Physician Contract Renegotiation

Wealth Advisor

In this video, Jamison, a wealth advisor at EWA, provides an example of how they assist physicians in negotiating their employment contracts. He emphasizes the importance of referencing MGMA (Medical Group Management Association) data to evaluate the fairness of the contract compared to national averages for the physician’s specialty and region.

Jamison walks through an example involving a surgeon with a base salary of $750,000, a $100,000 bonus, and additional compensation based on work RVUs (Relative Value Units). By comparing the physician’s current contract with MGMA data, it becomes evident that the physician is undercompensated by approximately $750,000.

Through negotiation, the final contract is adjusted to include a guaranteed base salary of $750,000, a work RVU target of 9,800 per year, and a $100,000 bonus. This results in a significant increase in total compensation to around $1.2 million per year.

Jamison also highlights important contract details to consider, such as malpractice coverage types (occurrence vs. claims made), tail coverage, location clauses, and restrictive covenants. He emphasizes that contract negotiations are highly individualized, and it’s crucial to seek professional advice when navigating these negotiations for specific circumstances.

Video Transcript

Hi. I’m Jamison, a wealth advisor with EWA. And in this video, we’re going to walk through an example of how we help physicians negotiate their contracts. Important to reference MGMA data compared to your current contract versus what the national averages are in the MGMA data.

So in this example so assume this is a surgeon. Base salary of $750,000, has a bonus of $100,000. Call pay is separate. Total compensation per year is $850,000. This is not based on any production. The bonus is based on the hospital productivity.

In this example, this physician is on track to hit 15,000 work RVUs per year. At 15,000 work RVUs, according to the MJMA data for his region, would put him in the 75th percentile of that specialty. Based on the 75th percentile, compensation per work RVU would be $99.81.

So total compensation if 15,000 work RV user hit is right around $1.5 million. So based on current contract versus the MGMA data, about $750,000 short of what he should be compensated. So there’s a lot of back and forth and ask between both parties during this negotiation, but very unlikely that the hospital would actually pay about one and a half million a year because there’s some overhead and some expenses that the hospital has to pay to employ the physician.

So end result of this, after the back and forth got the contract to be a base salary of $750,000, that’s guaranteed the work RV target is 9800 per year plus the $100,000 bonus. And then anything above that 9800 RVU target would be comped at work RVU.

So somewhere in between, it ends up being in between the 50th and 75th percentile. So not the whole way up to the 1.5 million, but. He’s on track to hit 15,000 work RVUs per year. That’s going to end up being about $400,000 per year of additional compensation.

So total comp will be about $1.2 million per year. So significant increase in compensation. Just by referencing the national MGMA data and understanding how the contract works, really important to look at what type of malpractice coverage you have.

Two different types. One is occurrence and one is claims made. With claims made coverage, it’s important to have tail coverage if you were to leave the hospital, which could be very expensive. So it could help negotiate with the hospital or the new hospital to pay for the tail coverage when you leave.

With occurrence coverage, you don’t need any tail coverage when you leave. So any claims that happen are already covered and generally this ends up being the better kind. Other thing to be aware of is location of the new contract.

If you are switching jobs, sometimes the hospital can dictate where you are doing your procedures or where you are. So if the hospital dictates it, then you could be driving to a bunch of different locations.

And if, for example, you have to pick your kids up from daycare, it could be very hard to navigate that. One other thing to be aware of is the restrictive covenant and the non compete in your contract.

If you are switching jobs, sometimes the restrictive covenant can be so severe with the radius that you’re not allowed to work in that you have to leave and move to a totally different city. So always want to make sure you review that when you are switching jobs.

Contract negotiations are case by case situation, so if you have any questions about your specific situation or would like us to review, feel free to reach out.

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