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Join us as we explore two compelling case studies featuring Jon Appino, the driving force behind Contract Diagnostics. In the first, three interventional radiologists, earning over $700k but under-compensated by market standards, sought Jon’s expertise to update their outdated eight-year pay structure. Despite paying their own malpractice insurance and having no paid leave, these highly productive physicians successfully negotiated fair compensation, increased profit sharing, and better terms for malpractice insurance. The second case study highlights a group of general surgeons at a small community hospital who faced similar challenges. With Jon’s strategic guidance, they secured significant pay increases, a $50,000 annual quality bonus, and updated renegotiation terms, setting a precedent for future physician contract negotiations.

Jon Appino has been the driving force behind Contract Diagnostics since 2011, where he leads a dedicated team on a mission to empower physicians with the knowledge, tools, and confidence to negotiate robust employment contracts and secure the best compensation packages.

He discusses the KevinMD articles, “A case study: How group negotiations led to better contracts for interventional radiologists” and “A group of 4 successful surgeons negotiate better contracts: a case study.”

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Transcript

Kevin Pho: Hi, and welcome to the show. Subscribe at KevinMD.com/podcast. Today we welcome back Jon Appino. He’s the founder of Contract Diagnostics, and today we’re going to talk about two case studies. The first, how group negotiations led to better contracts for interventional radiologists. And the second, a group of four successful surgeons negotiate better contracts, a case study. So Jon, welcome back to the show. How are you?

Jon Appino: Thank you sir, I’m well. I appreciate you having me back. We love doing this stuff and we love talking about it as well, so I’m excited to share some successes with you today.

Kevin Pho: So let’s talk about the first one, how group negotiations led to better contracts for interventional radiologists. Tell us about this one.

Jon Appino: So first, every story matters. And we work at Contract Diagnostics a lot with individual physicians, whether you’re a resident coming out of school, or a physician transitioning from one job to the next, or somebody going from a private practice into retirement. We work with individual physicians a lot, but we’re starting to work a lot more with group contracts, and I think there’s a lot of reasons behind it we can dive into if you’d like.

But yeah, a couple of case studies that we wrote about, and again these are hyper successful when they’re done right. So the first one is this group of interventional radiologists, and there was three of them. They’ve been working with this organization for many years, very successful in terms of their production, they were earning above the 75th percentile, but they felt like the tradeoff between the work and the compensation was still a mismatch.

They’ve been wanting to hire somebody to help them out with call for quite some time. They had a retirement that was going to be looming in three years. They figured they better get that done soon, so they didn’t get stuck with more call, being Q2 coming up when their partner retired.

So they gave us a call, and we talked through everything with them. We looked at their current contract, we felt that there was some space as far as where they were currently being paid and the workload that they were doing and where we thought we could bring them, in addition to bringing up other important things like how their malpractice insurance was paid, and the new hire for a fourth interventional radiologist coming up and making that much more of a priority for the organization.

So they engaged us, and we engaged with the employer, and we had a great process that was a little bit longer than we expected and we wanted, but at the end of the day they were very happy with the result.

Kevin Pho: All right, so give us a little bit of context in terms of the setting. How long were these interventional radiologists previously employed with this employer, and what kind of employer was it? Was it a hospital, was it an academic facility? Just give us a little context in terms of the setting where they worked.

Jon Appino: Yeah, it was a private facility, and they’ve been together, this group, for about eight or nine years. And over that time the three of them had been hyper successful in working with this organization to bring their interventional radiology division up and really make it something where it didn’t really exist before. And the three of them kind of created and then grew it to a very successful practice.

They all got along, they were I think friends outside of work, they were all on the same page with what they were looking for in a renegotiation. They also hadn’t had a discussion or a negotiation with the employer for four years. And this is something we feel that physicians should have these conversations every year as far as how you’re doing and your performance and how your compensation looks, but at least every other or every third year in terms of asking maybe more specific questions with what they could do for compensation, how it will change.

We’ve seen lots of articles on inflation over the past 18 to 20 months, and we’ve seen a lot of data this year coming out with MGMA on how physicians, most of them did better this year, but they still haven’t paced with inflation, and they haven’t in fact if you go all the way back to 2019. So real wages if you will are going down.

