It’s no secret that compensation can be a difficult discussion with potential employers.
Here, we’ll give you everything that you need to navigate that discussion and start earning what you’re worth.
We’ll delve into understanding your worth, evaluating (and prioritizing) the roles that will bring you the most happiness, and the four key factors to review within the contract negotiation phase.
Keep reading for our complete guide to physician compensation.
Know How Much You’re Worth Before the Interview
The best time to start thinking about how much you want to get paid at a new position is well before you walk into an interview. When you’re in that interview, you should have a confident answer to the question, “What type of compensation are you looking for?”
If you don’t have a firm answer, you limit your negotiation opportunities and potentially stunt your future earnings. If you know how much you’re worth, you can provide a reliable answer when asked about physician compensation. From there, you can present your case as to why you are worth what you’re asking.
Negotiating pay is complicated, so it is essential to build a positive rapport and ask the right questions before, during, and after the initial interview.
When the topic of pay comes up (and it always does), it takes the interview into a realm of negotiation that some candidates are ready for. However, many physicians don’t do due diligence before this conversation begins, and end up starting the negotiation at a place that is not favorable to them.
What happens when a candidate is not ready for the compensation question?
They might respond by saying, “I’d like to make at least $275,000.”
Is $275,000 fair?
If it is below market value, how would an employer respond?
“Sure, Dr. Anderson, we can offer $275,000…”
The employer would be happy to offer this number if they were prepared to offer $300,000. The offer could be better because the average rate paid for that specialty is higher, and the candidate would be able to hit the required revenue targets, which would enable a more substantial amount to be paid.
In this article, we will discuss how you can determine how much to ask for and other bargaining chips that should be considered during physician salary negotiations.
Want help reviewing a contract? Learn more about our contract review services!
Stop the Bleeding Before it Starts
Whether you are just launching your career after training, joining a new practice, or becoming a partner, you should make sure that you’re fully prepared for the transition by considering key areas that can cause financial bleeding or low work satisfaction.
This means that total compensation should not be the only thing you look at when considering an employment offer.
Before joining a new practice, do as much research as possible regarding what the working relationship will entail. Too many physicians accept offers without digging deeper to find out if the advertisements, interviews, and verbal agreements during preliminary interviews are realistic.
The recruitment process is designed to attract quality candidates, and sometimes the opportunity seems better than it really is.
By accepting an offer without complete information, a physician’s new practice can figuratively begin bleeding on day one, causing the relationship to end before the contract reaches its term. This can lead to unfavorable conditions and termination issues.
Let’s look at a few red flags you should watch out for before signing a new agreement.
1. Compensation and Partnership
The economic value of the offer should be competitive during the initial terms of employment and also during the second term or partnership.
Many offers include lucrative guarantees during the first term that are designed to attract candidates, but terms become unfavorable at the end of the guarantee period. A clear understanding of what is expected before, during, and after a guaranteed term is essential.
How can a negotiating physician raise these sensitive subjects?
While the contract may not spell out the compensation terms at the time of contract renewal, candidates can ask the employer to explain how other physicians are set up.
Another way to approach this is by asking what the range of compensation is during early vs. mature years, while at the same time asking how much those individuals are working. Some contracts might even have set pay increases, and you may be able to negotiate that percent increase at the time of renewal.
The more a candidate can compare their prior work experience to their new potential colleagues’ work and compensation, the better he/she can know if the same results can be produced.
Some compensation packages include productivity bonuses that are hard to (if rarely) ever achieved. This can be investigated by asking, “When did your last two to three physicians hit their bonus thresholds?”
When a partnership track is involved, it is common to find lower compensation packages. Part of this is due to the employer’s mindset of expecting the new physician to invest sweat equity and demonstrate a commitment to the future rewards of partnership. The future partners know that the financial benefits of partnership often outweigh the initial higher compensation figures of employed positions.
2. How to Know How Much to Ask For
The first thing a candidate can do when seeking out information about average physician salaries in the area is to speak with colleagues who are in a similar stage of their career who may be able to provide insight.
Compensation for primary care physicians will vary among employers who practice emergency medicine. Rates will also differ between private practices and public healthcare organizations, so try to talk to physicians with related medical specialties at similar practices.
