What Can Physicians Ask For in Their Contract?

Today’s post is a guest post from Dr. Nirav Patel, a private plastic surgeon in Atlanta. Nirav carries a really unique perspective as both an MD and a JD. He has specialized experience related to contract negotiation for physicians. Dr. Patel also spent the beginning of his career as an employed physician before transitioning to private practice recently.

Take it away Dr. Patel!

What Can Physicians Ask For in Their Contract?

Doctors endure years of training yet remain ill-equipped to negotiate their first employment contracts.  We’re so used to being eager to please and to not “rock the boat.” But this is not the time to be timid.

Many might find it surprising that you can negotiate ANYTHING in your contract! The worst that can happen is that your employer says “No.”  You can’t get what you want if you don’t ask.

Data I will be sharing here are borne out of initial research I did while a resident at the University of California, Davis (UCD), surveying California Society of Plastic Surgeons (CSPS) members. From there, we expanded our study to American Society of Plastic Surgeons (ASPS) membership. The Baylor plastic surgery program then aggregated these data with those obtained from our other national societies.

My and my coauthors’ research aims were to evaluate areas of concern in typical plastic surgeon contracts and to assess their comprehensiveness. We identified elements that you should include in contracts to better preserve varied interests. This really applies to all physicians but is especially relevant to employed physicians.

Results from the survey

Our ASPS survey had 400 complete responses with representative national distribution.  

• 47% had more than 20 years’ experience
• 19% had 16-20 years’ experience
• 18% had 11-15 years
• 14% had 6-10 years
• Only 2% had 0-5 years’ experience

Private practice vs. employed physicians

• 62% of ASPS respondents were in private practice
• 26% were in academia
• 1% (only 2 respondents) stated having both community practice and academic affiliations
• 3% were in the military
• 9% reported practicing in a multi-specialty group model, such as Kaiser Permanente, which is prevalent throughout California

Partnership status

• 47% of members reported not being in partnership as we defined it
• Of the remainder that were in partnerships, respondents were nearly 4 times more likely to have entered into a formal legal structure (such as a limited liability company or LLC), versus informal arrangement such as sharing of office space, at 41 versus 11% of all respondents

Key finding and mistake! – Most physicians still don’t use an attorney for contract review!

• 64% of the ASPS did not seek attorney assistance with their contracts

This key finding was striking, given the financial, professional, and personal issues at stake for a newly minted attending doctors.

Medical Malpractice Insurance

Many don’t fully understand their medical malpractice insurance coverage options.  

Most popular is claims-made coverage, where the malpractice insurance policy covers claims that are made during a policy term.  

However, other types of policies such as prior acts (or ‘Nose’) coverage, occurrence coverage, or claims-paid coverage, kick in or ‘trigger’ for events occurring prior to the policy, events that occur during the policy term, or when a claim is paid, respectively.

Tail coverage is particularly important when you transition away from a job to another one.  It effectively extends your claims-made policy.  

This, then, raises the question: Who will pay your tail??  

I advise that you attempt to negotiate tail coverage through your employer, to avoid the financial pain of self-coverage for potentially years after you have separated from that employer.

For the survey, ‘Claims-Made’ was the most popular malpractice coverage, accounting for 43%, while 1% (3 respondents) had no malpractice coverage provided.

Another look at the malpractice coverage breakdown, taken from the aggregated data analyzed by the Baylor program, demonstrate clearly that claims made and tail coverage account for the preponderance of the respondents.

Regarding how they secured their policies:

• 66% stated it was through employment
• 33% purchased their own policies
• Still, 1% had no policy at all

Since securing hospital privileges typically requires carriage of medical malpractice coverage, and in our unfortunately litigious culture in the United States, we should not be seeing anyone without malpractice coverage!

(Jordan here: This is an unbelievable stat! The fact that even 1 doctor was practicing without malpractice insurance is scary.)

Disability insurance

• 87% of the ASPS respondents secured disability coverage
• 91% of these had “own occupation coverage”, meaning 9% did not
• 65% purchased their own policies and 26% secured them through employers
• Again, 9% had NO policy.