And so they engaged us because they hadn’t had that conversation for four years. They felt like the amount of effort and work they were putting in was not congruent with the amount of compensation they were earning, even though they were paid a lot of money, earning well above the 75th percentile. So they engaged us and we had a great conversation with the employer, and the back and forth can get sometimes a little bit sketchy, but at the end of the day they were happy with the results.

Kevin Pho: So talk about the dynamics of a group situation, or negotiating as a group versus negotiating individually. How does that change the dynamics?

Jon Appino: We feel that first off, in a lot of our physician contract reviews we go over lots of other things outside of compensation, but we focus heavily on compensation obviously, if the physician is able to negotiate it, but also just that they understand it.

When we hear back from some of our clients in certain situations, we hear that they can’t increase pay because they pay all physicians the same. And I’m sure a lot of physicians listening to this podcast will say that’s what they’ve been told. They set the conversion factor at $48 for each physician, and that’s what they pay everybody. So if you ask for 49 or 50, even if you’re a highly successful physician and you may quit, they’re likely unable to do it, because they pay the department the same, and maybe they review compensation every second or third year, but they pay all the physicians the same.

So our take is maybe the group should go in and say, we should revalue what our work is worth. And if you haven’t had a discussion with the employer in quite some time, now is the time. And so having data, being empowered with what’s fair and what’s fair market, if you will, based on how the employer is describing it, we feel that physicians have a lot more negotiating capital when they come as a group, whether it’s three, whether it’s 20 or 40.

When they come to the employer as a group saying, we’d like to discuss certain aspects of our terms, and again it could be compensation, it could be other things like staffing, it could be resources, it could be simply things like time off or how they’re structuring call. So it could be a lot of other things. But we believe that the physicians have a lot more power when they’re talking together as a group than just individually as a physician.

Kevin Pho: So talk about some of the specific outcomes that this particular negotiation yielded. You talk about that a little bit in the article.

Jon Appino: Yeah, so we were able to increase the conversion factor slightly, but more so, and I think better for them, we were able to increase a profit share allocation. So they were allocating a certain percent of profits based on part of the practice, we were able to increase that significantly. That was going to benefit them both near-term and long-term as the practice continued to grow.

We were on record with bringing in a fourth physician, so they’re going to bring in a fourth physician. Before we were finalizing everything they actually had the job posted. They were going to share in a percent of profits for that fourth individual until they elected them to be part of the plan, which I believe was after a three-year vesting period.

And we changed a couple of things on call, and everything else for the most part remained the same. I do believe we changed how their malpractice was paid, so I think they were paying for their own, I think the organization was providing them a supplement for some of the malpractice insurance as well. So we were hoping it was going to take about three months, it ended up taking about five and a half, but I think the extra time was definitely worth it.

Kevin Pho: And when this group of physicians approached their employer about renegotiating some terms of their contract, how amenable or how flexible did you find the employer to be?

Jon Appino: At first, not that much. Some employers are happy to take discussions and conversations with outside firms like Contract Diagnostics around their physician employees or even their contractors. This one was a little bit different, and I think they realized that they hadn’t had to have this conversation for three or four years, physicians hadn’t pressed it. And I think they thought that they, I hate to say get away with it, but I think they thought this was just a new norm, right? You hire good dogs and you let them run and you don’t need to have these conversations unless they come to you, and these physicians hadn’t come to them.

And I think they realized that having an outside company like Contract Diagnostics come with data, I think they were maybe a little bit nervous on how the process was going to go. But again, we take these things knowing that everybody has the same goals. Usually the physicians want to stay there, the employers enjoy the physicians, want to just find a happy cohesive way to move forward with a little bit better terms that work for both parties. And at the end of the day this employer understood and realized, and we were able to find terms that worked for everybody.

Kevin Pho: So I’m sure this group had several options when it came to third-party negotiations. It could be local attorneys, it could be Contract Diagnostics, a national firm. So what made them choose you guys?

Jon Appino: You know, I don’t know. I know that one thing that separates our firm from others is we have that compensation data, we have compensation experts here, we have people who have worked on the other side of the table. So many of the folks that have worked here have worked in house for hospitals, and they’ve led group comp, they’ve led compensation committees, they’ve led contracting for these groups, and they know how these individuals think.

And I think when the physician sits down and thinks, who do I want doing this for me, I want somebody who knows what the other party is thinking, I want somebody who knows how they’re going to process things, how they’re going to come back and say fair market, we can’t pay you more. They want someone who’s able to counter that with appropriate discussions and arguments and data. And those are all things that we can do at Contract Diagnostics with our team.

