Today, we are going to focus on physician employment contracts and chat with Jon Appino, the CEO of Contract Diagnostics.
Jon obtained his BS in Biology and Chemistry with a Pre-med focus. After deciding on a business career over medicine, he has spent the past 15+ years working in various sized companies and start-ups in the healthcare field. He completed his MBA in 2004 and launched his most recent company, Contract Diagnostics, in 2011. He is passionate about the education of Physicians with regards to the non-clinical (business) aspects of medicine.
What I think is pretty neat about this company is that Contract Diagnostics offers a wide range of review packages with price points starting at only $200 with flexible payment plans for Residents and Fellows as they complete their training.
This interview reveals the following:
– The Best Free Tool Online To Understand Contracts (Hint: Jon had nothing to do with it)
– How a Female Physician Got Screwed with Crappy Tail Coverage (and what you can do to make sure this isn’t you!)
– Learn the 3 worst contract & financial pitfalls for doctors
– Check Out Their Awesome Pricing & how they keep costs reasonable for residents & fellows
Dave: My name is Dave Denniston. Welcome to my latest podcast- The Freedom Formula for Physicians. Today, we are going to focus on physician employment contracts.
One of my latest quests has been to connect and network with other professionals that help physicians.
Today, we are going to chat with Jon Appino. Jon obtained his BS in Biology and Chemistry with a Pre-med focus. After deciding on a business career over medicine, he has spent the past 15+ years working in various sized companies and start-ups in the healthcare field.
He completed his MBA in 2004 and launched his most recent company, Contract Diagnostics, in 2011. He is passionate about the education of Physicians with regards to the non-clinical (business) aspects of medicine.
What I think is pretty neat about this company is that Contract Diagnostics offers a wide range of review packages with price points starting at only $200 with flexible payment plans for Residents and Fellows as they complete their training.
We’ll definitely get into that later! Welcome Jon!
Jon: Thanks Dave, looking forward to be here.
Dave: Well, let’s kick this off. Tell us a bit about yourself. As I mentioned in the intro, you started off your journey as a pre-med student and then changed gears. Why did you choose this focus on contracts and develop your company and how did it happen?
Jon: So it’s been a long road to kind of get to where we are. My mother was a nurse practitioner for thirty five years, so I know all the physicians ta the smaller town I grew up at South Dakota. A lot of them kind of dissuaded me from wanting to go into medicine. I wanted to be an emergency medicine physician, that’s kind of what my heart was when I was in college and doing my undergrad. A lot of them kind of thought maybe there will be other opportunities that will be better than a career in medicine and a lot of them would kind of said stuff and go back for computers and this was back in the late nineties.
Obviously when you get so far in college you don’t want to stop and go back and so I thought “how can I finish up what I’ve started and then go out there and get some experience that will allow me to do what I like to do”. So I finished my undergrad degree, I got a job with a big pharmaceutical company out of college, I did a variety of different tasks with them including sales and marketing and contracting in Chicago and New York and in variety of different cities. And then one thing led to a different company, to a different company, to a couple of startups in the healthcare field.
I always loved working with physician and I always had a good time finding ways to actually educate and reach out to them and provide value to them in some form or another because they understand the schedule, they understand the demands on them and I think that obviously having a customer based that are good communicators and that are intelligent an those kind of things are all advantageous to me as an entrepreneur. And so I always find a way to provide value back to the physician and contract diagnostic is simply the creation of what was embarked in me.
I got a lot of friends and neighbors who are physicians and as I talked with them and have a beer or wine with them on a weekend and you kind of asked me what keeps you up at night? What are you paying for? What do you like about your job or like about your career? And what keeps on coming up is you know, a lot of them are residents and fellows especially was we don’t have a very logical process for this whole contractor view. We know we should get it done, we don’t know if we can afford it, we do call a regular lawyer from the yellow pages, do we use a family friend? People walk three thousand or four thousand dollars or three hundred bucks an hour and I don’t have any money, I’m a resident.
