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Category Archives: Contract Negotiation

Before You Take That Job, Review the Benefits

Employee benefits are an integral component of a physician’s overall financial plan, and your financial advisor should review these benefit offerings with you to determine which of those options best meet your needs.

When discussing with your advisor, covering every aspect of your potential benefit package is the goal, but here are a few highlights to pay attention to:

  • Retirement plans: Most employers offer a retirement plan to their employees. Your financial advisor should discuss the plan offerings to ensure you are maximizing matching dollars and your total contribution. For many physicians, their retirement plan will be one of their largest assets to fund retirement. Additionally, many employers offer a Roth option for employee deferrals in addition to the typical pre-tax or Traditional employee deferral. Your advisor should discuss the tax implications of each option and how it fits into your overall investment strategy.
  • Long-term disability: If your employer provides disability benefits, it is important for you to understand the coverage offered and how it integrates with any existing individual disability insurance you own or are considering purchasing. Most employer long-term disability plans have a definition of disability that only protects physicians in their specialty for a limited time. If you are required to pay a portion of the cost of coverage, you can often opt out of coverage to increase the amount of individual coverage you can purchase, which may be the best option for many physicians. For others, the long-term disability benefits could fill a gap in their financial plan and your advisor should help you maximize this offering as necessary.
  • Medical coverage: Many employers now offer a high-deductible option in the medical coverage choices. Depending on your family situation, a Health Maintenance Organization (HMO) or Preferred Provider Organization (PPO) option may be optimal. However, it is important to understand the benefits of choosing a plan with current tax savings even though there may be higher out-of-pocket expenses.

Reviewing benefits for a new job is important, but don’t limit the benefit review to a new job only. Open enrollment is an important time in the ongoing financial planning process, and your financial advisor should take an active role in helping you determine which employee benefits to adjust as your individual or family circumstances change over time.

Are you in need of a benefit review with a financial advisor?

Advisory services offered through Larson Financial Group, LLC, a Registered Investment Advisor.
Securities offered through Larson Financial Securities, LLC, member FINRA/SIPC.
Larson Financial Group, LLC, Larson Financial Securities, LLC and their representatives do not provide legal or tax advice or services.  Please consult the appropriate professional regarding your legal or tax planning needs.
The views and opinions expressed in this article are those of the author, are for educational purposes only and do not necessarily reflect the official policy or position of Larson Financial Group, LLC or any of its affiliates.

How to Approach a Contract Negotiation with a Potential Employer

Provided By Tom Burch, CRPC®, Senior Financial Advisor at Larson Financial Group

Whether you’re starting your career in medicine or transitioning from one position to another, having a solid grasp of the terms of an employment contract before signing is crucial. Physician employment contracts can be lengthy, and many line items will have a substantial impact on both your professional and personal life.

There can be some trepidation, especially among younger physicians receiving their first offer, about objecting or countering the initial offer made by the employer. No contract is carved in stone, and instances of a hospital simply refusing to negotiate are extremely rare. That being said, knowing how and when to approach these matters will give you the confidence needed to stand your ground with conviction.

Receiving the Offer Letter

After the interview process has concluded, a physician may first receive a letter of intent if the employer has decided to move forward. This is an overview of the major terms of the forthcoming employment contract that verifies both parties are on the same page before the contract is drafted.

In many cases, letters of engagement are the only written instruments that are used to memorialize an agreement, so you should really have them looked at by a licensed attorney before signing. If you have any concerns that compensation is not consistent with market standards, you can request additional language be added to the offer that gives you some wiggle room to negotiate. You shouldn’t feel any reluctance to request these revisions, because at this point they’ve invested a lot of time and money to determine you’re the right person to fill the position.1

Compensation

Physician Employment Contract Review

Once you’ve received the actual contract, it should specifically state how much and how often you will be paid. These figures should not be viewed in a vacuum. You’ll want to verify that the compensation you are offered is comparable to that of physicians with similar experience in your geographical area.

In addition to a base salary, many physicians also receive performance incentives based on productivity. Hospital systems usually base their performance-incentive model on a measurement of productivity calculated by the Center for Medicare and Medicaid known as RVUs (Relative Value Units). Your contract should include a conversion formula to specify the dollar amount of each RVU, and a potential employer can usually provide an estimate of how many RVUs you can anticipate so you can calculate whether these performance thresholds are realistic.

For private practices, performance incentives are typically based on collections instead of RVUs. However, the reimbursements for a procedure vary depending on how the patient will pay for the treatment. Knowing the practice’s current payor mix should help you determine if the incentives for the collections-based model in the contract are feasible. Knowledge of how incoming patients are allocated will also allow you to forecast collections with a greater degree of certainty.

