This podcast features an interview with author Dennis Hursh.
This interview reveals the following:
– The one critical thing EVERY physician should know about contracts
– How to understand the HUGE differences between productivity models, and which productivity model is the worst
– Learn what is negotiable and what is NOT negotiable in your contract
DAVE: My name is Dave Denniston. Welcome to my latest podcast- The Physician Financial Prescription. Today, we are going to focus on physician employment contracts.
One of my latest quests has been to connect and network with other authors to help physicians.
Right now is an incredible time of the years for many residents and fellows. Many of you are being wined and dined, as you consider inking the contract in front of you.
However, maybe you are wondering…
Is this the best I can get?
Am I leaving money on the table?
What are the pitfalls that other physicians have fallen into?
Who can I have review my contract? What can they do for me to get me the best possible deal?
Today, we are going to chat with Dennis Hursh, the author of The Final Hurdle, A Physician’s Guide to Negotiating a Fair Employment Agreement.
Besides being an author, Dennis is a practicing attorney since 1982, he has focused on representing physicians in contracts since 1992.
He is a contributing editor to the Physician’s News Digest, and has published several articles on physicians’ contractural matters.
He is also a frequent lecturer at residency and fellowship programs, has spoken at events sponsored by the Pennsylvania Medical Society, the Penn State Milton S. Hershey Medical Center, the Pennsylvannia Society of Cardiology, the American Podiatry Association, and much more!
He also founded The Physician Prosperity Program, the nation’s premier contract review and negotiation service.
And as a mentioned, he is an author. I have no idea who he has the time to do all of time. I personally really enjoyed this book- I learned a lot from it and I think you will too.
DENNIS: Great to be here Dave.
DAVE: Well, let’s kick this off. Tell us a bit about yourself. You started off your journey as a attorney focusing on a wide spectrum of cases and now you focus on physicians. Why did you choose this focus and how did you transition over time?
DENNIS: Well as you mentioned I was doing a lot, I was predominantly a tax lawyer, I was a tax manager at Coopers and Lybrand which is now Price Waterhouse Cooper. And I want to set up my law firm, I was representing a lot of preferred provider organizations and I was working with the Pennsylvania Medical Society among a lot of other groups to set up physician organizations and the idea was we’ve set them up and have them operate their own PPO’s. I always enjoyed working with physicians but my focus kind of changed when my daughter Rachel was born. She was born with we now know the George Syndrome but her major problem was truncus arteriosus and her first year and a half we probably spent more than half our time in the hospital, mostly children’s hospital in Philadelphia and one night in particular, I’ll never forget the critical care doc and the cardiology fellow literally spent the night glued at her bed. I think the cardiology fellow went out at one moment and grabbed a salad and so he was gone for maybe twenty minutes, the critical care doc was there constantly never left the bedside and obviously doing every trick in the book and a few that probably weren’t in the book to save her. Pretty much that night I decided that one way or another I was going to try and figure out a way to pay them back and I don’t think that what I do is really an adequate payback for Rachel’s life, but it’s a start.
DAVE: Well it’s a mazing when we go through these life events and they change us and the focus changes. So tell us more about as you started working with docs and you wanting to pay it back a little bit. How does your practice evolved over the years?
DENNIS: Well in a lot of ways I have traditionally represented private practice physicians and as I tell people in a large sense that is an equivalent to be a veterinarian and specializing in an endangered species. The practice is just going away. So I still, I love to work with private practices, I really think that is the best medicine. I think when doctors have more control I think medicine is better but I became more and more aware of doctors coming in to the practices and leaving hospitals or leaving fellowships and I really started to realize how many of them were signing the piece of paper that was handed to them. It was clear to me that conventional wisdom was that this is carved in stone and you are given it and if you don’t sign it as is we’re going to go find somebody else. And I’ve learned over the years physicians really don’t seem to know how valuable they are that there aren’t usually fifty physicians vying for that spot, if the employer has spent the time and called through the resumes and done some interviews and made you an offer they’re very interested in having you there. They’ve invested a lot of time and a precious physician’s time and probably a lot of money. So it was frustrating for me to find out all these doctors that were coming to me on contract renewals and having their contracts reviewed because they’re sitting around and they’re talking to people and they say “you know I hate that we have to do that” and their colleague will say “well I don’t have to do that”. And so a sort of a light bulb comes on, “wait a minute that’s in the standard contact” and so I became aware that really when they’re getting out, when physicians are getting out of training that first contract can have such an impact on their lives that I kind of decided that I could probably do the most for the practice of medicine or for physicians if I really started focusing on people coming out of training and that was sort of the empathise for the book.
