40 Questions To Ask During Physician Contract Negotiations

Entering a used practice can be like buying a used car. You just never know where it has been or how well it is really running, regardless of what it looks like on the outside. At our hospital, physicians have a lot of different employment models with some employed by the University, some in small group practices, some who are in solo practices, and some that are in large multi-specialty practices with hundreds of physicians. Our fellows asked me to give a talk next month on what to look for as they begin their job searches for their future medical practices. Here is a summary of my thoughts… 40 questions to ask during job negotiations:

1. What is the salary? BEWARE OF THIS QUESTION!! Salary ≠ Salary. There can be hidden benefits and there can be hidden costs. This is a question often best left to the end of the job interview. There is often considerably more to job satisfaction than income than money alone. Don’t say “yes” to the first job offer but do your homework and check the MGMA salary report as a general guide of what salary to expect.
2. Will you be hospital-employed or privately employed? In 2002, 75% of physician practices were owned by physicians. By 2011, more than 60% were owned by hospitals. The current trend is definitely toward hospital employment and even if you are looking at a private group, there is a chance that it is negotiating an employment agreement. Although there can be advantages to either model, current healthcare economic policies and reimbursement make it easier to succeed in a hospital-employed model in most cases.
3. Who governs the practice? In small groups it is the partners. In large groups it is typically a CEO and board of trustees. In hospitals it is usually a CEO and board of trustees. At Universities it is usually the Dean and board of trustees. In government agencies, it is an administrator or political appointee. Be sure that the governance places a priority on your interests.
4. Who do you really work for? Particularly with hospital or academic employment, the leadership structure can be complex and more resemble a matrix than a hierarchy. With large organizations and practices, be sure you know who you will report to and who will be making the decisions that will affect different aspects of your job.
5. How does the group define clinical productivity? RVUs? Patient encounters? Shifts? Billings? Receipts? Each of these has advantages and disadvantages. How clinical productivity is measured for one specialty may not be best for a different specialty.
6. How many patients should I see? This is not only specialty-specific but can vary tremendously from one patient population to another within the same specialty. Hospitalists generally see about 1.5-2 patient encounters per hour or 15-18 encounters per day. But not all encounters are equal, for example, a hospitalist co-managing reasonably healthy patients admitted for joint replacement surgery can see far more patients per shift than a hospitalist doing primary management of complex medical admissions admitted through the emergency department. Ambulatory physicians should expect about 20 minutes per patient. 82% of physicians work 8-12 hours per day for an average of 10 hours per day and an average of 59.6 hours per week. For internal medicine it works out to about 110 patient encounters per week.
7. Do I need a productivity ramp-up period? If you are an emergency room physician, anesthesiologist, trauma surgeon, or critical care physician, then the answer is no because you will have a full slate of patients your first day in the hospital. If you are a surgical specialist, a consultant in a competitive market or a primary care physician then the answer is likely to be yes. Ramp-ups give the new physician a guaranteed salary if they are not able to make their own salary with their own billings and are usually phased out over a 1-3 year period. Also, most physicians do not reach optimal clinical efficiency until about 7 years after completing their formal training, which is why physicians age 50-60 are currently the most productive physicians in the United States.
8. What is the group’s payer mix? You can plan on bringing in about $34/RVU for Medicare, $25/RVU for Medicaid (depending on your state), and $30-70/RVU for commercial insurance. Self-pay patients can vary but most of the time will provide negligible reimbursement.
9. Will my payer mix affect my income? In Ohio, it can take up to 180 days to get commercial insurance company provider approval. Therefore, building a practice may mean more self-pay and Medicaid in the beginning. If you plan to rely on inpatient unassigned ER admissions to build your practice, bear in mind that these patients will generally have a lower payer mix. The affordable Care Act Medicaid expansion states have much better payer mixes than those states that opted out of Medicaid expansion. States that did NOT adopt Medicaid expansion include: Alabama, Florida, Georgia, Idaho, Kansas, Maine, Mississippi, Missouri, Nebraska, North Carolina, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Wisconsin, and Wyoming.
10. Who negotiates commercial insurance contracts? Small group practices will usually get the “standard” rates from insurance companies and this is typically 90-110% of Medicare on a per RVU basis. Large groups may have higher reimbursement from the same insurance companies, depending on their leverage. Huge groups or those with monopolies may get 150-180% of Medicare rates. If the hospital is sponsoring the contract negotiation with an insurance company, the focus may be more on hospital reimbursement rates than on physician reimbursement rates. Most patients don’t realize that when they get admitted to the hospital, the amount that 2 physicians get paid by an insurance company to provide a given service or do a procedure can vary depending on who those physicians are employed by.
11. Are “easy” duties equally shared? There are some clinical activities that can generate a lot of income per physician work hour. Be sure that the more senior members of the practice are not hoarding all of these relatively easy activities such as EKG interpretation, PFT interpretation, bone density interpretation, reading cardiology non-invasive tests, EEG interpretation, EMG interpretation, and sleep study interpretation.
