Physician Compensation and Joining a New Practice

When joining a new practice, stop the bleeding before it starts

Whether a physician is launching their career for the first time after training, joining a new practice or becoming a partner, they should make sure they are fully prepared for the transition by considering key areas that can cause financial bleeding or low work satisfaction.

 

Before joining a new practice, it is imperative to consider many factors and do as much research as possible regarding what the working relationship may entail. Too many physicians accept an offer without digging deeper to find out if the advertisements, interviews and verbal agreements during preliminary negotiations have a high enough probability of actually occurring. 

 

The recruitment process is designed to attract quality candidates and sometimes the opportunity may be advertised to appear stronger than it truly is.

 

By accepting an offer without complete information, a physician's new practice can figuratively begin bleeding on day one, causing the relationship to end before the contract reaches its term. This can lead to unfavorable terms and termination issues. 

 

Practice Governance and Cultural Fit
This area can be explored by asking specific questions about the history of the organization during the interview process. The founders, current practice managers, staff, and terminated or retired physicians each have their own experience that can shed light on the evolution of the practice, work environment and potential governance issues that may exist. 
 
It is very difficult to get the full story from just the recruiter or president of the organization. By showing interest in the history and asking appropriate followup questions, the strengths and weaknesses of the group can be discovered. Prominent surveys indicate that problems with governance and cultural fit are a leading cause for early termination.

 

Compensation and Partnership
The economic value of the offer should be competitive during the initial term of employment and also during the second term and/or partnership. Many offers include guarantees during the first term that attract candidates until they explore how compensation is structured after the guarantee period. A clear understanding of the before and after is necessary. 

 

While the contract may not spell out the compensation terms at contract renewal, candidates can ask the employer to explain how other physicians are set up. Another way to approach this is by asking what the range of compensation is during early years vs. mature years while at the same time asking how much those individuals are working. The more a candidate can compare their prior work experience to the new potential colleagues' work and compensation, the better he/she is able to know if the same results can be produced.

 

Some compensation packages include productivity bonuses that are hard to if rarely ever achieved. This can be investigated by asking "when did your last two to three physicians hit their bonus thresholds?"  

 

When a partnership track is involved, it is common to find lower compensation packages. Part of this is due to the employer's mindset of expecting the new physician to invest sweat equity and demonstrate commitment to the future rewards of partnership. The future partners know that the financial benefits of partnership often outweigh the initial higher compensation figures of employed positions. 

 

Employment Benefits
The benefits associated with employment or partnership provide additional value and should be factored into the assessment of an offer. The most common benefits include: 
  • Malpractice insurance
  • Retirement plans
  • Health insurance
  • CME time off
  • Vacation time off
  • Allowances for CME, dues, licenses and subscriptions
  • Professional development opportunities
  • Life and disability insurance
  • Dental and vision insurance
When transitioning to a new practice, the following key areas should be addressed in order to prevent financial hardship:

 

#1 Contract review and negotiation -- Employers hire law firms to draft contracts that protect the employer. Since physicians who leave a practice tend to do so in the early years...47% of physicians who terminate early do so in less than three years and 60% in less than five years, according to the 2010 Physician Retention Survey by the AMGA and Cejka Search...employers protect themselves through contracts. Doctors who sign "employer-sided" contracts must prepare themselves for the traps and pitfalls they contain. Both what is included in the contract and language that is missing can cause harm. Omissions in a contract are rarely an accident.   
 
Physicians who are going to sign a contract have access to a network of independent attorneys who specialize in physician contracts. For more information, go to the following page: Physician Contract Review and Negotiation Services 

#2 Malpractice insurance -- A review of the current policy and how it covers claims after leaving the employer is a must. Often times there are financial obligations that the outgoing physician is responsible for. Practicing in a different state can cause additional requirements. A full assessment of the doctor's responsibilities can prevent future hassles.

 

#3 Retirement plan -- There are rules that govern which accounts can be rolled over to new retirement plans. A financial advisor should be able to provide direction to the best way to manage the options along with the future investment choices. For access to physician specialized financial advisors,contact us.

 

#4 Life and disability insurance -- As physicians change jobs, they will find out that both the coverage they have through the current employer and the new employer are not portable unless they are individually owned. Doctors who have not already set up their own private insurance plans should do so before signing a new contract. Otherwise, the new employer's benefits may limit the amount and quality of coverage that could be obtained.

To research physician own-occupation disability insurance and to find out more about the limitations of employer plans, complete the secure form via the following link: 

 

Residents and fellows can access discounts of up to 40-50%. There is no cost to research options and once the results come back from the top insurance companies, one of our advisors can present them.

 

These are just a few of the many areas that should be considered when preparing for a practice transition.

 

For access to a free resource that goes into the other areas, check out the Physician Employment Interview Kit.  

 

As always, if you have questions or want to discuss any Practice Management Tips, please don't hesitate to contact our office.

 

 

More Practice Management Tips are available via the link below:

See Other Practice Management Tips

For other resources, go to physician contract review and negotiation.