DAVE: What so I think, what I found about working with docs in the financial planning world is early in their career they tend to be trusting and perhaps too much so because they are bright, they are super busy and they just don’t have the time to take care of this stuff and I kind of think of it as a deer at the headlights look as many of these residents, they’re entering this last year of practice and they felt like “oh my gosh, oh my gosh I’m going to be able to finally make some money and pay off some debt” and they’re overwhelmed with responsibilities and their low man on the totem pole and can’t find the time to focus on this stuff and I think what happens they just sign the dotted line because they’re so excited about it but perhaps
DENNIS: You can’t blame them, they have been making subsistence wages and suddenly you know you’re signing a contract five, six, seven times what you are making now, it sounds great. You know, what’s not to like about it? What do I have to read, what did you say that salary was? Okay, where do I sign?
DENNIS: And they don’t realize just sometimes what they’re getting themselves into.
DAVE: Well and I think what’s great about your book in “The Final Hurdle”. I have talked about this with clients that their initial contract talks so much about their benefits and you focus so much on that bottom line- the number of compensation. Well how are they going to get paid? It seems really simple with their salary and there’s this productivity bonus that maybe I could get.
What I found in your book, perhaps that there’s not enough time that’s spent in understanding how this productivity measure can vary so much from one opportunity to another. One of the comparisons that I thought was really intriguing is this relationship between billings, collecting, collections and RVU’s. So tell us a little bit more about that, what’s going on with those three things?
DENNIS: Well the frustrating thing for me is when they pay you based upon billings, what that means generally is we will look at the bills that are sent out and we’ll have a certain number and if you exceed that number we will give you some percentage of what exceeds. So it kind of looks at what the bill going out was rather than how much money we made on it. So in some sense that’s sort of good if you’re dealing with an indigent patient, your billings are going to be the same as if you’re dealing for a patient with a Cadillac Health Plan, so in a sense that’s good.
I also see and its actually more common than billings is collections. Collections are kind of bad in a hospital setting because of all the years that hospitals have been employing physicians it seems none of them have really learned how to bill for physician’s services. So if you’re based on collections you were totally at the mercy of the hospital’s billing department and as I said that is not necessarily doing good billing. So if the money is not coming in then your bonus and it should always be bonus by the way, I absolutely think a new physician should never be paid strictly on productivity. Because you don’t have control over the patients that are going to present. You know doctors seem to think productivity is fine, I’ll work hard and I don’t mind working hard so I’m not concerned but you can’t work hard if the patients aren’t presenting and sometimes that’s not under your control.
DAVE: Well then collections I mean its delay, delay, delay right? It could be couple of months.
DENNIS: It is and sometimes they’re just not diligent. Most private practices will be generating bills the next day, sometimes that day as you know morning’s bills are being submitted electronically in the afternoon, certainly by the next day they’ve submitted hospitals you know it seems like they batch it. And then if Joe at the billing is off for vacation it doesn’t go in and then it seems like they have horrible follow-up. I mean most private practices if they are not paid in thirty days they are going to resubmit that bill and it just seems that hospitals don’t. It’s shocking to me that after all these years it seems like they still haven’t learned how to bill for physician’s services. So collections is kind of scary for me.
DAVE: Well what about RVU’s? you know they are coming out more and more and you make that point in the book that RVU’s can be great and that it treat all patient encounters the same regardless of how the patient pays, whether its insurance or private or Medicare or now the ACA yet it also has a big disadvantage, the extras that are outside of the patient care.
