Wednesday, December 17, 2008

Understanding Different Types of Compensation

To negotiate properly, it is important to fully understand different models of compensation. Some of the most common types are explained below:

• Salary Compensation – A fixed salary is a familiar concept, but be sure you know the payment frequency. There should be a cost of living adjustment each year (roughly three percent) to account for inflation.

• Compensation Based on Productivity – In this system, physicians are paid based on their productivity in the prior month, minus adjustments. Productivity can be measured by hours worked; number of patients seen; amount billed to patients; or amount collected from patients. Adjustments are usually overhead costs. For more information, see the American Academy of Family Physicians’ primer on physician productivity compensation.

• Compensation Based on Net Income – In this setup, physicians are paid a percentage of net income (which is the money that remains after all practice expenses are paid). The percentage of net income can be based on monthly physician productivity, or can be a percentage divided evenly among physicians. An evenly divided percentage may diminish overall physician incentive, which could decrease net income.

• Formula Based Compensation – Productivity, referral sources, and board certification are just a few factors that might go into a compensation-determining formula. Formulas must be examined individually because they vary greatly.
NEJM examines the basic pros and cons of various physician compensation models. Regardless of the type of compensation, you can ask for a range of compensation received by other physicians or partners (this is especially important for formula based compensation offers).

Monday, November 24, 2008

Negotiating a Physician Employment Contract: Overview

The upcoming series of blogs will address contract negotiation. This blog does not constitute legal advice; you should contact a legal expert if some aspect of a contract is confusing. Before examining contract negotiation specifics, consider the following general advice:

First, come to the table with the proper attitude. You will likely work with many of the people you negotiate with. Control your emotions, do not take anything personally, and remember that your goal is not to squeeze every last penny out of your employer.

Second, consider several relevant legal issues. All assurances must be in writing. The legal concept of parol evidence renders verbal assurances meaningless if they contradict a written and signed agreement. Physicians should take their time and have confusing legal terms explained. Do not make assumptions about contract language. If you are not comfortable negotiating on your own, you can use a physician recruiter, search an online database that provides attorneys or consultants to physicians, or even hire an agent.

Finally, be prepared. Have an acceptable range in mind for each negotiable benefit before negotiations begin. You might want to negotiate compensation towards the end and first focus on some of contractual aspects that are “easier” to agree to.
For additional advice, read the American Academy of Family Physicians’ article on negotiation gambits, the AMA’s model employment contract, or negotiation tips from the American College of Physicians.

Wednesday, October 29, 2008

Will Your Life Insurance Company Be Able to Pay Claims?

After the federal bailout of AIG, some have questioned the ability of an insolvent insurance company to pay benefits to its policyholders. Even amidst the current economic turmoil, however, one thing you do not have to worry about is your insurance company failing to pay benefits to you. Historically, insurance companies have become insolvent, but there are several reasons that policyholders have never walk away empty-handed.

First, each state carefully regulates its insurance industry. Each insurance company is at all times required to maintain a statutorily specified percentage of its assets in liquid form so that it can pay benefits without delay.

Second, insurance companies also insure themselves through reinsurance. Reinsurance is how large insurance companies spread their risk exposure.

Third, a struggling company also makes for a great acquisition target for other insurance companies. Regardless of merger or acquisition, your policy terms will not change.

Finally, in terms of AIG, the bailout was in response not to its insurance business, but instead to a liquidity crisis generated by over issuing credit default swaps. Additionally, the AIG subsidiaries that actually issue insurance policies have remained financially stable (for all the reasons mentioned above) and have had no problems paying insurance benefits to policyholders.
If you have further questions or concerns, please contact Doctor Disability at 866-899-7318 or visit

Monday, October 06, 2008

Interviewing Part II: Inspection and Analysis

Part II of the interview process is your inspection and analysis of the potential employer.

First, you should investigate the work surroundings and any satellite facilities. You should note the work environment and also the people. Is the practice efficient? Are the offices clean and organized? Are the people welcoming? How long are patients kept waiting? If you do not have time to investigate after part I of the interview, you may need to schedule a follow-up visit.

