Speaker 1: You're listening to Your Practice Made Perfect, support, protection, and advice for practicing medical professionals, brought to you by SVMIC.
Brian: Hello and welcome to today's podcast. My name is Brian Fortenberry and today we're going to about really a critical issue, contract negotiations and employment contracts and it can be very intimidating and an uncertain area for many of us. To join us to discuss this and an expert in this area is Mr. Steve Dickens. Steve, welcome today.
Steve: Thank you, thank you for having me Brian.
Brian: Before we even really get started, Steve, I know you have a lot that you've been involved in and extensive background. Tell us a little about yourself and your time here at SVMIC.
Steve: Okay. I've been at SVMIC for the last ten years now in a variety of roles. I spent a number of years in risk management leading a series of the presentations that we did there for physicians and staff but for the last several years I've focused on the medical practice services department which of course is one of the value added services here at SVMIC and we are the consultants who go out and work with the physicians and their staff on the business side of medicine.
Brian: A very valuable part of what we do certainly, as well and I think those people that take advantage of that would definitely agree to that. When we're talking about employment agreements and contracts you know they can be really confusing...
Brian: And it can be difficult certainly for those of us that is not our forte. What are some of the key areas that you're going find in these employment agreements and contracts?
Steve: Well, the key areas that you really need to be considering as you go into the negotiation process are what are the mechanics of it, what is compensation look like, define what the expected performance will be. Often times the overlooked issues are around behavior. How are you expected to conduct yourself as a physician? What are the interaction with your colleagues, with your staff members and also what does a separation from the employer look like? Most people don't think about that until it's too late.
Brian:No, honestly you probably don't go in thinking about what your departure looks like.
Steve: Well, no, no one ever gets married thinking they're going to get divorced ...
Steve: And that is essentially what this is.
Brian: And so you're having to really negotiate the end at the very beginning. What falls within some of these areas that we're talking about? Everything probably from your malpractice coverage to the variety of ... like you said ... I didn't even think about what your behavior is or your interactions. What does that encompass?
Steve: Well, there are a lot of things that go into these areas. Usually what most people think about in contract negotiation is what are they going to get paid, how are they going to get paid, and that has really begun to change over the last several years as physicians practices are all being reimbursed differently and making this transition to quality based reimbursement that is trickling down to physicians so what kind of organization is it that you're stepping into? So that's one of the first areas, probably the most uncomfortable area for most people to negotiate. But beyond that, what is the schedule? How many days are you expect ... or what time are you expected to show up? Are there requirements around taking call? Will you be expected to make nursing rounds to supervise advanced practitioners? When does your documentation have to be done? And if there are behavioral issues, who is in charge of correcting those? Are there mechanisms that allow you to self correct?
And then of course, if the relationship, for whatever reason, you decide to part ways ... and sometimes those are just about life changes ... you wanna move to a different part of the country, it's time to slow down your practice, you wanna do something else. The big issues there are who becomes responsible for what. Who owns the medical records, who notifies the patients? If you're a partner in the practice or if you have ownership in the building, what are the mechanisms to get out of those. Your professional liability insurance, who is going to pay that? The tail coverage, what are the requirements around that? So a lot of different things. It's really about what does it look like when we leave one another. What is the most successful, cleanest cut way to do that and if you don't negotiate that in the beginning, when everyone is getting along really well, it unfortunately can get a little bit ugly.
Brian: In your experience, is there outside people that often help negotiate this, are there attorneys involved, or is it generally just the employee or do you guys here at SVMIC do you get involved in that at all?
Steve: We do not get involved in the actual negotiations. We will review a contract, we will go in and talk about compensation models. This is what this looks like if you use this model, plug the numbers in and do this. Certainly, we can provide industry data on what the medium income is for physician depending on what their specialty is, where they are, some of those different types of things we do provide that information. But we always recommend that at the end of the day, whether you've done the negotiating yourself or someone else has been involved in the process, that you have an attorney review the agreement. Many physicians will have an accountant or perhaps their financial advisor be a part of that. I think that most physicians prefer just to sit down with the people that they're working with. In a large practice setting more than likely the practice executive is going to be representing the doctors that you're joining ...
Steve: And that can be intimidating sometimes as well. But do make sure that you're comfortable with the agreement and the assumption is always that the agreement will be enforced.
Brian: Yeah and the handshake ... that's not as binding.
Steve: It's not. It's not. And if you join a group and you're there 5 years, 10 years, 20 years, the players may have all changed, the senior physicians ...
Brian: That's a good point ...
