. However, it’s two years from when the patient either knows or should have known of the injury. And then there are also some exceptions for minor patients to be able to see once they reach the age of majority. In that situation, sometimes, a longer tail insurance policy makes sense. Tail insurance can be one year, two years, five years, or ten years.
There are also unlimited tail insurance policies. Meaning it just goes on forever. And if any claim arises in the future, the physician is covered no matter when it’s filed. Now, why would a physician pay less or more? Simple, it’s cost. Like normal tail insurance, let’s say that covers five years would probably be around twice the annual premium. An unlimited policy may cost more than that. So, if the physician is responsible, they need to think about, alright, what’s my liability here?
How Can You Be Exempted from Paying the Tail Insurance?
What’s the potential for me being sued? Certainly, what specialty they’re in, I think, is important as well. And then they can make a financial decision. Now, there are two ways of getting out of paying for tail insurance. If you stay with the same insurance company, let’s say we have a cardiologist working for a private physician-owned practice. Then, they use whoever the insurance company is, move a job, and that new job uses the same insurance company.
Usually, they’ll roll over the old tail insurance into the new policy. The physician won’t have to pay for tail insurance. When you start a job, there’s no way of knowing if you leave the job and who the new employer will be if they use the same insurance policy. So, that certainly shouldn’t be relied upon. The other way is your new employer paying for your old tail insurance, called nose coverage. This doesn’t happen very often. It can, but most employers do not pay for nose coverage. And if they do, it’s almost always a hospital network. It’s exceedingly rare for a physician for a smaller physician-owned practice to pay nose coverage for any of the physicians they’re bringing in. It just won’t happen.
What Is the Advantage of a Longer Tail Insurance Coverage?
What makes sense as far as how long it should last? Well, the longer the tail insurance, the safer it is for the physician. So, getting unlimited tail insurance makes sense. Now, as I said before, the cost is a factor. Let’s give a scenario where the physician was sued, and the tail insurance expired. It’s a good claim; they didn’t miss the statute limitations. It hasn’t run yet. Well, the physician could be personally liable, not only for whatever the judgment is but for attorney’s fees and things like that.
It could cripple someone financially if they don’t have a malpractice policy in place if they are sued. It’s not worth it. At least I don’t think it’s worth rolling the dice. It is smart to get a tail insurance policy. The longer the tail insurance, the safer it is for the physician. Anyway, that’s kind of how long the tail insurance policy will last.
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How much vacation time do doctors get? Let’s break down what is considered time off and then what is normal. First, I find that many people lump everything into vacation, meaning just any time away from work. No one lumps it like that. It’s generally thought of as paid time off or PTO. And then there are four things that go into paid time off. You do have vacation time, you have sick days, you have holidays, and then you have continuing medical education. Those four things all go into the pot for paid time off. And then that determines how much time off you get.
Normal Amount of Vacation Time Physicians Should Receive
The average physician gets around 30 days of total time off. So, when you add up, let’s just say a normal amount would be 15 days of vacation and five sick days. Now, many states have actual laws in place that dictate how many sick days an individual can get. I would check into that prior to figuring out how much actual time off you get. You’ll usually get somewhere between three to five days for CME and around seven to eight federal holidays. It depends upon the office and then also the call responsibilities of the physician. And this is specialty-dependent, so when I say the average amount, I’m just taking the average amount across all specialties, around 30 days.
If you’re getting less than that, it’s probably not enough. And certainly, if you’re getting 20 days, that’s well below average if you add everything up. Now, there are some specialties that get a significant amount of more than 30 days. Radiology and anesthesiology, for whatever reason, tend to get much more. Obviously, if you’re doing shift work, so if you’re in the ED or a hospitalist, many of you won’t get any time off. So, if you’re seven-on/seven-off, your time off is the week that you have off, and you’re not going to get any additional paid time off. However, I have seen recently, which I’ve never seen before, a few hospitalist jobs that are offering paid time off in addition to the time off that they get, which I think is abnormal but obviously great for the hospitalist.
What to Do if A Physician is Offered a Substandard Amount of Paid Time Off (PTO)?
What do you do if you’re being offered a substandard amount of paid time off? First, you need to go to them and say, look, the industry averages are these, and you’re giving me this, and it’s not enough. You also must consider, as I said before, what your call responsibilities and expectations are. If you’re on call for 75% of the holidays, that’s not true time off. Do you get the day off after you take the call? Sometimes that’s not in the contract, and it should be spelled out. As far as vacation time, I find that most of the larger hospitals and hospital networks have a generous time off policy, and they are not going to bend on that. It’s the same for all the physicians, and you’re going to get what they offer. The room for negotiation is the smaller physician-owned practices.
Those are also the organizations that tend to try to screw over the physician. So, let’s just say you’re just coming out of residency or fellowship. They may say, well, this is your first year, so you only get five days of vacation or something like that. You’re going to be completely burned out. Your compensation structure will also determine how much time off you want to take. If you’re on an income guarantee, say you’re making $250,000 a year, and it has no productivity incentives tied to it at all, well, the more time off you take, the better.
Take Much Time Off as You Can
Your compensation is not going to be affected in any way. So, you might as well get as much time off as you can. If you’re being paid purely on production, such as RVUs or net collections, then you have to take into account, well, every day I’m out of the office is the day I’m not making money. You’re going to have to, I guess, determine the point of, alright, I need at least this much time off to keep saving, but I also need to work this much to make the amount that I want. Those are some things to think about as well. So, that’s how much time off a normal physician gets per year.
What is Paid Time Off?
Paid Time Off (PTO) refers to the amount of time a person has for taking off from work without being penalized. This typically includes vacations, holidays, and sick days. Physician PTO policies vary greatly as they are determined by employer discretion and union agreements which are a key part of the benefits package.
Key Factors That All Physician PTO Policies Should Include
There are some key factors that all physician PTO policies should include: how much paid time off you get per year; what happens when you take a day or more of your paid time off; what happens if you’re using up your allotted days then go on vacation; and whether or not unused days carry over into other years.
Differences Between Private Practice vs. Hospital Employment
Most larger hospital network employers will offer accrual-based PTO. Meaning the physician does not receive a chunk of paid time off at the beginning of each contract year; they accrue a set amount each pay period. Private practice employers generally give time off without accrual factored in.
What Factors Are Counted in PTO?
Vacation: Hospitals and health networks generally offer more vacation (15) than smaller physician owned groups (10).
Sick Days: Many times, this amount is mandated by State law.
Holidays: Some organizations observe different holidays than others.
Continuing Medical Education: Most employers give between 3-5 days off for CME participation.
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How do you calculate tail insurance coverage? If you are a provider and sign an employment agreement or independent contractor agreement, it may state who’s responsible for the malpractice insurance. And then, who’s responsible for paying the tail insurance coverage expense if it’s a claims-made policy?
Three Types of Insurance
There are three types of insurance utilized by healthcare providers. One would be claims-made, which you do need tail insurance. The second is occurrence-based coverage, where tail insurance is unnecessary, or you could be working for an extensive healthcare network, and then they would be self-insured. In that scenario, it’s implausible you’d have to pay for tail insurance. This is specific to providers with claims-made policies, and then in the contract, it would dictate that the provider would have to pay for the tail insurance policy after the agreement is terminated.
The Easiest Way to Calculate a Tail Insurance
The easiest way to calculate a tail insurance cost is to take your annual premium. And the annual premium is how much it costs to insure you annually. And then you would multiply that times two. Now, it can vary from one and a half to up to three times, but a good rule of thumb is that it will be twice your annual premium. Now, that’s a one-time cost. If you have a tail policy for, let’s say it’s a three-year period, there would be an upfront cost, which would cover the entire three years. You don’t have to pay every year. So, let’s say you have a $10,000 annual premium. Then the tail cost would be $20,000. Most insurance companies expect the entire amount to be paid upfront. Some of them do offer payment plans, but many of them don’t.
Few Ways of Getting Out of Paying for Tail Insurance
There are a few ways of getting out of paying for tail insurance. And I think it’s probably a good idea to go through those. One is negotiating before signing the employment agreement, stating that the employer would be responsible for paying the tail cost. That’s the first way. The second way would be your new employer would pay your old tail. That’s called nose coverage. You can think of that as like a quasi-signing bonus in some ways. And then the last way would be that this primarily applies to people in private physician-owned practices. Still, if your new job uses the same insurance company, that insurance company will likely roll over your policy into your new one. Then you won’t have to pay for tail insurance.
Now, you have no idea if you just started a job and where your next job will be. So, that’s not something you can count on, but there are many states where specific specialties, I guess, identify and utilize a particular insurer. And so, let’s say you’re in cardiology. There might be an insurer that caters to the cardiology market. In that way, it might be more likely that you would have the same insurance company if you switched to another physician-owned group, but that’s certainly not something you can bank on. The easiest way to calculate tail coverage is to double whatever your annual premium is.
Annual Premium Costs
Now, most people don’t know what their annual premium is. You need to ask the employer or contact the insurance company to find out what it is. It will vary depending on what state I will be working in. You could be in the same specialty in one state and move to another. And the tail costs vary significantly. It’s primarily based upon the states that have imposed strict caps on the med mal damages. Whereas others, insurance can be much more expensive if there are no caps. Texas, for instance, is a pretty physician-friendly market for insurance, much less costly than in other states. So, you need to think about, alright, In what state will I be working? What’s the environment like for malpractice claims? And then, based upon that annual premium, you’d be able to calculate what your tail cost will be.
What is Claims-Made Malpractice Insurance? | Malpractice Insurance
One of the most frequent things when reviewing a physician’s contract is malpractice insurance, the differences between the different types, and tail insurance. Today, I will talk about claims-made malpractice insurance for a physician. Let’s do some basics on malpractice insurance, precisely, claims-made coverage. Every physician is required to have a malpractice insurance policy. The employer will be the one that nearly always will pay for the underlying coverage. Every year they must pay a premium to the insurance company. And then, if they continue to pay that premium, the physician is covered for their activities for that employer.
Coverage Limit
Most of the time, the coverage limit will be 1 million, 3 million. That means 1 million per claim. And then no more than 3 million aggregate per year. If you have $3 million claims in one year, you have more significant problems than just insurance. You’re going to have some board complaints. You might have a database entry if they settle or lose a trial. So, it’s a bigger problem if someone asks or is concerned about the aggregate limit.
Types of Malpractice Insurance
There are usually three types of insurance. You have self-insurance programs. Some of the more prominent hospitals and healthcare networks are self-insured, which means they have a lot of money to pay claims. The second would be occurrence-based insurance. And that means a policy has to be in effect when the malpractice event occurs. The benefit of occurrence-based insurance is you do not need tail insurance. The downside is it just costs a little bit more. Generally, occurrence-based insurance costs about a third more per year than a claims-made policy.
Claims-Made Malpractice Insurance for a Physician
And then lastly, what we’re going to kind of detail today is claims-made insurance. A claims-made insurance policy must be in effect when the claim is made. Suppose you are with an employer, terminate the agreement, and leave. In that case, there will be a period called the statute of limitations from when a patient can still sue you. In most states, it’s two years. Even though you’re no longer with the employer and it was a claims-made policy that ended when you left, you need gap coverage. Another policy covers the gap between the last day you work for the employer and the last date where the statute limitations run. And what’s commonly known as tail insurance.
