Here’s what you should know about how your physicians approach employment contracts
Before signing anything, physicians should clearly understand all the provisions of their employment contract and judge whether they reflect what is most important to them personally and professionally, says Steven P. Furr, M.D., FAAFP, president of the American Academy of Family Physicians. “And the bottom line is, a verbal agreement is only as good as the paper it’s written on.” Repertoire recently asked Dr. Furr to respond to questions about physician contracting. Here are his responses.
The basics
Repertoire: What percentage of physicians are employees today? How many have written contracts in place?
Steven Furr, M.D.: Currently, about 75% of AAFP members are employed. More than half of that 75% are employed by a hospital or health system. Just under half are employed by physician-owned groups or other entities like community health centers or the Veterans Administration. We are not aware of any common practices where physicians are employed without contracts.
Repertoire: Does practice ownership (i.e., independent, corporate, health system, private equity) affect physician contracting?
Dr. Furr: Employment contracts with private practices or physician-owned groups may include an option for future equity. Such contracts should include a date by which to expect the option to become an owner; benefits, voting rights, and compensation for owners; and expected cost of becoming an owner. Physicians should insist the contract not terminate immediately if equity is not offered or if there is a delay. If this provision is not included, the physician could be left working without a contract in the event the practice delays or does not offer ownership equity.
Physician compensation
Repertoire: Compensation can come in various forms, such as salary-only, salary plus bonus, and productivity-based. How widespread are each of these three approaches today?
Dr. Furr: In a recent survey, AAFP members shared the most common components of their compensation as base salary, bonus, and productivity-based compensation. A majority reported their bonuses were based on quality performance. Anecdotally, members report to us that improvements in payment to their employers are not being passed along to employed physicians.
Repertoire: Of the three compensation models, “salary-only” would seem to be the least risky and “productivity-based compensation” the riskiest. Would you agree?
Dr. Furr: Compensation for family physicians should align with the value provided by primary care’s four core functions (the 4Cs): first contact, continuity, comprehensiveness and coordination of care. It should be based on meaningful quality, value and patient experience rather than productivity. Financial incentives should align with what matters most to patients and their family physicians, as well as the movement toward well-designed value-based primary care payment models.
While “salary-only” is theoretically less risky, it also has the least opportunity for additional financial rewards from either bonuses or greater productivity. Employed family physicians may keep that trade-off and their risk tolerance in mind when choosing and negotiating the salary structure they want.
Organizations should ensure their salary structures, levels, benefits and policies of the compensation package foster internal equity and reflect the family physician’s leadership of the care team.
Repertoire: Earlier you commented that “patient experience” might be one component of a compensation package. How successful are today’s practice owners in incorporating patient experience in compensation?
Dr. Furr: There is no straightforward answer. Each physician practice can choose whether to include patient experience metrics in the compensation package it offers to its employed physicians.
Some health systems and/or practices include one or more of the CG-CAHPS measures in their compensation packages, albeit representing only a small fraction of the primary care physician’s overall compensation. [CG-CAHPS is the Consumer Assessment of Healthcare Providers and Systems from the Agency for Healthcare Research and Quality.]
We believe a much better measure is the new Person-Centered Primary Care Measure (PCPCM) from the AAFP, which is a patient-reported outcome performance measure focused on the unique value of primary care. It focuses on aspects including accessibility, continuity, comprehensiveness, coordination, advocacy, family and community context, and goal-oriented care.
Who determines productivity?
Repertoire: Can you elaborate on how “productivity-based compensation” arrangements typically work?
Dr. Furr: According to the New England Journal of Medicine, productivity-based compensation models are when physicians are paid a percentage of either billings or collections, or they are paid based on the resource-based relative value scale (RBRVS) RVUs assigned to services. The overhead costs of the practice – both fixed and variable – are allocated among the physicians. Even ostensibly “salary-only” arrangements may have a productivity component requiring the physician to generate a certain number of RVUs, for example, to earn his or her salary, and paying a higher salary if the physician generates RVUs above a given threshold.
Repertoire: What are the primary shortcomings of measuring productivity in terms of RVUs?
