How to navigate stipend offers [PODCAST]

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We dive into navigating stipend structures for final-year medical residents with insights from Jon Appino, the CEO of Contract Diagnostics. He shares expert advice on what to consider when evaluating stipend offers, understanding repayment clauses, negotiating terms, and safeguarding your future salary. Learn how to approach early job commitments, manage non-compete clauses, and leverage negotiation tactics to secure the best outcome as you prepare for your fellowship or attending role.

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 article, “Navigating stipend offers: a resident’s question.”

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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 CEO of Contract Diagnostics. Today’s KevinMD article is “Navigating stipend offers: a resident’s question.” Jon, welcome back to the show.

Jon Appino: Thank you for having me, sir. Always, always fun.

Kevin Pho: All right. So Jon’s been on multiple times, of course, talking about all things contract-related to clinicians. What’s this latest one about navigating stipend offers?

Jon Appino: Yeah, we had a question that came through one of our national discussions, our national educational events that we did, and we thought other people might benefit from it, so we wrote and published something on it. It was about stipended plans. I think the verbiage can be taken in different ways by different people, but the stipend in this situation was a physician asking, “Should I sign a contract early to receive a stipend?” And this is, you know, mid- to late 2024, Q3, and he was looking at signing a contract for 2026, so looking at signing out, you know, eighteen months, twenty months in advance. And he was thinking, “Is this in my best interest? There’s a stipend that they’re offering me. How should I look at the stipend? How should I navigate this process?” And he was just looking for some general advice.

Kevin Pho: So just to be clear, to sign that contract committing him to a job eighteen months in the future, that job would give him a stipend in order to commit that early. Is that what I’m hearing?

Jon Appino: Yeah. So it’s a benefit. Having a stipend plan is a benefit to many people. So the organization, maybe they have a physician retiring and they’ve had plenty of notice, so they want to replace that physician. Maybe they just know that they’re going to be busy and they want to have appropriate physicians on staff for twenty, twenty-four, even thirty months down the road. Maybe there are certain specialties that are hard to recruit. Maybe they’ve got predictions and projections on volumes coming up. For whatever reason, a lot of employers like to lock in physicians early, and they like to know what their staffing models look like ahead of time. I think we’ve all seen the model of the physician supply-and-demand curves over the next, you know, thirty years, and they don’t look good for a lot of employers. So they’re finding, “How can we fill our roles easily, quickly? And if we can predict the future and protect our time, that’s a good thing.”

And a lot of physicians are thinking, you know, maybe they know where they want to go. Maybe they’re from a certain part of the country. They know that they want to be in Chicago, or they want to be in the Midwest, or they want to be on the beach somewhere, Southern California, for example. And they know, “Why am I going to wait? I like this employer. They reached out to me. They’re willing to offer me the stipend plan, and I’ll go ahead and sign.” So again, it can be a win-win for a lot of people, but it can also turn out bad in some situations.

Kevin Pho: And in cases like this particular question, was it a physician in the last year of residency or the last year of fellowship?

Jon Appino: Yeah, it was an orthopedic surgeon that was going to go do a couple of extra training years and was looking at signing out early. And I believe this one, they were offering him $4,000 per month for the next, I don’t know if it was twelve months or fourteen months or sixteen or eighteen months, but they were going to offer him money while he’s training. And you know, I don’t know what the current salaries are for residents and fellows these days, but I know $4,000 can move the needle quite a bit. And so it’s a benefit to him and his family. I believe that he had two or three kids, and, you know, rent or a mortgage, one of the two, and having $4,000 extra per month was going to be a big win to him and his family. And he thought, “If I’m going to take the job anyways, I might as well take a little bit extra money during my training.”

Kevin Pho: So in terms of that stipend plan, it’s $4,000 a month for fourteen months, as long as, of course, he follows through and takes a job.

Jon Appino: Yeah. So they provide this income to him, if you want to call it an advance. A lot of them do have signing bonuses as well. They still offer repayment on loans. They still offer relocation. They still offer a healthy salary. But they offer this to him every single month as a benefit to signing out early. Of course, if the physician doesn’t show up, they owe that money back, with interest most often, and that’s kind of where the crux is. So it could be a wonderful thing for a physician and his or her family, but if they don’t show up for work, or maybe they get a better offer. And believe it or not, Kevin, we do have a lot of, I wouldn’t say a lot, but we have more than we expect, physicians who go through our process, sign a contract, and call us back in three months, four months, six months, and they say, “I’ve got a better offer. How do I get out of the one that I already signed?” And so it’s one of those things where there’s a lot of risk that goes into these things.

And you know, I could bring up another point of risk. Maybe you sign the contract, and it says you’ll have a stipend of $4,000 per month for the next twelve months or eighteen months. Then when you start, you’ll get an extra $50,000 signing bonus or starting bonus, plus we’ll repay your relocation amount, and we’ll give you a salary at, let’s just say, $400,000 with an RVU rate of 61 each. So everything said, you’ve got a contract. It’s got everything in there, from maybe a restrictive covenant to tail insurance to a start date to, you know, all the requirements of the schedule and call obligations. It’s no different than any other physician who might be starting in three or four months, but the contract is locking in a lot of those salary figures as well.