Let’s discuss if you must purchase tail insurance with a claims-made policy. Everyone wants to know, well, what’s the cost? A good rule of thumb is that tail insurance coverage generally costs about twice your annual premium. So, if you have a $10,000 annual premium, multiply those times two. Then you would have to pay $20,000 once your employment contract is terminated to cover your tail insurance. That’s a one-time payment. You don’t have to pay it every year. It’s just that you pay all of it upfront, and then you’re covered for whatever. Some tail insurance policies last longer than others. Generally, you want more than long enough to go past the statute of limitations. Most malpractice claims it’s when the patient either knows or should have known of the malpractice event.
Who Has to Pay Malpractice Tail Coverage?
There are infrequent times, but a patient would’ve no way to know about a malpractice event until years later. And so that’s kind of when this kicks in. Who must pay for tail insurance? If you work for a hospital or healthcare network, most of them will be self-insured, but let’s say they had a claims-made policy. They will generally pay for your tail insurance. Most physicians who have to pay for tail insurance are employed with a private physician-owned group. I’d say it’s probably 75% of physicians who work for a physician smaller physician-owned group that must pay their tail insurance. Is this something you can negotiate? Sure. A couple of thoughts on that.
You can ask them to outright pay for your tail insurance. If they say no to that, which many of them most likely will, you could also say, alright, well, let’s do it this way. Let’s say for every year that I am employed with you. You’ll agree to pay a quarter of my tail insurance cost. If I finish a year and then leave, you will pay a quarter of the tail insurance. If I stay for two years, you will pay half. And in that way, if I complete 40 years, the employer will pay for the entire tail insurance.
I find some employers understand that that is a fair way of doing things. And then you can play with the annual percentages or how much each party pays. There are creative ways of figuring out how to split the cost of the tail insurance between the physician and the employer.
Will an Employee Have a Choice Between Claims-Made and Occurrence-Made Policy?
Most of the time, the physician will not have the choice of either getting an occurrence-based or a claims-made policy. Whatever the employer or type of malpractice insurance the employer decides to use, the type of malpractice insurance the employee will have to use. Usually, the physician can’t say, hey, I’d like an occurrence coverage if the employer decides to use claims-made. The reason why the employer uses claims-made is it’s cheaper.
As I said, an occurrence policy is about a third more expensive per year than a claims-made policy. So, suppose you’re the employer, and you’ll make the physician pay for their tail insurance. In that case, you’ll say, not only am I going to save a third per year on annual premium cost, but I’m not going to pay for tail insurance either. Save them some money. There is a kind of math equation. Let’s say you did have the option of choosing occurrence or claims-made insurance. It will be based on how long you decide to be with the employer.
Consideration When Choosing Between Claims-Made and Occurrence-Based Policy
If you have, say, a $6,000 annual premium and occurrence-based would be $8,000. So, $2000 more. The longer you are with the employer, the more that would make sense. If you’re with the claims-made policy, you’re paying $6,000 yearly, or the employer is. Still, in the end, the longer you are with your employer, the tail insurance can sometimes be a little bit more expensive. So, you do need to do the math of, alright, if I’m paying a third more per year, at what point does it make sense to pay if I plan on staying with the employer for ten years? Well, that might make more sense to a claims-made policy.
Maybe an occurrence policy also makes more sense if you’re there for a shorter time. This certainly is something that you can negotiate in an employment contract. And I do think it’s something that most physicians feel is important. It’s also specialty-dependent. If you’re primary care and paying $6,000 in your annual premium, then $12,000 for tail insurance isn’t that big. Suppose you’re an OB-GYN paying $50,000 yearly for your underlying coverage and must leave. Your tail insurance is a hundred thousand dollars, well. That will certainly get your attention, and you may need to discuss it with the employer.
How to Get Out of Having to Pay for Tail Insurance?
A couple of ways of getting out of having to pay for tail insurance: one, obviously to negotiate so the employer agrees to pay for it. Two, if you are with an insurance company and your new job uses the same insurance company. Then generally, the insurance company will roll over your old policy and tail insurance into your new one. You won’t have to pay for tail insurance. Now, no one’s going to know for sure if they leave a position, the new employer will utilize the same insurance company, but that’s one way of doing it.
And then the last way of doing it is nose coverage. That means the new employer would pay your old tail insurance called nose coverage. And then that would be a way for you to get out of having to pay for it. Nose coverage happens, I would say, infrequently. Still, it’s not entirely unique that a new employer would pay someone’s old tail insurance. So, that’s what claims-made coverage is. It’s a lot of, I guess, complicated scenarios but simple once you break it down into three different types of insurance.
Why is Physician Tail Coverage so Expensive? | Tail Insurance
Why is tail insurance for a physician so expensive? Let’s get a little background on when a physician would need tail insurance and then kind of cost analysis, and then why it is so expensive. First, the physician must identify what type of insurance policy they have. There are usually three main types. If you’re employed with the hospital network, most large hospital networks are self-insured now, so you would not need tail insurance if you’re working for a big hospital network, usually.
Some hospital networks have claims-made policies, but the physician won’t need to pay for the tail insurance expenses in most instances. Most of the time, if there’s a claims-made policy and the physician is required to pay for their tail insurance, it’s when a smaller physician-owned group employs them. If you have occurrence-based coverage, you do not need tail insurance. Occurrence-based coverage means the incident must occur when the policy is in place. In that scenario, it doesn’t matter when the claim is filed if there was a policy when the event occurred, then the physician is covered.
One would purchase claims-made over occurrence-based because occurrence-based is about one-third more expensive than the claims-made policy. So, if you paid 6,000 a year for claims-made, you pay around 8,000 for occurrence. Now, if you do have a claims-made policy, and most of the time, if you have a claims-made policy, it means you’re employed with a smaller physician-owned group. And then, the employment contract will state who is responsible for paying for the tail insurance. In this scenario, the physician is responsible for paying for tail insurance coverage, and there’s a claims-made policy.
Considerations for a Physician’s Tail Insurance Calculation
In that scenario, tail insurance coverage usually costs about twice what the annual premium is for the physician. The annual premium is what the practice pays annually to insure the physician. It would be best if you found out what your annual premium. And then two, you must figure out how long you’ve been with the practice. Tail costs can go anywhere from one and a half up to three times the annual premium.
And it’s usually based on the length of time the physician has been with the employer. If you’re only there for a year or two, it might be closer to the 1.5 ratio, whereas, if you’ve been there two decades, it could be closer to the three times your annual premium. Specialty is also certainly important. OB-GYN and many surgical specialties have extremely high yearly premiums, meaning their tail insurance cost could be like a hundred thousand dollars.
Whereas if you’re in family medicine or pediatrics, your annual premium is probably 6,000, meaning your tail insurance costs might be around 12,000 per year. Tail covers the gap between when you leave the employer and the last day somebody can sue you. It’s called the statute of limitations. In most states, it’s around two years from when the patient knew or should have known of the malpractice. There are some exceptions for minors allowed to sue up until the date of majority, but a good rule of thumb is it’s around two years in that scenario. There are shorter tail policies. You may get one that’s only two years long, or you may want to get a policy that covers an infinite amount of time.
Can Tail Insurance Coverage Be Negotiated With the Employer?
The length of time the tail insurance lasts can also affect the cost of the tail insurance itself. Anything with long tail insurance will cost a little bit more. You might not get to the two-times ratio with anything with shorter tail insurance. This is something that you can negotiate in a contract. A couple of ways of approaching it.
Forgiveness Period for Tail Insurance
If the employer isn’t willing to kind of foot the entire cost of tail insurance, you could suggest giving a forgiveness percentage at the end of each year of employment. For instance, you could say, look, let’s say, for every year that I’m employed here, you will cover 25% of the tail insurance cost. If I’m here for one year, the physician’s responsible for 75%, two years, 50%, three years, and 75%. And then, if the physician completes four years of employment, the employer will pay for the entire amount.
We often use that if the employer isn’t willing to pay the entire cost from the beginning. Maybe offer them, alright, well, it’s fair that if I’m here for a very long period, you will cover my tail insurance. I think that’s one good way of negotiating it if they’re not willing to foot the entire bill.
Nose Insurance
Another way of paying for it is if when you leave the employer and get a new job, the new employer could pay for your old tail insurance, which is called nose insurance. And that could be a part of the negotiation when you’re leaving one job and going to another is alright, here’s my tail insurance cost, I’d like you to cover that—and sometimes used as a signing bonus or in addition. I guess it just depends.
Same Insurance Company
Then lastly, if you stay with the same insurance company, let’s say you stay in the same state. You’re in the same specialty and just moving to a different practice. They utilize the same insurance company. Most companies will roll over your old policy into a new one, and you won’t have to pay tail insurance. So, is tail insurance expensive? It’s specialty-dependent. I mean, every amount is relative. If you’re making 500,000 a year and must pay a 15,000 tail insurance, it’s probably not as shocking as those in other professions.
How Is Tail Insurance Calculated?
How is tail insurance calculated? What is tail insurance? Under what kind of malpractice policy do you need it? And then how much does it cost? There are two common types of malpractice policies for healthcare providers. You have occurrence-based and claims-made. In a claims-made policy, you need tail insurance; if it’s an occurrence policy, you do not.
Different factors are considered to Calculate tail insurance. There are different lengths of tail insurance. You could have one year, two-year, five-year, or infinite, and then with each one, it’s a little bit more expensive. A good rule of thumb in calculating tail insurance costs is about twice your annual premium. Let’s say you’re a family practice physician. On average, your annual premium, so how much it costs to insure you each year, will probably be about $6,000. And so, if you had to pay double that, the tail insurance calculation would be $12,000.
Now, that’s a one-time payment. You do not have to pay it annually. You give it all at once, and then you’re covered for how long the tail insurance is. If it’s up to you how long the tail insurance lasts, it makes sense to get an indefinite tail insurance policy. You are rolling the dice if you have one-year tail insurance, but the statute of limitations is longer than a year because you’re uncovered for that period. And if you do not have malpractice insurance, they could come after you potentially. And that could be catastrophic for a professional. If it’s only a couple thousand dollars more, it’s just simply worth it to get the longest tail insurance policy that you can. That way, it’s just one last thing you have to worry about.
Two Common Types of Malpractice Insurance Coverage
Let’s talk about the differences between the two malpractice insurance. For an occurrence-based policy, a policy must be in effect when the malpractice incident occurs. There is no need for tail insurance in that scenario, and I’ll explain why.
In a claims-made policy, a policy must be in effect when the claim is made. And so, for an employee who terminates a relationship with an employer, there will be a period where somebody can sue them. In most states, it’s two years. It’s called the statute of limitations. And in this scenario, let’s say a physician leaves the practice, they’re no longer an employee, and they have a claims-made policy, and that policy is done.
Well, they need an additional policy called tail insurance that covers the gap between when they leave the employer and the last day an individual can sue them. There are some exceptions in some states when a minor becomes an adult and a few other scenarios, but let’s use two years as a standard amount here. The employment contract will state that the employer will pay for the underlying policy, assuming you’re not an independent contractor.
Who Will Buy Tail Malpractice Coverage?
