The Worst Clauses Hiding in Every Physician’s Contract and How To Negotiate Them! With Attorney Michael Johnson

“More physicians should renegotiate their contracts. If more folks in jobs push harder in the jobs that they currently have, it's going to open up more space for residents and fellows to push as well. You know, it's often difficult for residents and fellows to leapfrog some of the more senior physicians in that practice. If they don't push back on terrible comp plans, then that's going to reduce leverage downstream.”

Michael Johnson is an attorney and the founder of Michael Johnson Legal, a firm that works exclusively with physicians. More specifically, Michael helps doctors with contract negotiations. Starting early on in medical school, physicians are taught how to advocate for their patients in every possible scenario. But they begin their careers — in a uniquely demanding field — without any training on how to advocate for their own interests or needs. Learning how to negotiate and renegotiate job contracts should be part of every physician’s self-advocacy tool box.

On this episode of How I Doctor, Offcall co-founder Dr. Graham Walker and Michael talk about what makes physician contracts unusually punitive, and why doctors are so under-informed about the legal documents that dictate everything from salaries and schedules to the rules for leaving jobs and finding new ones. Michael explains what should be included in every physician contract, which types of red-flag clauses to watch out for, how to evaluate a contract’s longer-term career impacts, and how to actually push for changes before agreeing to terms of employment. Michael shares actionable tips that physicians at different career stages can use to protect their well-being and gain more agency in their working lives.

A side note: This is the perfect week to have Michael on How I Doctor — because Offcall is working to collect compensation data for a rural anesthesiology practice that’s about to begin contract negotiations with a hospital. The practice’s independence is on the line, and they need accurate, high-confidence salary data to win their fight. Any anesthesiologists who want to help out this physician group can do so by sharing their salaries anonymously through Offcall. Here’s more info.

Here are four highlights from Michael and Graham’s informative, illuminating conversation:

The three worst types of clauses in physician contracts

“When I first started looking at physician employment contracts, I was blown away. Like no other employment contracts in any other industry are this nonsensical. … You’ve trained for so long, you are so incredibly valuable. But then a lot of these contracts are really just incredibly punitive. I saw that a lot of physicians maybe took this mindset of, ‘Okay, this is just what everyone does, and this is just the norm. This is standard and I'm just going to go with it.’ But the standard is not working out for physicians right now.”

What exactly makes physician contracts so punitive and nonsensical? These are the three types of clauses Michael hates the most:

• Employment termination clauses, which take away a physician’s legal right to leave a job without cause during their agreed-upon term (often three years). About 10% to 15% of physician contracts have a clause like this, Michael estimates. Effectively, it means a doctor can’t quit their job unless they’re not getting paid.
• Non-compete clauses, which limit where doctors can work (usually for one or two years) after leaving a job. A severely restrictive non-compete clause can make it hard for a doctor to get a new job unless they move.
• Non-solicit clauses, which can prohibit physicians from continuing relationships formed during their employment. That might mean a physician wouldn’t be allowed to accept referrals, practice at the same facilities, or even keep seeing former patients — even if patients take it upon themselves to follow their doctor.

Additionally, Michael says there are three other types of common clauses to watch out for and understand: malpractice insurance and tail coverage (out-of-pocket costs can be especially expensive for certain specialties); moonlighting rights (not all physicians are allowed to generate secondary income streams); and compensation, clawback, and waiver issues (all the ways physicians can lose money during a termination).

Three things every job contract should clearly explain (but most don’t)

“You might want to think, okay, what are the main interview promises that I'm relying upon to pick this job over others?”

It’s understandable if physicians — especially those early in their careers, who are getting their first job offers — don’t feel comfortable requesting changes to their contracts. It’s not a topic they learn anything about or are trained to navigate. But Michael says it’s important to develop a negotiation strategy. And the first step is understanding what’s supposed to be in a job contract. Every physician contract, Michael says, should provide clarity on three issues:

• Work obligations: What exactly does your job require you to do? What will your schedule look like? Can you work remotely? What’s your expected workload?
• Compensation: How much are you getting paid? And, just as importantly, how is your compensation determined? (RVUs are the most common model.) “When physicians get their first job offer,” Michael says, “they usually see a signing bonus that looks wonderful, and then they see a base salary. That is usually not how physicians are actually compensated. Long term, they’re more compensated based on volume.” So, a contract should state how an employer pays a physician for their work volume. For example, does a job come with a managerial stipend or compensation for supervision of an NP? Administrative work is rarely compensated, so a physician should know what admin work will be expected.
• Exit strategy: What are the legal and financial penalties associated with leaving a job?