So if, in this specialty, for example, 400,000 might be the median at that time, and they lock in at 400 with an RVU rate of 61, and when they start working, or maybe in that final year of training, that final four months or six months of training, they start getting offers for 430, for 440, for 450, at 66 an RVU or 72 an RVU, it can be quite painful to show up for your job at 400 and $61 per RVU, knowing that the place down the street maybe pays quite a bit more. And depending on the opportunity, you may be locked into a restrictive covenant or a non-compete. And again, depending on if you leave that position after your stipend is paid off, you may have tail insurance to buy. So lots of things can factor into these stipend agreements that are more in the future, that a lot of physicians need to think through before they just think, “$4,000 a month, man, that could benefit my family.”

Kevin Pho: So tell us, in fact, those specific questions that physicians need to ask themselves in order to consider this stipend plan. How did you advise this particular physician?

Jon Appino: Yeah. Well, number one, we always tell them, if you know this is where you want to be, if you know this is a group that you could work with, then we think it could be a wonderful thing for you and your family. We advise physicians to know how the taxes work. Do they get the $4,000, or do they get $4,000 less taxes? Of course, they need to know what happens if something comes up between now and when they’re scheduled to show up for work, or if they don’t work for the one year, two years, three years, or four that’s required in the agreement.

It’s important to understand the repayment provisions. Maybe there’s something that is unfortunate, like a death or a disability. It’s one thing to make a decision to not show up, right? And there are consequences to that decision. But sometimes, you know, life is cruel, and in the issue of a death or disability, or maybe even, in the first couple years, a for-cause termination by the physician or a no-cause termination by the employer, those things are out of the physician’s control. We would like to hope and expect that those dollars would not need to be repaid.

It’s also important to know, again, what the salary figure looks like, and we do advise our clients that they should insert something into the contract that says “or market rates.” And of course, we always encourage our physicians to have lots of robust conversations with the employer about, you know, “How do you set compensation? How does it change over time? What if it changes between now and when I start?” And hopefully they say, “Well, you know, we just peg it to the 50th percentile,” or “We always start our physicians at the 30th percentile,” or “We start all physicians at the same.” I would ask them the question, “What if you’re starting physicians at a different number when I show up? Will my compensation be adjusted?” Of course, we’d like to say adjusted only upwards, never downwards, but I think most employers would say, “We rarely decrease physician compensation,” at least, you know, at least on the surface. They might have other ways that they would do it. But we would have those things inserted into the contract as well.

So I think it can be a wonderful thing for a physician and his or her family. I just think it’s important to make sure you understand all the risk behind it and what happens if things don’t work out the way everybody expects.

Kevin Pho: And in terms of the type of jobs that typically offer a stipend, are we talking about hospital-based systems, academic medical centers, specialists, primary care? What type of jobs are typically offered stipends?

Jon Appino: That’s a great question. We see this for hospital-employed positions. You know, we don’t see it for academics. If there’s a private practice involved, that might be with a layover of a recruitment agreement and an income subsidy from a hospital system, but most often it’s just with a hospital system itself looking to hire. And again, it just depends on what their needs are right now. I mean, you can search what the highest needs are. I mean, cardiothoracic surgery is in huge need right now. Urology is the oldest practicing specialty, so if you look at the projected retirement patterns of urologists right now, any urologist coming out of training in the next four years, five years could probably sign a contract right now for pretty good money and have a lot of negotiating capital. And primary care, of course, is always being recruited and hired.

And you know, it does vary by location a little bit. We see less of a need, maybe, to hire eighteen months or twenty-four months or longer out in some metropolitan areas that are more highly sought after, so we might see this more in, you know, some rural Midwest areas or some mid-major cities, where maybe it’s not as lucrative for many people to apply to jobs, because they might be able to fill their neurology jobs or their oncology jobs, you know, within six months or eight months of opening them. So we see it vary by geographical reach and then also by the type of position: not academics, rarely private practice, unless there’s a hospital layover or maybe unless there’s a history with the group. Sometimes we’ve seen, you know, maybe a private practice and there’s a history with the physician in the community. So maybe they grew up in a community of 100,000 or 250,000 in the Midwest, and they want to go back there, and they know everyone in the practice. That might be an instance where there might be a private practice that would provide some kind of plan like this. But most often it’s hospital-employed positions.

Kevin Pho: Now, like you said, sometimes after you sign a stipend, situations change. What are some scenarios that physicians may face if they want to get out of a stipend plan?

Jon Appino: Yeah. Again, how it’s repaid and how it’s taxed are super important. So most often, if you decide that you don’t want to show up for the position, you would owe whatever it is you’ve taken. So if it’s $4,000 per month, there might be interest on that. Depending on how they tax it, there might be additional dollars to repay on that. That might be due within thirty days or sixty days of your notice that you won’t show up, or when you don’t show up, or maybe there’ll be some type of payment plan. It depends on how the agreement is worded. So, you know, if you just change your mind, which is OK, there might be consequences as far as financial repayment to go there.