And then, it will also state who is responsible for tail insurance. Now, if you’re in private practice, like a smaller physician-owned group, they will likely have a claims-made policy. And it’s also very likely they will make the provider pay for tail insurance when the contract ends. If it’s an occurrence-based policy, you’re good; you don’t have to worry about tail insurance when the contract ends.
Why Would Someone Get One Over the Other?
An occurrence-based policy is around one-third more expensive per year than claims-made. So, if it is a smaller physician-owned practice, they usually use claims-made, so they pay a third less annually for the premium because they’re going to be the ones paying for it. And then two, they’ll usually put the tail insurance cost on the provider. So, they not only pay less per year for the premium, but they also don’t have to pay for tail insurance, and it’s just cheaper for them. That’s why 9 out of 10 private practice owners use claims-made coverage. Some use occurrence-based, but it’s rare.
If you have a claims-made policy, and it is determined in the employment agreement that you are responsible for paying for tail insurance, let’s break that down. It will state that you must purchase a tail insurance policy prior to your last day of employment with the employer. Usually, it’ll also say how long the tail insurance policy must be.
How Do You Get the Employer to Pay for Tail insurance?
Well, ask them when you’re negotiating. I’d like you to cover the tail insurance expenses. They may say no. If they do, you could come back at them, and we’ve had some success with saying, alright, well, you’re not going to pay for all of it. What if we do it like forgiveness over the initial term? What I mean by that is, if you signed a three-year contract, you would say, alright, for every year that I complete for you, one-third of the cost of tail insurance will be covered by you.
So, after three years, when I’ve completed the initial term, you will be responsible for paying for tail insurance if I leave any period after that. You could also have your new employer pay for your tail insurance. That’s called nose coverage. And then the last way of not having to pay for it would be if you stay with the same insurance company with your new position. They’ll generally roll over your old policy into a new one. In that way, you don’t have to pay for tail insurance. So, that’s a little primer on how tail insurance is calculated.
Claims-Made Malpractice Tail Insurance
One of the most frequent things when reviewing a physician’s contract is malpractice insurance coverage, the differences between the different types, and then tail coverage. Today, I’m going to talk about what is claims-made malpractice insurance for physicians. Let’s just do some basics on what malpractice insurance is, specifically, what claims-made coverage is. Doctors are required to have medical malpractice insurance policy.
Who Usually Pays for Claims Made Insurance Policy?
The employer will be the one that nearly always will pay for the underlying coverage. Every year they must pay a premium to the insurance company. If they continue to pay that premium, the doctor is covered for any of their activities for that employer.
Coverage Limits
Most of the time, the coverage limit will be 1 million, 3 million. That means 1 million per claim. And then no more than 3 million aggregate per year. If you’re having $3 million claims in one year, you have bigger problems than just insurance. You’re going to have some board complaints. You might have a database entry if they settle or lose a trial. So, if someone asks or is concerned about the aggregate medical malpractice insurance coverage limit, it’s a bigger problem than that.
3 Types of Malpractice Insurance
There are usually three types of insurance.
Self Insurance
You have self-insurance programs. Some of the bigger hospitals and healthcare networks are self-insured, which generally means they have a lot of money set aside to pay claims out of.
Occurrence Coverage
The second would be occurrence-based insurance. And that just means a malpractice policy has to be in effect when the malpractice event occurred. The benefit of occurrence-based insurance is you do not need tail coverage. The downside is it just costs a little bit more. Generally, occurrence-based insurance costs about a third more per year than a claims-made malpractice policy would.
Claims Made Coverage
And then lastly, what we’re going to kind of detail today is claims-made insurance. A claims-made malpractice policy must be in effect when the claim is made. If you are with an employer and the agreement is terminated, and you leave, there will be a period called the statute of limitations from when a patient can still sue you. In most states, it’s two years. Even though you’re no longer with the employer, and it was a claims-made malpractice policy that ended when you left, you need gap coverage.
Tail Insurance
Another malpractice insurance policy covers the gap between the last day you work for the employer and the last date where the statute limitations run. And that’s commonly known as tail insurance coverage or tail coverage. You must buy tail insurance coverage if you had a claims-made malpractice policy. Let’s talk about that.
Cost of Tail Insurance
Everyone wants to know, well, what’s the cost? A good rule of thumb is that tail insurance coverage generally costs about twice your annual premium. So, if you have a $10,000 annual premium, multiply those times two, and then you would have to pay $20,000 once your employment contract is terminated to cover your tail insurance coverage. That’s a one-time payment. You don’t have to pay it every year. It’s just that you pay all of it upfront, and then you’re covered for whatever it is.
Some tail insurance coverage policies last longer than others. Generally, you want more than long enough to go past the statute of limitations. Most malpractice claims it’s when the patient either knows or should have known of the malpractice event. There is an infrequent period, but a patient would’ve no way to know about a medical malpractice event until years later. And so that’s kind of when tail coverage kicks in.
Who Pays for Tail Insurance?
Who must pay for tail coverage? If you work for a hospital or healthcare network, most of them will be self-insured, but let’s just say they had a claims-made malpractice policy. They will generally pay for your tail. Most of the physicians who have to pay for tail coverage are employed with a private physician-owned group. I’d say it’s probably 75% of physicians who work for a smaller physician-owned medical facility that must pay their own tail.
Is this something you can negotiate? Sure. A couple of thoughts on that. You can just ask them to outright pay for your tail. If they say no to that, which many of them most likely will, then you could also say, alright, well, let’s do it this way. Let’s say for every year that I am employed with you. You’ll agree to pay a quarter of my tail cost. If I finish out a year and then leave, you will pay a quarter of the tail insurance. If I stay for two years, you’d pay half, and so on. And in that way, if I complete four years, the employer will pay for the entire tail insurance. I find some employers understand that that is a fair way of doing things. And then you can kind of play with the percentages per year or how much each party pays.
But there are some creative ways of figuring out how to split the cost of the tail coverage with physicians and employers. Most of the time, physicians will not have the choice of either getting an occurrence-based malpractice policy or a claims-made malpractice policy. Whatever the employer or type of insurance the employer decides to go with, that’s the type of insurance the employee will have to use.
Can Physicians Choose Which Insurance To Use?
Usually, physicians can’t say, hey, I’d like an occurrence coverage if the employer decides to use claims-made. The reason why the employer uses claims-made is it’s cheaper. As I said before, an occurrence-based malpractice policy is about a third more expensive per year than a claims-made malpractice policy. So, if you’re the employer and you’re going to make physicians pay for their own tail, you’ll say, not only am I going to save a third per year on annual premium cost, but then I’m not going to pay for tail coverage either. Save them some money.
There is a kind of math equation. Let’s say you did have the option of choosing occurrence or claims-made insurance. It will be based on how long you decide to be with the employer. If you have, say, a $6,000 annual premium and occurrence-based would be $8,000. So, $2000 more. The longer you are with the employer, the more that would make sense. Whereas if you’re with the claims-made malpractice policy, you’re paying $6,000 a year or the employer is, but in the end, the longer with your employer, the tail can sometimes be a little bit more expensive. So, you do need to do the math of, alright, if I’m paying a third more per year, at what point does it make sense just to pay if I plan on staying with the employer for ten years?
Well, that might make more sense to a claims-made malpractice policy. Whereas if you’re there for a shorter period of time, maybe an occurrence base malpractice policy makes more sense as well. This certainly is something that you can negotiate in an employment contract.
Why Who Pays for Tail Insurance is a Big Deal?
And I do think it’s something that most physicians feel is important. It’s also specialty-dependent. I mean, if you’re primary care and you’re paying $6,000 in your annual premium, then $12,000 for tail coverage isn’t that big a deal. Let’s say surgeons, or if you’re an OB-GYN and you’re paying $50,000 a year for your underlying coverage, and you must leave. Your tail coverage is a hundred thousand dollars, well, that’s certainly something that’s going to get your attention, and you may need to discuss the employer.
A couple of ways of getting out of having to pay for tail coverage: one, obviously to negotiate so the employer agrees to pay for it. Suppose you are with an insurance company, and your new job uses the same insurance company. In that case, generally, the insurance company will just roll over your old malpractice policy and tail insurance into your new malpractice policy. You won’t have to pay for tail coverage. Now, no one’s going to know for certain if they leave a position, the new employer will utilize the same insurance company, but that’s one way of doing it. And then the last way of doing it is nose coverage. That means the new employer would pay your old tail called nose coverage. And then that would be a way for you to get out of having to pay for it.
Nose coverage happens, I would say, infrequently, but certainly, it’s not unique that a new employer would pay someone’s old tail insurance. So, that’s what claims-made coverage is. It’s kind of a lot of, I guess, complicated scenarios but simple once you break it down into three different types of insurance.
How much does tail insurance cost for an anesthesiologist? First, you need to identify the type of malpractice insurance in your contract.
What are the Types of Malpractice Insurance?
If you have a claims-made policy, it will require tail insurance. And then, in the agreement, it will state who’s responsible for paying the tail insurance cost. If you have an occurrence-based coverage plan, tail insurance is not necessary. So, it wouldn’t matter how much the tail costs in that event. The last type of insurance would be if you’re working for an extensive healthcare network and they’re self-insured. In that scenario, it’s implausible that the physician would have to pay tail insurance. So, in this scenario, it would only apply if you’re working for either a physician-owned group or a small individual hospital with a claims-made policy. So, that’s the first thing you need to do.
How Much Does Tail Insurance Cost?
Next, how much does tail insurance cost? A good rule of thumb is that tail insurance is around twice your annual premium. And your annual premium is how much it costs to ensure you annually. You would take that amount, multiply that times two, and that’s how much the tail insurance would cost. It can vary somewhere between one and a half to three times your annual premium, which would be based upon claims history and then the length of time with the employer. But most of the time, most of the time, around twice your annual premium would be an average amount. Now, how much is a annual premium for an anesthesiologist?
How Much Is the Annual Premium for an Anesthesiologist?
It depends upon where you are. It does vary state by state. Some states have very strong caps on malpractice damages, reducing the insurance needed for physicians like Texas. Then other states have either no caps or very few caps. And so, the insurance in those states could be much more expensive. It would be unlikely that an anesthesiologist would have a policy for less than $10,000 a year. And depending upon what types of procedures you’re doing, it can be much more than that.
Somewhere between 10 to 20 a year would be, I would say, an average amount based upon the factors I just said. Let’s say you’re a physician and must pay tail insurance. How do you pay for it? Well, the employment contract will very likely state that you must secure the tail insurance before the termination of the contract. So, maybe by the last week of your employment with the employer, you would have to secure the policy and pay the amount. It’s a one-time payment. It’s not like tail insurance which is a yearly thing. You pay one time, and it covers however long the tail lasts. And that’s up to you.
You could buy a tail policy for two years, five years, or indefinite. And then that will influence the cost as well. Some companies accept payment plans for tail insurance costs, but most require just the entire amount upfront. So, it’s not like a tiny amount of money. It’s worth planning for that. If you’re going to leave an employer and you’re required to pay the tail, you need to anticipate that and set a little money aside.
How to Avoid Paying You Tail Malpractice Insurance?