Why it’s essential to dive into the details of a non-compete clause

“Pull up that map. Understand exactly where the contract says you cannot work upon termination. If it's not that bad then you might just want to leave it alone.”

For early-career physicians figuring out how to tackle contract negotiations, Michael says non-compete clauses are a good starting point. If a contract includes a non-compete, make sure you know exactly where you can work if you leave the job and how the stated restrictions would affect you. A 10-mile non-compete — meaning you can’t work anywhere within 10 miles of a location where you practice — might be doable in a sprawling metropolitan area. But in a small city or a rural area, the exact same stipulation might eliminate most of your job options. Also, Michael says, it’s easier to deal with a one-year non-compete than a two-year one.

He adds a tip: “The safest way to sign a non-compete is to assume that it’s enforceable as written. It can be difficult to challenge these on the back end.”

Why physicians shouldn’t only negotiate contracts for new jobs

“There’s this kind of fake expectation that at the end of a particular term, you and the employer are going to sit down at the table and have an adult conversation about what the term should be in the next renewal. That's really not how it's working.”

More physicians should renegotiate their contracts, Michael says. And they shouldn’t rely on employers to initiate or guide them through the process. An employer is more likely to say nothing and let a physician’s contract renew indefinitely. So, it’s important to be proactive — go to your employer with specific requests for how you want to modify your contract. And put everything in writing, Michael says, whether you’re pushing for changes to your compensation, your work schedule, or something else.

Michael stresses the value of doing local market research to understand what a competitive offer looks like. He encourages physicians to use resources like Offcall, which provides reliable salary data from those in similar regions and roles. Also, Michael says, it’s helpful to get a feel for the market by checking out other opportunities — i.e., by going out and interviewing.

Connect further with Michael on Instagram.

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Transcript

Michael Johnson:

More physicians should renegotiate their contract. If more folks in jobs push harder in the jobs that they currently have, it's going to open up more space for residents and fellows to push as well. It's often difficult for residents and fellows to leapfrog some of the more senior physicians in that practice. If they don't push back on a terrible comp plan, then that's going to reduce leverage downstream.

Graham Walker:

Welcome to How I Doctor, where we're bringing joy back to medicine. We've got an incredible guest today, but first, I want to quickly ask for your help about something urgent. Over the next week, an 18 physician anesthesiology group in the south is entering into contract negotiation with their rural hospital and ask if Offcall could help. We want to collect 100 anesthesiologist data points from across the country so we can help build this group a data set to help them negotiate. As always, the data is anonymous and confidential. If you know an anesthesiologist, have them sign up at Offcall.com. Let's do everything in our power to help this group remain independent and show the power of physician-level data and what our community can accomplish when we work together. Thank you. And now, on with the episode. In medical training, we're taught how to advocate for our patients to go the extra mile, stay late, fill out forms, make calls, but nobody teaches us how to advocate for ourselves.

It's taboo for a doctor to even admit that we have wants, or desires, or needs too. Graduating from residency is one of the biggest transitions in our career, and most of us walk straight into our first job without understanding what exactly we're signing. We don't know how to negotiate... We don't even know if we can negotiate, let alone what's fair or what's normal. There's this assumption that because we're just out of training, we shouldn't push back, or that asking for something better might seem difficult for us. Michael Johnson is trying to change that. He's an attorney who works exclusively with physicians and physician groups helping us understand our contract, spot the red flags, and make sure we're building our careers that are sustainable. Michael, welcome to the show. Thanks for being here.

MJ:

Thank you so much for the invite. That's quite an intro, by the way, I hope I live up to it. But I'm excited to try to close the information gap on the business and legal side of medicine.

A Knowledge Gap on the Legal Side of Medicine

GW:

Most of us, even during residency, really get zero training on contracts, negotiation. Why is it such a problem for doctors entering the workforce today in particular?

MJ:

There's so many powerful folks around you that can really control the direction of medicine, it's not just about doctors seeing patients. If it was that, then I think things would be a lot easier. But with all of the complicating factors, just so important for physicians to understand the business and legal side of medicine, understanding how their contracts might affect their career goals, their life plans, their ability to pivot, and change, and really affect how they practice. So we really need to know this stuff.

GW:

Michael, how'd you decide to get into this, specifically working with physicians only?

