Employment contracts are important. They protect the employer and employee’s agreement and ensure that all of the conditions mentioned before the hiring are met by both parties. It’s definitely a big and complicated topic, especially because they’re written in legal language that requires a good understanding of the law to read and write properly.
This post will give you a primer about physician employment contracts, but don’t hesitate to contact a professional if you have any doubts regarding your contract!
Payment & Compensation
If you’re an up-and-coming young physician, it’s more than likely that you aren’t going to earn more than other physicians with similar attributes and knowledge. Expect your compensation to reflect the earnings of other comparable physicians in your geographical area.
Understanding your incentive structure
While your earnings might be lower than an established physician, it doesn’t mean that you can’t be compensated for your work in other ways. For this reason, you need to review the contract details when it comes to compensation.
The contract items that will affect your future earnings potential, as well as your quality of life, are: the time it takes to earn partnership, work schedules, repayment language, and incentive component structure. When you’re reviewing your contract, you should be asking “When or how do I receive my incentive or bonus?” It’s important to know the industry standard, as some practices or clinics set an incredibly high bar for a bonus incentive.
It’s difficult to gauge whether the offered incentive plan is realistic. If you are offered an incentive or bonus program be sure to ask about how the plan works not only in theory but in practice. Make sure you know whether new physicians have actually received bonuses when similar bars are set so you have a rough idea of how you have to approach your work.
How do the different compensation plans work?
Different practices use different payment models, and these models affect many things in your work environment. Practice dynamics, group-member relations, and long-term earnings prospects, these are the things that depend on how the payment is set up. We have listed common compensation plans and their pros and cons for you down below.
Guaranteed salary plus bonuses or incentives:
This is a common and most straight-forward model you will find. You have a set level of income, but if you are able to meet the incentive goals, then you will receive bonuses.
The good thing about this model is that it secures your income, but it might not promote productivity. Some practices have an incredibly high bar for incentive bonuses, which means that the physicians will work very hard to earn them, or simply do the bare minimum to get by.
in this model, the after-expenses revenues are split equally among the group’s physicians. This structure is also fairly straightforward and has the advantage of discouraging overutilization of services.
However, it requires that every physician is on the same level of effort. One physician might be doing more than the rest and everybody will get paid the same. Regular performance assessments must be in order for this system to be at its most effective.
This model can be fairly complicated due to its many variables. Physicians are paid as either a percentage of billings or collections and the fixed and variable overhead costs of the practice are shared. They may also receive compensation based on the relative value scale units (RVSUs) assigned to different procedures for patient visits.
In this model, it is important to know the patient mix. A physician serving a patient base that consists mostly of Medicare or Medicaid patients would earn less than a physician who primarily works with commercially insured patients.
While this model rewards extra effort by physicians, it can create a competitive environment that may not be appealing to all physicians. In addition, RVSUs and overhead allocation can be difficult to administer.
While incentive chasing work environment can encourage more productivity, but it will also create a highly competitive atmosphere. Those who thrive in these situations will see their performance rise while those who don’t will see it drop.
Review your payment term
It’s of the utmost importance that you understand what your contract says. There’s an example of a young orthopedic surgeon who left training and signed a contract with a listed salary of $500,000 per year.
While that is the amount he gets, but the contract also states that he must pay up for any shortfall or lack of productivity he may have. At the end of the year, the group requested that he return $300,000 because there is a return salary clause in the contract. This wouldn’t have happened had he consulted with an attorney. He would have been briefed on what the contract says, thus saving him a headache by the end of every year.