Benefits

The contract should also list all benefits your employer extends to you; typically including health, disability, life insurance and retirement plans. This is usually an aspect of the contract where there is a lot of room for negotiation, but you need to be vigilant. The employer probably won’t agree to all of your benefits-related requests, but the only way to secure any of the perks on your list is to ask directly.

In addition to sign-on bonuses and reimbursement for moving expenses, many employers provide a stipend for continuing medical education and the costs associated with board certification or recertification. In addition, it’s not uncommon for an employer to cover a physician’s hospital or society dues and offer medical school debt repayment assistance. Make sure your contract states in no uncertain terms the expenses your employer will cover.

Legal Restrictions

Physicians should also seek clarity in regards to what their options and rights are if the decision is made to terminate employment. Restrictive covenants could prohibit you from practicing medicine following contract termination.

If the contract indicates your non-compete is binding within a certain mile radius of any of their sites, this could severely limit your professional options.2 You should know the non-compete rules like the back of your hand, and the non-compete provisions of your spouse if he or she is a physician as well. They can and usually do factor into personal decisions, such as if and when to buy a home.

Conclusion

Regardless of the length of a contract, physicians need to take the time to educate themselves on the underlying details of the agreement before negotiations begin. This typically requires the assistance of a professional that is capable of boiling down complex legal terminology into language that is easy to understand.

In addition to analyzing the legality of the document, you will want to verify that the benefits are reasonable and that the expectations for performance incentives are realistic. The best employment contracts establish principles that encourage shared responsibility and collaboration while creating opportunities for innovation, continuous improvement and shared benefits. Even if this isn’t your first time through the process of negotiating an employment agreement, experience is simply no substitute for the oversight of a competent attorney familiar with your individual circumstances.

References

  1. Fairway Physician Home Loans, “The Physician Financial Success Podcast” http://physicianfinancialsuccess.com/dennis-hursh-pahealthlaw-com/
  2. Hannah Stuart, “Negotiating a Contract You Can Live With” (June 26, 2015). http://mdnews.com/negotiating-contract-you-can-live

 

Advisory Services offered through Larson Financial Group, LLC, a Registered Investment Advisor. Securities offered through Larson Financial Securities, LLC, Member FINRA/SIPC.

Larson Financial Group and its representatives do not provide legal or tax advice. Please consult the appropriate professional regarding your legal or tax planning needs.

Evaluating a Physician Employment Contract

When we work with young physicians who are getting ready to finish residency or fellowship, it’s common for us to hear:

This is my first real job I’ve ever had.

I have no idea what to look for in a contract.

After spending close to a decade in training and accumulating nearly $180,000 of debt in the process, now comes the critical time when you officially enter your chosen field. When performing a physician contract review, compensation is an obvious starting point but there are other factors that need to be considered as well. Qualitative factors such as will this be a positive work environment that will allow you to reach your career objectives and thrive can be just as important. Many line items in your contract may determine not only how you operate in your professional life, but in your personal life as well.

Physician employment contracts can be lengthy and the underlying language can vary substantially. For example, a university hospital with a research department may want to own any intellectual property that you create. A small practice focused on serving patients may not care about research you do on your own time. You don’t want to just sign a legally binding document that you understand very little of and hope for the best. You need a professional that is capable of boiling down complex legal terminology into language that is easy to understand.

By working with a financial advisor that specializes in physicians, like Larson Financial Group, you’ll:

  • Get access to the latest industry benchmark data to ensure you’re being offered a fair salary, sign-on bonus, and incentive methodology.  Other data points include:
    • CME
    • Vacation Days
    • Retirement Benefits
    • Productivity Metrics (Collections or wRVUs) for your specialty
    • All this broken down Nationally, by Region, by Employer type, and more!
  • Play Good Cop/Bad Cop: you’ve heard this term, but probably not in this context!  By working with a financial advisor who specializes in negotiation, you don’t have to be the one that is asking for a higher sign-on bonus to meet market rates, leave that to us!  This lets you walk in on your first day on the job and not feel like you were “on the other side of the table” as your new employer.
  • Have access to a knowledgeable resource when you have questions on the financial implications related to non-compete/restrictive covenants, liquidated damages, etc.
  • Receive recommendations to expert healthcare employment law attorneys, when applicable.

Compensation and Bonus

Sample Benchmark Analysis – PM&R 2019

First and foremost, it is necessary to understand how each organization measures a physician’s productivity before you can forecast compensation and determine if it’s reasonable.

FOR PRIVATE PRACTICES

Performance incentives are typically based on collections. However, the reimbursements for a procedure vary depending on how the patient will pay for the treatment:

  • Are they enrolled in Medicare or Medicaid?
  • Do they have private insurance or are they paying cash?

Knowing the practice’s current payor mix should help you determine if the incentives for the collections-based model in the contract are realistic. Knowledge of how incoming patients are allocated will also allow you to forecast collections with a greater degree of certainty.