Why Michael Chose to Devote His Career to Physician Contracts

MJ:

Yeah. So I was swiping around on Bumble about nine years ago and met my future wife, and she was in her last year of training. We actually met the week before match, which is a stressful time, obviously. So the first couple of days she's explaining the match process, but I still don't understand, it's a nonsensical process. So we were engaged during PGY-1, married during PGY-2. Shortly after that, started looking at, first, little moonlighting gigs during residency, and then looking at, first, attending physicians, and there really wasn't a lot of information out there to help physicians understand how to navigate this. There weren't a lot of lawyers that were really doing this in a very personalized way, helping physicians hand together negotiate these deals. So we went through it ourselves, and then I started helping her colleagues, helping some folks around. And then started my own practice in 2019. I found helping physicians be a wonderful way to dedicate a career. There's a lot of silly ways to make money as a lawyer, obviously, but it was just really refreshing to be able to help individual physicians.

GW:

I love talking with people outside of medicine just to get their take on physicians. Do you have stereotypes or insights about what physicians are great at, and maybe what we're terrible at too?

MJ:

Yeah. So one thing, y'all are brilliant, and it doesn't take a lot of education, insight, just intrigue about a topic for y'all to just run with it. So we created a course about physician contracts and we post a lot of educational information, and I've seen physicians just latch onto that and grow in their knowledge base really, really quickly. If you're thinking, "Oh, law, business, oh, I didn't train on any of that," forget about that. Y'all are so smart. If you get the right information in front of you, you can really make a big difference in your background, your understanding, very, very quickly. And then from the law side, when I first started looking at physician employment contracts, I was blown away. No other employment contracts in any other industry are this nonsensical. You make such a large amount of money compared to most folks who are employed.

Why Physician Contracts Are Nonsensical

And you've trained for so long, you're so incredibly valuable, but then a lot of these contracts are really just incredibly punitive. And I saw that a lot of physicians maybe took this mindset of, "Okay, this is just what everyone does, and this is just the norm. This is standard, and I'm just going to go with it." But the standard is not working out for physicians right now. So I've seen a lot of our clients, when we go through our process together, really come out of it saying, "Okay, now, I'm prepared to advocate for myself with this first contract." And down the road... and I think that is a grassroots thing that is growing amongst the next generation, really understanding how important this is and preparing themselves for future renegotiation, for advocating for themselves throughout their career.

GW:

What are the nonsensical things that are like, "It's crazy that they're in MD professional contracts all the time," that you wouldn't find as maybe a lawyer, or a scientist, or some other industry of professionals?

The Worst Types of Clauses: Termination, Non-Solicits and Non-Competes

MJ:

Probably my least favorite clause in a physician contract is when a physician has, let's say, a three-year term and no legal right to terminate without cause for the first three years. Say, maybe 10 or 15% of physician contracts have this where the physician wants to leave, unless they have a for cause reason to leave, meaning, the practice isn't paying them... or sometimes it, because they draft the employment agreements 99% of the time, so they don't really create a lot of responsibilities on their side. So some of these are structured like, "As long as we're paying you, you can't leave for three years. If you want to leave, you're stuck. We're going to sue you for millions of dollars." And I've been on the other side of that and it is nasty. So that's one that jumps out. And then obviously, non-competes. We talk about non-competes a ton, but the idea that an employer can sign you up... you don't really know that much about them yet.

You don't know for sure... especially when you're coming out of training, you don't know for sure what practice setting makes the most sense for you, whether you're going to be a good fit, but signing up for that employment agreement means you agree to a non-compete that might make you leave town, that might uproot your family. I'm the spouse of a physician, so for a lot of spouses of physicians, this means that they will have to uproot their careers. You got kids in school, and then you're trying to uproot kids out of school. These can be incredibly punitive, and just the idea that this is even possible still for physicians is terrible. And then I'd say the third is the non-solicit clause. So this speaks to what you can do with the valuable relationships that you develop during your employment. So if you think about them, you think about with patients, with co-workers, with facilities that you work at, with referral sources. A lot of non-solicit clauses will say, "You can't use any of these upon termination." You can't sometimes even accept your patients, which sounds wild as a physician.

GW:

Even if you didn't recruit, you didn't say, "Hey, come with me to my new private practice or the hospital across the street," you just said, "You didn't even tell people where you were going, but they followed you, they found you." Even that's not allowed?

MJ:

Sometimes, that is not allowed. That's a common negotiation point, if you're looking for negotiation points here, especially if you're in an elective surgery practice, obviously, a little less important if you're a hospitalist, or maybe anesthesia, or something, emergency medicine as well, probably not as important. But depending on your practice, those can be as gnarly as the worst non-competes because if you can't accept referrals, you can't see your former patients, you can't practice at the same facilities, then how are you going to practice locally anyways? Who cares about the non-competes? So there's a lot of rough things out there, but those three really jumped out.

GW:

It almost sounds like this is like a necessary... no offense to lawyers, but necessary evil. What do you say when doctors say, "I don't want a lawyer. I don't want to know the business or the legal mumbo jumbo, I just want to take care of patients"?

