Ensuring fair compensation and benefits in physician contracts [PODCAST]

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In this episode, we discuss the important factors that physicians need to consider when reviewing their employment contracts with guest Dennis Hursh, a physician contract attorney. From compensation to benefits, we dive into the details of what should be carefully reviewed before signing the agreement. Learn about benchmarks such as the Medical Group Management Association (MGMA) and why the bulk of compensation should be a base salary. We also cover topics like disability insurance, CME allowances, and the potential pitfalls of compensation related to the value or volume of referrals. Tune in to ensure that you’re fully informed before signing your next employment contract.

Dennis Hursh is a veteran attorney with over 40 years of experience in health law. He is founder, Physician Agreements Health Law, which offers a fixed fee review of physician employment agreements to protect physicians in one of the biggest transactions of their careers. He can also be reached on Facebook and LinkedIn.

He discusses his KevinMD article, “New employment contracts: What physicians need to know about compensation and benefits.”

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Transcript

Kevin Pho: All right, welcome to the show. Subscribe at KevinMD.com/podcast and get CME for this episode by clicking on the CME link in the show notes. Today we welcome back a regular guest, Dennis Hursh. He’s a physician contract attorney. His latest KevinMD article is titled “New employment contracts: What physicians need to know about compensation and benefits.” Dennis, welcome back to the show.

Dennis Hursh: Oh, thanks. It’s good to be here.

Kevin Pho: You’ve been on the show regularly. For those interested in hearing about your story and all your previous episodes, go to KevinMD.com/podcast, and in the search bar in the upper right-hand corner, search for Dennis’s name and his prior episodes. So today we’re going to go right into this article about new employment contracts: What physicians need to know about compensation and benefits. So tell us, how did this article come together?

Dennis Hursh: Well, a lot of it is, unfortunately, bad experiences that physicians I represent have had. Some of them are things like RVUs, and can you audit the RVUs? I actually had a working physician, very busy, seeing patients five days a week, who had a contract that said, “We can reduce your compensation if your productivity declines.” They came to him and said, “We’re going to cut your compensation by something like 60 percent because you’re so unproductive,” and we couldn’t figure out why. He didn’t have the right to audit in his contract, but we finally got them to give him his billing records, and we compared them to his schedule. There were literally days when he was not credited with anything, days when he had a full schedule and saw patients all day, and there were days where nothing was billed. There were days where he billed for two patients out of a whole day’s schedule.

We never did figure out what happened, but we were able to show the schedule and get them to not decrease his compensation. I think he was probably entitled to an increase, but at least we got them to not decrease it. So it’s horror stories like that that get you looking at specific issues in an agreement.

Kevin Pho: So in that particular story you just mentioned, when you showed the institution the billing records and there was obviously a discrepancy, how did they respond?

Dennis Hursh: Well, they kept saying, “No. I mean, we’re a hospital. We know what we’re doing. We’re obviously billing for your work.” And so we just said, “OK, the first appointment of the day was Mrs. Smith. Where can you show me a bill for Mrs. Smith?” “We can’t.” So I don’t know. It’s possible there was a digit misplaced somewhere in their system and another physician got credit. We never did figure out what happened, or maybe they really weren’t billing for them. But the point was, he was working very hard, but their records showed he was barely doing anything. So it’s really important that you have the right to say, “Hey, show me these records. If I’m falling down on productivity, let me know.”

Kevin Pho: So compensation and benefits obviously are key points of any physician contract. Let’s start at the beginning. Tell us about some of those key elements of a typical physician employment contract. How are they typically phrased and presented to the doctor?

Dennis Hursh: Well, a lot of times people are tricked, I think, by saying, “Oh, this employer is paying me more.” Well, with the possible exception of recruiting lunches, there’s really no such thing as a free lunch. If they’re paying you more, there’s a good chance that they’re going to expect more productivity. So if the productivity levels aren’t specifically provided in the agreement, it’s a good thing to try and ask what other people are doing, because, as I said, if one is paying you more than the other, it’s a pretty safe bet that they’re planning on working you harder.