Dr. Furr: One limitation of using RVUs is their dependence on accurate CPT coding. Productivity measures for physicians who code incorrectly don’t reflect the actual work they do. Further, RVUs, like traditional productivity measures (e.g., number of encounters, billed charges), are geared toward a fee-for-service environment. They may not work as well in capitated and other environments in which generating patient encounters and CPT codes is not the emphasis. Lastly, RVUs tend to favor procedural services over “cognitive” services such as evaluation and management services, which means physicians who do more procedural services may be viewed as more “productive,” whether they are or not on other bases.
An unintended consequence of paying based on RVUs is that physician groups may encourage physicians to see more patients per day to meet network goals at the expense of longer, more quality-focused visits with patients. If we want to avoid going back to the age of seeing 30-40 or more patients a day, we would not support productivity-based incentives.
What makes up a work week?
Repertoire: Can physicians control or limit the number of patients they must see per day, week or month?
Dr. Furr: Employment contracts typically outline expectations for patient-care hours but not the number of patients seen or the size of a physician’s patient panel. The size of a physician’s patient panel and the number of patients seen in a typical day are likely to change during their career and may vary based on multiple factors, including the age, health status, and social determinants of health of the practice’s patient population. A more common measure of productivity is RVUs, as mentioned above.
An employment contract should provide a clear picture of what work life will be like, including schedule, patient care and administration hours, scheduled flexibility, additional duties, supervision, and call. Red flags to look for are requirements for patient care hours of 40 hours per week and employment expectations that don’t align with verbal promises made during the interviews and negotiations.
Repertoire: AAFP cautions against contracts that call for a minimum number of patient hours per week while allotting no time for administrative work or other tasks. What are the key issues involved?
Dr. Furr: Many contracts state physicians must devote most of their hours directly to patient care. However, these contracts don’t consider the amount of time spent on administrative tasks or the burden that comes with them, including electronic health record entries, tedious prior authorizations, referrals, paperwork and reviewing test results.
According to research from the Medical Group Management Association, nearly 90% of physicians found prior authorizations to be very or extremely burdensome. Moreover, 97% of physicians reported their patients experienced delays or denials for medically necessary care due to prior authorization requirements. That’s why it’s imperative for physicians to ensure any contracts consider administrative tasks together with patient care.
How do bonuses work?
Repertoire: How clearly should the basis for bonuses be spelled out in the contract? What are red flags for the physician to look out for?
Dr. Furr: Bonuses should be spelled out as clearly as possible in contracts. With a staggering physician workforce shortage, physician recruiting has become highly competitive. To attract physicians, some employers may offer bonuses, including a signing bonus. Physicians need to be sure they clearly understand how their termination (voluntary or otherwise) could impact bonuses and any required repayment.
Repertoire: You referred to bonuses based on quality performance. In your opinion, how successful are today’s practice owners in 1) defining quality performance, 2) monitoring it and 3) rewarding physicians on the basis of it?
Dr. Furr: For bonus compensation purposes, each physician practice can choose to define “quality performance” however it seems appropriate for the population it serves and the priorities of the clinic, which are often driven by multiple payer contracts. For example, some health systems choose a few quality/performance measures internally and tie those to compensation incentives for their employed physicians. Sometimes the primary care physicians have a “say” in which measures are chosen, and sometimes they do not. (In some cases, health system administration chooses the measures without input from the employed primary care physicians.)
That said, quality measures are not set in stone. They can change. Quality measures and goals in contracts may be set one to two years out, but if recommendations change and are not incorporated into an electronic medical record, confusion can result when trying to define a contract goal for incentive. The contract may say one thing and the EMR is now measuring differently.
Monitoring quality performance varies by physician practice/organization, as well as the capabilities of the clinic’s electronic health record system. Many practices have an EHR system that displays a performance “dashboard” so physicians can view their “performance” on a variety of measures in real time. However, the lack of interoperability across healthcare systems and settings presents a challenge. The performance dashboard that primary care physicians view in their EHR system often includes only data from patient care that was provided in their own clinic or health system [but not] outside of the primary care practice or healthcare system. This creates limitations in using the data for performance measurement.