A Shift In Employment Models Has Made Physician Contracts More Punitive

MJ:

Unfortunately, I wish it wasn't the case. If all this wasn't in physician contracts, I could do something else, it'd be totally fine. But the reality now for physicians is that their contracts are so restrictive, there's so many moving parts here that can really derail a career, really affect your family and your life on a personal level. You really just... you got to know it. Over the last couple of decades, we've seen a massive shift over from private practice into employment models, either employment with a hospital system, employment with a private equity group, employment with large physician groups where you're not owning your practice anymore, and with that change has come even more punitive contracts around what you're required to do.

GW:

What's your opinion on this? Is it that the large health systems, employers, insurers are throwing their weight around, and physicians... is it they have more power, or that physicians aren't fighting back, or that we don't know how to fight back? Where is this coming from?

Physician Fees Have Fallen While Hospitals Have Taken a Bigger Cut

MJ:

Yeah, so there's been a massive change in how the payers are controlling this market. So taking hospitals, for example, the amount that CMS pays for services in a hospital setting, the facility fee portion has gone up while the physician fee portion of that payment has gone down. This is common across pretty much every specialty. So now, when the physician previously could earn a nice amount of money just collecting on the physician fee portion, that has gone way down, whereas now, the hospital is receiving more of those funds and now has more control over how much of those funds they're willing to divert to physicians to supplement the diving amount of pay that physicians are receiving for their service. So this is where we see some kind of nonsensical results. So some physicians might be earning 50, 70, $90 per work RVU, but Medicare, Medicaid might only be paying $31 for that. So then the amount that the hospital is receiving under the facility fee portion now being dipped into to pay for physicians.

So you're thinking about, "Okay, how do I remain independent in that situation?" It gets really difficult under those metrics, because the hospital group could pay $60 per work RVU, but if you stayed independent and just saw the patient and receive just the payment for the physician fee portion, now you might be receiving 31, and you got to pay your own overhead. So we've seen a 40% gap in a very, very short period of time. That's really hard to overcome. That's one of the realities that is causing a lot of physicians to consider employment over independent practice, and is also why some of these contracts are getting even more punitive.

GW:

I think the number is something like 26% reduction in the past 20 years, and that's adjusting for inflation. So certainly, the cost of running a practice has not gone down, but the reimbursement for the same... and I would argue even more work, patients are way more complicated than they were 20 years ago, on way more medications, takes way more brain power to get through the average human has gone up a lot too. Michael, let's talk a little bit about negotiating. Let's just say I'm a new grad, I'm graduating from my residency, and I've got either a job offer or maybe an actual contract in hand that was emailed to me. How do I even start to negotiate? What words do I say or I write back in an email to my employer? I want to be the good doctor, I don't want to cause trouble. I want to get off on the right foot. What do I do?

Why Residents Need To Start the Job Search Earlier

MJ:

Yeah. So first thing, let's back up about 18 to 9 months and talk about how to get this started. Best position to be in as a resident or fellow is to start the interview process 18 to 9 months out. Consider more than one opportunity-

GW:

Before I graduate, essentially?

MJ:

Yeah. 18 to 9 months out before you graduate, consider more than one opportunity... ideally, in the same geographic region, so we have time on our side, and we have leverage with more than one offer. Take it from folks that do it all the time, start early-

GW:

I was just going to say, I can't believe those numbers. There's no way... I mean, yeah, to all the second and third year residents, you should be starting now. That right there is not what most people hear either.

The Three Issues That Every Contract Should Clearly Explain

MJ:

Yeah. So for psychiatry, for example, I like for folks to have had some taste of all of their rotations. So usually, by year two, you've seen something interventional, you see an inpatient, you see an outpatient, you've seen emergency, you've maybe had some experience with child, maybe have more of a therapy rotation, you've seen a little bit of everything, so you have an idea. I think once you have that, you can start the process. And then I would say from a negotiation strategy side, you got to understand the main issues. On the for physician contracts, really see three big questions that every physician contract should provide clarity on they usually don't though. Number one is your work obligations, what are you required to do? Things like work location, call and call schedule, volume expectation, clinical template, NP and PA supervision, there's so many issues.

A lot of times, folks go to interview for a job, they're probably made a bunch of promises about what the job is, but very rarely are those in the contract. So for example, if you're picking a job because it's part tele, part remote, and it offers a four-day workweek instead of five, and there is no worse than Q10 call, that's majority of time, none of that is in the contract so they can change it unilaterally at any time. So you might want to think, "Okay, what are the main interview promises that I'm relying upon to pick this job over others?" So that's work obligations. Number two is compensation. When physicians get their first job offer, they usually see a signing bonus, that looks wonderful, and then they see a base salary. But that is usually not how physicians are actually compensated long-term, we're more compensated based on volume. Not too many payers are paying for quality of work.