Our current project contract diagnostics which I think, what a fantastic time working with these guys and for other thing, for sure lots and lots of you as in the future and basically came out of physician’s needs and what they told us they wanted. So we actually put a bunch of focus scripts together, have them build a model and we just found a way to make it happen. So they said we’d like this and this and we put a package together around that and we put obviously what price points we would need on things in order to make it worthwhile and profitable for our business. We worked with them, we kind of customized.
Dave: It’s like the residents and the fellows they’re getting into practice and they’re ready to go right? They’ve been in residency, they’ve been in medical student training for the last seven, eight, nine, ten years and it can be tempting just to want to sign the dotted line, just move on.
Tell us more about Contract Diagnostics. When I think of contracts, I think usually of attorneys. Do you have attorneys on staff or how does this work for your company to review over the legalese? What’s the process like from start to finish?
Jon: Sure, so we look at these process completely different I think than any other firm or law firm or company in the nation. So again our feedbacks from some of our physicians who helped us build this model, I had a lawyer review it and it was basically like I check the box, right? Yes its legal, I don’t see any intrinsic flaws and go ahead and sign it. But they don’t understand you, a bunch of physicians are like “what is this I get paid thirty seven dollars and twenty nine cents per RVU over seven thousand four hundred per year? What do these numbers mean? Is that good or is that bad? Right? What are the averages in these areas for these types of numbers?” What normal, what standard to a lawyer who you know gets people out of speeding tickets and those divorces and pot litigations and maybe those lease physician contracts or four, five physician’s contracts here, they maybe don’t have a good hand along what normal and what standard is.
So even though ones maybe do more physician contract or do a hundred a year, they don’t have access to some of the data that we have to provide information back to the physician, you know physicians are information hungry client, they don’t have the data that provide like let us say “what is the going rate in this particular area? What are the average RVU conversion rate? What are the average collection type and how should a compensation structure be modified?”
So our process, obviously we have legal in-house that reviews all the contracts from a legal perspective, to make sure that there’s no intrinsic flaws, there’s nothing illegal, there’s nothing that they need to be aware of from that perspective. However we don’t stop there like most of the other companies. We also have benefit advisers who can go to the benefit package. What is your medical malpractice look like? What are your medical insurance? What’s your retirement plan look like? What are good questions to ask the physician or to ask the group or the employer and they’re looking at making this potential job or career or opportunity? How do we also didn’t have obviously the compensation analysis, so what goes through the compensation structure and detail, analyze it, compare to lots of different benchmarks that we have and provide feedback on if its generous, if its underwhelming, if it should be modified or if it should be questioned? So we kind of its more holistic process than just a yes its legal or it’s illegal. It’s more of a comprehensive, holistic review.
Dave: So tell me more, being the numbers nerd that I am, I’m really interested in that data collection sites. So is that something that you guys have collected in house? Where you getting data from to, compared to these benchmarks?
Jon: So we spend thousands and thousands of dollars a year on survey data, that’s aggregated by major companies Solve and Cutter, MGMA, there’s a variety of different surveys that are taken out there and they shelve at data to large hot well system, we actually purchase that here at contact diagnostics. You can imagine there’s a little bit of survey bias in their data and this varies on data that a lot of people use to benchmark how they pay position. We also keep our internal very robust, blinded data and we’ve kept since we opened up our doors. And so if somebody wants to know what is the going rate for a neurologist in Iowa, we can tell you. If somebody wants to know what the going rate for a pulmonologist is in the Chicago metro, we can tell you not only from the survey data that we can purchase but also our internal data which is raw and which is unbiased. And so wee have access in both data, multiple data set and we can kind of create a blended, you know depending on which package they purchase from us, we can put together a document that says: here’s what the expectation should be, we can put twenty fifth percent how being medium, seventy fifth percentile, how ninety percentile for everything from income perspective, a guaranteed salary perspective, a signing bonus. We will caution them out, vacation time. If there’s bonuses, what the average percent of collections over some threshold or RVU payout. We can have some lovely imbursement to something that people like to have in certain contracts. So we can pull all of that data and reaching up to physicians and like “hey this is a very good offer” or “this is not a very good offer”.