One thing we would suggest to that physician who contacted us saying, “Oh my gosh, I got to pay back $80,000 or $40,000. What do I do?” We would say, “Well, depending on your situation and your negotiating capital, maybe that’s something that you can get from your next employer, or maybe you take a lower salary at your next employer and they pay it off for you.” So maybe there’s a tax benefit to that. We would encourage them to consult with a tax accountant in that situation. But there might be some creative ways to lessen the pain of writing a check that large. Maybe the physician doesn’t have it.

Other things to consider, of course, are the unknowns, right? We talked earlier about death or about disability. The hospital could close, for crying out loud. You know, what happens in those situations? Maybe the location that you were scheduled to work at is no longer. Maybe it’s a brand-new building. It’s a wonderful location, but maybe it’s less than ideal for where you wanted to live and wanted to work. And we could go on and on. There are lots of different situations that are just completely out of the physician’s hands. And again, they’re out of almost all physicians’ hands, but when you’re signing with a date in four months or in five months or in ten months, things might be a little bit less likely to change before you get there than if you’re signing out, you know, a year or two or more.

Kevin Pho: And what kind of ballpark ranges have you seen stipend plans range dollar-wise? You mentioned $4,000 in this particular instance. What kind of range?

Jon Appino: Anywhere from $1,000 to $5,000 is what we’ve seen. So again, that’s on a per-month basis, and it depends on when it’s starting. Maybe it started twelve months before, or eighteen months before, or six months before, and that’s for people who are signing out quite a ways. We have seen people who have signed in December and they’re starting in July or August, and they’re able to get a stipend plan for five months or for six months. So it’s one of those things that you can request oftentimes.

I mean, our business typically gets fairly busy in October, November, December through March, and April slows a little bit, and then May and June are a little bit lighter, outside of some last-minute position signings. And then, of course, we’re working with prior clients as well. But depending on when you sign, it might be looked at as more of an advance on your salary, or maybe you’re taking your signing bonus early. So maybe they’re offering a $50,000 signing bonus, but most of the time we’re now seeing signing bonuses paid on commencement, so it’s more of a starting bonus, not a true signing bonus. So maybe the physician says, “I don’t want a starting bonus. I’d rather have it paid over the next five months so I can, you know, pay some loans or pay some bills or save up money for a house.” And so there might be some creative ways that you could take what’s a signing bonus or a starting bonus and allocate that differently over the course of the next two, six, or ten months.

Kevin Pho: And that leads me to my next question. If physicians are negotiating for a job that starts sometime in the future, they can introduce the potential of a stipend if that fits their best interest?

Jon Appino: Absolutely, absolutely. Yeah, I think employers know the intentions of a signing bonus, and a lot of them, again, have shifted to a commencement bonus, but they all know about stipend plans, I’m assuming. And it would be something that a physician could definitely bring up if they feel that that’s best for their individual situation. And we would encourage an open conversation about all types of compensation, from, I mean, any pre-starting incentives, like signing bonuses, stipends, or up-front student loan payments, to after you’ve started working: your salary, your signing or your starting bonus, any student loans that are coming in after you start, or even bonus structures, or even CME dollars, you know, or medical director payments. I mean, lots of different things. Be encouraged to have good dialogs with the potential employer.

Kevin Pho: We’re talking to Jon Appino. He’s the CEO of Contract Diagnostics. Today’s KevinMD article is “Navigating stipend offers: a resident’s question.” Jon, as always, we’ll end with some take-home messages to the KevinMD audience.

Jon Appino: Take-home messages. Oh my goodness. If we want to keep on this theme of stipends, I would say get a lot of practice interviewing. Interviewing is something that a lot of physicians don’t do often, and things that we don’t typically do often, we’re not generally good at. So I think getting some practice interviews, interviewing multiple times, getting multiple offers, I think is a very healthy thing for a physician to do: one, just to be good at something that they don’t do often, and to understand a specific market and the dynamics and how different places compensate. It is good to have competing offers when you’re going in and negotiating. It improves your negotiating capital, even if you’re a highly sought-after specialist or physician.

And I think then, when you get that letter of intent, don’t sign it. Have it looked at. Negotiate from the letter of intent. If you see a letter of intent, we see, I don’t know, one in five physicians have letters of intent, and unfortunately too many sign them thinking they’re nonbinding, when they’re kind of agreeing to the compensation on them. So don’t sign those letters of intent. Make sure you negotiate from them. And then, of course, when you get your contract, it’s important to have everything looked at, because there might be some language in there that could be painful from a financial perspective later in the future, and it’s important to have some eyes on that of somebody who knows what they’re doing. And that’s what we do every day here at Contract Diagnostics. We make it, believe it or not, fun for the physicians. So a couple of take-home messages there, and look forward to connecting with you soon.

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

Jon Appino: Thanks.

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