Now, a couple of ways around having to pay for the tail. Well, negotiating in advance before signing the contract and ensuring that the employer covers it is one way. Two, having your new employer pay your old tail it’s called nose coverage. And so, that would almost be like a quasi-signing bonus, but that would be one way around it. And then the third way would be if you’re staying within the same state, usually, but more importantly.
Suppose you’re staying with the same insurance company with your new job. Usually, in that scenario, if you’re going from a physician-owned group to another physician-owned group, it’s the same insurance company. In that case, they’ll usually roll over the policy into your new policy; that way, you don’t have to pay for the tail. It’s impossible to anticipate when you will accept a job and where your next job will be. Still, those are three ways of getting around having to pay for tail insurance.
Who typically pays for tail insurance coverage? To talk about tail insurance coverage, we also need to talk about underlying malpractice policies. We’re going to hit both of those. First, when do you need tail insurance coverage? There are three main types of insurance for physicians. They may be self-insured if you’re with a large hospital or healthcare network. And in that scenario, you usually would not need tail insurance. If you have an occurrence-based policy, it means a policy must be in effect when the malpractice event occurs. You do not need to buy tail insurance for that as well. And then the third is claims-made. Under a claims-made insurance policy, a policy must be in effect when the claim is made.
Why You Need to Add Tail Coverage in Claims-Made
And since you could terminate your relationship with that employer, there will be a gap between the termination date and the last day somebody can sue you. That’s called the statute of limitations. In most states, it’s two years. Now, two years from when the patient either knows or should have known of the malpractice event. Sometimes, it can go past two years. A tail insurance policy is a coverage that covers that gap between when you leave and the last day somebody can sue you. Why would an employer use claims-made versus occurrence? Let’s say it’s a private employer. We’re just going to assume hospitals are self-insured. In this scenario, let’s talk about a private physician practice. If they must choose between occurrence and claims-made, 9 times out of 10, they will choose claims-made because it’s cheaper.
Who Must Pay for Tail Coverage Depends on the Work Set-Up
An occurrence policy is generally around a third more expensive per year for a physician. But as I said before, tail insurance is unnecessary for an occurrence policy. A claims-made policy, if they’re cheaper than an occurrence-based policy. In the long run, it’ll be cheaper if the physician pays for the tail coverage. And that’s why they do that. The premise of this blog is who typically pays for tail insurance. If you’re a physician who does shift work, say hospitalist or ED, it’s almost always the physician who will pay for your tail insurance. If you work for a hospital and they’re not self-insured, and they have a claims-made policy, it’s extremely rare.
Maybe one out of a hundred would the physician have to pay for tail insurance. Almost whenever a physician is employed by a hospital or health network. The employer will pay for your tail insurance. If you’re in private practice or an employee of private practice, 9 times out of 10, they’ll have claims-made coverage. And then, I’d say, probably 50% of the time, maybe a little bit above that. The physician is going to be the one that must pay for tail insurance. Is that fair? It’s just a matter of negotiation.
Tail insurance costs about twice your annual premium. Let’s take a primary care physician. Their annual premium is between $6,000 to $8,000. If the physician had to pay for tail insurance, multiply that by two. So, it would be somewhere between 12,000 to 16,000. They’d have to pay for the tail coverage. That’s a one-time cost. You don’t have to pay annually for tail insurance. It’s just a one-time fee when the contract terminates. Then you’re covered for normally the entire gap, or it’s a specific period.
Tips on Negotiating Who Pays for Tail Coverage
You want to get a policy that goes well past the statute limitations. It’s a real specialty, depending on whether this is a huge deal. In primary care, you must pay 12,000 for tail insurance. It isn’t very pleasant, but it will not break the bank for you. If you are an OB-GYN with a $50,000 annual premium and must pay a hundred thousand dollars for tail insurance. That’s something completely different. And so, negotiating who must pay for tail insurance could be the key point in negotiating an OB-GYN. It would help if you did the math on this. If you can increase your base salary by 15,000 versus negotiating with the employer paying for tail insurance, that’s a no-brainer. You’re going to get that 15,000 every year. And that’s worth much more than just having a one-time $15,000 cost for tail insurance.
Before signing the employment agreement, you must negotiate who pays for the tail insurance. Usually, the employer will send the agreement. The physician will look it over. If they’re smart, they’ll have an attorney review it. And then we’ll come up with a list of things that we need either clarified or that we’re going to ask for. And in that scenario, we figure out what is most important to the physician and then situate the counteroffer.
Negotiate Tail Malpractice Coverage With Your Employer
Every situation is different. Some things are more important to a physician than others. Maybe some physicians need the non-compete amended because they cannot leave the area once the contract terminates. Maybe a bonus is most important to a physician to help them pay a down payment on a house. Or, in other cases, if they’re, as I said before, an OB-GYN. They don’t want to pay a hundred thousand dollars when the contract terminates. That might be the most important thing to them.
Two other considerations, one, if you’re with an employer and you must pay for tail insurance, but you move to a different employer that utilizes the same insurance company. Usually, that insurance company will allow you to roll over your old policy into your new one. Thus avoiding paying for the tail coverage. Now, there’s no way you’ll know that when you start a job. That it will have the same insurance company, but that’s one way of getting out of paying for it. The other way would be having your new employer pay your old tail insurance. That’s called nose coverage.
In nose coverage, it simply would be a negotiation with your new employer that says, once the contract terminates with your current employer, they will pay your old tail insurance or reimburse you for whatever you paid for. Nose coverage doesn’t happen very often, but it certainly does. And it’s a possibility for a physician. So, who typically pays for tail coverage? I’d say, typically, it’s the physician. Still, it’s not completely out of the ordinary for a physician to be provided. It’s just a point of negotiation.
How Is Tail Coverage Calculated?
How is tail coverage calculated as far as the cost is concerned? Let’s first talk about when a physician would need tail coverage, who’s responsible for it, and then the good cost estimate. First, a physician only needs tail insurance if they have a claims-made policy. Claims-made policy means a policy must be in effect when the claim is made. It’s possible that if a physician terminates a contract, there will be a gap between the last day they work for the employer and the last day someone can sue them. In most states, it’s called statute limitations.
How long someone can sue for, and in most states, it’s two years. So, it’s two years from when the patient knows or should have known of the malpractice. That’s why some incidents can go beyond two years if it would be impossible for the patient to know that a malpractice incident had occurred. Someone needs to purchase tail insurance if a physician has a claims-made policy. And so, in the physician contract, it’s going to say who’s responsible for it. If it doesn’t, that’s a problem you need to solve before signing the agreement. Regarding who pays for it, it depends on where the physician is employed. First, suppose a physician works for a smaller physician-owned practice most of the time. In that case, the physician will be responsible for that tail insurance cost.
Claims-Made Policy Vs Occurrence-Based Policy
However, suppose the physician works for a big hospital network. In that case, it’s very unlikely the physician will have to pay for the coverage of the tail insurance. Depending on the size, the hospital network will be self-insured or will always cover the tail insurance for any of the physicians they employ. There is another instance where the physician would not have to pay tail insurance if there’s an occurrence-based policy. Under an occurrence-based policy, a policy must be in effect when the incident occurs. And so, that way, no tail insurance is needed. The difference between occurrence and claims-made is price. An occurrence policy is usually about one-third more expensive than a claims-made policy. So, you’ll pay one-third more per year. But then, you don’t have to pay that big chunk at the end for the tail coverage.
Claims-made is cheaper per year. And when the physician leaves, that tail insurance policy has to be paid. And that’s when that big outlay of cash comes in. How much does tail insurance cost? When talking to a physician, I usually say the best estimates are around two times your annual premium. However, depending on the length of time the physician has been with the employer. It could be either shorter or longer. So, I think the best rate range is usually between 150% to 300% of the annual premium for that policy.
Annual Premium Cost
The annual premium is simply what the employer pays to ensure the physician per year. Let’s take primary care, for instance. A good rule of thumb is that primary care malpractice insurance is usually around 6,000 yearly.
It also depends on your state, but just like an overall general estimate, we’ll say 6,000. Let’s say the physician has been there three years, and they terminate the contract, moving on to a new job. In that case, the tail insurance cost would be $12,000 or an estimated $12,000. And if the physician was responsible for paying for that. Before their last day of providing care to that employer, they would have to buy that policy, show proof of that to the employer, and then move on. There are, I guess, two scenarios where a physician would not have to pay tail insurance if they were responsible for it. One, they could always get their new employer to pay their old tail insurance, called nose coverage.
Consider it a signing bonus that the new employer will pay the old coverage for tail insurance or if the physician stays with the same insurance company. So, if you’re with one insurance company, your new physician utilizes the same insurer. In that scenario, they’ll generally roll your old policy into your new one. Then you won’t have to pay tail insurance. As I said before, most of the time, if you’re in a private physician-owned practice, the physician won’t be responsible for paying tail insurance. Now, there are a couple of ways to negotiate this. Just tell the employer I’d like you to pay for my tail insurance. If they’re unwilling to do that, another scenario would be to split the cost based on how long the physician has been there.
Why Is It Important that an Employer Covers the Tail?
I think one good way of doing it is, let’s say, a four-year term for a contract. Then 25% of the tail insurance costs will be covered by the employer for each year the physician is employed. So, if they’re employed for two years and then leave. They would split the tail insurance costs 50/50 with a new or old employer. That’s one way of doing it. This is important for some specialties like the higher-level surgical specialties. OB-GYN has enormous tail insurance costs, which need consideration. If the physician is an OB-GYN and must pay for all of their tail insurance, they’ve been there for eight years. They could have a tail insurance cost of a hundred thousand dollars, which has to be paid all at once.
That’s a lot of money for almost anyone. So, trying to figure out a way to split the cost of the employers is one of the higher points of negotiation as far as that goes. Anyway, I hope that was helpful regarding calculating a tail insurance cost. Anywhere between 150% to 300% of your annual premium. The longer you’re there, the higher the range. The shorter you’re there, the lower the range.
How Important is Tail Coverage?
How important tail coverage is for physicians. First, we’ll talk about what tail coverage is and what type of policy you need. Then the importance of it, and what kinds of negative repercussions if the physician does not have a tail.
First, you will only need a tail if you have a claims-made policy. A claims-made policy must be in effect when the claim is made, filed, and served to the physician. If a physician leaves a job, there will be a gap between the last patient they see that employee. Then, the last day somebody can sue them is the statute of limitations.
In most states, a malpractice claim is two years. And that’s from when either the patient knows or should have known of the malpractice incident. That’s why it can sometimes go past two years if there was no way of knowing about the malpractice until later. Suppose the physician has a claims-made policy in the employment contract. In that case, it will state who is responsible for paying for the tail insurance policy. Suppose you are an employed physician. Maybe a small physician-owned practice, it’s very likely that you’ll have to pay for a tail. If you work for a big hospital network, it is unlikely you will have to pay for tail insurance. Most of the time, the big hospital networks are either self-insured. This means you don’t have to buy tail coverage, or they offer that as a perk of being in that job.
How Much Does Malpractice Tail Insurance Cost?
If you’re in private practice or employed with a private practice, you’re likely to be the one paying for the tail. One question I get very often is how much does it cost? A good rule of thumb is that tail costs about twice your annual premium. How long you’ve been with the employer can fluctuate. Sometimes from 150% up to 300%, but the average is about twice what you pay annually for your premium. The annual premium is how much the employer has to pay to cover you for one year. Some people have no idea how much it costs. Let’s say you’re in primary care. Usually, your annual premium will be somewhere between $6,000 to $8,000.
