Physiatry Practice Management Resources

Be sure, too, that you're not incurring gaps in insurance coverage if you're changing jobs. If, for instance, your health insurance from a previous employer will run out before your coverage at the new group kicks in, you could negotiate an earlier coverage date.

Bonus. Usually offered as a deal sweetener, a bonus is typically based on productivity and may be more lucrative after you've built up your practice. Request a history of bonuses paid over the last few years to get an idea of size and how soon you're likely to see any extra pay. Be sure the contract specifies a formula for calculating the bonus. A typical one is a percentage of revenue that exceeds overhead, including your salary, benefits, and moving expenses.

The formula Carman aims for is 80 percent of the new doctor's net collections, minus base compensation and overhead. For example, take a doctor earning $120,000 annually in a practice with 50 percent overhead. If his net collections for the quarter totaled $110,000, he'd receive a $3,000 quarterly bonus. That's $110,000, less $22,000 (the 20 percent of collections that goes to the group), less $55,000 (50 percent overhead), less $30,000 (base quarterly compensation).

To get an idea of future profitability, Carman always asks about anticipated expenditures and other practice plans. If a bonus seems unlikely because of other expenses, he tries to negotiate better terms in other clauses.

However, be aware that there's a norm relating to deals offered to doctors just out of training. "Don't try to pursue something dramatically different," Stuart advises. "If you have partnership aspirations, it's frequently wise to leave something on the table."

Termination clause. The contract will include language to the effect that the employer or employee can terminate the agreement on 60 to 90 days' notice, without giving a reason. Typically, the doctor will be paid and receive benefits during that notice period.

Stuart suggests that if you must move a great distance to join the practice, you might want a six-month moratorium on the employer's right to terminate you. This would give you time to develop contacts and referral sources in the area, which will make it easier to find a new position should that become necessary.

Pay particular attention to "termination for cause" language. Reasons for dismissal, which typically include dishonesty, moral turpitude, and professional incompetence, should be specified in the contract. Beware of subjective, open-ended provisions like "behavior that is not in the best interests of the practice."

"Being terminated for cause could follow you for a long time," says Cooper. "If the definitions of cause are too loose, ask that they be eliminated."

Noncompete clause. Chances are, your contract will contain a restrictive covenant. This means that, should you leave the practice, you agree not to compete with this employer within a certain geographical area for a certain time period, typically one to three years. This is probably one of the most contentious parts of the employment contract. "I've seen deals fall apart because young physicians flatly refuse to sign this," says Stuart.

The restriction should not appear on contracts in states where it's not enforceable, such as California and Massachusetts, or where it's prohibited. In states where there has been mixed judicial opinion on the restriction, employers may include it, "hoping that they'd draw the right judge if it came to a court fight," says Cooper. The legality would depend on the reasonableness of the duration and the geographic scope. A one-year limitation and a one- to two-mile radius in a small town or suburban setting could be quite reasonable, Stuart says. On the other hand, a one-mile radius in a major city might be considered unreasonable because it could cover thousands of potential patients.

Try as you might, it's highly unlikely that you can eliminate this clause. The group wants to protect its business, so aim for a reasonable balance. Richard Cooper suggests that the restriction specifically name the practices or health care facilities you're not permitted to work at, as opposed to barring you from an entire area. Cooper also suggests limiting the triggering events for a noncompete clause to termination for cause by the group or no-cause termination by the doctor.

Partnership. Generally, a doctor joining a practice accepts a lower salary because she expects to become a partner. The employment agreement won't promise partnership, but it should specify at what point the new doctor will be considered—say, after one, two, or three years—and should describe, at least in general terms, how the buy-in price will be determined.

This section of the contract should address:

• The trial period. Stuart believes that one year should be enough for a practice to decide whether it wants a more permanent union with the new doctor. Rosary Payne says that the contract should specify an annual or, preferably, semiannual review of the new doctor's work so she and the practice know where they stand. The evaluation criteria, such as quality of medical care, nature and frequency of patient complaints, and productivity data, should be described.

• What's being purchased. Is it stock in a professional corporation or an interest in a professional partnership? Are assets such as real estate part of the deal?

• The buy-in formula. Traditionally, a practice has been valued based on three components: hard assets such as furniture and equipment, accounts receivable, and goodwill. Until recently, goodwill has been the most significant factor. But as managed care has grown, patients have tended to choose doctors in their health insurance plans rather than by reputation. So goodwill has become less of a factor, and buy-ins are generally less expensive.

If the price will be high, however, will the group finance the buy-in at low interest rates over several years? Alternatively, practice consultant Jeff Denning recommends that the group credit the new doctor with the amount he or she earns for the practice above the compensation package (including bonus). The credit should be applied to the eventual buy-in price. And the new doctor shouldn't be shy about asking how the partners value the practice.

Again, remember your etiquette, Denning advises. "It's always delicate to raise such an issue when you're being courted, and that's why everyone is so happy to leave it until later. But you could feel abused later," he says. "Acknowledge that looking at the books would be premature because the doctors don't know you, but that you'd like to know how they set a value on the practice when a new partner arrives. Tell them, 'If we can agree on a methodology, it doesn't matter as much what the numbers are.' " The more you can nail down the buy-in details, the better you can compare the deal with other opportunities and the cost of creating your own practice from scratch (see "Do you have the right stuff to go solo?").

Ultimately, you probably won't get everything you want in your employment agreement. But keep in mind that you're pursuing a relationship. "It's more akin to marriage than to buying a car," says James Stuart. "With the latter, you're interested in getting the best car possible for the least amount of money. You don't care whether the salesperson has a good opinion of you." In negotiating with a practice, you want a favorable contract, but you should also want a good deal for the partners—and their good opinion, particularly if you have partnership aspirations. Adds Stuart, "This has to be a win-win relationship."

Written by: Doreen Mangan