Physician pay won’t budge for one doctor. Negotiate as a group. [PODCAST]

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Many physicians are told their pay follows a standard plan that cannot change for one person. Jon Appino, a physician contract and compensation consultant at Contract Diagnostics, says administrators are often telling the truth. His firm is a central resource for physicians and their families, offering consulting and coaching on employment contracts, compensation, schedules, and benefits. This episode is based on his article “Negotiating physician compensation works better in groups,” published on KevinMD. You will hear why hospital systems revisit pay plans every two or three years, and why waiting for the new addendum often means it has already cleared finance. He explains how your group can get involved twelve months ahead, bring its own data, and raise staffing, equipment, and call, not just salary. He shares how three and a half general surgeons gained about $140,000 per physician per year after their plan went five years without review. For new physicians handed a non-negotiable contract, he lays out the clarifying questions to ask, and why asking for more after hearing “standard” can sound bad. Press play to hear when a group voice works best and how to be proactive before your next pay plan arrives.

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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 is at Contract Diagnostics, and today’s KevinMD article is “Negotiating physician compensation works better in groups.” Jon, welcome back to the show.

Jon Appino: Good to see you. Appreciate you having me.

Kevin Pho: All right. Before talking about the article itself, what led you to write it in the first place?

Jon Appino: So, we do a lot of contract reviews. We talk to a lot of physicians about compensation, and over fifteen years of doing this, we’ve heard it more and more lately. It’s not every single physician, and it’s not every single situation; every story is different, we truly believe. But when we talk about compensation, and whether they should ask for more and how they ask for more, we hear from more and more physicians that they’re just told there’s a standard compensation plan for the department and they’re unable to change anything for one physician.

That brings up a lot more questions. Even if they feel like it’s underpaid, even if there’s another job across town that’s offering more money, oftentimes, depending on the system, the setup, the story, and the facility, their answer is clear. They say, “We can’t, because we pay everybody the same, and if we were to pay you more, then we would have inequities in the program.”

So it led us to think: If it truly is underpaid, and the work that they’re doing should be valued at a higher number, how can we help those physicians get to a better number? Sometimes, if one physician doesn’t have a voice, the department does. That could be between three people and sometimes fifty people, but we feel like maybe a collective voice is necessary in some situations.

Kevin Pho: So, in terms of when this arises, are you seeing this more in a particular setting? For instance, I hear this a lot in academic medical settings. What about hospital-employed groups or private practice? When does this situation typically come up?

Jon Appino: Not so much in private practice. Private practices tend to make some of their own rules. They may have a comp plan for shareholders and a comp plan for non-shareholders, potential partners, or even contractors. So private practice is a little bit of a different animal. But like you said, academic practices definitely have some kind of model. Maybe it’s based on your tenure or your title in the organization, maybe it’s based on other roles that you might have, or even specialty training.

A lot of times, these larger systems try to standardize plans across maybe an entire system, regardless of the location. There might be multiple locations, and the comp plans might be the same or they might be different. So we’ve seen it more and more in hospital systems. As you well know, and as everyone listening knows, we’ve seen more physicians go into hospital employment over the past decade than ever before. So we hear it more often here at Contract Diagnostics that it’s just a standard plan. Some of these large systems tend to have more dedicated comp plans for departments that are looked at and redrafted, usually on a somewhat routine basis, but that’s not always the case either.

Kevin Pho: So walk us through the path. As physicians, we’re always told that we need to get a lawyer to review the contract, and I have a lot of attorneys come on my podcast and talk about which parts are negotiable. But now we’re talking about larger groups that give us a roadblock, saying there’s a standard plan. “We can’t negotiate. We can’t make exceptions.” So walk us through your article. Walk us through what we should do next when we encounter that.