So, the tail policy would be 12,000 to 16,000, something like that. Some of the other specialties like surgery and OB-GYN. It can be tens of thousands of dollars per year with a tail cost of fifty to a hundred thousand sometimes, so it’s very important. What happens if you don’t have tail insurance? Well, simple. If you leave an employer, someone has two years to sue you. You have no insurance policy to cover that gap. You can be sued and not have any insurance to back you up, which is a problem. Even though it sometimes costs a substantial amount, rolling the dice on hoping that a malpractice claim doesn’t arise in your gap is a bad idea. I mean, malpractice, not depending upon the severity, obviously, but most policy limits are 1 million per occurrence and then 3 million aggregate per year.
Search for Better Tail Insurance Policy Offer
You can imagine if you don’t have an insurance policy and there’s a million-dollar claim, it could bankrupt some people. So, you need to buy tail insurance. Where to find it? Well, you can go with the same insurance company. They’ll give you a cost, pay it, and you’re good to go. I would go shopping a little bit. You don’t have to go with the same underlying insurance provider. Whoever’s providing you with the annual coverage doesn’t necessarily mean you have to go with them for your tail insurance. I would suggest shopping around. Sometimes, I’ve had people who have found tail insurance coverage with the same limits. They also have the same length of time for 25, 20% less than the cost given to them by their current insurance provider. So, that is the importance of tail insurance. And then a little breakdown of claims-made coverage as well.
It depends upon where you are. It does vary state by state. Some states have very strong caps on malpractice damages, which then reduces the insurance needed for physicians like Texas, for instance, and then other states have either no caps or very little caps. And so, the insurance in those states could be much more expensive. It would be unlikely that an anesthesiologist would have a policy for less than $10,000 a year. And depending upon what types of procedures you’re doing; it can be much more than that. Somewhere between 10 to 20 a year would be, I would say, an average amount based upon the factors I just said. Now, let’s say you’re a physician and you’re required to pay tail insurance. How do you pay for it? Well, the employment contract will very likely state that you must secure the tail insurance prior to the termination of the contract.
So, maybe by the last week of your employment with the employer, you would have to secure the policy and pay the amount. It’s a one-time payment. It’s not like tail insurance which is a yearly thing. You just pay one time, and it covers however long the tail lasts. And that’s up to you, you could buy a tail policy for two years, five years, or indefinite. And then that will influence the cost as well. Some companies do accept payment plans for tail insurance costs, but most of them require just the entire amount upfront. So, it’s not like a tiny amount of money. It’s worth planning for that. If you’re going to leave an employer and you’re required to pay the tail, you need to anticipate that and set a little money aside. Now, a couple of ways around having to pay for tail.
Well, obviously, negotiating in advance before signing the contract and making certain that the employer covers it, that’s one way. Two, having your new employer pay your old tail, it’s called nose coverage. And so, that would almost be like a quasi-signing bonus in some way, but that would be one way around it. And then the third way would be if you’re staying within the same state, usually, but more importantly, if you’re staying with the same insurance company with your new job, usually in that scenario, if you’re going from a physician-owned group to another physician-owned group, and it’s the same insurance company, they’ll usually just roll over the policy into your new policy and that way you don’t have to pay for tail at all. Obviously, it’s impossible to anticipate when you accept a job where your next job is going to be, but those are three ways of getting around having to pay for tail insurance.
https://www.chellelaw.com/wp-content/uploads/2022/08/Blog-2-scaled.jpg14402560adminhttps://www.chellelaw.com/wp-content/uploads/2020/01/cropped-favicon-1-300x300.pngadmin2022-08-12 18:58:452022-09-25 15:19:24How Much is Tail Coverage for an Anesthesiologist?
How does tail insurance work? You’ll need medical malpractice insurance while practicing if you are a high-level healthcare professional like physicians, NPs, PAs, and dentists. And then, depending upon what type of coverage you have, you may need tail insurance. I will break down the common types of malpractice insurance and when tail insurance is necessary. And the details of when it needs to be paid, for how long, how much it costs, etc. The two most common malpractice insurance types in private practice are occurrence-based and claims-made policies.
When Do You Need Tail Insurance?
An occurrence-based policy simply means a policy must be in effect when the malpractice incident occurs. And in that scenario, tail insurance is not necessary. Under claims-made insurance policies, a policy must be in effect when the claim is made. If a provider leaves, there’s a gap between their last day at work and the day somebody can sue them. It’s called the statute of limitations. For most states, it’s two years.
There are some exceptions, but in general, two years is a good rule of thumb in this situation. Let’s say for this case, it’s two years. Suppose you leave the employer. There’ll be a two-year gap where someone can still sue you for what you did for that employer. And so, in that scenario, you need a policy that covers that gap, known as tail insurance in the industry. If you have a claims-made policy, you need tail insurance. If you have an occurrence-based policy, you don’t.
Who Should Purchase Tail Coverage?
If you have a claims-made policy, the employment contract will dictate who pays the underlying premium. Ninety-nine out of a hundred times, it will be the employer if you’re an employee and not an independent contractor. And then the employment agreement will also cover who pays for tail insurance. Now, this can vary significantly from contract to contract. If you’re working for a private physician-owned practice, it’s more likely they will be responsible for paying for tail insurance.
A physician-owned practice would rarely pay for tail insurance. I’d say maybe 75% versus 25%. So, 75% must pay for their tail insurance. In the contract, it’s going to state, alright, the physician is responsible for paying tail insurance. Let’s kind of break down the details of that. The tail policy will need to be in place before the end of the employment relationship. So, let’s say the physician gave notice, and there’s a 60-day without-cause termination. They will have to get that policy secured before the end of those 60 days when they leave.
Average Tail Coverage Cost
Tail insurance generally costs about twice what your annual premium is. This varies based upon specialty. So, if maybe your primary care, it could be around 5,000 to 6,000. Whereas if you’re an OB-GYN, it could be 40,000 or 50,000 yearly. A good rule of thumb is twice the annual premium, which you will have to pay for tail insurance. It’s a one-time cost. You’re not going to have to pay it every year. But you’ll have to pay all the money upfront to purchase the tail before the end of the employment relationship.
How Long is the Duration of a Tail Insurance?
Now, how long does tail insurance last? Well, it depends on what type of policy you bought. You can purchase one-year tail insurance, two-year tail insurance, five-year tail insurance, and unlimited tail insurance.In my opinion, it seems shortsighted to purchase short tail insurance. Why would people do that? Well, it’s just a cost. Now, I said two times is the average. But it can usually range from 1.5 times up to 3 times the annual premium. That is, based on how long the tail insurance is. And then also, how long you’ve been with the employer and that type of thing.
Determining how long you should get should be easy. It should be unlimited tail insurance; it should go on forever. You don’t want a scenario where you are not covered when a claim is made. And that could be financially crippling for a healthcare provider if they’re ultimately found guilty or must reach a settlement.
Add Tail Coverage to Negotiations With Your New Employer
Now, you can negotiate who pays for tail insurance coverage in the employment agreement. If you go to the employer and say, I’d like you to purchase my tail insurance, they may say no. One strategy we’ve been successful with is asking the employer to forgive a portion of the tail insurance cost. Based upon how long the provider has been with the employer. For instance, let’s say the physician has a three-year initial term. They complete the three years. Negotiating with the employer is one way of getting out of having to pay for tail insurance.
Another would be if your new employer pays for your old tail insurance, that’s called nose insurance. Or this doesn’t work if you’re working in the hospital network. If you’re with a private-owned practice and leave for another one within that state, they use the same insurance carrier. Generally, the insurance carrier will roll over your old policy into your new one. You won’t have to purchase tail insurance.
Now, there’s no way you’re going to know, okay, in my next job when I leave this one, whether they have the same insurance or not, but that’s another way of getting out of having to pay for tail coverage. So, that’s how tail insurance works. It just covers the gap between when you leave an employer then the last day somebody can sue you. It’s around twice the annual premium. And then you can negotiate who is ultimately responsible for covering the expenses associated with it.
What are the Types of Medical Malpractice Insurance?
What are the different types of medical liability insurance coverage? This is a frequent topic that comes up when I’m reviewing a contract. Med schools or training do not break down the different types of malpractice insurance coverage. It’s always good when talking to a relatively new physician who doesn’t understand the different professional liability insurance. To give a brief breakdown of each one. And maybe the pros and cons of each insurance policy. There are three main types of professional liability insurance policies for physicians. You have self-insurance programs from big hospital networks. Most private practices will utilize one of two, either occurrence-based coverage or claims-made insurance coverage.
3 Main Types of Liability Policies
Let’s talk about the three liability insurance. First is self-insurance. Large hospital networks usually have their policy: they’ll set aside a pot of money and pay claims out of that. In that circumstance, generally, the physician doesn’t have to worry about purchasing tail coverage. The employer’s self-insurance program covers that. This is great. It’s excellent insurance when a physician never has to worry about tail coverage. And doesn’t have to worry about paying for the underlying premium. That is a lovely, secure feeling. That’s what most large hospital networks utilize.
The next type of insurance is occurrence-based coverage. And that means an insurance policy has to be in effect when the event occurs. Any malpractice event will occur while you’re with the employer. So, you are covered in perpetuity if an occurrence-based policy is in place and then something happens. The benefit of occurrence-based insurance is that you don’t need to buy tail coverage. The downside is it costs more than a claims-made policy. A good rule of thumb is that occurrence is about a third more expensive than claims-made policies annual your premium.
So to give an example, let’s say you have a claims-made policy. It’s 6,000, then your occurrence-based coverage would be around 8,000 per year. There’s a math equation you need to consider to determine what is the best insurance policy for a physician. And I’ll get into that at the end. But honestly, physicians often don’t have a choice between an occurrence-based or a claims-made policy. It’s whatever the employer of a small business chooses to provide. That’s what the physician must go for.
Tail Coverage
The last one is the claims-made insurance policy. That means an insurance policy must be in effect when the claim is made. Suppose someone terminates a contract, and they no longer work for the employer. There’s still a gap between their last day of practice with that employer and the last day somebody can sue. That’s called the statute of limitations for malpractice claims. In most states, it’s two years. If no insurance policy is in effect if a claim is made, the physician is at risk of trouble. Nearly every employer will require one of the parties to purchase tail coverage.
Prior Acts Coverage
The need for tail coverage is simply covering that gap between the last day a physician works for the employer. And then on the last day somebody can sue them. Now, it’s two years from when the patient either knows or should have known of a malpractice incident. It’s possible to bypass two years if there’s no way for the patient to know until a few years later. I’d say most of the time if a physician is working for private practice, a small physician-owned business, group, etc. They will have to be the one that purchases the tail policy.
Some employers will pay for tail coverage. But I’d say the physician is responsible for their tail coverage more often than not. Tail coverage costs about two times the annual coverage for claims. So, if a physician has a $10,000 annual premium for claims-made coverage, you multiply that times two. That’s about how much they’ll have to pay for tail coverage.
