How Physicians Can Negotiate the Best Hospital Employment Deal

August 30, 2012
James Doulgeris

Yes, hospital employment may seem like heaven on earth, but the devil lives in the details. Here are some things to ponder before signing on the dotted line.

The prospect sounds appealing: Your local hospital or hospital-owned medical group makes you an offer to join them. Money up front, the practice is run for you, reduced calls, no payroll, no expenses - you just do what you were trained to do and still get financially rewarded for doing well. Whether you go with a group or as a solo, the precedent is already well established - 65 percent of physicians are already similarly employed, a number that is rapidly approaching 75 percent.

A proposal is made and an agreement tendered. Assets are purchased, debt goes away, and you have guaranteed income, performance incentives, and benefits. It seems like heaven on earth, but the devil lives in the details. Dense and often misinterpreted small print rises to get you when you least expect it. But it is not just the small print; it is far more often the plain, unambiguous terms and conditions having to do with compensation that create problems.

Performance clauses are the most common cause of disputes and disappointments, particularly when compensation includes bonuses dependent on revenue-based goals. Not because they are unrealistic, and most often not because of the physician, but because there is often little or no marketing support, and little appreciation for the impact of payer mix because hospitals are reimbursed more generously than physicians.

Things are fine at first - the patients that follow you will make your initial payer mix more balanced but, over time, as your original patients thin out by attrition, the void is typically filled with lower reimbursing patients through the general referral system.

Complicating matters, hospitals are generally not very good at collecting deductibles and copays, causing your accounts receivable to mount, further impeding accessing performance incentives. Further, hospitals are also quick to send past due amounts to collections, alienating many patients and giving others incentive to drift to other physicians, further diluting patient volume in the most critical area, private insurance.

It gets harder and harder to achieve incentive income until, as often happens, you don’t.

These are an often repeated laments, and ones that are difficult to remedy. The obvious choice is to avoid the situation in the first place, however, with precedent having been set by predecessors, it is easier said than done. It’s no one’s fault, nor is it everyone’s fault, it’s just business.

The good news is that there are steps you can take to protect your interests:

• Talk to physicians and staff already in the group. If they are happy, be wary - you probably will be too, but only if you get the same deal. If they are not, you don’t want the same deal.

• Don’t use your regular attorney unless they are expert in negotiating physician employment agreements. Hire a specialist to represent you, attorney or not, with as much experience in negotiating hospital and medical group employment agreements as you can find. They will know how to avoid terms and conditions that may cause you to regret your decision.

• DO NOT get directly involved in the negotiations or discussions. Ever. Let your representative do that. Your job is to approve terms and conditions when you are comfortable with them, or when you believe you have gotten the best deal to be had. Negotiations can be contentious. Let any animus remain between administration and your representative. Stay back, smile, be friendly, be reasonable - you’re the one that has to work there for years to come. The hospital or practice negotiator will rarely be the decision maker. There is good reason for that. Any negotiator that does not need approval from others is at a substantial disadvantage. That would be you without representation.

• Make the change for the right reasons. If, for example, you are leaving a partnership because of the politics or issues with managing partners, keep in mind that politics equally exist in the workplace, and you can rarely effect a change in management as an employee. If you are leaving because you are seeking stability, a better quality of life and relief from the burden of running a practice, and are willing to trade control and some upside in compensation for eliminating the downside, you are likely making a good decision.

• Lastly, when the deal is done and the paperwork is ready to sign, sleep on it. If you wake up still feeling you are making the right move, you probably are.

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