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How to Negotiate Your Physician Contract

The best advice I received before I started to negotiate my physician contract was to know my value. I didn’t know how to do this however. Among many other things I didn’t know about negotiating my contract as a doctor.

Regardless of when we negotiate our physician contract, and whether it is our first one or 10th, we are at a disadvantage. In general, doctors don’t know how to negotiate. We never learned. Often, we don’t really understand how compensation works or, like I mentioned above, what our value to the practice.

negotiate physician contract

But you can be sure that the person negotiating with you on the other side of the table does know all this stuff!

So we are at a huge disadvantage.

How I learned to negotiate my physician contract

I truly believe that I negotiated the best contract *for me.* And this is a huge qualifier. Some of you may think my contract is horrible. And I may think yours is bad. But none of that matters if the person with the actual contract is happy. It’s a one person game.

Anyway, that aside put aside, I do think I did a great job with my contract. I’m up for renegotiation in a year and will plan to do similar. You can read about my contract here.

I learned how to negotiate a physician contract in a very roundabout way. I basically sought the advice of as many mentors as I could. My attending mentors, recent resident graduates, my cousin who is a physician. Anyone that I could find to read my contract and give feedback. I also had a lawyer review the final version.

This helped a ton. But it also took a lot of time and effort and I had to sort through the good and bad advice. Because definitely there was some bad advice in retrospect.

This is not the ideal learning method

That’s why I’ve worked really hard to put as many resources together in one place on this blog for everyone. I’ve included a lot of personal anecdotes but it’s also important to share wisdom from doctors who do this all the time.

The more experience, the better.

With this goal…

I recently hosted a free webinar with Dr. Kathryn Sarnoski of Contract Diagnostics. She spent an hour with all of us discussing the ins and outs of how to negotiate a physician contract with a ton of Q&A from the audience at the end.

I want to share that webinar here so that anyone new or who missed the webinar can benefit from her amazing experience!

Here is the entire webinar:

But, I also want to touch on some of the important highlights!

The process of finding a job and how to negotiate your physician contract

In Kathryn’s words:

The site visit

“First, generally the negotiations and the job finding really starts with your site visit.

When it comes to the site visit, that is your opportunity to start negotiating. This is your chance to see what kind of resources are in your hospital, in your clinic, who your team is going to consist of, and look at the instruments if you work in an OR or do procedures.

I just like to remind people that the site visit is not the right time to be talking about your salary. Generally, they won’t ask you about that. But if they do, it’s just a great time to politely say, “I really need to look at the whole picture.”

There’s so much that goes into your compensation. And so you don’t need to lock yourself into a particular number at that point.

It’s a really nice opportunity for you. Especially if it’s a move to see if this is a culture, a setting, a place that you and your family can grow and thrive. And so take that time too, to, to explore the area and get excited about that.

Managing an offer letter

Once you’ve done that, and you feel like you’re ready to move forward with the job about 20% of the time, you’re going to be offered a letter of intent. So this is where you wanna start to have somebody start reviewing the contract with you. This is where legal language starts coming into this and where you’re starting to make agreements with your employer.

Basically a letter of intent is a preliminary commitment. So usually they’ll say in there, this is non-binding, this is not your contract. But, they are going to lay out a lot of the points, um, that you will see in your contract. They’ll be transcribed over essentially your salary, maybe your, some of your benefits, your vacation times, CME money start date. A lot of that will often be in that letter of intent.

So you want to feel comfortable signing that because now that’s going to end up in your contract. And if you decide to sign the offer and then get the contract and you actually think, “well I really wanted a lot more money for this.” They’re going to look twice at you and say, but you already said that was okay. So this is really the time to get somebody on board looking at your contract. Somebody who’s really familiar with physician contracts.

Related Post:
Successfully Navigating a Physician Offer Letter

Actual negotiations

Once you start looking at your contract, they’re going to be talking about position. Expectations are usually one of the first sections in your contract. Doesn’t have to be the first, but it’s often times the first.

And this is an area that I really like to spend some time talking with physicians about what their expect, like what they personally expect their position to look like. Because the language can oftentimes be very vague. You might see something as simple as a 1.0 FTE or just the phrase part time, and then they don’t define it any further for you.