One of the big things that we actually do see and we spend a lot of time coaching to this is the differences between male and female compensation. We have a lot of females that don’t feel comfortable asking for more compensation. With our guidance and our data they feel comfortable by asking those things and we get phone calls all day from female physicians who are ecstatic because they were able to negotiate an additional ten thousand per year or twenty thousand per year or thirty thousand per year by just formulating a couple of questions based on our coaching.
Dave: Well I know that one of the big concerns that many of us have for physicians is worst compensation going, right? You got Medicare reimbursements possibly going down, that’s been being argued every year in congress and they just did a patch on that recently. Have you seen that data recently? Has compensation kind of flattening out? Is that going up a little bit? What does that look like the last couple of years?
Jon: It varies, it varies base on specialty, it varies base on geographic region, it varies on payer mix and what type of clinic or hospital you’re looking at joining. But overall we’ve seen compensation trends to go down at most specialties, they’re down more in some like nematology than they are in others, in cardiology it will take in the hit. But again it depends a lot on the employer and how savvy they are with certain things regarding provider based selling or variety of different strategies and tactics around appropriate ways to make sure that they are maximizing those revenues sources. Again small or private practice versus large corporate employer benefits and risks involved but we do see increases and decreases in compensation and that end a lot of contracts actually say your compensation can change at any time.
Dave: So, obviously, you’ve seen a lot of contracts. Tell me about the worst contract you’ve ever seen.
Jon: The worst, so great question. We’ve read a lot of contracts like you’ve said and there’s a lot of them that’s just like you know, that are standard but same thing that they can be changed and modified, some have bolder plate, right? But they still need to be reviewed and understood by the physician, it’s an important document they’re signing, it’s still important that they spend a couple of hundred bucks to have somebody review it.
As far as the worst contract we see challenging contracts in smaller private practices who made me have not have employees, physician employees in the past so the one physician, two physician, three physician practice who been kind of running for ten or twenty years and they’re now kind of looking at maybe I’m going to retire in a few years, I’d like to bring on an associate. Sometimes those contracts are challenging because they haven’t done it before, they may be trying to instead of building it appropriately and spending quite a bit of money on having an attorney draft a reasonable document they might be trying to cook you or cut something online. It just doesn’t work out well and we start on asking them questions, they don’t know the answers because they’ve never done it before.
Sometimes they can be inflexible, when we talk about partnership opportunities in two years or three years they don’t know the answers and we did recently, I think we got a lot of specifics where physicians basically turned down offers based on our works. We recently have a private practice opportunity that the physician was told it’s a two year track of partnership, we will pay you. The physician everything was fine, liked the guy, thought that was a good practice, called us up, have us review, we told them what we thought of the contract. I thought it was a fine contract but there was a lot of details missing. The physician actually had us reach out to their practice and negotiate it for him and at the end of the day what we found out was the physician was extremely reflectable, at the end of two years they were going to apply what we thought was a ridiculous multiple to the profits of the business as far as they buy it and they unswervingly and make him fifty-fifty partners, they were always going to be a seventy-thirty partners. and so he will never have a true voice and so you’re the physician you just assumed that time served, you’d be a fifty-fifty partner and all of a sudden he looked at us, wait a minute I got six hundred grand for thirty percent of the business and I’m still going to be a minority shareholder, so I never really have a true say, I’m the physician.
Sometimes we work with these practices and various inflexible.
Dave: I had a client, a fellow transitioning to practice, who recently paid an attorney to review and negotiate their contract. This person supposedly specialized in contracts in this area with this employer. Lo and behold, when the negotiation started, it ended pretty quick. There was virtually no negotiation.
She and her husband were pretty upset. They got about $5k in additional benefits, but had to pay $3k for the service. So, it turned out okay. Yet, she really seemed to expect a lot more based on how the attorney presented their practice.
I’m not sure if the attorney didn’t know what they were doing or the employer got burned and didn’t want to negotiate or if my client had unrealistic expectations.
So tell us, what do you think are realistic expectations that physicians should have when they negotiate a contract?