It’s a one-time cost, so you don’t have to pay it yearly until the statute of limitations runs. It’s just a one-time cost. As soon as you finish the employer, it covers you for that amount. There can be different lengths as far as the tail coverage policy goes. Still, often the tail coverage policy will cover a reasonable amount of time until the statute of limitations is over. Somewhere between two to five years. As far as the math equation, if a physician does have their choice of insurance products, either occurrence or claims-made. Then you need to consider the period you’re willing to be with the employer. In order to lessen the risk of paying more for the professional liability coverage.
Is There a Need to Buy Tail Coverage?
If you’re paying a third more for occurrence coverage per year. But you don’t have to pay a tail. Then it might make sense to utilize that if you’re going to be there on a short-term basis. Let’s say you’re there for two years, you’re going to pay a third more for those two years. But then you don’t have this big one-time cost at the end. If you’re in a claims-made insurance policy. And you’re going to be somewhere long-term, it might make sense to use claims-made. Therefore, your annual premium with the insurance company is cheaper. But then you’ll still have that hit on the end with the tail coverage. Which one is better? It honestly just depends upon the situation. And then indeed, it depends upon specialty.
The annual premium can vary wildly. Primary care, peds, or something that could be 6,000 a year. Whereas OB-GYN, one of the higher-level surgeons, cardiac surgeon, etc. could be between 20,000 to 50,000 a year. And then do the math on that tail coverage cost. It could be forty to a hundred thousand for their tail coverage. It’s specialty-dependent as well. This certainly is something we negotiate as it can take great resources from a physician. When we’re looking at a physician contract, you always must consider, okay, what’s most important to me. And then what areas can we work on. More comp, more time off period, better bonuses, whatever. But who pays for the tail insurance product is an essential piece for most physicians. Especially the ones in those higher-end specialties.
Physician recruitment agreement forgivable loans explained. Primarily, hospitals use these for people just coming out of training. How a recruitment agreement works is the physician would have an employment agreement with a private practice within an area. Then, the hospital would supplement the first-year compensation of the physician if they stay within the area for some time. I know it might be a little complicated, so let’s break it down. The employment contract with the employer will dictate the employment relationship between the parties.
What are “Physician Recruitment Agreements?”
Some practices couldn’t afford to compensate a physician at the very beginning completely. And so, the hospital may need that specialty in the area, but they don’t want to employ that physician themselves. They might say, if you bring in this physician in this specialty, we’ll cover their first-year expenses plus some bonuses. In the recruitment agreement, it may state, “We’re going to give you a signing bonus. We’ll be helping with relocation assistance, and then cover a certain amount of compensation for the entire first year.” Let’s say you’ve got a primary care physician, and they’re making 200,000 a year. The hospital would say, alright, we’re going to supplement 200,000 for that first year.
And then they’ll offset that by whatever the physician brings in. They’ll cover the practice’s expenses as well. And then at the end of that year, there will be an outstanding amount of money.
How Physician Loans Work
And that amount is going to be kind of thought of like a forgivable loan. And as long as the physician stays within that geographic area of the hospital. The recruiting agreement will say, as long as you stay within these zip codes, we’ll continue to forgive the loan. There’ll usually be a one-year income guarantee period for compensation, and then there’ll be a forgiveness period after the fact. Usually, it’s three to four years.
How they usually would do it is they’ll take that amount. In this scenario, the total amount with signing bonuses, relocation assistance, base salary, and practice expenses is 300,000. And it’s a three-year forgiveness period. They’ll say, alright, for every month you’re here, we’ll forgive 1/36 of that 300,000. If you stay in the area practicing for three years, we’ll forgive that amount at the end of that period. You do not owe us anything. Then you’re free to move on and do what you want.
Why Would a Physician Sign a Physician Recruitment Agreement?
Now, why would doctors sign physician’s recruitment agreements? Well, during recruitment, I would avoid it if possible. But there are some jobs that would only exist if supplemented in some way by the hospital network. And so, you need to say, is the practice just doing this not to have to pay me? And I will not tell the practice that they’re doing something dumb. They’re not, they’re being smart about the business. Why wouldn’t they accept supplements? Why would they say no, we’ll pay everything, when they could have a hospital cover many of the fees.
The Downside to Physicians in Signing Physician Loan Agreements?
The downside to the physicians is several things. One, they will ultimately be responsible for the outstanding amount at the end of the initial income guarantee period. And let’s have a scenario where they have a non-compete in their contract with the employer. Still, the recruitment agreement states they must stay within a geographic region to forgive the outstanding amount. They could be completely limited in their options if they have a terrible non-compete in the employment agreement.
Ideally, the hospital would require the employer to remove any non-compete language. I’d suggest making sure that happens. And you need to press the hospital network to press the employer to remove that language. If you go to the employer and say, I’d like that removed, they may say, no, we’re not doing that. If the hospital insists that the employer remove that type of language, you need to tell the hospital. Therefore this needs to happen. They will much more likely remove them if the practice requires a physician. Still, they don’t want to pay the entire amount of compensation and bonuses at the beginning. It’s likely worth it for them to remove the non-compete to get supplemented with all the things I just mentioned.
If you have physician recruitment forgivable loans, you get the non-compete removed from the physician’s employment contract. Because if you’re in a rural environment, there aren’t that many opportunities in your specialty. And you did have a non-compete, maybe there are no opportunities for you. It would be impossible for you to work out that three-year forgiveness period. You’re stuck with a significant amount of money.
There is interest in that amount as well. They’ll likely have you pay it back immediately and fully as soon as you’re no longer practicing within that region. So, that’s something physicians must be cautious about. And then another one is, every job looks great at the beginning, right? Everyone is nice, the huge growth opportunity, but it may not be as nice when you get there.
Other Issues to Think About
There may be problems that there’s just no way of knowing about in the interview process. You may come into a job and think, oh man, this isn’t gonna work for me. If you’re under a recruitment agreement, it could cause big problems for you. One, getting out of that job or two, paying back significant amounts of money. I would be cautious about signing a recruitment agreement with a hospital network without really thinking about it. Is this the absolute place that I want to be? Do I have other opportunities elsewhere that won’t require me to sign a recruitment agreement? It’s an arduous process. When I’m going over physician’s contract agreements with someone who just had training, they generally don’t know about these things.
When adding a recruitment agreement on top of an employment agreement, it’s like information overload for physicians. Sometimes, it’s difficult to convey the dangers of signing something like that. It’s probably infrequent. The contract agreements that I review containing or having a recruitment agreement attached is perhaps less than 10%. I’m not saying this is a terrible opportunity. As I said, some jobs may not exist if the hospital doesn’t supplement them for the first year. And they can become tremendous opportunities.
But you always must look at, alright, what’s the worst-case scenario in this situation? The worst-case scenario is someone signs a contract, starts a job, hates it, gets out, and owes 200,000. I can tell you if you’re just out of training, you’re not going to have, at least not immediately. So, that’s a breakdown of physician forgivable loans. I would suggest talking to somebody, an attorney, about each document before you sign anything. Especially Physician Loan Agreements or Physician Recruiting Agreements. Honestly, be careful if you’re going to do both and find somebody with expertise in doing this. To get a set of eyes on it and kind of walk you through the dangers of it.
Are Physicians Eligible for Student Loan Forgiveness?
Are physicians eligible for student loan forgiveness? In my mind, there are three main ways that physicians can have their loans forgiven. Or at least a portion of their loan forgiven. The first would be if the employer simply agrees to pay a certain amount directly to the physician’s loan provider. The second would be if they’re part of the public service loan forgiveness program. Which is where they work for a federal entity for a period, generally out of training. And then third would be if there’s a state program.
Not every state provides a loan forgiveness program, but many states do. Normally, it would be in rural areas that are hard to recruit. And the state would then pay or forgive a certain amount of whatever their loan was. If the physicians stay in the area practicing their specialty for a set amount of time.
Hospital Networks Loan Forgiveness Programs
Let’s just take each one individually and go through some of the things you need to think about. First, it would be with the hospital or hospital network. You are very rarely going to see any kind of loan forgiveness if you are joining a private physician-owned practice. It just simply does not happen. Say you enter loan forgiveness with a hospital or hospital network. It’s usually situated like this: they’ll say, we’ll pay this amount to your loan provider directly.
And as long as you stay employed with us, there’s no repayment. There are a couple of ways to situate it. The first would be if they just give a lump sum upfront. Normally, the loan forgiveness would be somewhere between 50,000 to 150,000. Then if they give a lump sum upfront. The hospital would forgive over time. Say they give you $150,000 for loan forgiveness, and then you leave after six months. You’re going to have to pay back a large portion of it.
It’s usually tied to the term of the agreement, sometimes beyond it if it’s a significant amount of money. Let’s say you have a three-year initial term. They’d say, for every month you’re there, we’d forgive 1/36 of the loan that the upfront money we gave you. That’s a normal way of doing it. Another would be, let’s just say it’s $50,000 stretched out over the term. And it’ll just state every month, we’ll pay directly the 1/36 of 50,000 is to your loan provider. That’s good in the fact that physicians wouldn’t ever have to repay anything which is annoying. And there are some tax implications as well. So, those are the two main ways of doing it.
Student Loan Forgiveness in a Big Hospital Network Setting
If you’re with a hospital network, they’ll just pay you a significant sum of money upfront. Then you use that to pay off a portion of your loan. Or they’ll just pay a certain set amount over time. Suppose they were going to pay you 150,000. They may do 50,000 at the end of each year of the initial term of the contract. So, after year one, they’d pay 50,000 to the loan provider after year two. That’s another way of avoiding having to pay anything back. And I would suggest doing it that way.
Eligible Students: Public Service Loan Forgiveness
The next one would be with the public service loan forgiveness program. Briefly, this is if you become employed through the federal government. And then staying employed for ten years is the amount then they will completely forgive your student loan.
The downside to that is you’re usually going to make less, so your compensation is going to be below market. So, you may need to do a cost analysis. Say I’m making $50,000 less a year over the course of 10 years. Could I have just taken a normal position, made more, and then paid it off in the end? Depends upon the situation. But that’s kind of the thinking that you need to go through. Ask, alright, which one ultimately would I make more money or have the forgiven faster?
Lastly, as I mentioned, if there’s a state program. Some states will provide, once again, usually somewhere between 50,000 to 150,000. And they’d say, if the physician was working within a certain area for a period, they’d forgive whatever set amount.
Loan forgiveness is rarely provided. It’s not a common thing. If you’re joining a private physician-owned group, it’s exceedingly rare you’d get any kind of loan forgiveness at all. Obviously, it’s a great perk to a job. Plenty of physicians I assist then seek out those jobs and get through the initial three-year term. Have a bunch of their loans forgiven. And then move on to whatever city that they ultimately want to end up in. That’s a smart way of doing it. So yes, physicians are eligible for loan forgiveness. It generally will not be the entire sum. It will be a decent portion of it. But if you kind of look for those specific jobs, you certainly can find opportunities for that.
Loan Repayment: Do Hospitals Pay Off Student Loans for Doctors?