Kevin Pho: All right, let’s talk about the second case study, a group of four successful surgeons negotiate better contracts. So another group negotiation. Tell us what this one’s about.

Jon Appino: This one, I’m happy about all the group contracts that we’ve done, but this one was a smashing success. Four surgeons hadn’t had an increase in the conversion factor for, I want to say, eight years. And they were working at a somewhat rural hospital, they got along well with the CEO, and again they just hadn’t had a change in years.

They were successful. The four were producing as many as 5.2 90th percentile physicians. So they were producing a lot, they were earning a lot, even though the conversion factor by any means was well below what it should be.

So I don’t know how they heard about us, but they gave us a call and they engaged us. We got everybody on the same page with where we thought we could go. After we analyzed the situation and we realized how much work they were doing, we felt they were severely underpaid, although they were earning a lot of money at the end of the year.

We reached out to the CEO, and they were actually happy to work with us. They looked at us more as consultants, because again, as a small hospital they didn’t have the ability to pay some of the consultant fees that some of the larger competitors do as far as what is fair market and how much should we pay people. They didn’t have a lot of the data sets.

So we were able to review with them, we were able to review their production and peg them to how successful they had been, which the hospital didn’t know. They knew they were successful, they knew that they were doing a lot of cases, but they had no idea how successful they were compared to a typical 75th percentile physician or a 90th percentile physician. We were able to bring up additional items such as call and trauma call. They were doing an outreach facility as well, so we brought up outside things other than compensation.

But at the end of the day, the conversion factor, it was almost difficult to request the conversion factor that we felt was fair, because it was so far from where they currently were. The delta to the hospital every year was going to be significant. And we went back and forth with the physicians on, what number do we present, because this seems fair to everybody, but it seems like a big delta from where the hospital is, and it’s really going to impact their bottom line at the end of this year and every year moving forward, even though it was fair.

And so working with the physicians, and again working with the facility as a partner, we were able to step up their conversion factor over three years to what everybody deemed fair market. In three years we got a significant bump in year one, in year two, and then in year three we got to where we felt that it should be. The whole time we were also able to implement a quality bonus of $50,000, which was new for everybody there. Since it was the facility’s first time doing this, we were able to guarantee it in year one, since they’d never done it before. We wanted to make sure they had a trial year, capture the metrics, and then make it at risk in year two.

Kevin Pho: So I’m hearing from both of these cases that negotiating as a group would likely yield better results than an individual physician negotiating alone. Is that a correct assumption?

Jon Appino: I think it depends on the goals, but overall I think that’s true. I had a physician call me this week and said, Jon, what’s your success with these negotiation packages? It was a single physician, and I told him, I said it depends what your goals are.

If your goal is solely increasing compensation, if your goal is having a better call schedule, if your goal is simply understanding the terms better, making sure that lines up with what’s considered normal and fair, if your goal is being able to leave in two years with no hassle, with no pain, with no financial outlay, I think it all depends on the goals. But for the most part yes, when physicians come in as groups, they’re much more likely to be heard and taken seriously.

Kevin Pho: Now negotiating as a group, of course physicians have to be on the same page. Do you encounter scenarios where the physicians within that group had different values, different goals in the negotiations? And if so, how did you handle that?

Jon Appino: We have come across it. So far the differences have not been too vast, too separate, and we’ve been able to kind of get people on the same page. Now some people, they want to be a 0.8 and some want to be a 1.0. Some physicians in a group are more vocal and others are just kind of there for the ride.

So I think it depends on what type of group you’re working with. Obviously the group that we worked with that were pediatric hospitalists, much different than a group of all female OB/GYNs that we worked with, much different than a group of mixed surgeons that we’ve worked with. So I think it depends on the group you’re working with. But yeah, we do see physicians fragmented a little bit, but for the most part the ones that we’ve worked with have seemed to be on the same page.

Kevin Pho: So the decision between negotiating alone versus with a group, tell us the type of questions they should ask themselves in order to choose the right approach.

Jon Appino: I think everyone should ask themselves, when was the last time my compensation was updated? Do I understand my compensation? Do I know where I produce and how I’m compensated? So if you are producing in the 75th percentile, are you being compensated at the 75th percentile, for a group or for an individual physician? And if not, I think a phone call to somebody would be a good idea, or at least looking at some numbers and some compensation data, which we have here as well.

