A group of four successful surgeons negotiate better contracts: a case study


How can a group of dedicated general surgeons transform their compensation and work conditions in six months? Here’s their story.

The group’s story: facts and dynamics

Four general surgeons, one NP, and one PA for a specific physician have been practicing at a small community hospital with three ancillary facilities in the Northeast for many years. The group and staffing have been dependable, without turnover, for the past three years. Three physicians have many years before retirement and are dedicated to staying in the community. One is planning to retire in three years. They provide a full range of surgical services, including trauma calls and assisting gastroenterology on weekends. They are at maximum work capacity, highly productive, and successful (production = 5.22 90th-percentile physicians). They want to hire a third party to help the team negotiate a new contract versus going alone.

What the group wants

  • Increase in pay and benefits, of course.
  • Update the structure and contents of the physician agreements with renegotiation targets at 2-3 years instead of 5-6 years.
  • Hire a new physician to increase the group to five in anticipation of the upcoming retirement.
  • Possible new operating room equipment, including resource and technology updates.

Challenges

  • Will the hospital be open to negotiations with a third party?
  • Can the group of surgeons be on the same page?

For any progress to be made, all physicians must agree on terms and what they want. This unity and collaboration benefit the group and the health care community as a whole, fostering a sense of teamwork and shared goals. Fragmentation, back deals, side offers, and similar issues are common in negotiations, posing a significant challenge and potentially breaking groups apart. This facility faces multiple local, regional, and national challenges. These complexities underline the necessity for specialized services for group contract negotiations.

Leveraging third-party expertise in compensation strategy

Thoroughly analyze both sides—what the physicians want and what the hospital can afford to do. Using various data sources, determine the “fair market value” for the group in the particular location. Mediate with the hospital: Most physicians are not prepared for this process, either from a time or knowledge standpoint. The administration viewed the negotiations as a win-win for the hospital, community, and physicians.

Results: What happened?

The conversion factor per wRVU increased by $8 in year one, $10 in year two, and $12 in year three from the baseline number. They added a $50,000 quality bonus per year for each physician (which we were able to guarantee in year one). The call pay didn’t change in favor of the higher CF per wRVU. By running calculations using the last 12 months, the overall benefit to the group in year one will be $594,334 with the same level of production. Accounting for four surgeons, the average of the group (production did vary) will be over $148,000 in year one alone.

What physicians considering a group negotiation need to know

  • The total process took about 5-6 months. It’s not uncommon for this process to take longer, with the hospital dragging out the process, resulting in inaction or poor results.
  • All the surgeons did was invest a few hours upfront in calls and emails, send documents, and approve the asks/proposals/offers.
  • Able to put a ‘renegotiation’ piece in the agreement in three years—so can repeat the process to re-up this in three years (it was 5+ last time before they got an update or appropriate pay and benefits increase).
  • The administration enjoyed working with an expert third party, and the best part was that the physicians benefited with minimal effort.

Key takeaways

  • Physician employers: partners, not adversaries. They want physicians to be satisfied with their compensation arrangements. There is already a shortage of surgeons, and the number is expected to worsen. Replacement of surgeons poses financial, health care, and community challenges. They find it difficult to get a physician’s time and attention.
  • Even within the same group, physicians cannot decide what they want and have no clue what is “fair” since they do not have access to industry knowledge like hospitals do. We solve these issues. Often frustrated and underappreciated, physicians can find solace when their compensation is fair, a sentiment that physician employers may not always be aware of. Maximizing physician compensation reduces burnout. Many physicians know medicine but little about the business of medicine. It is essential to have tools to even the playing field so the team has the power of knowledge in negotiations.
  • Physicians: they are busy, overwhelmed, and skeptical. Despite their dedication to medicine, many physicians are locked into long-term agreements without updates. This lack of clarity can lead to uncertainty and feeling in the dark about their contracts, which could be improved with precise and updated agreements. They have difficulty agreeing on patient care, let alone what they want in their careers, which would improve their lives.

Conclusion

This case illustrates the importance of preparation, unity, and strategic communication in contract negotiations. The surgeons’ proactive approach improved their contractual conditions and set a precedent for future negotiations within the hospital.

Jon Appino has been the driving force behind Contract Diagnostics since 2011, where he leads a dedicated team on a mission to empower physicians with the knowledge, tools, and confidence to negotiate robust employment contracts and secure the best compensation packages. With over a century of collective experience, the CDx team is a paragon of field expertise. With over 25 years of diverse health care experience, Jon leads this seasoned team of professionals. From Pete’s 20+ years to Anu’s 25+ years, complemented by Jillian and Laura’s 10+ years each, our team boasts a wealth of knowledge. This remarkable tenure is further fortified by the skills and backgrounds of our other team members, including Kathryn Sarnoski, MD, and Jan Schmitz, director of operations. Their combined experience ensures that Contract Diagnostics offers the most seasoned and insightful guidance in physician compensation.

Discover more of Jon’s perspectives on physician compensation by exploring the Contract Diagnostics blog or connecting on social media platforms like LinkedInFacebookYouTube, and Instagram.

The Contract Diagnostics team offers comprehensive consulting services tailored to physicians and their families, addressing employment contracts and compensation structures. Our expertise spans contract physician compensation, schedules, benefits, and more.

Our mission is to establish a central resource where physicians can access information, consulting, and coaching to navigate the intricacies of employment contracts and compensation structures, ensuring equitable remuneration.

Questions? Feel free to reach out to us via our website or at 888-574-5526.






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