The Fine Print
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We are all guilty of it.
I know I certainly am.
When I am faced with pages and pages of legalese, my eyes tend to gloss over and I tend to skip to the end.
How many of us have read word for word the iTunes Terms and Conditions Policy when we download a song?
Yup. Check mark and agree it is.
For a $1.09 download the ramifications are trivial if you do miss something by not reading the fine print.
However with the amount of dollars at play in typical physician contracts, just signing on the dotted line may end up costing you 10s if not 100s of thousands of dollars.
Even if you took the time to read the contract word for word, line for line, how many of us truly understand some of the terms and wordings of these legal documents?
Just like I can’t expect a layperson to have a firm grasp of medical terminology, it is reasonable to assume that most physicians do not have the necessary legal background to make heads or tails of what is put in front of us.
We spent considerable time and money to earn our MD or DO degree.
Now is not the time to cut corners and try and save a few bucks if the end results will cost us exponentially more down the road.
Fortunately there are services available which can take the guesswork out of evaluating a contract.
One such service just happens to be a sponsor of this blog, Contract Diagnostics.
The founder of Contract Diagnostics, Joe Appino, was kind enough to provide the following information so that you can gain some knowledge in this area.
Do “standard” contracts need professional review?
Many consider Physician contracts with hospital systems or large employers ‘standard’.
Often times, the Physician redefines these types of contracts as ‘non-negotiable’ and therefore thinks there is no point in having it professionally reviewed.
While this may seem reasonable on the surface, having these documents not looked at by a trained eye can be a big (and potentially costly) mistake.
First, Physicians spend a large amount of money on their training and have the potential to earn millions of dollars over the course of their career.
Yes, this could turn into a million (or multi-million) dollar contract (if it isn’t already).
Your $250,000 investment in training yourself and your earning power alone should be enough to know the contract needs to be looked at by a trained eye.
There is just too much on the financial table not to spend a few hundred dollars.
It is always a good investment for the Physician.
Second, it is often not what the contract says but what it doesn’t say that is the problem.
What is left out?
Is your location specifically defined?
Is your schedule in detail?
Do you have any control?
When and how is your incentive compensation paid?
What are the details of the benefit plans (including malpractice insurance)?
These are often times not in the contract, and may not be negotiable, but with the right education around the contract you will know what questions to ask the employer so the expectation is set.
Lastly, it is important to know exactly what you are signing.
How can you quit?
What do all the non-clinical terms mean?
What type of notice do I have in various circumstances?
Understanding what happens in defined situations can prevent a surprise or disagreement later on with the employer.
All Physician contracts need to be reviewed.
Many do not need an ‘hourly’ attorney to review them at a cost of thousands of dollars.
However, spending a few hundred dollars to understand the document could be one of the best investments you ever make.
How to evaluate your compensation structure.
Compensation structures can be as unique as the contracts themselves.
If you were to look at 100 different physician contracts you’d find 90-95 different compensation structures.
Most of the time, they are confusing and reference many numbers physicians are not familiar with.
Lets start with your collections.
Your collections are variable on a couple of factors.
Do you know what your payor mix will be?
You could be reimbursed differently for Medicaid patients and commercially insured patients.
Next, what are the collection times?
Just because you see a patient today doesn’t mean you’ll collect on those patient charges tomorrow.
It could be months! (a discussion around account receivables are for a different time).
Another item for discussion is the expected collection ratio.
This varies (and changes) with each specialty.
You could bill a $200 charge but collect only $130 from the payor.
This is an important part if contracts discuss both collections AND billings.
You’ll also want a good expectation with your annual billings and/or collections.
If you receive a percent of your collections above a certain threshold you’ll need to know what you should expect to produce in a fiscal year.
Residents/Fellows generally aren’t familiar with these numbers.
Make sure you have a trusted source for this information (a google search is not reliable).
If you are paid on wRVUs it’s a very different ballgame.
wRVU Contracts can be structured in numerous ways as well.
They could pay you a dollar amount for each wRVU, they could ‘tier’ the structure (meaning the ‘conversion factor’ increases as your wRVUs increase), or the contract could have numerous hybrids as well.
wRVUs have many benefits but also many unknowns.
How many should you produce at your specific practice?
If you are required to ‘cover’ your base salary through wRVUs will you be able to?
Many contracts have guaranteed salaries for the first year or two then are structured to a wRVU schedule where the physician cannot keep their income at the previous level simply because they cannot produce as many wRVUs as they need to.
The bottom line on compensation structures is this: they are confusing.
Contracts give many numbers but do not provide specific details on if they are attainable or what numbers constitute an average.
It is important to not only understand the legal aspects of your contract but the ‘non-legal’ portions such as the compensation clause as well.
Jon Appino is the Principal at Contract Diagnostics, a national firm dedicated to educating Physicians around employment contracts. www.contractdiagnostics.com
If you are in search of financial help, please consider enlisting the service of any of the sponsors of this blog who I feel are part of the “good guys and gals of finance.”
Even a steadfast DIY’er can sometimes gain benefit from the occasional professional input.
NOTE: The website XRAYVSN contains affiliate links and thus receives compensation whenever a purchase through these links is made (at no further cost to you). Although these proceeds help keep this site going they do not have any bearing on the reviews of any products I endorse which are from my own honest experiences. Thank you- XRAYVSN