Physician Contracts Negotiating Tips | Hospitalist Contract Negotiation

Do you want to know how to negotiate hospitalist contracts? I have some good and some bad news. The good news is that there are certain areas within the employment contract that a hospitalist can negotiate. The bad news is that one of the main areas where it’s difficult to negotiate is the base salary or hourly rate. There are two ways a hospital can be staffed. Either the hospital employs them, or there’s a staffing company/physician group that contracts with that hospital to staff the hospital with hospitalists. I find that most companies want to keep the rates standard, especially if there’s an hourly rate involved. I mean, the variables for any hospitalist job are the base salary. And the shift expectations per year, month, or hourly rate, usually with the shift differential.

Main Areas of Hospitalist Employment Contract That You Can Negotiate

When the hospitalist negotiates, the company will typically push back and say, “Look, we want to keep the rate standardized.” The physician is going to talk. There will most likely be friction if one person makes $20 more than another. So, suppose it’s an hourly rate position. In that case, getting the organization to move off that is challenging. Contract negotiation can be complex in this case. Some movements and contract agreements are reachable if it’s just a base salary. However, there will be a narrow range of what the action could be on a base salary. 

And then, as long as the shifts are required, they can move them. In some places, the longer the physician has been with that company or hospital, the more their expectations may change over time. And that’s a place that we can sometimes negotiate. 

The areas of the employment contract that you do have some movement on would be:

• The signing bonus
• Relocation assistance 
• Non-compete scope
• Nose coverage
• Whether they pay for your tail when you’re leaving

What Is a Fair Signing Bonus for a Hospitalist?

I’d say those are the main areas where there is some movement. Now, how does a physician determine what’s a fair signing bonus for a hospitalist? Well, it depends on who you are in the country. Suppose you’re looking into a facility that’s in a difficult location to staff. More rural communities without large cities around them are always harder to staff.

That’s just the reality. And so, the hospitalist has more leverage in asking for a higher signing bonus. Some communities will not only provide a signing bonus. But they can also offer student loan assistance where they’ll pay a particular portion to the company that has the student loans. Usually, that can be substantial, somewhere between fifty to a hundred thousand. But as far as the signing bonus goes for a hospitalist, I’d say anywhere between 10,000 and 50,000 could be a normal range. And then you certainly want to ensure that the organization is also paying for your move.

Can The Bonuses Be Negotiated?

One thing to keep in mind, especially for hospitalists coming out of training, is that the timing of those bonuses can be negotiable as well. You’re in residency, and you don’t make a ton of money. Some people don’t have $15,000 to put down for action because, most of the time, they’ll state that they will reimburse you. One of our negotiating points is having them pay the cost directly to the moving company. And have them provide the signing bonus upon executing the document and signing it, and not just when the hospitalist starts the job. A non-compete can be necessary as well. Now, if you’re in a one-hospital town, a non-compete has almost no effect on you because it needs to be reasonable. Something reasonable is usually somewhere between 5 to 15 miles and one year. 

But if you’re in a large metropolitan area, and you want to stay in that city, decreasing the radius of the geographic restriction certainly is something that we would look to do as well. And then, as I mentioned before, with malpractice insurance, sometimes you can work on if the organization provides tail insurance or not. A good rule of thumb in tail insurance is that it’s usually about twice your annual premium. For hospitalists, it’s probably somewhere between 7,000 to 10,000. So, your tail insurance cost would be 14,000 to 20,000, something like that. So, is it possible to negotiate points in a hospitalist contract? Obviously, yes. Getting any movement, base salary, or maybe a little action is strict. Still, the signing bonus, and non-compete, which pays for tail insurance, are the areas that I think you should focus on.

Other Blogs of Interest 

• Family Medicine Contract Negotiation Tips
• What Can You Negotiate in a Physician Contract?
• Physician Offer Letter Negotiation

What Can You Negotiate in a Physician Contract?

What can a physician negotiate in an employment contract? The short answer is everything. It ultimately depends upon the willingness of the employer as to whether they’re willing to negotiate terms or not. Extensive hospital networks are less likely to change an employment contract agreement significantly. Unlike if a physician is looking into a physician with a smaller physician-owned practice, there’s much more leeway for significant changes. What are the things that are important to the physician, and then what are the things that they can get changed?