Seniority doesn't really factor in, and less seniority means more volume. So understanding that volume is what is paying, and understanding how that employer is compensating that volume. So for example, we might have a psychiatrist that comes into the firm with two offers in hand, both pay a starting salary of $300,000 with a $50,000 signing bonus. They might be thinking, "Well, comp's the same." But hold off, because one might be paying $75 per work RVU and the other one's paying 60. So all else is equal. Maybe you want to consider the one that pays more. There's maybe something about call pay, there could be a managerial stipend, there could be supervision of NP and PA. There's a lot that goes into-

GW:

Protected time to do notes or administrative work.

MJ:

Exactly. So we usually don't pay for administrative work, by the way, very rarely do you get anything for that. So understanding what are you required to do and what do you pay to do that work.

GW:

You're making it sound very simple. It's like, "Hey, what are both sides agreeing to do?" If I'm going to legally sign this, which holds the weight of the law, what am I agreeing to do for you? What are you agreeing to do for me?

MJ:

That is the basics of contracts, write an obligations between the parties. The challenge with physician contracts though is that both of those questions are going to be a bit malleable long-term. It's really hard for us to lock in every single nook and cranny about your work obligations forever, that's probably unrealistic. Also on comp, with the changing payor models, changing total value of your work, future comp is usually in the employer's discretion to adjust. Not all employers adjust very well. So they might be paying at the top of the market now, they might not be paying at the top of the market 5 or 10 years from now. So you need to be prepared for that. So you can't make a decision solely on what the comp and the work obligations are, either discussed in an interview process or in your contract, it comes to the third question now, is exit strategy.

What are the legal and financial penalties associated with leaving? If you can leave, if you have value to the employer, frankly, you're making the money, and you can easily take that value somewhere else, then now, you can negotiate from a position of strength in the future. So if they want to change work obligations, how are you going to affect that in a negotiation? And the answer is your exit strategy. So we already touched on three of the six big rocks that we call them in the firm. We touched on non-competes, non-solicit clause, termination rights. Four is malpractice insurance and tail coverage. So coming out of pocket to pay for tail coverage can be very expensive depending on your specialty. So that can be a big barrier to exit.

Number five is moonlighting rights. So not every physician can go outside of their primary employment and create a second source of income that can be used as leverage against their first source of income. Issue is compensation clawback and waiver issues, these are all of the little ways that physicians can lose money during a termination. So things like maybe paying back part or all of your signing bonus.

GW:

If you leave within the first X years or something like that, right?

MJ:

Yeah. So a common clause might be that $50,000 signing bonus that we used in our first... that could be tied to, let's say, a two to five year commitment. So if it's five, you might want to ask for something like two, or it depends. Also, if most physician contracts will say, "If employment ends for any reason during that initial period, you have to pay back somewhere all of that money." Sometimes, it's reduced prorated over that time, sometimes, you got to pay it all in full, sometimes, there was that interest. I saw 13% interest on one recently, five years, no reduction, 13% interest. Like, "Man, that thing's almost going to double in five years. You're going to have one magical day where you're relieved of like 80, $90,000." That's kind of silly.

So there's a ton of areas that you can negotiate those payback obligations, those callback obligations, down so that it makes it a little bit easier financially for you to leave. Same with your bonus structures. Sometimes, employers will structure it such that you have to stay for an entire year, and maybe three months later, when they actually pay the productivity bonus, or the quality metric bonus, or whatever they have before you actually receive it. So sometimes, those payments become a big part of your total comp and it creates a carrot that's way out there, it can make it difficult for you to leave with all the money in your pocket.

GW:

Michael, I'm sitting here listening to you say all this and my nice people-pleaser, Midwest brain is reacting, add in my Hippocratic Oath brain, and I'm thinking, medicine, we all know as doctors that stuff happens in life, people get sick, people get pregnant, all of these things that where our patients require extra or more care. And so where are you drawing the line between the doctor understanding life happens and the doctor being a sucker for agreeing to something where maybe the employer says, "Yeah, well, we can't really put your call term... your call schedule in writing because we don't know what's going to happen in six months or two years, and we don't want to box ourselves in-

MJ:

The AMA estimates it cost a half a million to a million dollars to replace a physician, might be a little bit lower or higher depending on your specialty, but it is a ton of money. So I understand their economic motivation around these contracts. But look, at the end of the day, if physician contract didn't come with all of these nasty exit strategy clauses, then I could live with more flexibility on work obligations and comp, it was super easy to move around, then, cool, then it turns into more of your traditional job, and then physicians could vote with their feet a lot easier when their employer was being unfair. But a lot of these contract clauses we just talked about make it more difficult to do that. So I think that's the big awareness piece for physicians. I think a lot of folks have been in academics for a really long time. They've been in medical school, they were in residency, maybe they did a fellowship. They're in a more contained environment. And then when they go into employment, it might just be different, maybe there's a little bit of awareness there.