So one thing is just looking at the salary. The first thing you obviously have to do is compare it to benchmarks. It’s not, “Hey, the other guys in my fellowship class are getting offers for this.” You want to look at benchmarks to see what that area is paying. Another thing you see frequently is that the employer says, “We’ll change it based upon fair market value.” Now, that’s fair; under Stark law, they have to pay you fair market value. But a lot of times it’s “fair market value is what I say it is.” And I actually pushed back once, and they said, “We have qualified coders and CPAs that work for us,” as if those people have any clue what physician compensation should be.

So I always put something in, or try to get something in, that if there’s going to be an adjustment in compensation, it should be done after an analysis by a nationally recognized physician compensation consultant, and the physician should have the right to see all the data and, if he or she wants to dispute it, to hire their own consultant and talk about it. It shouldn’t be “We’ll pay fair market value, and fair market value is whatever I say it is.”

A few obvious things you look for: Really, everybody should get a sign-on bonus, and again, MGMA has benchmarks for that. So if they’re not hitting the benchmark, I think it’s safe to ask why not. Most people, if you’re moving, would give you a relocation allowance. I always ask, if the physician isn’t moving, can we add that to the sign-on bonus? If the employer typically pays that for a physician, it shouldn’t matter to them if it comes out of this bucket or that bucket. So I always ask, “Hey, we don’t need a relocation allowance. How about adding it to the sign-on bonus?” It’s very fair.

Most employers ask you to repay the signing bonus if the agreement ends. So I mean, if you take a $40,000 signing bonus and, two months in, you say, “It turns out Toledo isn’t the paradise on Earth I thought it was. I think I’m going to move,” in that circumstance I think it’s completely fair to repay the signing bonus to them. But there are instances when I don’t think you should have to repay it. First of all, if they terminate you without cause, I think you should not have to repay that signing bonus. The biggest one to me is if you had the audacity to die or become disabled. I don’t think your heirs should have to repay that signing bonus.

The other thing you look at is that they usually amortize the signing bonus. I see some that say if you don’t work there three years, you owe the whole signing bonus back. You can generally get the employer to agree to amortize forgiveness on a monthly basis, which can be important. If you stay there 23 months and you had a two-year commitment, you shouldn’t have to repay the entire signing bonus.

Another thing I usually look for, particularly when you’re starting at a place, is that most of your compensation should be guaranteed base comp. I actually see some where physicians come in and are expected to start a practice, and they’re paid on productivity on day one, and that’s just not fair. I mean, you can see why the employer does it: “Let’s hire that physician, and if it turns out we didn’t need a physician, it’s no big deal, because we just won’t pay him anything.” But again, it’s a business risk they have to take. Can we afford a physician or can’t we? If we can’t, let’s not bring somebody in and put the risk on them.

If there is a productivity compensation formula, you’ve got to be able to understand it. Physicians say, “I don’t understand legal documents,” but it should be clear enough that if you sit down and look at it, you can figure out what you’re going to get paid. A lot of them really aren’t. And then, if there is compensation based on wRVUs, again, you have to have the ability to look at it and dispute calculations.

I always argue that wRVU production shouldn’t be adjusted by modifiers. Modifiers, as you probably know, reduce compensation from the payer. So for instance, if a surgeon is doing three hammertoes, for the second and third they’re only going to pay 50 percent to the entity, which is fair. I mean, you’ve got the OR prepped, and you’ve got the anesthesiologist there. But the fact is, the surgeon’s production shouldn’t be reduced by that. The surgeon did three distinct hammertoes, so there shouldn’t be modifiers on that.