Jon: Well I think it depends on what things are set up initially and outwards, I mean because we do so many contracts we can say “I would like this changed”, I think it’s a five percent chance that they will change it. So we do a good job on spending the expectations of our clients. If I were you I would ask for this or if you pay out to negotiate it we would ask for it but I don’t think they’re probably going to give on but we maybe got some creative alternatives that we can provide because again we do this a lot we can provide multiple ideas, suggestions, revisions, alternatives. But sometimes they are just unwilling to change and to modify contract and I think for that I mean especially for the local market a lot of the attorney, we have physicians call us quite a bit and they’ll say “I called local attorneys” and I asked them do have any conflicts of interests? I mean have you ever worked for this account before? And if they’ve ever taken money from that employer to do job they got a conflict. And it’s actually fairly difficult to find lawyers and a lot of times they don’t have that conflict, they haven’t worked with the hospital in one way or another, meaning taking the hospital’s money and now we’re talking about that conflict on their behalf and then we work with other accounts where we’ve been paid money by our client to negotiate and we’ve been kind of you know there’s really nothing to negotiate.
Now this is because they won’t change something in the contract doesn’t mean it is not important to have us do the negotiation or get us involved. sometimes it’s not just about changing from one thing to the next, it’s about having the right questions to ask, around expectations, anything like schedule or how retirement plan made look or what happens upon termination or the non-compete, just discussing and not maybe making demands on how it should be changed and modified but just having a discussion around on why that certain provision is in there. Sometimes it just becomes more of a fact finding mission to clarity that we want A to substitute for B, so to speak.
Dave: Let me switch gears – let’s talk about one of my favorite subjects, okay my favorite subject- money! One of the other topics that comes up with a lot of residents & fellows is the tremendous level of debt that they have. How willing are employers to include a debt forgiveness bonus or structure in some sort of debt incentive program?
Jon: Sure, so you know I don’t know when we track it, I don’t have a data in front of me but I want to say it’s a small percent as far as employers that provide tuition reimbursement or loan assistant. And there are more typically some of those kind of more rural, more hard to serve area and some of the government programs like incentives, some of the hospital providing recruitment incentives to get the physicians there. If you want to go work in Chicago or Dallas or Austin or the Northeast in general, it’s just really hard to find a lot of physician who want that jobs, so they don’t have to offer some of those incentives like they need maybe in some of the other place in the Northwest or more rural communities. So we do see it, we see it range from ten thousand dollars per year to four hundred thousand dollars in aggregate over a five or a ten year period. So it just depends on the individual situation.
Dave: Are you aware in any particular areas Jon that maybe docs should be checking out, you mentioned some rural areas, do you have any specific regions that you’ve seen some really awesome incentives from employers then?
Jon: You know we continue to see them throughout the Midwest, South Dakota, Iowa, Minnesota, Nebraska, Kansas, Missouri, you know certain parts of Texas, Alabama. We see some of the rural parts of the southeast, we see some of those from a financial perspective, we see them as a really good deal. But it just so variable, I mean we’ll deal with two independent, two different private practices for ophthalmology who have cornea or retina specialist in California and their businesses are so completely different and the profitability is so completely different of what we’re able to offer and his position is just graphically different. And it just shows that it’s not just about setting up a practice and seeing the patient that come in the door, there’s an art to how you deal in contract with payers and pay entire staff and the billing, encoding.
Dave: I would encourage anyone who’s listening to think about, you know if the employer irked and offer an incentive like that in the same area, is there a state program? Why not double if there’s some sort of rural program on top of the employer offering money because if you’re there four years maybe you could be out of debt completely.
Jon: Yes absolutely and you know the power of not having monthly payment and debt as a young, good earner physician for the next twenty or thirty years, what that can do for you, it will free up your capital for various investments or for investing into the future or for a variety of reasons that can be very valuable. So I agree.
Dave: For sure. What about in terms of as people get into practice, what have you seen or heard from some of your clientele what are some of the biggest financial pitfalls that they’re getting trapped into as they’re transitioning out to practice.
Jon: The biggest financial pitfall I think in general is nothing financially stabbed. It’s not knowing, I mean your income goes up significantly, it’s not having a plan I think number one of what to do with their increase financial win fold if you will as far as monthly paychecks and bonuses. I know you pay off debt, you buy a new house, buy a new car and I think they get this kind of, sometimes they don’t have a good idea to plan as far as how to move this process forward as they are now attending a much more healthy salary. So I think that’s kind of global, right? But for me contract perspective I mean it’s the same thing. How do you make sure that the money that’s coming in is the money that you’ve earned and how do you know that no matter what the contract ends or terminated you’re going to receive that money, again based on the contract of structure and how do you have a good expectation around that income? So if your base salary is two hundred thousand, how do you set up a budget for your monthly spend at 200k?