GW:

The problem with these contracts is that there are so many blockers, it's like a tic-tac-toe where you just can't win. That it's, okay, there's a signing bonus, but there's an exit clause. It makes it so much harder for the physician to feel like that there's any route that is fair or equitable for them.

Non-Compete: A Starting Place for Negotiations

MJ:

Yeah, but they're negotiable. So let's say you're that resident and you're looking at that opportunity and you're thinking, "Okay, what's important here?" I'll tell you, base salary and signing bonus isn't always what's most important, there are a lot of other issues that go into this. So really understanding your exit strategy clauses, your freedom clauses, and then think about what issues are going to affect you the most. A lot of folks start off with the non-compete, that's a pretty decent place to start. So understanding, okay, let's pull up that map and let's understand exactly where you cannot work, the contract says you can't work upon termination. And look, if it's not that bad, then you might just want to leave it alone. For example, Dallas and Houston, they're massive areas, you got a 10-mile non-compete, that might not really affect you that much.

But a hypothetical I use in the firm is Madison, Wisconsin... We're in Milwaukee, by the way, so we're also the Midwest, but Madison, Wisconsin, 10 miles around Madison, Wisconsin, might as well be 50 because it's mostly cornfields after that. So it can have a big impact. So for the non-compete, a common one might be, let's say, two years, 20 miles from one or more practice locations where you practice. You can work on some or all of those. So a one-year non-compete is easier to deal with than a two-year non-compete. A one-year locum plan to work that out can be very manageable for a lot of physicians, but when you get into two years, that can be pretty rough. And also, let's say, 20 miles is rough, but 10 miles opens up two or three reasonable employers that would keep you in your house, then cool, that might be your negotiation request. But the safest way to sign a non-compete, for example, is to assume that it is enforceable as written.

It can be difficult to challenge these on the back end, we should challenge more of these, by the way. I try to sue more employers on non-competes, it gets challenging. We need more physicians that are willing to fight these a little bit more, and I think that we'll get that push over the next few years. But remember, Eric Bricker talking about this, encouraging folks to say, "Hey, look, getting into a lawsuit is really not the end of the world, and we should challenge more of these." I agree. It can be challenging to fight them though, because often, your next employer might not hire you with that non-compete in place.

GW:

A lot of physicians tend to stay at one place for a long time, and our contract is just our contract. Are you hearing from physicians who are renegotiating the contract, that they've been there 5, 10 years? Many of us have contracts that are just kind of ad infinitum and don't really have a start or an end date to them necessarily.

More Physicians Should Re-negotiate Their Contracts

MJ:

More physicians should renegotiate their contract. If more folks in jobs push harder in the jobs that they currently have, it's going to open up more space for residents and fellows to push as well. It's often difficult for residents and fellows to leapfrog some of the more senior physicians in that practice. If they don't push back on a terrible comp plan, then that's going to reduce leverage downstream. So I encourage you to do that as well.

GW:

And is that just having a conversation with your chief, or your department head, or whatever, and just saying, "Hey, I've been here 15 years. I'd love to take some time and talk through these three things that I'm either unhappy about or I'd like to discuss," or something like that?

MJ:

Yeah, it's exactly that. I think that when you go to renegotiate, you have a couple quivers in your quill, if you will. One is knowing local competitive offers. That can be difficult to do. Your platform is helping with that because you can see more examples of what physicians in a similar position, in a similar geographic region are actually earning. So understanding what others are getting is a really good start, and if you have a couple interviews and you feel the market out yourself, that can also add to it. Understanding market data on top of that is really powerful. So the baseline for most employment agreements is that you start off with an initial two or three year term, and then it automatically renews under the exact same terms forever.

GW:

Yeah, it's like a lease or something like that. Yeah.