Steve: That you made the deal with are gone. The practice executive has retired. There's no one there to
remember those types of things and that is one of the biggest problems we deal with. Physicians will call us and they'll say, "Oh, I'm leaving to join a group or I'm selling my practice, or I'm retiring and no one has given any consideration to what suddenly happens to all of this work they've created.
Brian: We were talking about ... early on ... you said probably income is something that's very important ...
Brian: And you brought up the term compensation model ...
Brian: And you said based on that they could call in and you guys have information on different forms of
compensation models ...
Brian: And you can help them with that. What are the different compensation models? That's kind of a new thing for me.
Steve: Well, it's changing. The compensation models have changed over the last few years. For many years physicians simply ate what they killed. Is how we refer to ...
Steve: The more patients you saw, the more you build, the higher your income and most physicians were comfortable with that. As we've seen larger groups forming, the way that we're seeing physicians be reimbursed has began to change. You have issues of overhead, how is the overhead divided? Is it divided based on your productivity? Is it divided on an even split? There are 10 doctors in the group, we all divide it evenly. And so because of some of those different changes, we've begun to see that physicians are moving more toward a hybrid type model that perhaps part of their income is based indeed on how much they're working, but at the same time, some of their expenses may be allocated in a more even sense so that can vary that as well too. Some groups make the decision we all work, we all trust one another, and at the end of the day we just divide what's in the pot.
Brian: So it's important to know where you fall?
Steve: It is very important to know that. And again, as we are moving more toward a quality based system, there are practices out there that have opportunities to earn higher reimbursement if their group performs well. Likewise there are groups out there that will see less reimbursement if they don't perform as well. It's important to know how that impacts you individually as a physician. If the group does well but perhaps you individually aren't doing so well, are you gonna share evenly with that? At the same time, are you comfortable if you're performing well individually but the group as a whole is not, are you going to accept those penalties are well?
Brian: And you hear this quality component, and it's really not that quality has necessarily been a focus of healthcare in the past, obviously but that reimbursements now are starting to be partnered hand in hand with this quality component, that being new, kind of, in the newer arena, of healthcare, how does that affect the negotiation these days? Is it making it more difficult and if so, how and what can they do about that?
Steve: It is making the negotiations more difficult. Many groups are struggling to adjust to the new payment models. They are struggling to collect the data, they are struggling to demonstrate that they are delivering quality care. Certainly we believe that all physicians are working as hard as they can to take care of their patients but it becomes and issue of the metrics that the payor is requiring you to demonstrate. So one of the pieces of advice I give physicians when they are joining a group or another physician is to ask, "What preparation the group has made for this transition?"
Steve: And to ask those questions are you participating in the government programs, are you participating with the insurance carriers? What do your quality metrics look like? Most of this information is publicly available
Steve: But they will very quickly realize how sophisticated the group is when they start asking these hard questions. And any group that wants a physician to join them should have no issue in answering those questions.
Brian: And is some of that now linked to some of the healthcare insurance providers as well so they can negotiate these things even within practice to healthcare coverage companies now, correct?
Steve: That's correct. They can negotiate some of that individually between the group and the insurance company.
Brian: So it's probably a good idea to know what kind of negotiations they have had because that's going to determine your pay, probably.
Steve: That's a great question. Yes, they should know what the groups relationship with the payors is. If there's a large payor in the state and the group doesn't accept it or doesn't have a good relationship with them, that may impact the ability to develop a patient base.
Brian: Building on that, that is something that you might want to ask. As a physician begins the interview process, and starts thinking about the potential of joining a group, whether it's right out of residency or like you said, life events change and you are moving to different area of whatever the case may be. What are some things that you've come across in your experience that you say these are key questions to ask either of the executive or the physician that is making the decisions or practice manager and how involved do you get in looking at ... show me the hospital, show me this, show me that. What are some of those key questions that they should ask during that process.
Steve: I think the most important question is whether the group, physician, hospital, whatever it is that you're looking at to join, whether it is a cultural fit for you as an individual. You have to ask the question, are these people I want to practice medicine with? Do they practice medicine the way I do? Ask them ethical questions. If we had this happen with a patient, how would you handle it? If we had this happen with an employee, how would you handle it? And there are a lot of different types of cultures out there and none are right, none are wrong but you want to make sure that you trust the people you work with, that you fit in with them and the same is true if you were talking about the hospital. What is the philosophy of the hospital? Do they see physicians as a partner? Do they see they as a necessary evil? And the best people to ask those questions are other physicians in the community to ask the practice executive and I also think it's very important as a physician is looking at joining an entity that they take the opportunity to examine the community. Is this where they want to put their children in school?