In my mind, when I’m talking to a physician, the things that stick out as the most important would be:

• The signing bonus
• Relocation assistance
• How to terminate the contract agreement
• Make certain there’s without-cause termination that’s a reasonable length
• Compensation
• Productivity bonuses
• Non-compete
• Tail insurance
• Who pays for tail insurance if it’s a claims-made policy?

Physician Contract Negotiations

Let’s go through each of those and come up with some tips on negotiating. First, as far as compensation goes, the physician needs to know their and their specialty’s value. Getting the MGMA data is helpful. It is beneficial to talk to colleagues about what they’re being offered or what they’re currently making in different organizations. Sometimes, the associations for each specialty can provide information on your specialty’s average salary. That’s one way to look at it. As far as productivity goes, this is a little more difficult. It’s going to be completely based upon, I guess, the arrangement. Is it kind of a hybrid between a base salary and RVU production? A base salary and net-collections? Is it all RVU? Is it all net-collections?

This one is dependent upon the type of structure. You’re getting a base plus a certain amount if it’s net-collections or a hybrid model. Let’s say. For instance, the expectation was 20,000. Anything collected is over 20,000 by the practice, and the physician will get 15 to 25% of that. That would be a standard percentage. If the physician is purely on net-collections, around 40 to 45% is average. As far as RVUs go, there are two things you can negotiate: the threshold, meaning how many RVUs you must generate to get a certain amount, and the compensation factor, which is the monetary value associated with the RVUs. That has some leeway as well. Regarding signing bonuses and relocation assistance, the main things are the actual number, obviously, but more importantly, what’s the repayment schedule? 

Forgiveness Period in Physician’s Contract

Almost every contract is going to have a forgiveness period. Let’s say the physician gets a $20,000 signing bonus, and the initial term of the contract agreement is two years. Usually, they’ll have to stay for that initial two-year term to have the entire $20,000 forgiven, so they don’t have to pay anything back. The same goes for relocation assistance. Between $10,000 and $15,000 should be the cost of relocation assistance. The signing bonus can vary widely from 10 to 75. That one is specialty-dependent. As far as non-compete goes, this does vary state by state on what’s considered reasonable. There are a few states where it’s wholly unenforceable; California and Mexico, for instance. Usually, the non-compete shouldn’t be any longer than a year. The geographic restrictions should be 5 to 15 miles from your primary practice location. Where to negotiate with this?

Terms That Matter for Physician Contracts

You want to keep the length at one year or shorter. You want the non-compete to only apply to a few locations. Some employers will say the non-compete applies to every facility we own in the city. Instead of having one office within 10 miles, you could have 30. So, that’s very important. And then specialty as well. Some specialties can do multiple things. Let’s say you are in internal medicine. You can be a hospitalist, and you can go into family practice. You can do urgent care. If the non-compete states that you can’t practice medicine within that geographic restriction, you’re out of luck. Whereas if you keep it to the specialty of what you’re providing to that employer. Specifically, in this case, let’s say you are a hospitalist. 

You could go to family practice or urgent care for a year, and then when the non-compete ends, go back to being a hospitalist. That’s something to consider. And then malpractice insurance is always a considerable discussion with the physicians’ coworkers. First, you must identify whether it is a claims-based or occurrence-based policy. If it’s a big hospital, they might be self-insured. And after you determine what type it is, if it is a claims-made policy, tail insurance will need to be purchased after the contract terminates. And then who pays for that? Most of the time, if you’re in a small private physician-owned practice, the physician must pay for tail insurance when they leave. You rarely have to pay for tail insurance with an extensive hospital network. Now, tail insurance usually costs about twice what your annual premium is.