MJ:

Yeah. So some folks say, "Well, I want a two-year contract, a three-year contract." Most of the time, I don't care if it's 150-year contract because it automatically renews under the same terms indefinitely, and then there's this fake expectation that at the end of a particular term, you and the employer are going to sit down at the table and have an adult conversation about what the term should be in the next renewal, that's really not how it's working in practice. Employers will just be like, "Well, we're not going to say anything and just let it automatically renew indefinitely." So the real negotiation happens when individual physicians are willing to understand the market, maybe check out some other opportunities through interviews as well, and then make requests. So you can draft these, we do this in the firm all the time, but we say, "Okay, here's the information that we have, could you match X? Could you increase the work RVU to this number based on these factors? I would like to modify what I'm required to do to a four-day work week, a 4/10s instead of 5/8s, or whatever it is."

The Importance of Putting Everything in Writing

Now, you got to put those in writing though. You can have verbal conversations, but most folks in hospital admin are really good at telling physicians, "No," over a verbal conversation. [inaudible 00:31:23] all used to it than y'all are, they're good at it. I think getting comfortable with that friction, as lawyers, I love that. We fight all the time, we're trained to do that. But y'all are not always trained for that. So I think that putting these requests in writing and being willing to leave if you don't get what you're looking for, that's really the key. There's a number of times in the firm where we have put out an initial set of requests, in writing, and they say no or didn't even answer. Then our client gets another opportunity, negotiates that deal, gets it close to signing, and then comes back and says, "Hey, look, I have another opportunity. I wanted to give you a heads-up. If you can meet these requests in the next two days, then awesome, I'll stay, but I'm submitting my notice of termination now."

And then, magically, it happens where they can meet some or all of your requests, that is usually when you actually get your answer of whether they can do the thing for you, is when they're confident that you're going to leave if they don't say yes. They don't think they're going to leave, then often, they'll ignore it because that has worked for them for a really long time.

A Call to Action: Collecting Comp Data To Help Rural Practice Win Their Negotiation

GW:

Well, Michael, in our last 10 minutes, I wanted to talk with you a little bit about this rural anesthesia group that we're trying to help with Offcall and just get your opinions. You and I have talked a little bit about it already, but I'll just give you the quick rundown. This is a rural critical-access hospital in the south, and it's an anesthesia group, an independent anesthesia group that wants to stay independent, they're 12 ORs, I think it's about 16 full-time anesthesiologists. And what they like is that they control how their job works. They decide if they're on call all weekend or just they split up the weekends, they decide how they're paid based on RVUs, and they get a call stipend as well to cover the weekends, they are working... it's a mixture of OB, and gen surg, and surgical subspecialty care, and they're currently getting call stipends of, I think, $1,600 per weeknight and $2,500 per weekend.

Now, the challenge that this group is facing is that there are a couple other hospitals in the regional area that have moved to CRNA-only, and I think the payer mix of this hospital is changing as well in a negative way. And so the hospital of course wants to acquire the group, but the group wants to stay independent for reasons that all our listeners would understand. Do you have any opinions or tips on how this group should or could negotiate? Is it getting comps? Is it showing their value to the hospital?

What Makes Anesthesiology Different From Other Specialties

MJ:

Yeah. So looking at it from a macroeconomic perspective first, anesthesia is an interesting specialty right now because the value of anesthesia is very high and we have an anesthesia shortage, especially enrollment.

GW:

It's gone way up in the past five years, I think.

MJ:

Way up. Way up. They're making a lot, but the amount of reimbursement for their actual service is going down. It's this really weird market equilibrium, and a lot of hospital systems are having to cut more and more into their facility fee portion of their payments, primarily from their surgeons, to cover this difference. So if an anesthesia group is only making the physician fee portion of their service, frankly, they're getting crushed right now. It's really difficult for them to maintain competitiveness in the market for hiring anesthesiologists when others are paying more than what they're actually being paid to do the work. Also, we have hospitals where they really need their ORs to be full to be able to maintain profitability. If they can't do that, if they don't have anesthesia to do that, then they've got big problems.

Then there're orthos, there're... everybody else-

GW:

They're on a lock.

MJ:

They're all going to walk. So that could easily crush their bottom line. So now, anesthesiologists are wedged between this, and on top of that, we have the scope of practice issues with CRNAs. I've seen quite a few rural hospitals say, "You know what? We can't do anesthesia only or primarily anesthesia service anymore. We're going to go to a primarily or only CRNA model." I've had surgeons walk away from that, by the way.

GW:

Yeah, I could see surgeons concerned about how their patients are going to be managed during the surgery as well. Yeah.

MJ:

Yeah. And I think that's an important piece here, but they can pay CRNAs less, let's be frank, and they can provide a coverage, it's not the same as anesthesiologists. So these are the big macro factors affecting this. One of the things that's a struggle for anesthesiologists is that the quality of the service is not really factored in enough in the payer models. So I've seen some anesthesia groups really, really struggle and ultimately fold when they have long contracts with the hospital that they agreed to service. Let's say they sign up for 24/7, 365 coverage for five to seven years. So you think about how quickly these things can change. You might want to consider something a little bit tighter and more renegotiation as you go along with the payer models.