There is plenty of helpful information on Prudent Plastic Surgeon discussing the vital importance of own occupation disability insurance coverage. This is an absolute requirement for physicians. (Thanks for the shout out, Nirav!)

You don’t want to be forced into another specialty or into functioning as a generalist in the event you’re disabled.

Salary

While resources such as the MGMA exist to research physician salaries, data is meager for niche fields.  

What I also found is that overall salaries are not as high as what is cited, particularly when you are talking about new plastic surgery attending in the job market:

• 7% of the ASPS reported 2016 inflation-adjusted salaries of $100,000-$150,000;
• 23% reported $151,000-$200,000 and $201,000-$250,000;
• 19% for $250,000-$300,000, and
• 15% for $301,000-$400,000;
• 12% reported salaries in excess of $400,000.

Another way to look at it, from Baylor’s data aggregation, showed that the trend appears to be that the private practice folks have lower overall salaries than those in academia. It seems this is counterbalanced with a more aggressive incentive or bonus structure.

(I’ll bottom line this right here…know your value and ask for what you deserve. Physicians set their income in their first contract negotiation. Make it count. Here’s 4 steps to make sure you know what your value is as a physician.)

Compensation Options

Many responding physicians had compensation options in their contract such as:

• bonus structure (a.k.a. compensation incentives);
• formula-based compensation;
• percentage-based compensation;
• moving or relocation expenses;
• student loan forgiveness; and
• signing bonus

46% reported expense reimbursement, which is encouraging. However, a disappointing 31% had none of the listed options in their contracts.

Physicians happiness with their contract

Respondents were asked how satisfied they were with their employment contracts.  On a 5-point scale, with “1” reflecting “extreme dissatisfaction” and “5” reflecting “perfect happiness”:

• 22% reported scores of 1-2 (relative dissatisfaction);
• 78% scores of 3 or higher (relative satisfaction).

Second look at data from Baylor, at least to me, further points out to me that we need to do better.  We can improve upon the degree of contract dissatisfaction that we’re seeing in the data, no matter what the practice type.

As the Baylor paper notes – and unsurprisingly, perhaps – a heightened salary is well-correlated with a heightened satisfaction with one’s contract.

Aggregating the data did also pick up statistically significant differences in contract satisfaction between academic and private practice.

Interestingly, there was a statistically significant difference in contract satisfaction where attorney assistance with contract negotiations was concerned.

You can see an edge in satisfaction with those who did NOT utilize an attorney – it would be interesting to see how this broke down by subgroup – academic vs private.

A sign of blissful ignorance?  Or is there something real arguing AGAINST using an attorney?

Advice from Board-certified Physicians

Here are a select few quotes I picked either for their frequency, frankness, or straight-up cynical humor: 

• “Get a lawyer.” [which somewhat vindicates that contrary data mentioned above] 
• “Go solo.”
• “Go where you want to live.”
• “Never sign a do not complete clause.”
• “Never trust anyone.  Hospitals will ruin you.  Private practice is doomed.”
• “Protect your individuality.  Start your own website – in [the] future you may enter [into] private practice – need to have a web presence.”
• “Quit and do something else. Cut your losses now…It will only get worse. I can never retire. Paper or plastic sir?”
• “Don’t dwell on the first or second year of a contract.  Look at what the long range goals are of your employment. The future is much more important than what you get paid in the first or second year.”

What does this all mean?

I suggest following a simple algorithm when getting into the job market.  

1. Given the stakes, and as an attorney myself, I am obviously biased in answering the “Attorney vs. No attorney question.”  GET ONE.
   
2. I think a dichotomy between academic and private practice is a reasonable one, although I know many who straddle the line.  
   
3. Salary and bonus structure are clearly important and vary too much for our studies, based off short surveys, to provide meaningful advice beyond “look at these items carefully.”  
   
4. Within the private practice realm, I think it is vitally important to determine whether you are best suited to group practice, partnership, or solo practice right out of the post-plastic surgery training gate.