12. Are there medical directorships? These can be a great way to balance your overall employment activity portfolio, much like having some bonds in your investment portfolio. These can take the form of hospital directorships, practice-owned lab/imaging directorships, governmental directorships, industry directorships, and university teaching salary lines.
13. Is there a buy-in? This used to be pretty standard but is uncommon now and should be a red flag to you. There are some things that are appropriate for buy-in: property, equipment (depreciated), and accounts receivable. Think twice before buy-in for: referral base, patient charts, or practice equity.
14. Can I moonlight? No two moonlighting activities are exactly the same and be sure you know what the rules are before you sign your employment contract. Expect on having some unexpected expenses in your first few years of practice so being able to make a little extra money can really help. These may take the form of extra hospital shifts, extra clinics, expert witness testimony, business consulting, honoraria for giving talks, or board memberships. In some groups, income from these activities belongs to the practice and in other groups, the income belongs to the individual physician.
15. What intangibles will add to your job satisfaction? These can include teaching, research, publication, public health, community service, sports medicine, and medical volunteerism. Don’t underestimate the value of these things. In a recent survey of physicians, 17% said they were very dissatisfied and 25% said they were somewhat dissatisfied with their job. Only 41% of physicians said that they were very likely or somewhat likely to recommend a young person to go into medicine. I have lots of uncompensated intangibles in my job and that is one of the reasons that I’m so happy with my job.
16. Are there plans to be an accountable care organization (ACO)? ACOs were started as a provision of the Accountable Care Act in 2012. They are created by physicians and hospitals combining to provide all of the healthcare for at least 5,000 Medicare beneficiaries for 3 years. The providers are jointly responsible for the care of the patients with a goal of reducing unnecessary tests, keeping costs down, meeting quality benchmarks, and focusing on prevention. Those ACOs that are successful get paid extra by Medicare. However, many ACOs have failed, resulting in lower income. ACOs’ existence is also vulnerable to who is in Congress and who is the President so there is no guarantee that they will still exist 3 years from now. The bottom line, beware of practices that are ignoring ACOs but also beware of practices that are counting on ACOs to survive.
17. Does the practice use advanced practice providers? These can be nurse practitioners, physician assistants, CRNAs, clinical nurse specialists, or nurse midwives. The scope of practice of these providers varies from state to state so know the laws of the state you will be moving to. Also, there is a big difference between advance practice providers employed by a hospital versus employed by a physician practice. If they are employed by the hospital, then you the physician cannot use their documentation for your own notes in order to justify the level of service billed. It is possible, however, for the physician group to lease some of the advance practice provider’s time from the hospital enabling the physician to use the advance practice provider’s documentation as part of the physician’s note.
18. Is there an electronic medical record? This is not as much of an issue now compared to a few years ago since now, most practices will have an EMR of some kind. However, you do need to ask a few questions. Does it meet federal EMR requirements? Does it interface with the hospital EMR? Does it interface with referral physicians? Does it interface with the billing department? Does it work for you or do you have to work for it (not all EMRs are equally user-friendly)?
19. Are there restrictive covenants? Even though you think that your first job out of residency will be the one you will stay with for the rest of your life, it probably isn’t. Restrictive covenants can take many forms including: geographic non-compete, non-solicitation, hospital non-compete, and chart ownership. Restrictive covenants can be appropriate for some specialties but they must be reasonable. A 10 mile geographic non-compete clause may be OK for a thoracic surgeon specializing in robotic surgery. A 50 mile geographic non-compete is probably not OK for a hospitalist.
20. What about call? Do all partners participate equally? Not all call is created equal, for example, is call taken at home or in the hospital? If it is home call, how frequently do you have to come into the hospital at night? How many hospitals do you cover when you are on call? Is there a surge plan in case you get overwhelmed with admissions or consults? Are there residents or hospitalists who are in the hospital covering the patients with you?
21. What about shift work? If you will be working shifts (for example emergency medicine or hospitalist medicine), then who makes up the schedule? Does the new guy do all of the night shifts? Is there a shift pay differential for the undesirable shifts? Beware of productivity-based salary plans that have shift work because not all shifts are productivity-equal, for example, you probably won’t hit your RVU targets if you are primarily working the midnight to 8 AM shift in the emergency department.
22. How will my success be defined? RVUs? Total income? Number of procedures? Quality metrics? Patient satisfaction? Readmission rates? Length of stay? Publications? Grants? None of these are necessarily bad measures of success but just know what the rules are and what is valued by the practice before you start.
23. What is the history of the practice? Recent physician turnover can be a warning sign. A new venture may be riskier than an established group practice. Some turnover is OK – many/most physicians change jobs in their first 5 years of practice.