Do hospitals do student loan repayment for doctors? If a doctor gets a job with a hospital or healthcare network, can that organization pay off their student loans? Well, the answer to that is yes, they can. The better answer is how often do they do that? And then how is it structured? I would say it’s rare for any organization to agree to pay off student loan debt for physicians. I’d probably say less than 20% of the contracts I review include student loan assistance. And then also, there is easily a cap on how much the organization is willing to pay. I will say 150,000 is probably the max that I’ve seen.
Length of Forgiveness for Loan Repayment
Usually, it’s somewhere between fifty to a hundred thousand. Let’s kind of talk about how that is structured. It’s usually one of two ways. Suppose a physician signs an employment agreement with the hospital or network. There will be language in there that says, we will provide you with this amount of student loan assistance. And in that case, normally they are just providing a check and then they pay off the loans.
The organization will pay an amount directly to whoever the physician has a loan with. The two most common ways it’s done is, that the organization will simply cut a large check. So a hundred thousand dollars. And then they will just pay that directly to the loan provider. The physician then has to stay for a period, or they’d have to pay back an amount of that money.
I would say a normal amount would be anywhere between two to four years for forgiveness. And then how the hospital would forgive it, let’s just say it’s four years. Every month that the physician stays with the employer, 1/48 of that student loan forgiveness would then be forgiven. This means that 1/48 of 100,000 would be forgiven every month. And then they would work until it was completely gone. That’s one way of doing it.
Other Things to Think About
The other common way of doing it is that the employer will just set a standard amount. Once again let’s say it’s $100,000. They’ll say, over three years, we’ll pay 1/36 of that $100,000 each month directly to the loan provider. The benefit is that the physicians don’t have to worry about paying anything back.
The downside to that is with interest. It just makes sense to get a big chunk up front and pay it all off. And then the principle that interest is being drawn from is much smaller immediately. Now, if a physician goes into a job and they’re not certain they want to stay there for a while. Or they may leave after a year or two. Then it won’t make a lot of sense to take a huge lump sum upfront and then must repay it. There are some tax implications with that. I mean, it’s kind of a mess, so it depends upon the physician’s situation. If they’re certain they will stay in the community, there’s no way they’ll leave. Getting that big lump sum upfront makes complete sense.
Federal Provider Can Help With Student Loan Repayment
If someone’s iffy than the other, the monthly amount provided to the loan company would be a better option also. You can certainly ask for loan forgiveness. It’s very unlikely if the medical practitioner gets a job with a private physician-owned group, that they’ll get student loan assistance. That’s just reality. Most of the time that student loan assistance is provided is from a hospital or a healthcare network. So, that’s one thing to think about regarding student loans.
There are also some benefits of working for a federal program. You have the PSLF, Google that and I’ll go through that in a later video. But working for a federal provider is another way of getting all of your loans paid off quickly. Well, not quickly, but a better way of getting your loans paid off. In summary, do hospitals provide student loan assistance? Yes. There are different ways of doing it. Do they do it very often? No, especially dependent, but hopefully, that’s kind of a little rundown of how it works.
What Is a Stark Service Area?
What is a Stark service area? The definition is so that a physician can better understand the repercussions of signing a recruitment agreement. And whether they’re eligible to sign one as well. First, most recruitment agreements I find are for newer physicians. Either they’re just coming out of training or have been out for a year. And then the basis of the recruitment agreement. And the exception allowing a hospital to supplement the medical practice with money to bring in the physician. I’ll just read what those are. There must be a documented need in the area for the physician specialty. It must be in writing.
The physician must relocate their medical practice to the area. What is the area itself? It must be the geographic region that the hospital serves. And in this case, it should be the lowest number of contiguous zip codes. From which the hospital draws at least 75% of its patients. That means that in the recruitment agreement, there will be an attachment. It will just have a bunch of zip codes. And depending upon where it’s at, it could be 40 different zip codes. In some bigger cities, it could just be a couple. What those zip codes mean is that the physician has to relocate their practice within those zip codes. Then they have to provide care to the people within them.
How Do Hospitals Supplement?
And that grants the exception of how a hospital can supplement the medical practice that the physician is joining. How do they supplement? Well, it’s generally through an income guarantee. The hospital will guarantee that the physician will receive a certain amount each month. They can reimburse overhead expenses, signing bonuses, relocation expenses, and student loan assistance. There are several ways to supplement a medical practice. But the service area and medical practice must be within those zip codes. I guess the main thing to consider is that suppose the physician decides to leave the medical practice. They can continue to stay within that stark service area and not have to pay anything back to the hospital. How the recruitment agreement works is they will provide a certain amount of money, and it’s generally the first year, the income guarantee period.
And then, as long as the physician stays within that service area for several years, it’s three or four years. Which is called the forgiveness period. If you stay within that community for that period, the employer will forgive what the hospital paid in year one. Usually, it’s a monthly fraction. So the hospital would forgive 1/36 of that loan monthly if it’s a three-year forgiveness period. Suppose the relationship goes south with the employer within those contiguous zip codes that serve 75% of the patients. Now, there are two exceptions. There are some exceptions for rural communities. And to residents who’ve been training within the area where this may not necessarily apply. They don’t have to move into the area, but I won’t get into that right now. If the physician wants to end the agreement and stay within the area, they don’t have to pay anything back.
A Couple of Considerations
There must be an analysis of a few things before a physician signs a recruitment and employment agreement simultaneously. One, there shouldn’t be a non-compete. Most recruitment agreements will list that there can’t be a non-compete between the employer and the physician. Let’s say there’s a broad non-compete. 30 miles from the primary practice location and all the zip codes are obviously within 30 miles of the hospital. The physician won’t have the opportunity to stay within the area.
That’ll force them out. And they may be on the hook for having to pay back the amount that’s still left on the loan. First, the physician needs to make sure that there’s no non-compete. Or maybe a very reasonable and small non-compete where they’d have other opportunities. Another analysis we must do is, are there other opportunities in that area if the physician were to leave? In smaller communities and certain specialties, only one practice does that. So, if a physician wants to stay in that service area, is there another practice to go to? Do they have alternatives? The worst possible thing that can happen to a physician is when something happens with the original employer. They don’t have an opportunity to get a job within the service area. Then they owe hundreds of thousands of dollars to the hospital.
There should be joint and several liabilities between the medical practice and the physician. That’s another thing to also look at. Hopefully, that’s a good analysis of this stark service area. These are tricky. If the recruitment agreement is the sole reason why a job is available, certainly it’s an excellent opportunity. But these do not always end well. And they present some real challenges if the relationship goes south with the employer, so we need to be careful.
Here are some contract tips and new things to consider when negotiating an employment contract for a surgeon. In this scenario, let’s just take employment contracts. So, either you’re coming out of training, or perhaps you’re thinking of switching jobs, and you’re offered an employment contract. What are the areas you should be concerned about? And then maybe some areas in which you have more leverage than others.
Signing Bonus, Relocation Assistance, and other Bonuses You Can Get
The first thing you should think about is the bonuses. In almost any contract for a surgeon, there’ll be a signing bonus. And then if you are moving to a new city, town, wherever, they should pay for your relocation as well. We’ll call that relocation assistance.
So, you’ll have a signing bonus, and in addition, you’ll have relocation assistance. Now, how much is the normal signing bonus? Well, it depends. Anywhere between 20,000 to 50,000 would be a normal signing bonus. And then as far as relocation assistance, usually, somewhere between 10,000 to 15,000 would be considered a reasonable amount. If you are not getting that much for either one, that’s something you need to negotiate to improve.
Some employers will try to lump it all into one. So, take that into account, just add them together. But that’s the normal range for a surgeon. Obviously, there can be more. Some places like if you’re maybe entering with a rural hospital network, they might offer some student loan assistance as well. And there are some student loan packages that can reach 150,000. Now, there will be a period that you have to stay with the employer in order to get all of that money or have it forgiven and not have to pay it back.
But there are beyond the signing bonus and the relocation assistance. Some physicians also get student loan repayment as well, and that’s mostly for people just coming out of training. You’re not going to get that if you’ve been out for a while.
Negotiating Compensation Structure
Alright, next, you need to think about the compensation structure. Is it just the base salary? Is it RVU production if you’re in a hospital network? Or is it net-collections if you’re with maybe a private physician-owned practice? You need to determine your fair market value, and there are a couple of ways of doing that.
MGMA Data and Your Colleagues
One, talking to the people you’re in training with and seeing their offers, talking to your mentors and seeing what they’re making out there, and trying to find the MGMA data. The medical group management association is kind of the industry standard for compensation amongst different specialties for physicians. Getting up-to-date MGMA data is difficult unless you have direct access to it and pay for it. You could probably Google and find some year or two old data, but very unlikely you’re going to find the most up-to-date data on your own, but that is helpful even if it’s a year or two old to see, alright, well, what’s in a normal range.
You can also find beyond total compensation, average RVU production per year, per specialty, and average net-collections per specialty as well. So, you need to find that out. Now, is one compensation kind of calculation better than another? Not really. If you’re in a hospital network, it will likely be RVU production. If you’re in private practice, it will likely be net-collections. Or, if there is a productivity model involved, one is not better than another.
Net Collections
If you’re on net collections, it’s going to be a percentage of what the net collections you bring into the practice from your personally performed services are. That percentage can certainly change. If you’re on pure net-collections, it’ll be somewhere between 35% to 45%. If you’re on maybe a hybrid of like half guaranteed base and then half productivity, it might be somewhere between 15% to 25% of your net collections. Just kind of depends.
RVUs
And then RVUS, very simple. You just multiply the amount of RVUs you produce per year, quarter, month, and then multiply those times by a conversion factor. You can find that in the MGMA data as well. That is dependent upon specialties. The different subspecialties of surgery will have different comp factor numbers. A way of negotiating is trying to find what is fair market value and whether you’re getting it or not with your new job.
Strategies in Insurance Negotiation During Contract Negotiation Process
If you have a claims-made policy, will they pay for tail insurance? If you are joining a hospital network, they’re likely self-insured or have a policy where you will not have to pay tail insurance. They will likely have claims-made coverage if you’re going into a private or smaller physician-owned practice. And it’s also very likely they will expect you to pay for your tail insurance.
Tail insurance covers the gap between when you leave an employer and the last day somebody can sue you. And as far as tail costs, it could normally be around twice your annual premium. Surgical specialties can really, I guess, vary based upon what you’re doing, but it could be anywhere from 12,000 up to 30,000 a year. So, if you double that, that’s a good range of what you’d have to pay for tail insurance. Tail is a one-time payment; you don’t pay for it yearly. It’s just a one-time payment. Then you’re covered for what the length of the tail policy dictates.
Get the Employer to Pay for Tail Insurance
Getting the employer to pay for your tail is important for most people with a claims-made policy. Probably 75% of the physician-owned practices make the employee pay for it. If they’re not willing to pay for your entire tail, one strategy we’ve been successful with is telling them, let’s say a three-year initial term, then you would say, alright, for every year that I’m here, you would then chip in one-third of the cost for tail insurance.
And if you finish out the first three years, then the employer would pay for the entire amount of your tail policy. You can also get out of paying for your tail insurance if your new employer pays for your old tail. That’s called nose coverage. Or, if you stay with the same insurance company at your new job, they’ll usually just roll over your policy into a new one, and you wouldn’t have to pay tail. And then the last thing I’m going to talk about as far as things to think about when you’re negotiating is the non-compete. This is important, especially for surgeons.