DENNIS: Right and they’ve done a very thorough job, pretty much anything that has a CPT code attached, anything you do treating the patient there’s going to be a WRVU for. What there isn’t going to be a WRVU for is department meetings, a lot of times part of your job especially if it’s a small department part of your job description will be helping with the budget. There’s no budget WRVU, attending medical staff meetings, a lot of times marketing is expected and again there’s no marketing WRVU. So you just have to be aware that to say “okay sure I’ll do WRVU’s” and yes it is more fair, indigent patients the same WRVU, that’s great but just be aware that the hospital, if that’s the case you have to be very aware of what other duties are being assigned and you have to realize that that’s not going to generate WRVU’s so that you know if you’re thinking about, again the thing that I think I don’t say trick but misleads a lot of physicians is they think of productivity means working hard and I am willing to work hard and therefore productivity compensation will be great. But these are the things you know again that you don’t take in to consideration and you can be working hard and not getting paid.
DAVE: Well what about those physicians that are in the academic setting? Right now at the top of those things you just mentioned there also helping out with the residents and the fellows and teaching and doing all those things.
DENNIS: That’s right and again there’s no WRVU’s for any of that and I’ve seen physicians coming out of training and basically being the first in that specially, usually sub-specially in the hospital and they’re going to be the head of the department now because the department is them. And that means credentialing issues and everything else even though they are the only ones the hospital needs to develop appropriate credentialing and all the goes through. You know the new head of the department and again you know there’s no WRVU’s for any of that, so sometimes the administrative work is really will take physicians by surprise. Again there’s no problem with doing that work, it’s just that that’s why the salary is there, you should be paid for what you do.
DAVE: So what’s the bonuses and getting paid adequately? How do you think docs are getting seduced by these sirens of pay?
DENNIS: Well I think the issue is you didn’t get through training by being lazy, you are used to working very hard, working very long hours. You know you’re very smart and so docs tend to look at it and say “okay the salary is not so great but if I maxed out on the bonus, I will be doing ninetieth percentile of MGMA and its great. And since I work so hard I know what I’m going to get and it’s that base salary plus the maximum bonus”. The problem is they may very well be working very hard but all these things come in, you know they may not be getting paid for what they’re doing is one issue. The second issue is as good as you are, you aren’t doing anything to generate income unless there’s a patient that you’re involved with and I’ve seen the hospitals come in and say “we want to build up this department, we have four docs right now, we’re going to hire four more”.
DENNIS: Well guess what happens? Pretty much the original four that were on productivity compensation it’s an opted there that they’ve just all decided it’s a lifestyle practice but in fact you know their patient volume plummets and to the extent their income is tied to productivity to no fault of their own, their compensation plummets.
DAVE: And especially when you don’t have your name out there yet and you’re just trying to get going I mean that could be it, pretty situation.
DENNIS: Yes it really is, well and especially since let’s face it most physicians when you come in, its I call up from my doctor’s office and say “I want to see Dr. Smith” and they’ll say ” Dr. Smith can’t see you for three and a half weeks but our new doctor can see you Wednesday” you know and so that’s how you get, that’s how you first meet the patient. Well the problem is and you know in that scenario I was talking about where you doubled the staff’s size suddenly if I’m calling and want to see doctor Smith he’s going to be available Wednesday. So he’s the one I’m seeing, I have no reason to see the new physician. And so the new physician tend to get it even worse than the established physicians.
DAVE: Let’s just back up a second, I just want to think back to this moment where doctors, residents, fellows they’ve gotten their contract in hand now and they’re looking at it and they’re saying “gosh, I mean this seems pretty set, it’s like its written in stone”. Can you talk a little bit about what you can negotiate in these contracts versus what can you not negotiate? What is non-negotiable?