24. What’s under the rug? Some of the things that they won’t put in the employment ad you read in a medical journal can include: Medicare fraud history; federal investigations such as HIPAA violations, tax fraud, Stark violations, or discrimination; employee civil suits; state Medical Board violations; and malpractice history. If there was recent attrition, why did the previous doctors leave? Always Google the practice and the senior members of the practice to be sure that there is no hidden dirt on the practice.
25. Are there negotiable incentives? The salary may be non-negotiable, but there are a lot of other things that the hospital or practice may be willing to pay for. Sometimes, all it takes is just asking about student loan repayment, moving expenses, signing bonuses, board certification exam fees, DEA license fees, state medical license fees, practice advertising/promotion costs, and pager/cell phone/answering service.
26. What are the benefits? Computer? Expense accounts (CME, travel, books & journals, equipment?), Sick time accrual? Vacation time accrual? Retirement? Maternity leave? Paternity leave? Tuition discounts? Health insurance? Life insurance? Disability insurance? Health club membership? Meals? These can really add up and can make a job more valuable even though the salary alone may be considerably lower.
27. What is the practice overhead? There are some elements of overhead expense that all practices will have such as billing expense (“revenue cycle”), legal expenses, practice administration, rent, equipment, nurses, etc. Academic institutions will uniquely have additional expenses such as “Dean’s tax”, departmental tax, fellow salaries, research faculty support, and support of money-losing specialties. None of these are necessarily bad but you should know where every penny of your collected dollar is going.
28. What is the collection rate? This is a point of confusion for most physicians. The gross collection rate is the amount that you get paid versus amount you billed and typically 40-60%. It is completely dependent on where the practice sets its fees and is largely irrelevant. The net collection rate is the amount you get paid versus the contractual rates. This should be as close to 100% as possible and should always be > 90%. The net collection rate is a reflection of billing efficiency and is highly relevant.
29. What are the contract termination conditions? Most initial contracts are for 1-3 years. Frequent re-negotiation can be tedious but can protect you against changing medical economics. The contract should contain a termination clause. Typical “without cause” termination is 90 or 180 days and typical “with cause” termination is immediate.
30. Where will you actually be practicing? Most practices will have multiple locations that they practice in and just because your initial interview was at the flagship hospital does not mean that you will be spending all or even any of your time there. Know if you will be working at an outpatient clinic, an inpatient hospital, an urgent care, doing telemedicine, an LTACH, an affiliated hospital, or a nursing home.
31. Do you have a unique marketable skill? This can be negotiated into a higher salary than the standard base salary and can include expertise in interventional endoscopy, interventional bronchoscopy, cardiac MRI, endoscopic ultrasound, robotic surgery, laparoscopic surgery, or experience in a specific disease.
32. Does it feel right? For most physicians, that sense of it “feeling right” was one of the main factors in deciding what residency to choose. That same sense is helpful for your first job after residency and can be affected by, the partners, the practice, the administrator, the hospital, and the community.
33. What kind of malpractice do they have? “Claims made” means that the insurance coverage period covers the period of time the claim is filed. Claims made policies require purchase of a tail to cover any claims filed after the coverage period. “Occurrence” means that the insurance coverage period covers the period of time when the actual event occurred and it does not require purchase of a tail.
34. Who pays malpractice? The contract will usually say who pays for the annual premiums but be sure that you know who will pay for a tail insurance policy if you leave the practice. The cost of the tail can vary depending on the cost of the regular premium, the physician’s specialty, and how long the physician worked at the practice before resigning. Tail coverage can be very expensive.
35. What is the retirement plan? There are a bewildering number of retirement plan options including defined benefit pension plans, defined contribution pension plans, 401a plans, 401k plans, 403b plans, 457 plans, Social Security, IRAs, and SEPs. If you assume that you will work for 30 years and then live for 15 years after you retire and you are now making $150,000/year and you estimate you will need 80% of your annual income in retirement, then you are going to need about $5,000,000 by the time you retire. It is not as difficult to achieve as you might think but it is very important that you start early in your career. Be sure you know what your retirement savings options are and then take advantage of them early in your career to the best that you can afford.
36. How difficult was the contract negotiation? Was it a struggle? Was it fair? Your first negotiation with the partners or the hospital will not be your last.
37. Did they give it to you in writing? Some of the warning signs to be on the look-out for include a partner’s spouse who is involved in practice administration, an “acting” chairman (academic position), resistance to provide details in writing, no incentive bonus, a history of frequent physician turnover, and partners who are all old or all young.
38. Is the contract assignable or non-assignable? In the event of a potential group acquisition, consolidation, or merger will you be obliged to work for the new group (assignable contract) or will you be free to leave (non-assignable contract).
39. What happens if you leave? Can you cash in your unused vacation time and does it accrue from one year to the next? Can you cash in your unused CME time or unused sick time? Do you get to keep your accounts receivable or will they stay with the practice?
40. Do I need to have an attorney review the contract? Maybe…The bigger the practice, the less negotiable the contract but it is usually worth a few hundred dollars for the peace of mind that an attorney will give you that you are not being taken advantage of.

July 21, 2016