Physicians are trained to do many things, but contract negotiations may not be one of them.
Negotiating pay can be an intimidating process. It can also be embarrassing to discuss personal finances with anyone—even if it’s a new employer. Nevertheless, it’s important that physicians ask the right questions during the process. Moreover, these questions may vary if negotiating to join a private practice or hospital.
Here, we interview Tony Pate, principal recruiter at The Medicus Firm, on how to make negotiating a pay increase more successful—and less painful. The answers have been edited for clarity and brevity.
MDLinx: What should a physician first consider when negotiating salary?
Tony Pate (TP): The practice [or hospital] needs to be evaluated. You need to look at the compensation package and benefits. You need to know what the salary and income range are. What is the short-term potential? What is the offer during the first 1 or 2 years? If you want to see more patients or do more procedures, what is the earning potential?
You would need to understand where you want to be. Maybe a physician is in a really good practice and making at the 75th percentile. They’re going to want to look for an equal move. They aren’t going to want to move down to the 50th percentile. The physician and employer will try to reach an agreement.
MDLinx: Is there numerical data to guide salary negotiations?
TP: Most people refer to the Medical Group Management Association (MGMA) DataDive Provider Compensation. That’s probably the best statistical info out there on physician compensation. They provide data on 25th, 75th, 90th percentile, and median compensation. They break it down by specialty, region, or state.
MDLinx: Is the MGMA accessible only by firms or can individual physicians access this data?
TP: Membership is open to individuals and organizations. In terms of the compensation survey, you can buy that on the MGMA website.
MDLinx: What level of pay should most physicians expect?
TP: Most physicians are typically around a median salary for the specialty. If somebody is already in the 75th percentile and 12 to 15 years [out from] postgraduate training, this can be taken into consideration to get closer to the 75th percentile.
What the hospital is going to typically want to do is to demonstrate to the physician that the opportunity is there. The hospital [will tout that it] has the patient base. If you’re in a specialty with procedures, you’re going to have plenty of procedures. In other words, the ball is in your court. You’ll make the income you want to make.
MDLinx: What big-picture advice can you give physicians negotiating their own salary?
TP: Look at this over a 5-year period. Are you going to make the salary over 5 years that you want to make? Sometimes a hospital will be paying a larger year-1 guarantee because they are having trouble recruiting. But, that income might not be sustainable at years 2, 3, and beyond.
On the other hand, you may have a hospital that has a very average compensation but there’s lots of business … lots of patients … lots of procedures. So, you’ll be significantly better off over 5 years. For an interventional cardiologist, for example, the difference could be $1 million over 5 years.
MDLinx: Are there other forms of payment to consider during negotiations?
TP: It differs by hospital appointment, which is what most physicians are doing, or private practice. A private practice may have partnership potential. With hospital employment, there is a standard benefits package, which includes medical/dental, a small life insurance policy, a relocation allowance, paid time off, and sometimes a sign-on bonus. Depending on the specialty, it’s between 21 and 32 days off per year and can sometimes be negotiated. Things like 401K, employee matching, and so forth are pretty fixed.
MDLinx: Can you negotiate for repayment of student loans?
TP: We just don’t see that very much anymore. I think because hospital budgets have been cut so much. Ten to 12 years ago, the hospital would be glad to do that because it helped with retention. If you gave a physician $100,000 to pay off a loan, and they pay $20,000 a year, the physician would stick around for 5 years to pay off their loan.
MDLinx: What special salary considerations should be made with a private group with partnership track?
TP: Typically, the compensation is usually going to be lower in years 1 and 2, but once you make partnership, it could be significantly higher. Over a 5-year period, you may make more money but in the first 24 months, you make less money.
MDLinx: What are your thoughts regarding Relative Value Unit (RVU) compensation?
TP: You want to get as high a guarantee as you can get during the first 1 or 2 years, which hospitals offer. You also want to negotiate your RVU as high as possible, because physicians are paid on an RVU basis.
MDLinx: When negotiating pay, should the physician consider lifestyle preferences?
TP: Hospitals pay for how productive you are. If you are a family practice physician who sees 20 patients a day, you are going to make less than the physician who sees 25 patients per day. In an ideal world, you want the physician to have balance. How busy do you want to be? How do you maximize your income and have the lifestyle you want with your family?
MDLinx: In your opinion, what fears or concerns do physicians have about negotiating salary?
TP: I think that everybody has a fear of “Am I going to be successful?” or “Can I make a living?” and “Am I going to be happy?” In the world of physician supply, demand is [overwhelmingly] in their favor. They should be able to pick a location—or multiple locations—and if they have a good bedside manner, refer to other physicians correctly, and have normal outcomes, they should be able to be as busy as they want to be. There is no way they can fail. That fear should be eliminated.
The other fears are “Am I going to fit in?” and “Am I going to like these people?” They are going to have to build up a practice and have a patient panel [to find out]. If, for some reason, they aren’t happy, they can’t remove these fears until a couple of years down the road.
In summary, when negotiating your salary:
Keep an eye on the big picture
Imagine where you will be in 5 years
Consider the yearly breakdown of your pay
Most importantly, don’t undervalue yourself; lay a proper claim to your financial worth.
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