Clout, weight, leverage…just another way of saying “power”—which in the end, is really all about security. To create a certain level of financial and mental security for their families and themselves, orthopedists must approach the negotiation process with a surgical attention to detail, and they must be prepared.
Advice From Dr. Brad Henley
Brad Henley, M.D., M.B.A., is Professor of Orthopedic Surgery at the University of Washington in Seattle. A traumatologist who has not only witnessed the worst of the Emergency Department (ED), Dr. Henley is also a practice management consultant who has seen many a colleague go astray when negotiating employment agreements during his or her career. Regarding the importance of starting out on the right foot, Dr. Henley says, “A physician only has real leverage before he or she enters into a contract. The fact is that once you have signed on the dotted line you will have little leverage until contract renewal time rolls around. Even then, you will not have true leverage unless you’re willing ‘to walk.’ Most orthopedists want to know they are entering a position that will last for awhile, thus providing them with a sense of security. Ideally, you should aim for a contract with a five year term; three is the minimum.”
Having a flair for “hold ‘em or fold ‘em” helps. Dr. Henley: “You must have an exit strategy going in; if all they want to offer you is a three-year contract, you must be willing to walk away from the deal. Otherwise you will have much less leverage. The three-year contract provides less stability, in part because you have to start renegotiating at the two-year mark or even before.”
“Know your options, ” continues Dr. Henley.
Are you willing to move to another locale or join a private practice at the end of the contract term? If you want to convince a hospital or group to provide a five year contract, you have to be willing to say ‘no’ to their short term offerings. You can tell the hospital, ‘Look, I bring high quality care to the table. In order to provide this continuity of high value patient care, I need to be able to follow my patients longitudinally. I would like a five year agreement.’ You should aim for stability in the contract so that you are not thinking about renegotiation all the time. And whatever you do, don’t accept verbal promises…get it in writing.
While it may feel like you’re bargaining when you shouldn’t be (like for a gallon of milk), everything in the contract negotiation process, says Dr. Henley, is on the table. “You can negotiate the amount and duration of vacation and educational leave. Call is always up for discussion, with an eye towards the institution’s bylaws, as well as how the facility participates in the provision of emergency care/trauma call in the community.”
Opulence is unnecessary, but if possible, you should have some basic amenities and support. Dr. Henley: “You should inquire as to whether there is a basic on call room where you can sleep, access the phone, Electronic Medical Records, Picture Archiving and Communication Systems, radiographs and take a shower. There is also the issue of response time: how much time are you given to show up at the hospital in an emergency? Are there healthcare extenders who could take the first call? What is the quality of the ED staff and what type of acute musculoskeletal injury treatments and procedures are they comfortable doing themselves without your consultation? All of these come into play when trying to create a smooth working environment.”
On the staffing end, says Dr. Henley, know what you need and ask for it. “Will you have dedicated teams of nurses, technicians (scrub techs and C-arm/x-ray techs) to help in the OR? This can vary by specialty and practice. For trauma it’s as critical as in an elective referral practice since competent and well trained staff and surgical assistants can improve patient care and your efficiency. If seeing ambulatory patients in a hospital setting (e.g. clinic/office), it is best to have the same office staff working with you on a regular basis because as you work together consistently, you will get more efficient as a team, your patients will be better served and their satisfaction will increase.”
But what if you need new staff members down the road? “You can also negotiate your involvement in hiring and firing of hospital staff who work with you. What input do you want to have into the process? You can stipulate contractually that no one be hired or fired without your approval. Hospitals usually have certain human resource policies that may affect your involvement, but remember that when you’re being hired you have a lot of leverage. In the end, maybe you just want to bring your own staff along with you if you are moving from a private or group practice to a hospital setting.”