Is there the potential for ownership in the practice in the future? If so, the contract should lay out when the partnership could be offered and how the buy in is structured.

HOSPITAL SYSTEMS

Hospital Systems usually base their performance-incentive model on a measurement of productivity calculated by the Center for Medicare and Medicaid known as RVUs (relative value units). This is different than the collection model run by smaller practices. Your contract should include a conversion formula to specify the dollar amount of each RVU. The Medical Group Management Association (MGMA) has comprehensive data on how many RVUs a physician typically generates in relation to their specialty. Your potential employer should also be able to provide you with an estimate of how many RVUs you can anticipate so you can then determine whether the thresholds for performance incentives in the contract are feasible.

Under the university hospital arrangement, the RVU model is typically preferable to collections if there are performance incentives in the contract because the payor mix in an academic setting is often less than ideal. If you decide to pursue a career in academics, you’ll want to make sure the contract stipulates how your time will be allocated. This will let you set expectations for what percentage of your time will be devoted to research, teaching, treating patients, etc. While the compensation may not be as high for university hospital positions as they would be at a private group, there could be some intangible rewards. If you’re passionate about research and working with students, this route could align more closely with your career objectives.

THE NEGOTIATION

At the crux of financial negotiation of physician employment contracts is ensuring that you are compensated fairly and commensurately for the work you’re providing to your employer.  If you’re able to align your expected productivity with your associated compensated, then we consider this a fair offer.  For example, if you’re looking at the sample benchmark report, we would expect that after being in a job for more than 2 years and, a PM&R physician generating 4,733 wRVUs (Median Work RVUs for this specialty in 2019), would earn an estimated $292,110 (Median Total Compensation) for this specialty.  What we don’t want to see is the expectation that you’re generating 6,017 wRVUs (the 75th percentile) but only getting paid $242,754 (the 25th percentile).

Having access to the data keeps your negotiation and unemotional, a key to improving your offer to match market rates.  Meet with an advisor today to evaluate your contract.

Work Atmsophere

Physicians are in a period of transition when fielding job offers, and as many as 70% of physicians across all specialties change jobs within their first two years. Therefore, it’s important to select a location with a setting that will allow you to flourish professionally. When negotiating the terms of your employment, you’ll want to inquire about the facilities and resources that are at your disposal. There is usually a clause or series of clauses that discuss staff and other items necessary to fulfill the duties of a physician. This will help you determine if you have the space and staffing to meet the group’s productivity expectations. The current technology standards and provided equipment should also be discussed at this juncture.

An employment contract should lay out in black and white where you will be working and what type of schedule you will have to maintain. If you are expected to have evening or weekend clinic hours, this should all be expressed in the language of the contract. If working for a large system with multiple locations, the contract should also specify the exact location and include a clause that guarantees that any changes to your schedule or location will be mutually agreed upon.

What are your priorities?

There are generally three reasons why people choose a job:

    1. Location
    2. Work environment
    3. Compensation.

The perfect job is the one that is strong in all three, but that’s a very rare scenario. Generally, if a job can hit 2 of 3, then it’s worthwhile to take the offer seriously.  There’s no ‘right’ way to view it, it’s just being honest with yourself about what’s important and if this particular job checks those boxes.

Geographic Trends

As with most professions, compensation varies by region. The amount of the signing bonus and when it is given can usually be negotiated. The same can be true for relocation bonuses as well.

Another important benefit is medical malpractice insurance and what happens regarding coverage when employment ends. Many states require physicians to have certain levels of professional liability coverage during the period of time that falls under the state’s statute of limitation in which a suit can be brought. Your contract should specify the type of tail coverage offered.

Even if the contract is non-negotiable, it’s still important to have an understanding of what is being offered and what occurs when the contract is terminated. Depending on the contract termination language, you may be geographically restricted as far as where you can practice. You should know the non-compete rules like the back of your hand, and the non-compete provisions of your spouse if he or she is a physician as well. They can and usually do factor into personal decisions, such as if and when to buy a home.

Physician Contract Review

There are several reasons why you should have your physician employment contract reviewed by an attorney and a financial advisor, and by scheduling time to talk to us, we can help you determine what you need most.

Your attorney can analyze the legality of the document, while your advisor can help to verify that the benefits are reasonable and that the expectations for performance incentives are realistic. Your advisor can also help make you aware of retention bonuses and when they are awarded, so that if you decide to transition to another practice you’ll, be able to time the move so that you won’t lose out on a bonus (or worse, owe money to your former employer).

The value of a written agreement is that it dispels ambiguity and backtracking that cause confusion and perception problems. The best employment contracts establish principles that encourage shared responsibility and collaboration while creating opportunities for innovation, continuous improvement and shared benefits. You have invested far too many resources in your medical training to sign a contract without having it reviewed by a professional.