DENNIS: Honestly I mean it’s going to vary from place to place but I’ve been doing this now for well over twenty five years and I couldn’t tell you how many hundreds of these I’ve done and I have never had a contract where the employer came back and said “we will not make any of your changes, we will not bend on anything”. So pretty much everything is negotiable but for given employer you don’t know what it is. So usually what I do when I review a contract is I make suggestions that if they accepted each and every one of these you would have pretty much a perfect contract. Now as you can imagine, I was going to say that never happens, actually it was the weirdest thing, two weeks ago the CEO of the hospital sat down with my client, went right through the four page letter bullet by bullet and gave him every single one.
DENNIS: In twenty five years that has never happened and it probably will happen again in twenty five years so people shouldn’t expect that to happen. But what generally happens is they give a whole lot of those points completely, some they’ll say that’s not negotiable at all and they’ll be some that they’ll say well meet you halfway on. But I can’t really say this one is always non-negotiable because it just doesn’t work that way, each one has it seems has different things. And I think some of it is pain points, if they just had the star physician leave and compete against them because of a loophole in their covenant and not compete suddenly they’re going to have a fifteen page covenant not to compete and they won’t change that at all. It’s you know wherever they’ve been burned on they tend to not negotiate. So as you can imagine that varies from employer to employer.
DAVE: What I find from my financial planning world that there’s certain things that employers have to have the same for everybody, like your 401K match, like the amount of disability they offer to employees.
DENNIS: Well yes, federally qualified plans, yes they can’t. You know to get a tax deduction, its set up that you don’t come into a 401K for a year, they can’t say except you’re great so you can come in in a month. You’re right those federally qualified plans attacks qualified plans are more or less carved in stones. So a lot of the third arty benefits are but for instance vacation isn’t provided by a third party, moving allowance.
DAVE: Seeing the expenses
DENNIS: Right, signing bonus, you know all those things. Even call schedule, a lot of times I’ve seen instances where and because I’ve done a lot of them sometimes I’ve negotiated one for the same hospital and you think everybody gets the same but in fact you know then I get something and the new physician has a more strenuous call requirement or something that simply says call will be established by the employer period. Whereas I know other physicians in the department have a little more flexibility. So there really is very few things that can’t be negotiated. The issue is you just never know what for given employer it’s going to be. So I always ask for everything, again typically I would do like a three or four page letter with bullet points in every section and if they give you every one of those you would have pretty much a perfect contract and from their perspective it would be a lousy contract. So there’s going to be some give and take but you just never know. I never tell, I’ve learned over the years that a lot of physicians will take a review letter and summarize it. They’ll go through and say “these first five points I don’t care about that, oh that’s a deal breaker and oh I don’t care about this and this”. That’s a deal breaker. And then they go to the hospital and they will say “I’ve got four things I want”. Well if you think about it, if you and I are negotiating and you give me two of the four points and I said there are four things that are important to me and you gave me two, as far as you’re concerned you’ve met me halfway so now I should give two up because it’s only fair. I mean you met me halfway.
DENNIS: So it’s very different to hand a four page letter with all the bullet points and then end up saying “I’ll give you this one, I’ll give you that one, I’ll give you this one” no look you’ve won this one, this is critical, it just seems like you’re being more fair than to go in and say “I have four points and each one of them is a deal breaker, you know I won’t bend on any of them”.
DAVE: Be open minded.
DENNIS: Right but again I think don’t say “well this is not important so I’m not going to ask for it” you know I think there’s a concept with bargaining chips and you know putting the word reasonable before a requirement, are you going to lose sleep if they don’t do that? No, but in the other hand that’s something you can say okay you don’t have to do that. Then again I’m going to insist on this one, I don’t seem like I’m being unreasonable now.
DAVE: That’s good, good advice. Now we ran out of time a little bit, there’s so much I want to talk about but I think we have time to talk about all of it. I think it will be helpful for a lot of residents and fellows to think about typical restrictions in contracts, like you talk about the location, the physical restrictions that often come as well as the time and restrictions that come within the employment agreement, can you talk about that a little bit?