You even have a say in your public image. When the local populace opens a newspaper or turns on the TV, do they see you, the smiling, knowledgeable orthopedist? Dr. Henley: “You can actually negotiate how your practice will be marketed. While the typical trauma surgeon doesn’t need marketing services, elective orthopedists might want to ask to be included in advertising programs in all types of media. Orthopedists can also request to do outreach programs where they speak to the community or talk to primary care doctors who are aligned with the hospital.”
Above all, you should avoid the most common contract blunder:
Orthopedists tend to focus on compensation, aiming to be at least as successful and maybe more successful than before. The problem is that they don’t focus on the things (resources) that will allow them to get to that point.
“As the old adage goes, ” says Dr. Henley, “you get what you negotiate.”
Lisa Davis Weighs In
Lisa Davis, MBA, is the CEO of The Reno Orthopaedic Clinic, a 19-orthopedist practice in Reno, Nevada. Over the years, she has advocated for numerous physicians on a variety of business issues, including contracting. She advises, “Don’t weigh the terms of the contract solely in light of what you are getting on the way in; more important is what happens when something goes wrong or you decide to leave the practice. Contracts are rarely reviewed when things are going well…but they’re always gone over with a fine tooth comb when things have soured.”
“Understand what rights you have, ” explains Davis, “as far as patient care, accounts receivable, establishing a new practice in the area, taking your ancillary staff with you if you decide to leave, etc. Will you owe any money if you leave prior to the termination of the contract? What happens if you suffer a short or long-term illness or disability? Are you still responsible for your share of the overhead when you are not producing revenue? All of these questions must be addressed.”
As for the financial elephant in the room, says Davis, leave nothing in the abstract with regard to compensation. “To understand the compensation model under which you will be paid, you should ask, ‘How is overhead allocated? How does that change if one of the physicians leaves?’ I have seen hospital owned practices get in a vicious cycle of divvying up overhead to the remaining physicians, thus causing further departures until the practice implodes.”
Other monetary-related terrain to cover, recommends Davis, includes whether there is the potential to earn bonuses or increase your salary.
This is about lifestyle. There are physicians who, toward the end of their careers, are happy to take a salaried position with clear expectations and less hassles. The advantages are that if the overhead gets out of control, or if the billing office is not doing its job, or if the patient numbers are not as high as expected, you are still compensated at the same level. Younger physicians often prefer a salary and the potential to earn bonuses based on productivity. There is higher earning potential in this scenario but greater risk if the overhead is high or there is a poor performing billing office. Again it is about choice and personal preference. You need to know what you want, weigh the risks and develop a contract that pays you in a way you feel comfortable.
Also affecting your lifestyle, says Davis, can be the role played by those around you. “If your compensation depends on the revenue you bring in, you’ll want to ensure that the billing department is competent. Verify that you are safeguarded from improper billing practices or poor performance by the billing department. Ideally, there should be a separate billing system and staff from the hospital that is experienced in physician billing. It’s acceptable to ask things such as, ‘What are the days in A/R at present? What is the collection and overhead percentage? Are monthly reports provided that show charges, collections, visit numbers, days in A/R and detailed overhead charged to you? Is your practice subsidizing other practices?’”
As for how your fellow surgeons’ actions affect your daily life, Davis notes, “You should inquire as to the requirements for call and whether they change if another employed physician leaves. Also take a look at what else might change if such a doctor departs. In general this applies to physicians paid on a production, as opposed to a salary, basis. If you are coming into a hospital owned group practice you should understand the way overhead is charged to you and divided among the group. Do you pay a fixed amount each month, or a percent of your revenue or charges? Who covers the overhead when one doctor leaves? Is it divided amongst the remaining physicians, even though the space is now more than you need and there are too many staff…or does the hospital cover those costs?”