Now for a group, I think if a group has failed in the past to get movement, I think calling an outside firm would be a good idea. If a group thinks that they won’t be heard, we worked with groups who simply hired us because they wanted to be heard. They felt like the neurosurgeons, the surgeons, the cardiologists, the anesthesiologists, they were the ones the hospital was listening to and bending over backwards for and prioritizing, and their little group isn’t going to be heard unless they hire someone to speak for them. So that was one of the frames.

So again, I think that whether you feel like you won’t be heard if you have some requests, whether you feel like you’re being underpaid based on what the market is, because you’ve talked to other colleagues at other facilities or seen job postings and conversion rates are simply much higher at other competing facilities, I think all those situations should yield at least a look under the hood.

Whether that means you engage a firm and we do a full group negotiation for you with the facility, I’m not sure that’s for everybody. But maybe it’s just help putting together a pitch deck, something that we’re able to do here. And so I think it varies based on the individual physicians and based on the group that you’re talking about, but I think everybody is at some point worth digging into some questions and at least giving us a call and hopping on an inquiry call with us.

Kevin Pho: So these two case studies obviously very successful outcomes, but how common are those outcomes? How common do you get successes like this in these typical scenarios?

Jon Appino: Our group negotiation division is fairly new. We’ve worked with a handful of groups, and so far every one of them has been hyper successful. Now as far as hyper successful, I’m looking at the return on investment for our fee as far as what the physicians had taken back. Because again, it’s not just a one-time fee, it’s a bump today and next year and the next year and the next year. It’s recurring income if you will on the physician’s wage.

I think the lowest we’ve had, I think it was a $122,000 bump per year, was the lowest that we’ve ever had per physician for this group negotiation division. So at the end of the day they’re hyper profitable for the physicians to partake in. And although some might be $15,000 and some might be $99,000 as far as an annual bump, it’s definitely worth their time to go through the process.

Kevin Pho: So I’ve talked to a lot of attorneys when it comes to contract negotiations, and one of the things that they bring up is that sometimes a local attorney would know some of the local nuances of the medical institutions involved versus a national company like yourself. So how do you respond to something like that?

Jon Appino: Yeah, I agree. I think I would never say that somebody should not use a local attorney. I think local attorneys can be very beneficial if they’re looking at making changes in contracts, if they’re looking at having some of that local knowledge. A local attorney might be better in some ways than a national firm like ours.

Compensation data is something that we have that local attorneys don’t have access to. The competitive landscape, since all contracts are all we do, we do hundreds and hundreds of contract reviews in a given month, thousands in a year, and because of that we’re able to keep up on trends much quicker than a local attorney that might do five or 10 or even 30 a year.

And sometimes a combination approach is warranted and necessary as well. But I would never say that a local attorney wouldn’t be a good option for a physician. We take a little bit different angle as far as education and compensation than a local attorney would, maybe going over the legal aspects and making redline changes to the contract. But I’ll never discourage any physician from looking locally and seeing if that’s a good fit for them.

Kevin Pho: We’re talking to Jon Appino, and we’re talking about two case studies about group negotiations, and he is the founder of Contract Diagnostics. Jon, we’ll end with some take-home messages that you want to leave with the KevinMD audience.

Jon Appino: Oh, I think just that everybody should be engaged in their compensation, engaged in their production, engaged in the terms of their agreement. Whether you’re looking at how do you trade time for money, it’s a very important equation. Even if you earn a lot of money, you should make sure that the equation is fair for what your time is worth.

I think if you haven’t had an update in many years to your compensation schedule, now is the time to dig in and see how you’re paid, and engage a conversation with us or with anybody on what fair would be for your particular story. Not just looking at Doximity data or Medscape data or even MGMA data, but having your particular story listened to and then a customized approach sent back to you as far as what’s appropriate and reasonable.

And I think everybody should be proactive in that, not reactive. I talk to the physician who, after seven or eight years hasn’t had a raise, and we get them a great raise and they are so thrilled and happy, and I tell them that I’m sad, and I’m sad that they didn’t call us three or four years ago. Because I think everybody should keep an eye on this every second or third year. It’s hyper important, it’s how you trade time for money, and I think that everybody should keep an eye on that equation in a proactive way.

Kevin Pho: Jon, as always, thank you so much for sharing your perspective and insight, and thanks again for coming back on the show.

Jon Appino: Thanks for having us, Kevin.