Another thing, and I’ve only run into it once, is that your wRVU production should be credited on the date of service, not the billing date. I actually had an instance where there was quarterly billing, and somebody in the billing department was sick or something, so they didn’t credit any of the bills. So the physician lost a great deal of money because she didn’t meet her production. I mean, she had done the work, but the billing hadn’t posted it, so she wasn’t credited. So again, I think it should be on the date of service, not whenever they get around to billing it.

Kevin Pho: With so much compensation based on these productivity formulas, it’s critical that the RVUs are accurately tracked. How common is it that there is a discrepancy between what’s really done and what’s being reported?

Dennis Hursh: I think it’s uncommon. I’ve really only seen one where we absolutely knew that nothing was there. The problem you have, as I said, is that they stick modifiers on it: “We only got paid 50 percent for that second hammertoe, so we’re paying you 50 percent. We’re crediting you with 50 percent of the wRVUs.” And that’s not accurate. I see some that say, “We use benchmarks for wRVUs, but we adjust them because the physician fee schedule was changed last year,” or COVID. So it sounds very scientific, “We look at benchmarks,” but they really don’t. Then they just play with them and move them however they think they ought to go. So I would say incorrect billing isn’t as key as sticking modifiers on, or just saying, “These are the benchmarks,” but then randomly moving them because they think it’s fair. Again, it’s important that you really understand that formula, that it’s really unambiguous, and that you can confirm it.

Another thing I see a lot is that it doesn’t mention the timing of the payments: “If you exceed this many wRVUs, we will pay you this much per wRVU,” period. I saw one that said “after the end of the year,” so presumably, if you earned them in 2019, they’re still not in default, because it’s after the end of the year. So really clarifying when the payment is going to be made is important. So many of them say, “We’ll calculate it within 45 days,” and then, you know, “We’ll pay you whenever.” So again, the timing of the payment is important.

Another thing that I look for, if people are renewing a contract, is that I think they should get a retention bonus. I usually think you can get a retention bonus that’s roughly equal to what new physicians are getting as signing bonuses. I like that, and I’ve seen it to be the case. And the good thing is that there are benchmarks for signing bonuses. I’m not aware of any benchmarks for retention bonuses. So generally, if you’re renewing an agreement, I don’t think it should be, “Yeah, we’re just continuing, same as everything. We’re going to bump up your compensation, and that’s it.” There should also be a retention bonus there, and again, I use the MGMA benchmarks for a signing bonus.

Another thing I see all the time is, “We will not pay you during a disability,” or, “If you’re disabled, we can terminate the agreement.” And sometimes “disabled” isn’t defined. I’ve seen it defined as “if we determine you’re disabled.” Now, you’re working for a bunch of physicians. Do you really want your boss to be able to come in and say, “That looks like a bad hangnail to me. I think he’s disabled, so we’re terminating him”? So the disability should be determined either by a length of time that you’re out without working, which I think is very fair, or by a doctor who’s mutually agreeable to both parties. Sometimes they’ll say “if the disability insurance policy treats you as disabled,” and that’s also reasonable.

I think you do have to look at disability insurance too. You want to make sure that it covers a disability where you can’t work in your own occupation. I’ve seen some that basically say you can’t hold gainful employment. Well, every physician is a college graduate, so every physician is qualified to be an assistant manager at McDonald’s. You shouldn’t say you’re not disabled because, you know, McDonald’s is hiring. So make sure of a disability in your own occupation. Some of them are very detailed. I’ve seen some for surgeons that say you’re disabled if you can’t operate, which makes sense. So look at that disability policy very closely.

Again, there should be some period of time where they’re paying you if you become disabled. It shouldn’t be “If we determine you’re disabled, then we can terminate you.” There’s a large hospital system that basically says, “If we determine you’re disabled, we will terminate you.” So theoretically, if you’re in a bad car accident on Thursday, they can walk into the ICU on Friday and say, “Oh, he’s a mess. He’s not going to be working for 30 days. When he regains consciousness, tell him he’s fired.” Again, there ought to be some period of time that you’re covered.