We have a physician who was a two year OB doctor in the DC area and was transitioning down to Miami South Beach and they have a tail out of their policy, they didn’t offer a policy in Miami because they didn’t carry out malpractice insurance out of a variety of reasons, and so it is to tail out of their tail. Up to two years in training, you know OB and DC makes ok money but not tremendous money to put a ton of money in the bank every month. Her tail insurance that she had to pay was a hundred and eighty four thousand dollars, okay?
Dave: Oh my gosh.
Jon: So two years out of training, still with student loans and you can’t finance tail insurance, right? There’s no way to take it back, they can’t take it back if it’s you that makes your payment. And so you look at this, you go “okay maybe if it’s been financially astute, maybe invest a little bit, put some money in the bank and then maybe have thirty thousand liquid, maybe forty thousand liquid” and also you get a goal for a hundred and eighty grand. And that obviously dramatically changes your financial future and the physician didn’t even have a plea until they involve us with what their obligations were. Again that would be kind of on the extreme end of catastrophe that they didn’t see coming but you know we see everything in between. I think number one having a plan, number two understanding what the contract with regards to financial expectation and then making sure that you’re sticking to that plan I think is the most important thing when it comes to your major pitfalls if you will.
Dave: So what was the solution with this gal? Where she got this big bill, did the employer ended up making up for some of that because they didn’t have, practically they just try to deal with the employer or what was the solution on that story?
Jon: So probably one, I think if she would have involved us two years prior I don’t know if we would be able to make the situation go away but I think we would be able to make that much more palatable. I think we probably could have saved her at least fifty or maybe a hundred thousand if she would have got us involved right hand. But involving us in the back end was better than too late. So we were actually involved with the malpractice broker that we consult with, we shopped the tail, we were able to did a negotiation of her way out and I think we end up saving her maybe thirty or thirty five thousand. And so we helped her out a little bit, it still wasn’t what she need but at the end of the day she just had to you know friends and family and bank notes to get the money and she just have to pay it. And maybe we could have made it all go away if she would have engaged us in the front end but she would have a reasonable expectation and she wouldn’t be able to financially plan for this event and she wouldn’t have been blindsided on a Friday afternoon with “oh by the way you got to pay a hundred and eighty grand” we’re talking about a stressful weekend, right? And so I don’t know if maybe any solution and easy solution.
Dave: Cool. We just have a couple of minutes left and I just want to try and wrap up. One of the important things that I like to point people towards a resources and specifically regarding contracts, if people want to check out some residents or fellows or other physicians out there, some good books or some videos online where is some areas you could point people towards that you think would be good to educate them on regarding physician contracts.
Jon: Yes, one of the major job publications practice link, they have at least one or two print editions and online editions of their magazines ever year that talks about contracts. I mean that’s a great website for them to go to and read through those older editions.
Dave: Practice link?
Jon: Yes, practice link, practicelink.com and in their website they can find all the links that I believe that is on their website, I’m not sure about our two different interviews that we’ve done for them, different articles that we’ve read. We have a blog on our website and we’re blogging more and more about various topics, that’s a good place to go. there’s a variety of books on Amazon that they can buy but the AMA actually has a really nice kind of PVS on their website and it just kind of talks like here’s how to look at a contract, here’s something you have to keep an eye for. of course they recommend this will not make you a contract expert because you read it and they suggest that you engage a professional but it gives this overview on here’s a couple of things you keep an eye for, here’s a couple of things to maybe request if it’s not already in the contract. Actually AMA is a great resource and I forgot what it’s called but I think you just go to AMA website and type in contract or physician contract to pull out a really nice of kind of eBook, a pdf file that you can download, there’s no charge for it. It’s actually a great resource as well.