A step up from anecdotal evidence is getting access to reputable third-party data sources, like our 2020 Physician Compensation Report, that can provide real-life numbers. There are public and private compensation surveys online that you can attempt to leverage, but be wary of inaccurate data sources.
Another way to learn the average annual compensation of American physicians is to contact an advisory group like our team.
We maintain a proprietary database of all of the contracts we have reviewed and negotiated. We’ve successfully reviewed and negotiated over 5,000. More than any other group. In fact, 99% of our clients have been able to negotiate and sign favorable offers. That record includes contracts for all specialties, states, and practice types. Without having access to this database, physicians are not able to get data that is up to date for the current recruiting year.
Through a sufficient level of research and preparation from the sources mentioned above, you can go into interviews and negotiations confidently. If you think you are an above-average physician, don’t be afraid to start the negotiations at an above-average number. Remember, this is your future.
3. Practice Governance and Cultural Fit
Aside from compensation, it is important to consider how the medical practice is run, and if you will be a good cultural fit. You could be making all the money in the world and still be miserable if you’re not working for the right organization.
Practice governance and cultural fit can be explored by asking specific questions about the history of the organization. The founders, current practice managers, staff, and terminated or retired physicians each have their own experience that can shed light on the evolution of the practice, work environment, and potential governance issues that may exist.
It is very difficult to get the full story from just the recruiter or president of the organization. By showing interest in the practice’s history and asking appropriate follow-up questions, the strengths and weaknesses of the medical group can be discovered. Prominent surveys indicate that problems with governance and cultural fit are a leading cause for early termination.
You can ask these sorts of questions during interviews, but you might not always get the most honest answers. Try reaching out to current and former employees on sites like LinkedIn to get the inside scoop about the practice.
4. Employment Benefits
The benefits associated with employment or partnership provide additional value and should be factored into the assessment of an offer.
The most common benefits include:
- Malpractice insurance
- Retirement plans
- Health insurance
- CME time off
- Vacation time off
- Allowances for CME, dues, licenses, and subscriptions
- Professional development opportunities
- Life and disability insurance
- Dental and vision insurance
- Allowances for ongoing annual financial planning advice
The Key Factors in Physician Contract Negotiation
When transitioning to a new practice, the following key areas should be addressed to prevent financial hardship.
1. Contract Review
Employers hire law firms to draft contracts that protect the employer, since physicians who leave a practice tend to do so early. Almost 50% of U.S. physicians who terminate early do so in less than three years and 60% in less than five years, according to Physician Retention Surveys by the AMGA and Cejka Search.
Employers protect themselves through contracts. Employees can protect themselves through contract negotiation.
Doctors who sign “employer-sided” contracts must prepare themselves for the traps and pitfalls they contain. Both what is included in the contract and any language that is missing can cause harm. Omissions in a contract are rarely an accident.
Physicians who are going to sign a contract can get access to a network of independent attorneys who specialize in physician contracts. Just ask one of our advisors for a referral.
2. Malpractice Insurance
A review of the current malpractice insurance policy and how it covers claims after leaving the employer is a must. Often, there are financial obligations that the outgoing physician is responsible for. Practicing in a different state can cause additional requirements. A full assessment of the doctor’s responsibilities can prevent future hassles.
A skilled negotiator may be able to relieve the physician of covering malpractice insurance after leaving a position.
3. Retirement Plans
There are rules that govern which accounts can be rolled over to new retirement plans. A financial advisor should be able to provide direction to the best way to manage the options along with future investment choices. Contact us today for access to physician specialized financial advisors.
4. Life and Disability Insurance
As physicians change jobs, many find out that the coverage they have through their current employer is not portable when they move to a new employer unless they are individually owned.
Doctors who have not already set up their own private life and disability insurance plans should do so before signing a new contract. Otherwise, the new employer’s benefits may limit the amount and quality of coverage that could be obtained.
Residents and fellows can access discounts of up to 40-50%. There is no cost to research options, and once the results come back from the top insurance companies, one of our advisors can present them.
These are just a few of the many areas that healthcare professionals should consider when preparing for a practice transition.
If you have questions or want to discuss any practice management tips, please don’t hesitate to contact our office.