Another thing that you really have to look at is vacation and CME. I actually just recently had a horror story: A husband and wife coming out of training were both going to work for the same hospital. He got five more days of vacation, almost double the CME allowance, and an extra day for CME. I mean, obviously that’s the kind of thing where there are benchmarks, and hers were at the benchmark, but the point is, he got more. So it was great: The hospital had a female attorney, so I just laughed and said to her, “Hey, I guess it’s a man’s world.” And of course she got real defensive: “No, no, you can’t say that. Don’t ever say that.” And sure enough, they came back and gave her the same vacation and CME that her husband got. But again, you look at benchmarks and just make sure you’re being treated fairly.

And then there are a lot of things that most people pay for, and it should be in the agreement. I actually just reviewed one that said, “It is our current policy to provide malpractice insurance.” So, too bad, the day you started, we changed our policy. It should be very clear: “We do provide it.” Most employers are going to pay medical staff dues. Most employers are going to pay medical licensure costs, although it’s good to see if you can get them before you start. A lot of people say, “Oh yeah, when you renew your license, we’ll pay for that,” but they should pay for it when you’re coming in. Again, most employers pay for DEA and state equivalent fees. I’m finding more and more, particularly with hospitals, that they’ll give you a cell phone and usage plan and a laptop computer, so it’s important to ask for that stuff.

There are other details: mileage allowances for trips between offices and hospitals. A lot of places will pay for the dues for the AMA or the AOA, and maybe state and local medical societies, and maybe the dues for one or more specialty societies. I always try and get them separate from the CME allowance, because most benchmarks just have an allowance for CME. Then again, you get zero percent of what you don’t ask for.

I always ask for medical school debt assistance. A lot of employers do provide it, so there’s no harm in asking. And if you’re in fellowship or residency, I always try and get a stipend while you’re there. I haven’t seen any, I think, less than $1,500 a month, and I’ve seen some in excess of $3,000 a month, and that makes a big difference while you’re in fellowship or residency. So again, if you don’t ask for it, you definitely won’t get it. They should also be paying board certification and recertification expenses, and again, I think you try to get that separately reimbursed. It shouldn’t just be lumped into your CME allowance.

I usually try and get an agreement that they won’t change the benefits unless they’re offered by a third party. I mean, nobody can say, “We’ll give you a $15 copay on your health insurance,” because next year the health insurance company might change your plan. But they shouldn’t be able to amend things like vacation and CME. I recently did one where the physician’s salary and productivity and sign-on bonus and everything were on Schedule A, and they said, “We can unilaterally amend Schedule A.” So I mean, I think you should be able to say, “What am I getting paid?” and look at the contract. I had to tell that physician, “Well, I think you’re going to get this much, and I think you’re going to get this much signing bonus, but they can decide not to pay it.” Obviously, that’s not acceptable.

Rarely, but sometimes, you have to look. You should just confirm if they’re treating you like a partner. Sometimes they’ll say, “OK, we’re going to pay you your collections, and we’re going to take out all the benefits and charge them against you.” I usually don’t like that unless you are a partner. I mean, it’s fine if you’re getting a piece of ancillaries, you know, lab profits and things like that. But if you’re not, I don’t think it’s fair to say, “Yeah, we’re giving you your collections minus the benefits we’re charging you.”

One thing an attorney is useful for is that sometimes it’s good to look at it. I’ve seen some that I think clearly violated fraud and abuse laws, and I think it was done in good faith. Fraud and abuse laws say you can’t pay for a referral. In good faith, I’m sure the employer wanted to get the new physician to do hospital rounds. So rather than saying, “We’re going to pay you so much for doing rounds,” I think they, in good faith, said, “Hey, any labs that you order for any of our patients while you’re on hospital rounds, we’re going to give you the profit from that.” Again, I think it was in good faith, but that clearly would violate fraud and abuse laws. So it’s a good thing to look at.