Second, you should perform financial due diligence. Ask for fiscal information in a professional manner and be wary of a group that is unable or unwilling to produce basic financial documents. Your investigation will vary depending on the practice type, but you can focus your investigation on these general areas:

• The overhead-to-revenue ratio is one of the most important financial indicators. A group’s expenses should not exceed 50 percent of their revenue.
• Determine how the income distribution plan is structured. Are salaries divided evenly or productivity-based?
• Ask about the group’s long-term financial goals. The employer should be able to provide you with concrete and realistic answers.
• You should inquire about the group’s practice debt and repayment schedules.
• Ask for a list of the provider contracts and then investigate those companies and contracts, especially if one company is a source of a large percentage of the group’s patients.
Finally, the NEJM offers an interesting perspective on the internal due diligence that employers perform on their own group in order to ensure successful recruitment.

Friday, September 26, 2008

Interviewing Part I: Preparation

After you submit you cover letter and CV to a specific employer, you need to begin interview preparation. The interview can be broken down into two parts. First is the traditional part of the interview where you are asked questions and have the opportunity to ask your own questions. An equally important part of the interview process is the follow up inspection and financial analysis, which will be addressed in the next blog.

The most important thing a resident can do before an interview is to prepare. Chapter 6 of Dr. Shaw’s book provides numerous examples of interview questions. Not only do you need to be prepared for the questions that you will be asked, but you should have questions for your interviewer prepared and written down. This shows potential employers that you know what you are looking for and take the interview process seriously. Most of your questions will be objective, but a subjective question such as, “what do you like best about working here?” can also be revealing. Another general rule is that questions regarding compensation should come toward the end of the interview.You should end part I of the interview by offering positive feedback. You might mention that you are impressed by the environment and know that you would enjoy working with the people you met. If you are interested in further suggestions, Medical Economics Magazine also offers advice about the interview process from start to finish.

Tuesday, September 02, 2008

Beginning the Search for Specific Employers

Residents who are ready to target specific employers have two options: (1) do the work themselves or (2) hire a recruiter. This blog will highlight the options, benefits, and drawbacks of each choice.

Dr. Shaw mentions several ways to locate leads on your own. The staff physicians whom you work with are some of the most obvious information sources. These physicians may have valuable contacts. Another option is talking to residents who graduated ahead of you. They will have a good sense of the job market’s current state and an intimate knowledge of the entire job search process; a brief conversation could give you insight into a certain employer. Finally, pharmaceutical reps can be a good source of information because they interact with many physicians and have an idea of how efficient each practice is. The general drawback of locating leads on your own is that it can be time-consuming.
If you feel that you do not have time to find potential employers on your own, then you should consider using a recruiter. Some residents use more than one recruiter because each one might have access to different opportunities. A resident should never sign an exclusive agreement with one recruiter. There are lists of physician recruiters online, but recruiters also might contact you. Dr. Shaw opines that the recruiter you choose should have at least five years of experience; experience with your specialty; and should charge your future employer—not you. If you use a recruiter, be sure that you still do some homework on your own before signing a contract.

Tuesday, August 19, 2008

Drafting a Cover Letter and CV

After you determine the general type and location of your future practice, the next step is to prepare a cover letter and resume or curriculum vitae (CV) before you embark on your search for specific employers. A cover letter should be one page, include your contact info, and introduce your resume or CV without repeating information from your CV. A cover letter can also convey several ideas that might not be apparent from your CV, such as a reason for relocation, a resume gap, or your choice of a certain specialty. NEJM offers excellent cover letter advice, or you can browse examples of medical cover letters.

In general, your CV should include contact information and personal data; education, training, and certifications; followed by practical experience. The American Academy of Pediatrics offers an online CV Builder that can help a resident in any specialty create a CV. You can also check out a sample resident CV and these five CV tips.

The aesthetics of your cover letter and CV are also important. Spelling and grammar errors should be nonexistent. Fonts and headings must be professional and consistent. Use a laser printer and a high quality white or ivory paper.
Finally, both your cover letter and CV need to be tailored to the specific position that you are seeking. Avoid drafting a catch-all cover letter that applies to multiple employers and focus on a custom cover letter for each employer.