DENNIS: Yes you’re talking the covenant not to compete that says when you leave you won’t compete with me which is in a sense fair. You’re a new physician, you came in here, we basically gave you the referral sources or we turn the patients over. So it’s not fair for you to walk across the street and set up your own practice and take those from us, I don’t think anybody would say “yes that’s perfectly fair”. So they’ll have a covenant not to compete and that will basically say there’s something you can’t do within a given radius for a given period of time, the something is very critical. I see so many that will say you will not practice medicine in the given radius.
DENNIS: What you should be prohibited from doing is opening up a new office within the prohibited radius, not practicing medicine. So if you’re a primary care doc you should still be able to or any kind of doc you should still be able to see patients in the hospital, you just can’t have, if you are a hospital employee you just can’t have your office across the street from the hospital, very commonly it’s a prohibitioning instead of practicing medicine.
DAVE: I got to think about many surgeons located in just one place and they’re working for let’s say a different hospital system, they might end up having to move from hospital to hospital in order to do the surgeries.
DENNIS: Right and again they ought to, and I don’t know why hospitals do this frankly. They should be delighted that you’re admitting patients to their hospital even though you’re not working with them anymore, so you know they should be delighted but they don’t. They say you can’t practice medicine and like I said it should be your office location. But the two things are the radius and the time period. The radius, I usually try to knock it more than a five mile radius in an urban area. If you’re in the wilds, in Alaska where you drive three hours for groceries then obviously a five mile radius is not reasonable it can expand in the country. But five miles is where I start for urban and sub-urban. The time period, the thing I tell people is focus on the radius rather than the time period. If you’re not seeing patients for one year you’re as much out of the market as if you can’t see patients for two years. So I don’t, I believe it should be one year, five mile radius but I’m a lot more willing to give on the time period than I am at the radius.
DAVE: I understand and I think it’s all about reasonable expectations, right?
DAVE: Someone who says twenty mile radius that’s just nuts, that could be in a cold sub-urban area.
DENNIS: Well it is unless you’re in a you know again unless you’re used to driving twenty miles for groceries, if you’re in Montana or something, you’re in a ranch at Montana it may be not so unreasonable.
DAVE: It’s crazy, we did this road trip just last summer all the way through Montana, I’m just picturing those blue open skies, yes that can happen. Well there’s as much in the book that we simply don’t have time to cover here today, do you have any other just thoughts on contracts that you think folks should be aware, of areas that we don’t have time to cover today that you want to touch on?
DENNIS: Well I just think you have to realize that there’s no free lunch, so if you’re getting a super salary you should assume that they’re going to like expect super productivity. So you have to evaluate contracts on the totality not just one thing. There could be if in the same town, two places offer you a contract and one is significantly more money you can pretty much expect that they’re going to expect you to work a lot harder which may be fine for you. But you just have to know its totality, you don’t look at the compensation and say “that’s what makes it best” and I think the biggest thing to remember is there is no such thing as the standard contract. Every employer is willing to bend a little, some more than other but every contracts are willing to bend. So you really have to do your best to get the best deal that you can.
DAVE: Well I think that sounds totally fair. We’ve ran out of time here and I just want to say thank you so much for being with us. If people have more questions, how can they get in contact with you and also with your book The Final Hurdle where can they pick up a copy of it?
DENNIS: Well probably the easiest way, most convenient for them to get a hold of me would be to fill out there’s a contact form on my website which is at email@example.com my phone number is 866DOCLAW1. And the book is available pretty much everywhere it’s at Amazon, at Barnes and Noble and other places but you can find out about it at the book’s website which is thefinalhurdle.com
DAVE: Okay great well thanks again so much Dennis and we’ll be in touched, maybe we can talk a little more about partnerships next time.
DENNIS: That sounds great, I enjoyed it. Thank you.
DAVE: Alright everybody enjoy and this is Dave at capital advice regroup this is Freedom Formula for Physicians podcast. If you have any other questions or want to participate make sure to subscribe to this particular podcast or email me firstname.lastname@example.org if you have any questions. Enjoy, have a good one.