Physician Employment Contracts & Negotiation Tips

Your family practice’s annual malpractice premium is somewhere between $6,000 to $8,000. If you had to pay for tail insurance, it’s somewhere between 12,000 to 16,000. One thing you can negotiate is who pays for tail insurance coverage. Sometimes an employer will say if you’ve been with us for one year, we’ll pay for a quarter, then two years, half, and then three years, 75%. Some ways of getting out of having to pay the entire amount depending on the situation. Now, the first thing I talked about was whether the employer was willing to negotiate or not. Some employers will say this is a take-it or leave-it deal. I don’t think those employers will be great for getting together. If an employer is unwilling to budge on anything, it will likely be challenging to team up.

It means they’re not going to accommodate the physician somehow. So, I caution any physician who has been given a job offer. We ask for some clarification or certain concessions, and they say no, this is it. That’s usually a red flag. And I tell the physician that you may want to continue looking for a job because this might not be a good fit for you. Anything in the contract is negotiable. You need to figure out what’s most important to you. Sometimes, a non-compete is absolutely the number one thing. For others, it’s the compensation. For others, they do not have to pay tail insurance. It depends upon the physician’s wants and needs and then tailoring the negotiations to get them to that point.

How to Negotiate a Fair Salary Contract for Physicians

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

How do I get a better salary? There are a couple of ways of doing it. One, you need to know your worth. How does a physician find out what’s a reasonable salary? Well, there’s data. The MGMA (Medical Group Management Association) is probably the industry standard regarding compensation numbers. Still, 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, and Southwest, and those kinds of quadrants have different salary numbers associated with them. But the base salary could be excellent or not be significant depending upon if there’s productivity compensation in the contract agreement or if there’s potential for partnership. 

Physician Potential Partnership

So, there are many scenarios where a physician is out of training, and they’ve given a two-year, three-year contract agreement. That’s probably below what’s a reasonable or average amount for someone just coming out of training. With the carrot on the stick, if you take below market for these two or three years, you’ll get away above-market. Once you become a partner, be careful of the situation. 

Do you need to find out how many people are partners? How many people have they not offered a partnership? And then what will you make once you’ve become a partner? That’s certainly important. As far as the MGMA numbers go, they are hard to find. I mean, you can Google around and see, I would say, data from maybe a year or two old. I found that people are relying on 2020 numbers. COVID screwed them up. Some of the RVU compensation factor numbers are way out of whack. Some of the comps are just way out of whack. I would not use 2020 data. 2019 is probably the safest and most reliable number we have right now. MGMA hasn’t released the 2021 data while I’m making this video. 

So, Google around. You can try and find some numbers, but I’d say the best way to do this is to go out there and find multiple job offers and see what is offered to you initially. And then also, anyone in training has other people in their specialty that are also looking for jobs. Talk to your colleagues and the people that serve as your training partners. What do they offer you? Where have you been offered this? One tricky thing is that some people automatically think they’re in a high-cost city and will make more.

Why Should a Physician Consider the Cost of Living in a Specific Area?

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

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, you need to look in the smaller cities that are difficult to recruit. On average, you will make more money going to a small rural community.

That’s a fact. Once you have a number in mind, what do you do with the employer? You ask them for more. If the city offered you 300 and you wanted 325, you don’t ask for 325; you ask for more than that. So, if they provide 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 dumb if you’re asking. If you’re offered 300 and ask for 450, they will say, “Well, that’s ridiculous.” It may even yank the offer.

Leveraged Negotiation Contracts 

You need to know your value, and then specialty is also a big part of what kind of leverage you have. Any negotiation of contracts is based on leverage. Do you have it, or do you not? You have more leverage if you’re in a specialty that’s hard to recruit for 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.

Suppose you’re switching jobs in the community and bringing your patients with you. In that case, you’re worth more than someone coming into the community, like peds or primary care, that must build up a patient base that takes time. Those are tips on getting a better salary and where to start. Contacting an attorney and getting a feel for the area might be helpful.

It’s reasonably specialized in people that focus on physician contracts. It’s possible that you won’t find anybody in the area you’re looking at, so maybe do a broader search for that. But anyway, the last point is that some employers will not negotiate. They’ll say it’s a “take it or leave it” offer.