And obviously picking up the phone and calling us, we don’t charge people to talk to us on the phone about their situation. So I definitely welcome anybody to check us out online at contractdiagnostics.com or our eight number is 888-574-5526 and they can always find us that way and just get us on the phone and say “look here is my situation, what do you suggest that I do?” and we love taking calls, like I said at the beginning of our call we love providing value to physician and educate them in any way that we can. If that means that they engage us for a package where we make money on that that’s great, if it means that we just have another physician out there who thinks highly of our firm and we have a twenty minute or a thirty minute conversation with them and we don’t make a money today that’s perfectly fine as well.
So we encourage people to reach out to us and touch base and tell us a story and see if you can make friends to engage us and to work with us or if we do need skills necessary, so.
Dave: Well I mentioned at the beginning of the podcast about pricing, so I want you to just real quickly just give us a minute here, tell us about your pricing structure which I think is really unique and how you work with residents and fellows.
Jon: Yes, so we got a complemetal packages, they start at cheapest two hundred bucks. Our full negotiation costs seventeen hundred and we got a couple of different packages in between there. One where we just have a basic review where we do a very cool proprietary docking up for the physician where we re-graph the contract in plain English so they can actually read through our document and they can understand everything that is in the contract. They have questions that they should have and everything else. We actually ran over that with them on the phone before we engage the employer in the discussion. We have an upgrade to that, it’s called the advance review. It happens to be the most popular package that we have, it’s I think eighty one or eighty three percent of the review that we do. So I mean the other one chooses it. We do a triple review like we talked about before, the legal compensation and benefit review. We re-graph it into our proprietary document. We provide them with this full compensation sheet that shows them all the different details and figures around compensation. And we then provide them unlimited access to us, so it’s not just one session on the phone, they can email us as much as they’d like for a year, they can call us back as much as they like for a year. If they changed the contract based on our guides and recommendations there is no charge for us to re-review that. That’s kind of one of the reasons I think that that is our most popular package is because you get all of those things but you also have a very nice price point at seven hundred dollars. But we do for residents and fellows on that is we actually cut it up a little bit, we then look on his cash flows on a monthly basis is a little tight right now, if you like you can do two hundred bucks down and then the remaining five hundred bucks is due after you start your position.
So believe or not we do allow some people to wait seven months or eight months to pay us that remaining five hundred dollars. So far we’ve been very fortunate that we have physicians who have been prompt with their other payments, so we have not to track too many people down but I think that’s the function of the client that we work with and the physicians overall. So that’s our explect pay plan, we do offer that to residents and fellows and we have a lot of them who take us up on that offer. Our upgrade for them, from the advance to the negotiation reviews is becoming more and more popular. It adds a thousand dollars so it’s a thousand and seven hundred total and we basically take all of the discussions and all of the negotiations off of the physician’s plate and do everything for them. So based on our AR discussed earlier I think it’s even necessary we can make that decision with the physician at the time that we do the review, there might not much to change or maybe what we feel would be an inflexible employer, so maybe their additional money would be better spent somewhere else. But that’s a decision that we can actually make together after we’ve done the advance review.
Dave: Awesome, awesome I think that’s so neat, especially for residents they don’t want to put a whole lot of money out there so I think having those different options, reasonable price points is pretty awesome.
Well thanks so much for being with us Jon! If people have more questions, how can they get in contact with you?
Jon: Well they can visit our website at contractdiagnostics.com, they can call me directly, my office line is 816-288-3312 and again they can just call the front desk, its 888-574-5526 and we have a contact form on our website that we basically get back to people in a pretty quick fashion. Obviously people answer the phone if they call any times during regular business hours but we love to help anybody out there that’s listening and we’ll actually work with them on a client basis or just listening to their story and providing some recommendations based on our experience. Either way we’d love to provide value to your viewers, your listenership, your clients and everything else. So we appreciate the opportunity to be here today.
Dave: If you are a physician or someone else servicing physicians and want to tell your story, grapple with these tough issues, and get on the soapbox for a few minutes, I’d love to share it too in the next Freedom Formula for Physicians Podcast.
For the Freedom Formula for Physicians podcast, this is Dave Denniston. Thanks so much for joining us and make sure to subscribe and check in again soon! Have a good one.