“How much time do I have for all this stuff??”

Most importantly, you need to decide what practice model you wish to pursue.  

While practice types are not always mutually exclusive, you generally need to decide between academic vs HMO vs private practice. 

If you are leaning toward private practice, then you need to be honest with yourself about whether you want to setup a solo practice. If so, you’ll ideally want 1-2 years to get your ducks lined up, as creating a business plan, and shopping it around several banks, will take considerable time while immersed in your training or Boards collection.

Consider you job prospects – including on site interviews – ideally 1 year out and no later than 6 months out. Out-of-state licensure, securing medical malpractice coverage, getting through hospital credentialing – and you must be on staff at ONE hospital at a minimum for your Boards – all of these things take weeks to MONTHS.

6 months out, assuming you are signing up for a position as an employee, you should secure a lawyer with employment law and contracts experience, ideally with plastic surgeons! 

By 3 months out, your job contract should be finalized. Your focus at this point should be around logistics such as moving and finishing out your training.

Restrictive covenants – Buyer beware!

While data from these studies are helpful, they do not do a deep dive into restrictive covenants. And that is a huge deal for physicians in their contract. Many people hear about these things labeled as “non-competes,” but the devil is in the details…

BOTTOM LINE: do NOT accept a non-compete unless:

(1) the job offer is the best one you can get,
(2) you can get it limited in (a) scope and (b) duration, or
(3) ideally obtain employment in a jurisdiction where non-competes are UNENFORCEABLE

Non-solicitation generally means that you cannot take patients (or employees) away from your employer to your new practice.  However, this restrictive covenant needs to be balanced against your duty of care as a physician NOT to abandon care to your existing patients.

Take home points for physicians and their contract

Our data reveal critical elements one should negotiate to ensure smooth transition to practice. We come to the following seven conclusions:

• Seek legal counsel;
• Know what you want before signing;
• Start with an established group but also favor eventual solo practice;
• Structure practice buy-in and know your compensation incentives;
• Have an exit strategy: AVOID non-compete clauses (in jurisdictions that allow them);
• Protect long-term interests, and
• Realize that negotiating is business…Don’t take it personally!

Sharing my personal experience

I joined a well-established group private practice in Georgia immediately after completion of fellowship training in Atlanta. In the end, I was with the group for a full two years before deciding that I wanted to become my own boss and start a solo private practice.

I attempted to follow my own research’s advice, but of course practice doesn’t always follow what you know in principle…

The first two years in practice were incredibly helpful having the support of partners who were respected in the community. I also had a salary guarantee and stream of both insurance-based and cosmetic cases, along with a great setup near a major area hospital combined with numerous support staff.  

However, and despite knowing what I knew from my research, there was still that inkling of hope that my first attending job was going to be my last.  You have to hope for the best yet prepare for the worst, despite getting your “dream job.”

Unfortunately, that level of optimism affected my contract negotiations. Despite being an attorney who even consulted an employment lawyer for plastic surgeons, I did not advocate as strenuously for myself regarding:

• salary,
• elimination of restrictive covenants,
• tail coverage,
• and being able to take my before and after photographs with me to my new solo practice

All of these issues played a significant impact on the trajectory I was able to take starting up my business and getting it busier, faster.

My personal experience shows how vital it is to have an exit strategy, and to ensure that your landing to your next job is a soft one 

I am definitely much happier now being my own boss, and now that I am on the employer rather than employee side, I hope to keep my own advice to heart in the event I take on another surgeon in the long-range future, nearing retirement.

I’m a big believer in the Golden Rule: do unto others as you would have them do unto you.

It’s Jordan again…

Here’s how I found my job and this is another great comprehensive post about physician contracts for your review

And, if you are interested in learning about other ways for doctors to increase their compensation, check out this guide to physician side gigs for full time physicians (like me!)

You can also get free access to my masterclass webinar, 12 Steps to Financial Freedom for Physicians here!

What do you think? What did you ask for in your contract? Do you wish that you asked for anything else? What advice do you have for physicians negotiating a contract now? Let us know in the comments below!