Steve: Are they comfortable with where they're going to live? Can they afford a home in the community?
Steve: Maybe a great practice but if you have to live an hour away to be able to afford a house that's going to get old really quickly because you'll realize, oh, I'm not close to call, I'm not close to the office. Is your significant other happy with the culture? Are they happy with the area? If you have this constant conflict at home it makes it very difficult to be happy. I encourage physicians to spend time socially with other members of the group to see if it's a good fit, to see if these are people they want to be friends with.
Brian: That's a very important component because you're going to be spending an enormous amount of time with not only these other physicians, but the nurses and office staff and that hospital communication back and forth. If you're a surgeon you're going to be going to that particular OR and working with those people there and that personnel so I mean it really is a situation where you really need to investigate all of that because probably like any other position, a job that you might have, you're putting your best foot forward ...
Brian: In that interview process but they're trying to put their best foot forward as well and there's that and there's the realism level in there of what it's going to look like on a daily basis. So with that in mind, what should you really know before you start negotiating? You're preparing and maybe you've gone through the interview process and you've decided this is going to be a good fit. Now I've gotta negotiate this out.
Steve: Once you've decided that this is where you wanna be, that this is a good cultural fit, the two most important things you need to know are what are you worth? What are your peers being paid for similar positions? Know that data and whether you get that from the medical group management association, whether you get that from your professional society, the medical association ... wherever it is, make sure you have good data on what it is that you are worth and know what it is that you want.
Steve: Is money the most important thing to you? Are you willing to trade off a little bit of money for better benefits or for more time off? Where is that work life balance of what will make you happy so that you get up in the morning and you're still excited to go to work?
Brian: What is probably, in that negotiation process, the most overlooked part? Part that you think about after it's done and you go, man I wish I had addressed that back in the negotiation part?
Steve: Generally the most overlooked aspect in employment agreement is what happens when it comes time to sever the agreement. Someone hasn't performed the way that they should, you're not happy with the group, whatever reason it is that the parties choose to split ways we've not talked about what that looks like so it's really very important that you make those decisions at the very beginning of ... what's theirs, what's yours, who does what, who gets what.
Brian: Even though uncomfortable, it's probably less uncomfortable in the beginning.
Steve: It is. It is because no one ever thinks that we'll have to deal with it so sure, we'll agree to all of this now.
Brian: Right. Then whenever it gets down to the end, if it's not an amicable split, it can get kind of ugly and ...
Steve: It can be.
Brian: It can be really fixed on the front end. As we begin to wrap up talking about these employment agreements and the contracts if you had some advice for those physicians out there that really don't have a big business background, maybe this is even the first opportunity they've had out of school and they're really having to get into these interview process and contract negotiations, what are a few of just the key points out there and we talked about many, what are a few of the key ones that you would say, "Make sure you focus on this."
Steve: Make sure you focus on a compensation model that you understand. Make sure you understand what is expected of you in a performance sense. Call, office time, documentation, supervision of other employees. Will you be expected to participate on committees or governance models? Make sure that you understand what your benefits are, what's important to you and then again, that you understand how to terminate the agreement and what that looks like and if you don't have any background in contract negotiations and most physicians don't, it's not what they go to school to do, you want to look to someone you trust, and more than likely that is going to be healthcare attorney. Financial advisors are great and they can talk to you about benefits, your accountant certainly can talk to you about your compensation and those types of things. And most any attorney can review a contract and understand the mechanics of it. But physician employment agreements are more sophisticated than the average agreement so I do think it's important to get an attorney with a healthcare background. Someone who has done this before.
Brian: And if someone has some key questions on this and they're really confused and maybe this has sparked new questions within them today, they can certainly reach out to you or medical practice services, correct?
Steve: Absolutely. We're happy to do whatever we can and we'll answer anything we can and if it's something beyond our scope, we'll try to find resources to deal with that.
Brian: Well, and we will have more information in the show notes below that you can check on and get in contact with Steve and the folks in his department. Steve, thanks for taking the time to do this very important and often confusing topic and we appreciate you coming in.
Steve:Thank you for having me.
Speaker 1: Thank you for listening to this episode of Your Practice Made Perfect, with your host, Brian Fortenberry. Listen to more episodes, subscribe to the podcast, and find show notes at SVMIC.com/podcast. The contents of this podcast are intended for informational purposes only, and do not constitute legal advice. Policyholders are urged to consult with their personal attorney for legal advices, as specific legal requirements may vary from state to state and change over time.