Physician Compensation: What Every New Doctor Should Know

Here at The David Agency MedMal Insurance Company we have a front-row-seat to the trials and tribulations that physicians and medical caregivers go through when navigating their employment contracts and commitments.  It can be difficult for medical providers to understand exactly what they may be giving up in return for compensation.  A recent article by Dr Philip Eskew, in the Journal of American Physicians and Surgeons, highlights the challenges that new physicians face but we also think that this article contains great information for all types of medical providers, no matter their specialty or years of experience.

When negotiating a new position with a hospital group or large medical provider you should go into the negotiation knowing  what relative value units (RVU's) are.  RVU's are how employers track your production.  More than likely your bonus will also be tied to RVU so you should be able to figure out how much work you need to do in order to qualify for your bonus targets.  

Once you know how your production is going to be measured and how those measurements will translate into salary you can focus on the other important compensation factors that need to be considered. Before you sign that employment contract make sure you have a clear understanding of the following employment concepts that are unique to the practice of medicine.

DOES YOUR EMPLOYMENT AGREEMENT ADDRESS THE FOLLOWING?

Moonlighting- Moonlighting can be a great way to earn extra money.  The demand for part-time  physicians and medical providers is very high and opportunities are everywhere.  Make sure you know if you are allowed to pick-up extra hours and if you are allowed to moonlight, how many additional hours are you allowed to work.

Medical Malpractice Insurance / Tail- Most of the larger medical practices and hospital groups will pay the medical malpractice insurance premium for their employed providers.  However, most of these practices will NOT pay for a tail if the medical provider quits before their employment contract ends.  Always make sure that you know if you are responsible for buying your own tail if you leave the practice.  Tails are very expensive and employers use the tail provision of an employment contract in order to retain talent.  If your new employer tells you that you are responsible for purchasing your own tail, try negotiating for better terms.  For instance, one of our physician clients was able to negotiate with her new employer that the employer would cover the tail as long as she remained at the practice for at least 4 years.  

Administrative Duties- Let's face it, you probably didn't decide to practice medicine because you were excited about entering information into electronic health records or supervising mid-level providers.  Make sure you understand how much of your workday is devoted to practicing medicine and how much is administrative.  Remember, more than likely, your compensation will be based on the number of patients you see so try to limit the administrative responsibilities.

Signing Bonus- Signing bonuses are taxed as income and are taxed in the year that the bonus payment is received.  Consider asking for the bonus to be split over 2 years in order to minimize the tax-hit.  

Hopefully this article will act as a good primer for you as you enter into employment negotiations.  Knowing what to expect and how to protect your interests is vital.  Also,  always be sure to have a good employment attorney review your employment contract before you sign on any dotted line.  Good luck to you on your future endeavors.

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