And when they don’t define it in your actual contract, it leaves you open to negotiate those expectations in your physician contract. So they might tell you when you interview that, you’re 1.0 FTE is gonna be four days in clinic and a, call schedule that’s one in five because you have five total partners in the group. But then two people leave…

And suddenly that has changed to now you need clinic every day and you’re on call one in three. So you want to make sure that you’re protecting yourself from that potential change.

And so the position at expectation section is an opportunity to start to include really specific language. Just keep as much vague out of the contract and as much specifics into it so that you can really protect yourself throughout the assignment.

Understanding your compensation

Once you start negotiating all of that, a big question is how do I know if what I’m getting is fair?

Related Post:
4 Methods to Defining Your Value as a Physician 

We want to know if what we are getting is in line with what other people are getting. This can be a complicated question because there’s really a lot that goes into it. So I just wanna start briefly by talking through some of the common compensation models and then how you can negotiate those models.

The main compensation models are some sort of salaried model where you know exactly what you’re getting either on an hourly or a shift basis or an annual basis and then RVU based and collections based.

Salary is what it means. You know, it’s a flat rate. There’s really nothing that changes that other than your negotiations. So the RVU and the collections I’ll spend a little bit more time on. The RVU is a work relative value unit that is basically set by Medicare/Medicaid for each of the things that you produce as a physician, whether it’s an office visit a procedure, a C-section, or a like breast reconstruction. They each have a, a number set for them. So say C section is 15 RVUs.

This is the same whether I’m in Wisconsin, Colorado, Washington state. But, what’s going to change is the conversion factor factor. And that is set by the employer and they are basically giving a dollar amount to each one of those RVUs. So they are going to say something like each RVU at our facility for your job is worth $50 and that’s how you’ll be compensated for it. So you wanna do your math.

I have a little example here

And for example, let’s say they’ll pay you $200,000 as your salary guarantee. And then anything you produce over a threshold of 4,000, you’re now getting $44 in RVU. That’s basically saying that you’re getting 50 bucks/RVU for your first 4,000 under your base salary. And now they’re dropping your rate to 44. So this gives you a quick chance to do a little bit of math with them, have a little bit of a discussion with them and you can theoretically negotiate any three of those points.

So you can bump your base salary up. You can ask that conversion factor to be elevated beyond 44, or you can even drop that threshold per year for you to hit. We also really like to do escalators. So something like anything over 4,000 to 5,000, maybe it’s gonna be compensated at 50 bucks in VU and for 5,000 to 6,000 it’s 60 bucks/RVU.

Oftentimes those escalators are really popular and can get some good traction on the employer.

Extra income

There are ways to get some additional income. Often times for nurse practitioner, PA supervision, it’s really common to get some sort of stipend for that medical directorships or other administrative positions in time can often come with additional income research academics.

If you’re teaching, those are all opportunities when you’re going into partnership, all opportunities. So lots of different ways that you can, negotiate for or expect potentially some additional income.

Related Post:
Physician Side Gigs to Make You Passive Money

Your employer benefits

These also have a huge financial impact that you may not see, because they’re just handed over. But I’m a contractor now. And so I pay for all of this stuff outta pocket and it is super, super valuable to get it from an employer it’s very expensive when you do it on your own.

So it’s really worthwhile to take the time and look at the benefits package that you’re being offered by your employer to make sure that it meets your needs and your family’s needs for your health insurance, your life and disability insurance.

I do always recommend carrying your own life in disability policies because when you leave an employer, you also lose that policy. So that is something that’s nice to carry along with you and know that it’s available, if it’s important to you to have.

So just one other extra point to think about retirement funds can be great. Getting a match is great. Vacation. Time comes for many people with it. It there’s no monetary value you can put on that. It’s that valuable. Like I love my vacation time. I love having time away. And so if I can’t get my pay increased, if I can get extra time off, that’s great.

Are you getting a good deal?

So when we were talking about, well, how do I know if it’s fair? We do offer a product called Compensation Rx that specifically focus focuses on understanding what seems reasonable for your compensation. What seems reasonable for RVU thresholds collection thresholds, you name it, we’ve got a whole bunch. We pull all of the MGMA data.

