What You Need to Know About Your Compensation Package
Before signing an employment contract, it is crucial to understand the details of your compensation package. Often, things are not as straightforward as they may appear, and small details may make a big difference to your take-home bottom line and your lifestyle. Before you sign on the dotted line, consider both the cash and non-cash components and evaluate what is most important to you.
Base Salary - Not so basic
In the majority of employment contracts, physicians find an easy-to-digest "base salary" figure. This is just the tip of the iceberg! In many cases, the base salary is a minimum that you can expect to exceed through sustained productivity. However, in some cases, the fine print of your contract may reveal that your base salary itself is contingent on your productivity. The employer may choose a pre-set salary amount, or may use a “Relative Value Unit” (RVU) formula, which assigns a dollar amount to each particular encounter, procedure, and/or surgery performed by the physician. The RVU formulas can be complex, and may include performance targets that are not based on pure productivity. Bonuses may be calculated in the same way.
Trends in Value-based Payment
As payment models switch from emphasizing volume to emphasizing quality and value, the non-productivity performance target metrics are becoming more popular. These measures could include patient safety, quality, and/or patient satisfaction, and they are important to note because you may require additional resources or support from your future employer if you hope to succeed in making the targets. For example, meeting a patient satisfaction target may depend on the practice having adequate staff resources to collect patient encounter feedback and assist you in follow ups and care coordination. You will therefore want to be sure that these resources will be available to you before signing your contract.
Geography and Demand
When searching for an employed position, remember that your compensation package reflects more than the value of your specialty. Your value as a physician is a function of geography and demand. Salaries within the same specialty vary across the country, even among large metropolitan areas. Remember that your compensation may also depend on the needs of the community into which you're being hired. Are they flush with ophthalmologists? You may see that in the numbers. Because the difference in compensation within the same specialty can vary widely, you need to make sure you understand the "why" of your compensation package so that you can determine its fairness and place yourself in the best position to negotiate terms you are unhappy with.
Many employers offer signing bonuses in lieu of higher salaries. This is great if you can get it. But don't overlook the in-kind compensation your employer is offering. It is imperative that you understand the non-cash benefits included in your proposed compensation package, such as health insurance, retirement plans, and life insurance, along with the value these benefits have in one offer as compared to another. Perhaps your employer won't budge on compensation, but is willing to provide an increased 401(k) match. Perhaps you can negotiate some additional paid vacation days. You just seek to identify what is important to you and your family and get creative with your compensation asks, should you have any.
Of course, the nuances of a particular compensation package will vary from contract to contract, as may willingness of a prospective employer to negotiate the terms. Before signing any employment contract, be sure to have a healthcare attorney review it to identify any risks and suggest provisions that can be negotiated to your advantage.
Nixon Law Group offers physician employment contract review by an experienced healthcare attorney AND a physician, so you can understand how terms of the agreement will affect not only your compensation, but your everyday life as an employed physician. Click here to talk with one of our attorneys about your job offer.