Jon Appino: I feel like questions are always very important. If they are unable to change compensation, it doesn’t mean that we don’t have a lot of questions. Even on an individual level, we love to ask a lot of questions. If it’s a standardized plan, I’d want to know the last time it was revalued or revisited. I’d want to know what their cadence is. Some groups look at data every year but don’t adjust things unless there’s a major change. Some groups have a cadence: Every other year they look at a certain specialty, or every third year they look at a certain specialty. Maybe if the data changes by a certain percentage within any given year, they might look at it on a unique basis, because the data changed significantly one way or the other.

So it just varies so much. But we do see that hospital systems usually have some type of cadence. Every two years or every three years is very common for how often they’re looking at these plans, whether they update them or not. It might be dependent on leadership. It might be dependent on finances. It might be dependent on CMS and reimbursement rates. It might be dependent on a whole lot of factors.

But typically, on that two- or three-year cycle, the last thing we want, as they’re building this plan, is for the physicians not to even know. Maybe they just assume that they’re going to get an addendum and they’re expected to sign the addendum. We feel like there should be a better process for the physician groups to be part of that discussion, which means getting involved earlier, asking a lot of questions earlier in the game, and knowing when the cadence is coming up. Let’s get in front of them twelve months ahead, because sometimes these things take an awful long time.

I think if they wait until they get the addendum and then they want to go discuss it, chances are it’s already been through finance. It’s already been through the comp committee. It’s already been through a fair market value analysis or a third-party discussion, and I don’t know how flexible an employer would be at that time. That’s why we like to have them involved much earlier in the game, because we feel like if they can have a voice in the process, the chances of success, of getting something they’re more agreeable with, are much higher.

Kevin Pho: You wrote in the article that whenever an administrator tells a doctor that they can’t make the exception, they’re often really telling the truth. They really can’t make an exception in a lot of cases. Is that right?

Jon Appino: It is right in a lot of cases. Now, of course, there are always one-offs. Sometimes, maybe in cardiology, there’s a group of eight and they pay everybody the same. But maybe there are two interventionalists there, and one of them leaves; the only interventionalist left might have a little more negotiating capital than the other cardiologists in the group. So there’s always an exception.

Sometimes a physician is just doing more. Maybe the physician is the medical director, maybe they have a GME appointment, maybe they’re taking extra call, or maybe they’re volunteering at a separate site. So again, it’s not a copy-paste rule for everybody. There are certain exceptions, but that’s definitely something that we hear often, and I don’t think that they’re lying.

Kevin Pho: So you mentioned that when it comes to compensation, you want to ask what the cadence is and how often it’s revised, and get involved with the revisions of the compensation plan early. Is there anything else that physicians can do when negotiating with these large groups?

Jon Appino: I think just understanding the dynamics. A lot of times, the hospitals have access to information, and information is powerful. They have access to multiple different surveys, and they’re bringing in third-party analysis. They’re looking at all the back-end numbers, what people are doing and how they’re doing it, and maybe even comparing it to the market. They’ve got a third party that’s looking at all this through their eyes, and we’ve heard some different stories on how those numbers are created and put together. Whether it’s one number or three ranges of numbers, I think, depends on the third party and how they put it together.

But we do feel that a physician group should be involved in that discussion to share what they’re doing, because the administration that’s building these plans may be unaware of all the extra activities that the physicians are doing. They just see the numbers. They just see the RVUs. And again, if a physician comes into that discussion too late in the game, after it’s already been approved, and all they have is a simple printout from Doximity or maybe even MGMA, we feel it might be too late, number one. And having the analytics behind that is different than just having the number.

You might want to link it to a cholesterol number, right? It could be high, it could be low, but with the underlying patient, whether they smoke, whether they’re overweight, whether they exercise, whether they’re seventy years old or forty years old, whether they have a family history, all those back-end things matter. We think the physician should not just have, “Here’s the median, and I’m producing at the 75th percentile but getting paid the median.” That’s a powerful story and a good message, but they should have some underlying data and analytics to support their position in this discussion, negotiation, or whatever you want to call it.

Kevin Pho: Now, in general, how often do these groups revise their compensation plans?