You’ll then have to be willing to walk if you’re unhappy with your salary, but there are simple people out there who say, “No, we’re not negotiating.” This is the city 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 you’re unhappy with an offer, you need to be willing to walk. Accepting a deal that you think is well below your value is never a good feeling. Don’t just accept that because you need a job. Find the proper position.

What is Without Cause Termination in a Physician Contract?

What is without-cause termination in a physician contract? Essentially, it allows either party to terminate the contract agreement at any time. For any reason, with a certain amount of notice to the other party. Without-cause termination is essential because if a physician enters a job, everyone expects a position to be great, right? You don’t take a job hoping you want to leave immediately, but things change, or it certainly can be different once you start. 

Let’s say a physician takes a job. After a few months, it’s clear that it’s not a good cultural fit, or maybe they’re on productivity compensation. Whatever the reason, they’ve decided. I do not want to stay here. And so, without-cause termination will allow that physician to give notice, work out a period, and then move on. 

Average Length of Without Cause Termination Notice

The average length, or at least the standard for most without-cause termination notice periods, is somewhere between 60 to 90 days. Anything higher than 90 days causes a couple of problems. Anytime somebody gives notice, the dynamics will change between the physician and the other physicians or the organization itself. You’re no longer in the long-term plans. Sometimes, there can be bad blood as well. And so a shorter period to have to work out whatever is advantageous. It’s just better. If you had a 180-day notice, you’re there for six months dealing with a potentially awkward environment.

Another thing to consider is the longer the lead time, the harder it is to find a new job. If you’re coming out of training, everyone comes out at the same time. So, all employers understand this. And there’s a rhythm to when they offer jobs and start onboarding and all that type. If you’re out, you’ve been out for a while. And then you decide to switch, it can be at any time, but most people don’t post for jobs six months in advance. They will say, we have a need now. If you have a six-month notice requirement for your job, you may lose out on job opportunities because they need someone much faster than six months. 

And so, they’re going to find somebody and leave you in the dust. 

Two main reasons: don’t put yourself in a toxic environment for an extended period, and then two, help shorten it down so that you can find a new job more efficiently. In the physician contract, it’s going to state how much notice you must give. 

How Much Notice Time Do You Need to Terminate an Agreement?

And let’s say it’s 60 days. This example will also state that it must be in writing. So, you need to find in the physician contract that it’ll be under the termination section. And it will say without-cause termination, for no good reason, or something like that. And then it’ll just state that either party can terminate the contract agreement with a certain amount of notice to the other, as I said before, in 60 days.

There’s another section in your physician contract called either notice or notice. And it will state exactly how you can provide notice to the employer. It’ll say whether it needs to be certified mail or hand delivery. Most physician contracts don’t have email. Indeed, there’s no verbal acknowledgment, no fax. If you were to tell your boss, hey, I’m leaving in 90 days, but not give them a written letter that states you’re going. As a result, they could potentially force you to work for another 60 days until you give them adequate notice. So, those two sections. 

Look into the without-cause termination section to see how long or how much notice you must give. And then, look in the notices section and ensure that you can provide adequate notice. I’ve had a couple of times where physicians have called me after the fact and said I emailed my boss. It was 60 days’ notice; they waited 45 days and then came back and told me I didn’t provide them effective notice. And now, they’re saying I must give them another 60 days. Well, it’s vindictive on the part of the employer. They were mad and did that just to kind of screw with the physician. 

What Happens if a Physician Do Not Give Effective Notice

 But if you don’t give adequate notice, it doesn’t count. Ensure you’re both offering the right message and following the notice section. Now, what happens if you decide to leave a job and don’t give the proper amount of notice? Well, many physician contracts will have penalties associated with that. For instance, a common way of doing it would be to penalize the physician. They didn’t give enough notice of whatever their average daily rate was for every day. If it was 60 days and they only gave 30 days, they’d owe 30 days of their average pay to the employer. Average pay could be a significant amount of money.

You want to ensure that you give as much notice as required in that without-cause section. Therefore, you can’t be penalized. Employers could come after you for recruitment costs, locums to cover your shifts, or if you’re an outpatient or something like that. It’d be rare for them to do that. However, you are opening yourself up to liability if you fail to give them the specified amount of notice in your physician contract.