GW:

So kind of saying, "Hey, why don't we try this thing for the next two years, or the next 18 months," and make sure both sides are happy with the arrangement as opposed to some really long-drawn-out contract where the world is probably going to be a very different place by 2030.

MJ:

I think that's a good place to start. I think that understanding market norms for hiring an anesthesiologist is really important for the group because that's a defense against the hospital. They say, "I know you want us to accept this amount, but we literally can't do that because we won't be able to hire anybody to service this contract, and we don't have people to service it, then I don't care what number you agreed to, we literally can't do it." So it's going to fold. That's a good defensive measure. I think bringing in information to these negotiations will be helpful instead of the anesthesia group just saying, "We want X," being able to explain a little bit why, because this is the reality of the anesthesia market right now. There's plenty of first contract right out of training where folks are making 500 plus right out of the gate.

We can't accept this number because we cannot remain competitive. And the hospital wants to stay out of that. In a way, they like having the anesthesia group between themselves and the physicians because, now, they can sign these longer contracts that attempt to lock in anesthesia service at a set price, and then they can plan on that moving forward. So that would be a good starting point, a little bit of flexibility in how they're paid. I would make sure that there is ample support over what the physician is actually paid for the service. I've seen it work out where the RVU portion is actually reduced, and the payment for making sure enough anesthesiologists are there at particular times is what's actually paid. So removing some of the risk of the OR being maybe not as busy. So if the OR is not as busy, and then an anesthesiologist is paid on volume, then now, that is a struggle for the anesthesiologist. But maybe adding in more of a guaranteed payment for the availability instead of for the amount of reimbursement could be a good move.

GW:

Yeah, because they're paying for both, the ability to do cases, but also the availability for them to cover 24/7, 365 as well. I'd imagine it's probably a bigger deal in the rural space too. It's probably harder to attract anesthesiologists to a more rural area, and so that is a real concern, that if you can't pay a competitive price to an anesthesiologist, they're also going to move.

MJ:

No, absolutely. So the number of physicians that want to live and work in rural America is less than urban American, but I see that in my practice constantly. So there's already a rural pay bump that really needs to be baked in to maintain that competitiveness. At the end of the day, the problem is not position, it's not the value of their service, and I think that's something that needs to be humanized a little bit, like these negotiations over money have nothing to do with the quality of your patient care, there are a lot of other moving parts.

GW:

That's one of the things we're trying to build on Offcall as well, that you can compare a suburban, versus an urban, versus a rural hospital to make sure that you're comparing apples to apples. That's the other challenge of all this, is there's so many factors that go into how a human being physician decides if a job is an all-star job, an incredible job, versus, "Oh, man, this place is a really challenging place to work and doesn't make me want to come back the following day."

MJ:

Yeah, I agree. And there's a variance between total comp based on volume, based on practice setting, based on geography, can be wild, can vary quite a bit, but then if you dive into some of the details, you start to understand, "Okay, why is one physician being paid more than another?" You can start to build a plan for if you want to negotiate comp, here's where it would be better, here's how you would do it, and here's what information you would use.

GW:

Michael, I just want to thank you. Where's the best place for people to find you that want to either learn more, or take your courses, or work with you?

MJ:

Yeah. So we love Instagram. We have an Instagram profile, @physiciancontracts. We go on and post almost every day tips, issues that we're dealing with in the firm. Would love a follow there. We also have an educational course at PhysicianContracts.com, Mastering Physician Contracts. If you enjoy this hour, we got nine hours of educational content there, try to build it out as comprehensive and thorough as possible.` So if you want more resources, there's that. And then we have the law firm, Michael Johnson Legal, it's myself and three lawyers. And this is all we do, we spend all of our time-

GW:

I can tell,

MJ:

Negotiating, dreaming about physician contracts. So if you want some help navigating these deals, we're happy to help you.

GW:

Michael Johnson, thank you again, it's been an absolute pleasure. Thanks for joining me today. For insights into how doctors can better manage their money, head to offcall.com/podcast. Make an account on Offcall to confidentially share your details about your work, and sign up for our newsletter where you can hear more about the latest trends we're seeing in physician pay. You can find How I Doctor on Apple, Spotify, or wherever you listen to podcasts. We'll have new episodes weekly. This has been and continues to be Dr. Graham Walker. Stay well, stay inspired, and practice with purpose.