Online Resources

I just added a new static page to this blog.  It is called Online Resources, like this post. It includes some helpful publications and websites that physicians may find useful when reviewing an employment agreement.

There are literally thousands of similar resources out there, but I wanted to start with some of the most interesting and useful. As I find and analyze additional resources, I will update the page with the most recent additions listed at the top. If you have found especially useful online resources, please let me know and I will add them to the list. You can respond by responding in the Comments following this post.

Thanks – John


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Thoughts on Salary (part 3) – Example

clientLet’s take a deeper dive into RVU based compensation. Suppose that an organization that wants to recruit you is offering the following salary proposal: two years at a fixed salary, followed by a third year in which it converts to a fixed component PLUS an RVU based bonus. Let’s review the rationale and then look at actual MGMA numbers upon which the offer might be based.

Employer Perspective

The employer knows that it must offer a competitive salary, along with other forms of compensation and benefits, in order to entice you to sign on. For most specialties, there is still moderately fierce competition among employers for solid, well-trained physicians. The number of established physicians available is relatively small in comparison, so most recruiting is aimed at physicians coming out of residency and fellowship training programs. Continue reading

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Thoughts on Salary (part 2)

In Thoughts on Salary (part 1), I began with a discussion about the issues that impact an employer’s offer, the use of salary surveys and how RVUs are used to describe physician productivity. In this post, I will provide additional background on the compensation models that might be offered in an employment agreement.

piggy-bank-1595992_1280Older Compensation Models

For this discussion, I am going to take a historical perspective to compensation for physicians, starting with the earliest models and moving to the more recent models.

The earliest models were generally one of the following:

Net Income. This is the same model that any individual service oriented entrepreneur uses today. Compensation is simply the difference between collected revenues less the expenses of the business. A professional (whether physician, interior decorator, or yoga instructor) collects income for services, pays for associated expenses (marketing, insurance, staff, rent, etc.) and takes home the difference as salary.

This model is still used by solo practitioners and small groups. And some physician groups use a version of this method in which individual expenses are tracked, group expenses are shared using a formula, and take home pay is the difference between collections and the individual physician’s share of expenses.

In many of these groups, a certain percentage of earnings is held back for future investments or unforeseen costs. Some hospitals have used a version of this as well, but an estimation of expenses (sometimes called the allocation of expenses) must be used because the actual costs for support departments (like human resources, risk management, etc.) in a large organization cannot easily be attributed to an individual physician.

Fixed Salary. This method is very simple and is commonly used by non-profits and governmental agencies. The employer simply pays a fixed salary for the physician to work a set number of hours per week. It is also used when groups wish to employ physicians not on a partnership track, especially in specialties in which shift work is most common (emergency medicine, anesthesiology, hospitalist, etc.). This is also commonly seen with physicians working in nursing homes or with hospice organizations and other non–profits.

Continue reading

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During your final year of medical training, you might be daydreaming a bit about life beyond residency and fellowship. You’re looking forward to getting to work, making some money and start living! You have credit card debt, student loan debt, car payments, and perhaps some loans from family members to pay back. And with any luck, in addition to starting a new job that pays well, you hope to line up some moonlighting on the side. Sure, it might mean some long hours, but you’re already accustomed to that from your residency.

But – not so fast! Your new employer expects you to devote essentially all of your professional efforts to growing and promoting your practice. And a close look at your employment agreement indicates that there are several potential barriers to working outside your normal full-time work environment.

The first issue has to do with your restrictive covenant, an issue that I touched on in my previous blog (Restrictive Covenants), which prevents you from competing with your employer. You will also need to see what restrictions have been placed on moonlighting. Do you need your employer’s permission? Are there restrictions as to the type of work you can do? Is there language about the type of work you specifically can’t do? Continue reading

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Restrictive Covenants

A restrictive covenant (RC), as used in most physician employment agreements, is a provision(s) that prevents or restricts an employee from competing with his employer. Such provisions will prevent the new employee, in the event he leaves employment, from:

  • recruiting staff away from the employer to his new location;
  • soliciting customers (patients) of the employer;
  • setting up shop (practice) within a certain distance from the employer for a certain length of time.

electric-fenceSuch provisions implicitly acknowledge that there are costs to the employer of recruiting, hiring and establishing a physician in practice that will not be recouped if the newly recruited physician takes patients away from the employer to a competing entity or his own, newly established independent practice.

The third of these provisions is the most potentially damaging of these restrictions. If the duration is long enough and the distance far enough, the physician will have no choice but to abandon any practice he has created and start from scratch building a new practice at a distant site. These considerations, of course, apply mostly to primary care physicians and medical specialists, less to certain surgeons, and even less to anesthesiologists, emergency medicine specialists, urgent care physicians and hospitalists (who provide episodic care and don’t generally develop a “loyal” practice of repeat patients). Continue reading

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Sweat the “Small” Stuff and Enjoy a Bonus!

Seeking a good position, researching perspective employers, participating in interviews, and negotiating an agreement can be tedious, time-consuming work! And the reality is that most employers are going to offer a standard agreement, with a salary range that will probably be well within industry norms and internally consistent. Why bother with all of the meticulous review, contentious negotiation, and costly legal review? Here are a few examples of problems that can result from less than optimal employment agreements (names have been changed to protect the innocent).

Onerous Restrictive Covenants

Three imaginary physicians, Moe, Larry and Curly, all worked under agreements with a large hospital system, located in a semi-rural area with one major competing system. Each of them were NOT asked to renew their agreements at the end of their terms for various reasons. And each of hem had a slightly different non-compete clause in their agreements.

Curly had a two-year, 20-mile restriction following his termination. So, he had to look outside a 20 mile radius for a new position. Unfortunately, the closest employer outside the 20 mile radius for his specialty was more that a 50 minute drive from his home. Since he was required to be on call he would most likely need to move closer to the new system.

Larry had negotiated a slightly better agreement. His restriction was also for two years, but the radius was only 10 miles. There were several potential practice opportunities just beyond the 10 mile radius that Larry was able to select from, although he would need to build a new practice from scratch. But he would not face the task of uprooting his family, changing schools for his children and selling his home.

Moe probably fared the best. He had negotiated a one year restriction with a 20 mile radius. Because he was able to commute to a temporary job for year without moving and maintain his income at a reasonable level, he was later able to start a new practice near his home and eventually attract a large percentage of his previous patients to his new location. Continue reading

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Liability Insurance – Who Pays for Tail Coverage?

I want to briefly discuss the handling of liability insurance as part of the contract negotiation process. Generally, most employers agree – liability insurance is a bona fide business expense. This should be clearly stipulated in the employment agreement as a covered expense of employment.

Unless you’re working for the federal government or providing charity care without compensation (in some cases), you will be required to carry professional liability insurance in order to care for patients and provide services for your employer.

If your relationship with your employer is as an independent contractor, you might be expected to cover your own malpractice coverage. But barring that, your employer will expect to pay for the coverage.

armourThere are some caveats, however, that you want to keep in mind. You can generally only expect the coverage to apply to work done for the employer. If you plan to moonlight with other entities to boost your income, be sure that evidence of professional liability coverage is provided by the other entity prior to seeing patients.

And expect to have an offer of employment withdrawn if it is determined that you are not insurable for some reason, or if the costs of coverage significantly exceed local average premium rates. Continue reading

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