Rewarding physicians based on performance can also vary greatly by physician practice/organization. As the healthcare landscape continues to shift from fee-for-service to a heavier focus on value-based care, we’ll see a growing number of physician practices that offer performance-based compensation for their employed physicians. [But] the limitations on defining and monitoring quality performance also limit the effectiveness of rewarding physicians based on quality performance.
Termination and non-competes
Repertoire: Under what circumstances can a contract be terminated?
Dr. Furr: Termination of a contract is always a possibility, but it’s something that physicians try to avoid. Before taking action, I recommend they ask themselves a few questions: “Do both parties have the right to terminate?” “Will I receive written notice?” “Is there a possibility of fixing the issue before termination occurs, like a performance improvement plan?”
Additionally, it’s critical that physicians know their exit strategy. Since termination of an employment contract can impact insurance, bonuses, loan forgiveness and non-compete clauses, it’s important to be aware of exactly how a physician can terminate an agreement. A lawyer can help navigate these waters.
Repertoire: Where do practice owners stand on noncompete clauses today?
Dr. Furr: The most important thing I want to emphasize is that noncompete agreements in healthcare employment impede patient access to care and disrupt care continuity. A 2018 survey found that about 45% of primary care physicians in group practices were bound by noncompete clauses.
By stifling competition and limiting physicians’ ability to choose their employer, noncompete provisions have significant consequences on the healthcare workforce. For instance, with fewer clinicians, patients may have to wait longer to receive care or travel farther to access critical services. The result can be worse health outcomes and a less efficient healthcare system.
Noncompete agreements also contribute to burnout and mental health struggles by forcing clinicians to remain in unsustainable work environments or risk losing their livelihood or uprooting their families.
Repertoire: Do the non-compete provisions in today’s contracts differ from those of 5 or 10 years ago?
Dr. Furr: I think it’s important to take a closer look at how noncompete clauses can significantly impact a physician’s life, especially when coupled with growing healthcare consolidation. For instance, when a large employer with a sizeable geographic footprint imposes geographic radius as a noncompete provision, the physician may have to go out of state or to a new region. In other words, they may have to uproot their lives to continue to practice medicine.
Repertoire: How do young physicians differ from their predecessors in their approach to employment contracting?
Dr. Furr: Young physicians and their predecessors are increasingly choosing employment over starting their own practice. Almost 90% of AAFP New Physician Members are employed. We don’t yet have a clear answer to the drivers of this trend, but burnout and student loan debt may be contributors. Additionally, younger physicians may like the parameters of being employed by a practice, such as set hours, set vacation and CME packages.
That said, it’s important for physicians to equip themselves with knowledge and prepare to negotiate. There is a lot that physicians can negotiate for that they often don’t because they’re either too afraid to ask or they don’t even consider it within the realm of possibility.
So, my advice continues to be, know your worth and be informed. Physicians need to fully understand any employment contract before going into negotiations and before signing. It’s also critical to identify what is most important to them and focus on those crucial factors in negotiations. My hope is that our next generation of physicians will take the time to review their contracts and identify the most important items to negotiate and ask for provisions that will ensure they’re satisfied professionally so we can continue to provide the best care to patients.
Repertoire: What do physicians wish their sales reps knew about physician contracts?
Dr. Furr: For employed physicians, the contract plays an important role in career success. If a misunderstanding emerges during employment, you cannot rely on verbal promises and written correspondence (e.g., letters or emails). Only the terms spelled out in your contract matter. That’s why understanding how to negotiate your employment contract is essential to achieving professional satisfaction and personal fulfillment.
Editor’s note: The AAFP has developed resources to help physicians learn more about employment contracting, including a career benchmark dashboard equipped with comprehensive compensation and job satisfaction data. AAFP members can use this dashboard to see how their income, benefits, career satisfaction, and more compare to peers in similar roles by state.
Other AAFP resources include:
- AAFP Guiding Principles for Value-Based Payment, www.aafp.org/about/policies/all/value-basedpayment.html
- Measure what matters in primary care: The Person=Centered Primary Care Measure, www.aafp.org/pubs/fpm/issues/2022/0300/p17.pdf