Jon Appino: Usually every two or three years. And like I said, a lot of times they present the addendum to the physician maybe on a Friday and expect it back on a Monday, or present it on a Monday and expect it back signed on Friday. It’s not a discussion. It’s “Here’s your new compensation plan.” It’s almost expected to be accepted by the physicians and the group. Maybe they think that there’ll be a little bit of pushback. But again, if it’s already been through finance, if it’s already been through budgeting, if it’s already been through fair market value, the chance of modifying it in any significant way might be pretty slim. So we think having a seat at the table and being able to have your own analytics from your own perspective, not just using their analytics and how they’re looking at things, gives you a little bit of balance in that information equation.

Kevin Pho: And in general, when they’re interviewing a prospective physician, how likely are they to say yes or give a positive response, as in, “Yes, we could include you in future compensation group discussions”? How likely is that?

Jon Appino: Well, if they’re part of a department, I would expect that they would be part of any departmental plan. And again, I think it’s about having that discussion, knowing when the cadence is, and then being in touch with the administration, right? Working with them collaboratively, not with conflict or in any other way, but trying to work collaboratively with them to maybe bridge a gap or find the solution to a potential problem that the group might see.

I think having that voice at the table, being in constant contact with them, and knowing what that cadence is and how they build these plans and run them through finance is really important for the physician in understanding the timelines involved. Again, these things don’t happen overnight. They happen in the background as the physicians are working, as they’re doing what they do every single day: producing, seeing patients, and taking call. These things are quietly getting built in the background and then just presented to the physicians, versus them having a seat at the table to go over their own numbers and be able to tell their own version of the story.

Kevin Pho: How about other parts of a contract, say the non-monetary parts? How much flexibility is there when negotiating with large groups?

Jon Appino: That’s a great question. I think on an individual basis in large groups, maybe a little bit, maybe not a ton. It depends on what the ask is. If a group is looking at something, I think there’s a lot of power in the group having that discussion. I do feel like these discussions aren’t always only around a piece of language you don’t like in a contract, or of course a compensation structure, or how they’re structuring your PTO or some kind of family leave. I also think it can be much more.

When we talk to physicians about these things, we never talk only compensation. We ask them, “What about resources? What’s staffing like in the department? Do we need to bring up extra staffing? Or are you guys overstaffed? Do we need to bring on a layer of nurse practitioners or PAs, and what can they do to help? Do we need to talk about bringing on a night doc, because people don’t like doing nights anymore? Or maybe they’re spending too much on locums?” Maybe there’s a piece of equipment that would make their job or their life much easier and smoother so they can get out of clinic every day. Maybe administration doesn’t even know that the administrative burden is so high that they’re spending time on the weekends doing their charts from home.

So again, I think it’s not just around compensation, and maybe not just around a certain clause in an agreement, but around everything that would help them do their job: resources, technology, equipment, tools, staffing, clinic space. We could go on and on with what else could be discussed during these important times.

Kevin Pho: Can you give us some real examples or case studies, maybe success stories of physicians who successfully negotiated contracts with these large groups with standard contracts?

Jon Appino: Yeah. The one that comes to mind was a few years ago. It was a group of three and a half general surgeons, and they were in a standardized comp plan for the surgeons. They were doing the work of about 5.2 full-time equivalents at the 90th percentile, so they were doing really fantastic on numbers. I asked them about being understaffed, and they thought they were staffed just fine. They liked being busy, and they had a lot of cases to do. It was a smaller hospital in a midsize town. There were three and a half surgeons, four, with one part-time, and they had a comp plan that was standard for everybody. The last time it had been revised was five years ago.

The hospital hadn’t come to them with any plans. They assumed the physicians were happy: “They’re making good money. They’re producing good numbers. Why do we need to go to them? Why do we need to rock the boat?” And I don’t think the hospital understood how much the market had changed in five years.