And in order to ensure that you can get a breather at some point, you will need to have covered certain questions about non-work hours. Lisa Davis: “Inquire about paid time off and find out what considerations must be made before time off is scheduled. There should be time off and reimbursement to attend national meetings and to get your CME; you need to determine if this is taken out of vacation time or is separate. The fundamental element here is how much control the employed physician has in scheduling time off. Is approval required or is it at the discretion of the physician? Who is responsible for finding coverage for call? Is the time off uncompensated or compensated? Is there a short-term disability policy for the physician? Get the specifics on all these points.”
A philosophical Davis notes,
These issues vary from group to group and there is no right answer—it’s just what you can live with. It is about knowing what questions to ask so you don’t get into a situation you are unhappy with. Regarding vacation, there is no standard because it depends on the compensation model. If you are salaried there tends to be more specific guidelines since the vacation is generally compensated. If you are paid on a productivity system then you lose income every time you take vacation since you are not billing during that time. Different people are comfortable with different situations. Again you just need to clearly understand what you are getting into.
Regarding the governance structure of the practice, Davis suggests, “Decide how much input you want to have into the management of the practice…then check into the details. Is there a Board and will you have a seat on it? What about an MSO (Management Service Organization) to assist with the operational needs of the practice? Is the physician charged for the MSO services? Is there a manager on site? You must have a ‘go to’ person to contact when you have issues.”
Advice From Dr. Timothy Bray
But even before you get to the minutiae, says Timothy Bray, M.D., a surgeon at The Reno Orthopaedic Clinic, there are other, more personal things to consider. Dr. Bray, President-elect of the Orthopaedic Trauma Association, states, “Before signing on the dotted line make sure you have a geographic/lifestyle match. Because the newer orthopedic surgeons are very concerned about lifestyle choices it is important that the candidate have some commonality with the geography, such as the opportunity to bike, sail, climb, attend the theater, etc. Generally speaking, individuals who have attended medical school in the community, or trained in the area are far more likely to be comfortable living and practicing there for an extended time period.”
Dr. Bray also reminds negotiators to think about their significant others:
Consideration must also be given to the spouses. They need to be happy and excited about the move; simply ‘giving it a chance’ is probably not good enough. The fact is that the demands of starting a practice, i.e. call, meetings, tough cases in a new environment, etc., all weigh heavily on the mate.
And if there are rumblings of instability at work, that will affect her or him as well. Dr. Bray: “Assess the stability/security of the practice, regardless of whether it is private or hospital based in nature. For the hospital based programs, try to determine if the hospital administration has experience in running physician practices. On the private side, does the practice have long time employees and senior physicians? What is the financial status of the practice the candidate will be entering? Either the hospital or practice must convince the new candidate that he or she is entering a stable financial practice with the opportunity to grow and be successful. Remember, if you enter a hospital based practice, you are rarely included in the ancillary income, i.e. MRI, surgery center, etc. These income sources are becoming an increasingly larger percentage of orthopedic salaries as reimbursement declines and overhead increases.”
Another issue affecting the stability of the practice is the existence of competition in the community. “The candidate must look at how many cases there are to be done in his/her specific practice area and assess whether he or she can compete for those cases, ” says Dr. Bray. “The competition issue is basically word of mouth—the candidate needs to talk to the community practicing physicians and see if the type of cases he/she wants to do are being done in the community. Who does them, how many are there, what are the referral sources, and are there enough to be shared? The fundamental questions to ask are, ‘Does the community need a physician with my skills?’ and, ‘Are there enough cases for me to maintain my skills and eventually build my practice?’”
Between scouring the internet and utilizing local human resources, says Dr. Bray, surgeons should be able to make a sound decision. “Many of the hospital financials are public information and can be found online. Additionally, you can approach senior physicians in the community to learn historical information on contracting, reimbursement, employee retention, and union participation. All are strong indicators as to how well the hospital has done in the past. In general, most hospitals, like physicians practices, have sustained decreased reimbursements and increased overheads. How these institutions manage their resources and intend to grow are questions worth exploring.”
If you are thorough, you will know when to hold onto a good contract…and when to fold one up and send it sailing.
