How to Negotiate a Physician Contract
How do you negotiate a physician contract? 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, the only leverage someone has when they’re coming out of training, is are they 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, there is a learning curve that will go into moving into any position. 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. When you’re looking into, how do I negotiate? 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 at a job. There are some, at least in my mind, things that are more important than just the base compensation. One, what are the restrictive covenants?
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. Sometimes, the non-compete could be the most important thing in a contract. A non-compete says you cannot practice for a period of time within a specific area. 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 is probably going to be around 80,000. So, who pays for tail certainly could be the most important thing in an employment agreement for an OB-GYN. If you’re being paid on production. Let’s just say you’re in a contract that’s just pure net collection.
Employer Practice Negotiations
An average range for a physician is 35 to 40% of collections. Is there language in the contract that states, when the contract terminates, you’re going to be able to collect for a 60 to 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. When you’re looking just at base compensation, obviously having the numbers is important. So first, 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, and 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. Other blogs of interest include:
- Differences Between a Physician Offer Letter and a Contract
- What are Different Types of Physician Contracts?
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 kind of like a feel for what is someone getting in this area, but then you also have to take into account all the other things I just said. If someone has a base that’s $10,000 less, but they don’t have to pay for tail, or the non-compete is extraordinarily small, well, that’s worth way more than $10,000 in some instances. That’s kind of a few factors 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. 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, 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. 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 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 kind of coming out of training. However, you have the benefit of having some numbers of what you produced in your previous position. You can tell them, 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 absolutely essential in determining what your new total compensation would be in a new position. So, those are some tips on things to think about. I mean, honestly, just doing this video, I can think of this could be broken down into 10 different videos, but this is just kind of an overview on how to negotiate.
How to Negotiate a Physician 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. 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? 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, 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. But just the base salary could be great or could not be great depending upon if there’s productivity compensation in the agreement as well, or there’s maybe potential for partnership. So, there are many scenarios where a physician is out of training, and they’re 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. You need to find out how many people are partners? How many people have they not offered partnership to? And then what are you going to make once you’ve become a partner? That’s certainly something that’s important. Now, as far as the MGMA numbers go, 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 comp is just way out of whack. I would not use 2020 data. 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 around. You can try and find some numbers, but I’d say the best way of doing this is just to go out there and try to find multiple job offers and see what you’re being offered initially. And then also, anyone who’s in training, has other people in their specialty that are looking for jobs as well. Talk to your colleagues, talk to the people you’re in training with. What have you been offered? Where have you been offered this? One kind of difficult thing is that some people automatically think that they’re in a kind of high-cost city that they’ll make more.
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 kind of surprised sometimes because the salaries may not be kind of 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 cost of living, doesn’t mean that you’ll be making more, it’s the opposite, really.
If you’re in a rural location that’s hard to recruit to, you almost always will make more money in those scenarios. So, if money is the bottom line that you’re looking for, then you need to look in the smaller cities, that are just simply difficult to recruit to. You will absolutely make more money on average if you’re going to go to a small rural community, that’s facts. 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 an 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 in what kind of leverage you have. Any kind of contract negotiation is based on leverage. Do you have it or do you not? If you’re in a specialty that’s hard to recruit to or is in high demand, you simply have more leverage. 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 you’re bringing your patients with you, then you’re certainly 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. Those are some tips on how to get 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 possibly 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, there are some employers that 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 just simply people out there that say, no, we’re not negotiating. This is we’re offering what we offer, and I wouldn’t be offended by that. That’s just kind of the tech that they’re taking as far as employing somebody. So, don’t be surprised if you have an employer that says no, but if 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.
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