So we talked to the group. We unpacked a lot of things behind the scenes as far as what they were doing and how they were doing it. We did surveys on the market as far as how many surgeons could be there and how much work they were doing compared to the 90th percentile of different data sets. Then we came to the hospital, working with the physicians. Again, one thing we haven’t talked about yet is making sure that everybody’s on the same page. We had all the surgeons on the same page, wanting the same things, which is really important in these situations. We went with a couple of specific asks for everybody, not “this one wants this and this one wants that,” but “here’s what the group would like, to make it more up-to-date and more standard.”

The hospital hadn’t looked at the plan for quite some time, and they were quite shocked that the RVU conversion factor was so low. Once they adjusted it to where it should be, it was something like $140,000 extra per physician per year, just because of the change in the conversion factor, with no change to call pay and no change to anything else. It was a tremendous success for everybody. And I think the hospital actually really appreciated the physicians coming to them through us, opening up that dialog, and having that conversation in a rational way with data behind it. So they understood more of what was going on behind the scenes, and once they started to unpack it themselves, it became obvious that they were underpaying the physicians.

So that was one of the biggest successes, I think, that we’ve had. With the investment of time from the physicians, and some money, they were able to grow their compensation with the same amount of work by $140,000-plus every single year, not just one year but into the future. I think in year two, there was something like a $40,000 quality bonus that was kicking in as well. So it was a significant win for them, and that’s one of many that we could tell.

Some are just about call pay and nothing else. Some groups have already negotiated a conversion factor over the next three years, and all they want is a better structure for call and call pay. Maybe it’s about doing moonlighting at a different facility in their spare time. So we could share a lot of different successes, and we’ve had a lot with these group discussions, being able to open the lines of communication and really have a good discussion on the merits of the deal.

Kevin Pho: So it sounds like one of the keys is that it’s much more powerful to negotiate as a group, as one entity, rather than as an individual physician.

Jon Appino: I feel so, in some situations, yes. Now, it does change, right? There could be two or three people, or there could be fifty or fifty-five people. We find that with large groups, maybe cardiology groups that have fifty or fifty-five people, first off, the chance of getting the interventionalists, the EPs, the imaging guys, the general cardiologists, and the heart failure guys all on the same page is very slim to begin with. A group that size, I think, needs a different process.

We have found that the sweet spot tends to be groups of maybe three or four physicians up to maybe twelve, maybe fifteen, where everybody gets along for the most part. Everyone trusts each other in the physician ranks, and they all have the same goal. They all want the same thing, versus one person wanting this, another person wanting to do that, another person going to this location, and a subspecialty baked in there. We tend to find the most success when everybody’s on the same page, walking in the same direction. If we can help lead that discussion with the employer, the chances of success, I feel, are much better, and it’s just a smoother process.

Kevin Pho: What kind of advice do you have for, say, the newly graduated physician looking for their first job, perhaps staying in an academic facility or going to a large group, and being presented with the standard, non-negotiable contract? Any advice for these new physicians who may not have any experience negotiating a contract before?

Jon Appino: I have a ton of advice, but we don’t have time for all of it today. I would say, of course, make sure you have everything looked at. The contract is important, even if it’s non-negotiable, even if the comp plan can’t be changed, even if there’s zero negotiating ability on your end. There’s a big difference between negotiating and clarifying, and I think it’s about having good questions to ask.

Even if they say, “Look, the compensation is the same for everybody. Don’t even ask us to increase it. The signing bonus is standard,” or “We never offer a signing bonus. Don’t ask for one,” etc., it doesn’t mean that I don’t have thirty questions that they could ask. And none of the questions are “Can I have more money?” None of the questions are “Will you give me more?” The questions are the same ones we talked about, right? When do they update the comp plan? What’s the average in the department? When was the last time it was updated? What data do you use when you update it? What’s the process and the cadence that you use? What’s the timing? Who do you bring in? Who do you involve? How do you roll it out to us? And what would the timing be for that?