MGMA is based on a big survey that is done on a yearly basis and published to share general regional da or not general, but more specific regional data. And that’s what a lot of employers will reference when they make your offer. They’ll say like we’re pulling, you know, we’re offering you the media and MGMA, um, data for this region. So that’s something that you can use if you realize, wow, this is actually really far off.

If you’re not sure what survey they used, if any, or if they just made up a number, you can have some good, hard data for them. We do also include in our package all of our internal data that we have at this point. This is well over 10,000 physician reviews in the more than 10 years that we’ve been open. So we pulled the most recent data for your field and region so that you have very specifically, this is what 10 other docs in the last six months were offered for the same position.

Academics vs. private

If you’re specifically looking at academics, the AMC data set can sometimes be what they’re referencing and those numbers are generally gonna be different. When you work in academics, you’re oftentimes getting reimbursed less than what you would in an employee during a private practice setting. It just comes with the territory.

So it’s really ultimately comes down to what feels fair to you, what feels like appropriate compensation. But we do want to make sure that you’re always negotiating for the most that you possibly can get. So that we keep our compensations appropriate across the, the country and across the board and across all the different fields.

If you are interested in applying to multiple jobs, you do get a little bit of extra leverage saying like, “Hey, I really like you guys, but this place down the road is offering me $50,000 a year more. Can we match this?” It does offer you some opportunity for negotiation there as well. And a lot of times, places will respond well to that too.

Once you’ve reached the point of getting to a contract, generally everybody has a shared goal. Like we all wanna be here to, so let’s make this happen!”

Here are some additional resources to help you negotiate the perfect physician contract:

What do you think? How did you negotiate your physician contract? What did you do right? Or wrong? What advice would you give another doctor? Let me know in the comments below!

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    Jordan Frey MD, a plastic surgeon in Buffalo, NY, is one of the fastest-growing physician finance bloggers in the world. See how he went from financially clueless to increasing his net worth by $1M in 1 year and how you can do the same! Feel free to send Jordan a message at [email protected]

    4 thoughts on “How to Negotiate Your Physician Contract”

    1. Hi, Jordan. This post is absolutely outstanding. This is the best summary of how to approach your physician contract I’ve ever read. (I’m an ENT but embarrassingly have as a hobby studying physician contracts). All of your points are excellent, but your very first point about clarifying what 1.0 FTE means is top of my personal list. In specialty fields it is very common to lose partner or two and suddenly all of your weeknights and most of your weekends are left covering an ER or the practice. If this is not in your contract then the docs are left with no option other than threatening to quit if they aren’t compensated appropriately for the additional call burden or if locums is not obtained. This frequently sours relations going forward. Having these expectations outlined clearly in this contract is so critical. Also, I would recommend clarifying that “call” includes practice coverage not just the ER/hospital. Otherwise, I’ve seen many times that hospital admin will refuse to consider practice coverage “call”…they’ll claim the “call” in the contract only applies to ER coverage. If you or anyone in your practice is doing procedures then you’re stuck within 30 minutes of your location ALL the TIME even if you don’t have to cover an ER. We have a company that provides call coverage to employed surgeons so I’ve seen this many many many times.
      Again, awesome job on providing this content. This article has the potential worth to individual physicians of hundreds of thousands of dollars if they apply it to avoid mistakes in this process I’ve seen (and committed myself) many times. This will be my go to link for docs who reach out to me with contract questions in the future.

      Reply
      • If physicians want to be ethical and rewarded for their long studies and expertise, they must get ready to strike. Algorithms placed for physicians, particularly hospitalists to use are not at all aligned with good medicine for individual patients. They are indeed used to help MBA funnel money into CEO’s of hospitals, insurance and pharmaceutical companies. So far only nurses have shown the guts to get a little better pay and better medical care. I ask you fellow physicians, why are you leaving it to the nurses. Large hospital groups have become nothing more than realestate deals that use patients to farm for money. The greed in medicine is the paramount problem. How many patients do MBA’s see? We must fight the greed if we wish to remain the ethical leaders of medical care. If, indeed, we wish to be seen as good physicians.

        Reply
        • Hi Raymond, I can sense and understand the frustration that you feel along with many other physicians across the country. Ethically and realistically I don’t think that a general physician strike is feasible. However I do think that financial freedom puts the power back in our hands to find and keep the best jobs until other acclimate. Thank you for sharing your thoughts and reading!

          Reply

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