Tips About Non-Compete in Contract Negotiation
There are two components to a non-compete. You have things you can’t do while the contract is going on. That’s usually called either exclusivity or outside activities. And most of the contracts will state you have to get written approval if you want to work or practice medicine at all for anyone else during the term of your agreement.
Now, many surgeons will want to do moonlight, locums, or maybe just say they are plastics, but they’re working for a children’s hospital just doing hands. They may want to do and keep up their skills doing adults or other types of general plastics. And so, they want to make certain that their employment contract will allow them to do that. I mean, you wouldn’t want to be prohibited from keeping up your skills somewhere else. But most employers are strong with requiring approval. So, you want to get that approval in advance. Just say, if I do this, and if it doesn’t interfere with my job duties with you, am I allowed to do some of this outside stuff on my off time? And the employer should say yes in that scenario.
Now, regarding the non-compete after the contract ends, you need to think about, alright, well, what is the specialty that’s stopping me from doing? If you’re a general surgeon that says you can’t practice general surgery, that’s what it’s going to say. But once again, for other specialties that can do multiple things, you just want it to be specific to what you’re doing for that employer. And then it will be for a period, usually between one to two years. Try to get it to one year.
Geographic Restrictions of a Non-Compete
And then lastly, the geographic restriction will vary widely based on where you are. It’ll probably be a little bit less if you’re in an urban environment. Somewhere between 5 to 10 miles would be considered a reasonable amount. I’ve seen contracts trying to knock a surgeon out of every contiguous county, which could be a huge geographic radius or 10 miles from every facility their employer owns. And they could own dozens of them in a city. You want to limit it to the places you’re practicing, like your clinic location, surgery center, and hospitals where you perform procedures. Try to limit it to the fewest possible. And then try to really squeeze down that mileage radius as well. For some people, a non-compete is the biggest deal.
If you have family in town, kids in school, whatever it is, there’s just no way that you could move after, or if your employment ended. That could be the biggest negotiating point with an employer. Some people who move into a city for a specific job have no ties to the area and do not care because they will move as soon as the contract ends.
You must determine what’s the priority level for you. So, those are just four things to think about. There are dozens of other things that could go into a contract. I don’t have time to go over every one of them today, but I’d say the four that I went over are usually the four highlights I hit with every physician when discussing their employment contract.
How do you negotiate a physician contract? What are the goals to consider during the contract negotiation process to win the terms of the negotiated agreements? So in my mind, there are three different scenarios. One, you’re either just coming out of training. Two, you’re switching jobs to an area of the country that you’ve never been to before, or three, you’re moving from somewhere within the area where you already live. So negotiation is always based upon leverage. Do you have it or do you not? So let’s just take coming out of training, for instance. For the most part, in negotiating job offers, the only leverage someone has when they’re coming out of training is in a specialty that’s hard to recruit for? I mean, that’s just the honest truth.
Negotiating a Contract by Physicians
You are not bringing in any established PA patient base. You’re also all relatively new to being out on your own. So, a learning curve will go into moving into any position. Consider this, if you are either in an area that’s very difficult to recruit that could apply to any specialty, or you’re in a specialty that’s all to bring in and is super profitable. Those are two things to consider.
When you’re looking into it, how do I negotiate the terms of the contract? And when people say negotiate, most of the time, they think about the bottom line, what is my base salary. But I think that’s kind of a narrow mind. And this will apply to anybody looking for a job. There are some other goals to consider during contract negotiations, at least in my mind, things that are more important than just the base compensation. One, what are the terms of the restrictive covenants?
Non-Compete is Important to Most People
My advice if someone lives in an area, they have family in the area, they have kids in the area. They absolutely cannot move after the contract ends since they will have to also think about things related to moving – like the schooling of the kids, or your wife’s job, or if they are also running a business. Sometimes, the non-compete could be the most important thing in a contract. A non-compete says you cannot practice within a specific area for a period.
Negotiate Tail Insurance
Another important piece is, who pays for tail insurance. Depending upon specialty, this could be an enormous part of a contract. If you’re an OB-GYN and you have to pay for your own tail and your underlying premium is $40,000 a year, your tail insurance cost will be higher compared to other specialties, probably going to be around 80,000. So, who pays for tail insurance certainly could be the most important thing in an employment agreement during a contract negotiation for an OB-GYN.
Employer Practice Negotiations
My advice if you’re being paid on production. Let’s just say you’re in a contract that’s just pure net collection. An average range for a physician is 35 to 40% of collections. Is there language in the contract that states that when the contract terminates, you will be able to collect for a 60 to a 90-day window after the contract terminates? If you don’t have that, then you literally worked for free for two or three months, which nobody obviously wants to do.
Going back to what is important, it depends upon the person what his goals are. Having the numbers is important when you’re looking at base compensation. They’re not always easy to obtain. Most places or the majority of the places use MGMA numbers. That’s a medical group management association. Most of the time you have to pay for that, and it’s expensive. So no physician, at least most physicians are not gonna do that.
You could either find someone who has access to those numbers and try to get them. Or if you kind of Google around on the internet, sometimes you can find them, the average, our view production, average compensation. It is broken down into areas of the country. I honestly don’t think those are accurate when it comes to determining exactly how much in what part of the country. There’s just a feel for what someone is getting in this area, but then you also have to consider all the other things I just said. If someone has a base that’s $10,000 less, but employers will not make you pay for tail insurance, or the non-compete is extraordinarily small, that’s worth way more than $10,000 in some instances. That are kind of a few factors during contract negotiation to think about.
Physician Employment Contracts
If you’re just coming out of training, let’s say you’re established in the community, either you’re a primary care PE, it’s cardiology, you have an established space, and you’re just moving into a new practice. Well, this is the highest leverage you can have during contract negotiation. There’s gonna be no, or at least there shouldn’t be a lot of time needed to ramp up the practice. You’re just bringing people with you. Plus, when you have numbers in a community, these were my net collections, or these were the RVs I produced, or these were the patient encounters I had on a weekly basis. Those are absolute hard numbers that you can use to negotiate compensation terms, moving to a different practice.
In that case, you have the highest leverage possible. Then obviously, you can negotiate all the ancillary things I’ve already spoken about. The last thing would be, if you’re moving, you’re out of training, you’ve been in practice for a while, and you’re moving from one city to another, you don’t have an established patient base, that takes away some leverage. There are two factors that kind of work for you for your contract negotiation strategies.
One, are you moving to an area of the country that’s difficult to recruit to? Very rural communities certainly pay more simply because it’s harder to find physicians in certain specialties to come and make them move and live in those areas. Or two, if you’re in a specialty that is just simply hard to recruit to or extremely profitable. So obviously, surgeons are difficult to find, or some of the other GI subspecialties are always difficult as well.
Doctors Can Negotiate Effectively
If you’re moving to a different part of the country, then the same analysis applies to some kinds of training. However, you have the benefit of having some numbers of what you produced in your previous position. You can tell them during your contract negotiation that this was the net collection that I generated in my last position. Now, it doesn’t always translate from one state to another or one situation to another, and maybe you’re going from private practice into an employed group.
But having any kind of data to back up what your production was is essential during contract negotiation in determining your new total compensation in a new position. So, those are some tips on things to think about. I mean, honestly, just doing this video, I can think this could be broken down into ten different videos, but this is just kind of an overview on negotiating.
How to Negotiate a Physician’s Salary
How to negotiate a physician’s salary? As an initial matter, I don’t personally believe that the salary should be the driving factor in a decision for a physician. Now, clearly, if 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, a good team.
I think all 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, well, what do I do? How do I get a better salary during contract negotiation? How can I make them offer terms that are in my goals in the hiring process? There are a couple of ways of doing it during contract negotiations.
Know Your Worth
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, I would say, probably the industry standard as far as compensation numbers go, but 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 kinds of quadrants have different salary numbers associated with them.
Potential For A Partnership
But just the base salary could be great or not be great depending upon if there’s productivity compensation in the agreement as well, or there’s potential they can offer partnership. So, there are many scenarios where a physician is out of training, and they’ve given a two-year, three-year agreement. That’s probably below what’s a reasonable or average amount for someone just coming out of training, kind of with the carrot on the stick of, well, if you take below market for these two or three years, then 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.
MGMA Numbers
Now, as far as the MGMA numbers go, they are kind of hard to find. I mean, you can Google around and find, I would say, data from maybe a year or two old. I found that people are relying on 2020 numbers. They’re completely screwed up 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 to compare the contract offer. 2019 is probably the safest and most reliable number that we have right now. 2021 hasn’t been released, at least at this point while I’m making this video yet. So, Google and read around. You can try and find some numbers to help you with negotiations, but I’d say the best tactic is to go out there and find multiple job offers and see what you’re being offered initially.
Colleagues in Training
And then also, anyone in training has other people in their specialty that are also looking for jobs. Reach out to your colleagues, and talk to the people you’re in training with. What have you been offered? Where have you been offered this?
Cost of Living the Area
One difficult thing is that some people automatically think that they’re in a high-cost city and that they’ll make more, but have not considered other factors, like a higher cost of living. And that’s just not the case. It’s almost the opposite. If you’re looking for a job in a city that’s kind of a desirable location, usually the salaries, 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’re surprised sometimes because the salaries may not be adjusted to the cost of living of the area, California as well. If you’re in San Diego or LA or even in San Francisco, the cost of living is very high, and the housing is very high, but the salaries are not commensurate with that. You need to be aware that just because you’re in a bigger city with a higher living cost doesn’t mean you’ll be making more. It’s the opposite, really.
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 you need to look in the smaller cities that are simply difficult to recruit to. You will make more money on average if you’re going to go to a small rural community. That’s a fact.
Negotiating Numbers
Once you have a number in mind, what do you do with the employer? You ask them for more.
If you’re being offered 300 and you want 325, you don’t ask for 325. You ask for more than that. So, if they offer 300 and you want 325, then ask for 350, just kind of easy arithmetic, try to meet in the middle. Now there is a point where you will look either greedy or potentially just kind of dumb if you’re asking, if you’re offered 300, and you’re asked for 450, they’re going to say, well, that’s ridiculous for, it may even yank the offer.
You need to know your value, and then specialty is also a big part of what kind of leverage you have. Any kind of contract negotiation is based on leverage. Do you have it, or do you not? You simply have more leverage if you’re in a specialty that’s hard to recruit to or is 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. If you’re switching jobs in the community and bringing your patients with you, then you’re worth more than someone who’s coming into the community, like peds or primary care, that must build up a patient base that takes time.
Summary
Those are tips on getting a better salary and where to start. Contacting an attorney and trying to maybe get a feel for the area certainly might be helpful. It’s fairly specialized in people that just focus on physician contracts. It’s possible you won’t find somebody in the area you’re looking at, so maybe do a wider search for that. But anyway, the last point is that some employers simply will not negotiate. They’ll say it’s a take-it-or-leave-it offer, and you’ll then have to be willing to walk if you’re unhappy with salary, but there are simply people out there who say, no, we’re not negotiating.
This is what we’re offering, 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 it’s an offer that you’re unhappy with, you need to be willing to walk as well. It’s never a good feeling to accept a deal that you think is well below what your value is. Don’t just accept that because you need a job. Find the right job.