And again, I’ve been talking real fast, but there are a lot of things. I think you just have to look at it overall and say, “Is it fair? Are the benefits fair?” And you have to look at MGMA benchmarks and make sure that they’re paying you appropriately.

Kevin Pho: So one question regarding the benchmarks. There are so many that people go by: There’s MGMA, there’s SullivanCotter. So what are the differences between the benchmarks that different institutions use?

Dennis Hursh: Well, I personally prefer MGMA. The reason being, SullivanCotter has a bigger N; they do a bigger survey, but they do that because they lump academics in with other clinicians, and academics make less. So I’m not a big fan of SullivanCotter. I think MGMA is best. They have a separate database for academics, and they have a separate database for the first three years of practice. So with the other ones, you get this argument: “Well, the median compensation is this much, but you’re just starting out, so you should get less.” And MGMA would say, “No, the benchmark for that says this is what a starting physician makes.”

Kevin Pho: Do you find there’s more flexibility on the compensation side or the benefit side?

Dennis Hursh: Compensation, generally. A lot of times they have a benefit plan, although, again, a lot of times they can change things like vacation and CME allowances. But definitely compensation is generally easier.

Kevin Pho: So for those physicians who are just starting out and are looking at a compensation plan, and it’s normally a hybrid of some type of base salary plus productivity, what are you seeing in terms of that ratio? And what percentage should new physicians look for when it comes to base salary versus percentage compensation in that hybrid?

Dennis Hursh: I honestly think a new physician should get a base salary and then a productivity bonus. It shouldn’t be on you to develop a practice: You come to town, and “Hey, if you don’t develop a practice in a year, you’re going to get hammered.” And MGMA benchmarks have guaranteed compensation for a starting physician, not total. For the other benchmarks, it’s total compensation; sometimes it shows base salary and productivity. But for a starting physician, that’s one number, and that’s guaranteed compensation, and I think that’s what you should get.

Kevin Pho: So tell us some red flags that new physicians should look out for, either when looking at these job postings or even during an initial phone call or meeting. Just what are some red flags, some keywords that they should look out for, that should raise some alarm bells?

Dennis Hursh: Well, I think “We all work hard here” kind of scares me, because, I mean, quick, name 10 physicians who don’t work hard. So to say, “Oh, we all work hard,” to me, when you say that to a physician, you’re saying, “We kill ourselves.” I think it’s reasonable to look for things like: What are the partners’ schedules like? Will you tell me what the partners make? Because you’ll see some. I’ve had people where they’re leaving a practice where they’re being offered partnership, but the partners kill themselves too, and it’s just, “Hey, you know, I’ve made good money here. I had a lot of medical school loans, and I got them paid off, and that was great, but I can’t live like this for the next 40 years.” So I do think if you hear “We work hard here,” that’s kind of, well, physicians work hard. So if they say that, that’s a real red flag, I think.

Kevin Pho: We’re talking to Dennis Hursh. He’s a physician contract attorney. His KevinMD article is titled “New employment contracts: What physicians need to know about compensation and benefits.” Dennis, tell us some of your take-home messages from this article.

Dennis Hursh: Well, I think you have to look at every aspect of it. Too many physicians open up the contract and see the compensation. I particularly see it coming out of training: You’re making a whole lot more than you are right now, and you say, “Hey, this is great.” Understand that there’s no free lunch. So if you have two offers and one’s paying you more, it’s a pretty safe bet that you’re going to be working harder. I think you also have to look at the whole package. It’s not just compensation. You’ve got to look at productivity, and you do have to look at the benefits. It’s very important that you get things like CME and professional dues, professional society dues, medical staff, all that. So look at the whole thing. It’s not one number and everything else is OK. It really has to be a good package overall.

Kevin Pho: Dennis, it’s always a pleasure to have you on the show. Thanks for sharing your time and insight.

Dennis Hursh: Well, thanks. It was a pleasure.

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