I think there are a lot of questions that we can ask around a standardized compensation plan that simply isn’t going to change, no matter how good of a negotiator you are, how much negotiating capital you have, or how many offers you have behind the scenes. I think asking a lot of questions around the plan is really important. Even if it’s a standardized plan, say you have a base salary for two years, and in year three you go to the standardized production plan that everybody else is on. Well, if your contract says you’ll be on the standard comp plan, maybe we want to see the comp plan. If it says you’ll be paid 50 bucks an RVU, but the comp plan changes, will they update your agreement? Or are you agreeing to the 50 bucks?

And then, of course, if I’m off my guarantee in year two and on the production plan in year three, what’s the average? What’s the chance that someone doesn’t produce the minimum required to keep their salary at the end of the guarantee, which could be one year, two years, three years, or longer? Does anybody ever step back? And if so, how do you handle that situation?

I’d also love to know expectations, right? What are your expectations for me in year one, year two, and year three? Maybe there is, again, a base salary with a layered bonus plan. Does anybody ever earn a bonus in year one? Do they ever earn a bonus in year two? What’s the cadence of the bonuses? Do I need to be employed to receive the bonus, or is it paid for a partial year? Or is it only for a full year? And is that year a calendar year, a contract year, an academic year, or a fiscal year of the employer? I think all of those things are great questions to ask that might not be clear in the standardized, non-negotiable comp plan, and they are really important for any physician to understand and know going into any position that they’re signing for.

Kevin Pho: Now, we’ve talked about what physicians should do. What are some of the biggest mistakes that you’ve seen, some red flags that they should avoid when confronted with a, quote unquote, “non-negotiable” plan?

Jon Appino: I don’t know if I would call it a red flag, but I do think if they tell you it’s standard, if they say everyone’s paid the same, and then you still ask for more, it just sounds bad. But I realize that physicians want to do that; maybe they want to be told no. I don’t know that that’s a good tack. That’s why we don’t just tell our clients to go ask for this dollar amount, right? We always say to ask a lot of setup questions, and then it’ll become obvious if you could ask or should ask for more money. So I think sometimes asking is maybe not the right way to do it.

If you’re by yourself and you’re asking for those exemptions, maybe there’s a reason you’re asking for the exemption. Maybe you speak Spanish in a market that could really use a Spanish speaker. Maybe that’s a reason that you could ask for more. So again, it’s never all or none. Every story matters, and every story is important. There might be a way that you could have a story, a phrase, and a sales pitch that would encourage them to give you a different stipend. Maybe the comp plan stays the same, but there’s an extra stipend or something else on the back end, while the comp plan is still standardized and still the same for everybody.

And then I think the only other red flag would be just not asking questions, just accepting it without understanding it. If the comp plan is the comp plan, it’s not going to change, OK? But we still need to understand it. I think that’s one of the big red flags in general: If a contract is standard and the terms are standard and non-negotiable, a physician still might sign it without understanding it or without asking good questions around it.

Maybe, again, it’s a standardized contract and call is split equally across everybody. Great. There are four people in the department. What happens if somebody leaves? I’m not asking for a change in the contract. I’m just asking, “Do you bring in locums, or do you spread out the call higher among the three of us that are left, or two of us if another person takes maternity leave?” So even if something is standardized, it doesn’t mean that we don’t have a lot of clarifying questions to ask, so we do proper due diligence to make sure it’s the right deal for the physician at that time.

Kevin Pho: We’re talking to Jon Appino. He’s the founder of Contract Diagnostics, and today’s KevinMD article is “Negotiating physician compensation works better in groups.” Jon, as always, let’s end with your take-home messages for the KevinMD audience.

Jon Appino: Take-home messages. Oh, there could be so many. I think in general, a take-home message would be to think for yourself: When was the last time your comp plan was updated, and how was it presented back? Do you wish you had a seat at the table? Do you trust your partners? If so, maybe the next time it could be a different discussion, and you guys could be part of that discussion, and maybe the results might be something that is more palatable to you guys. We hear a lot of complaints about comp plans and how they’re revalued and revisited, and I think being proactive in that discussion, and not reactive, is much better.

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

Jon Appino: Always a good time. Appreciate you.

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