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Negotiating a Physician Signing Bonus

Blog, Physician Contract Review

I’m going to talk about negotiating a signing bonus for a physician. Some things to keep in mind and then maybe some industry averages as far as a signing bonus goes. First, when a physician is either coming out of training or switching jobs, I would say, it’s industry-standard for there to be signing bonus associated with the new employment contract. It’s also dependent upon whether the physician is entering into an agreement with a hospital or healthcare network, or if they’re joining a physician-owned practice.

Let’s take each one of those in order. First, let’s say you’re a resident or fellow coming out of training, and you’re going to join a small physician-owned practice. That is probably the level you’ll get the smallest signing bonus. Normally, in that scenario, I would say somewhere between 10,000 to 30,000 is standard. It is also specialty dependent. Obviously, the more specialized a physician is, the more leverage they have in negotiating. And therefore, they can get a higher signing bonus. If you are a physician coming out of training, joining a hospital or healthcare network, I find the signing bonus for them is usually a little bit higher than if you’re going to join a physician-owned practice. So, what do you do to negotiate? Well, one, I would ask the people that you’ve trained with, what are some other bonuses that you’re receiving? Because those people are in your specialty, they’re going to have up-to-date information as far as what’s being offered in general. However, I do find it is very geographic-specific. If you are moving to a location that is hard to staff to, or maybe not desirable at the general level like other locations, you’ll have the opportunity to get a higher signing bonus. Now, let’s say the employer says, hey, we’re going to give you a $10,000 signing bonus, but you want more than that.

Let’s just say you want 20, well, you don’t ask for 20, right? In any negotiation, you don’t throw up the number that you want. You go higher than that. So, if they’re offering 10 and you would like 20, then the smartest thing to do is to ask for 30 and then hope that they’ll meet in the middle. Another thing that needs to be considered is relocation assistance. Some places will, well, most places will give a signing bonus and relocation assistance. Let’s just say you get a $10,000 signing bonus, and then you’d also get 10,000 relocation assistance, which would aid in moving expenses. Sometimes, they’ll allow the physician to use that for travel to the city, to look for a place to live. So, airfare, hotel, whatever, and then others will also allow if it’s a short move and you’re not going to use all 10,000, then you could also use the rest of that money towards potentially like a security deposit or even a mortgage in some situations. Other blogs of interest include:

  • What is an Example of Physician Moonlighting?
  • What is a Non-Compete for a Physician?

It really depends upon the employer and how they handle things. I find that physician-owned practices are much more flexible in using that amount for whatever you want. Whereas the big healthcare organizations usually have policies on what can and can’t be used and it’s not flexible at all. It’s, this is what you can use it for. And that’s it. Also, beyond the signing bonus and beyond relocation assistance, the last part of that could be some student loan assistance. You almost never see student loan assistance from private physician-owned practices. It just doesn’t happen. If you’re going to get student loan assistance, it’s almost always going to be through a hospital or healthcare network. Those can be substantial 50,000 all the way up to 150,000.

And how they’ll handle that is at the end of the year, they will usually pay. Well, that’s not true. So, either monthly, quarterly basis, or yearly basis, they’ll just pay a lump sum directly to whoever the loan provider is for the physician. And then pays off over time. Those are best because generally, there’s no repayment obligation because it’s paid after the physician has worked a period. There is no repayment. Now, if you are getting a signing bonus and you are getting relocation assistance, there almost always will be a repayment obligation if the physician leaves prior to generally the initial term of the agreement. So, if you had a, let’s say, three-year contract. The employer would say, if you leave before the end of three years, you will owe us back a certain amount.

It could be forgiven monthly, once again, quarterly, yearly. Let’s just say it’s forgiven monthly. 1/36 of the amount is forgiven each month. And then until the end of the three-year initial term. After that point, the physician doesn’t have to pay anything back. To be honest, you don’t have a ton of leverage coming out of training. The only leverage someone would have coming out of training would be their specialty. Once again, if it’s harder to staff to, if it’s an area that’s difficult to bring in certain specialties, you have much more leverage than if you’re in a big metropolitan area, a lot of people want to live at, plentiful specialty to go around, then you just don’t have as much negotiating power. So, can you negotiate a signing bonus? Absolutely. You can. It’s just a matter of whether the employer is going to meet you in the middle or whether they’re going to move at all from what the initial offer is. Any kind of negotiation is about leverage. And if you don’t have it, it’s tough to get the employer to move in any way.

Negotiating a Physician Contract

How to negotiate a physician contract. In my mind, there are three different scenarios. One, you’re 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? 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, are they in a specialty that’s hard to recruit for? I mean, that’s just the truth.

You are not bringing in any established patient base. You’re also 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 to that could apply to any specialty, or you’re in a specialty that’s difficult 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. When you’re 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 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 must pay for your own tail and your underlying premium is $40,000 a year, your tail’s 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.

Like an average range for a physician is 35 to 40% of net collections is your total comp. 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 most of the places use MGMA numbers. That’s a medical group management association, and most of the time you must pay for that and it’s expensive. So, no physician, at least most physicians are not going to 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 RVUs 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 and what part of the country, there’s just kind of like a feel for what someone is 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.

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 going to 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 RVUs 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.

Physician Contract Negotiations

And 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.

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 essential in determining what your new total compensation would be in a new position. So hopefully, 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.

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March 7, 2022/by admin
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