ACR 2011: Advice on Contract Negotiations for Physicians

Negotiating a contract for a position in academia, industry, or private practice can be a complex and nerve-wracking process, with many physicians unsure of which questions to ask and which elements of their compensation beyond salary are negotiable.

At the 2011 ACR/ARHP Annual Meeting, the “Contract Negotiations for Physicians” session offered detailed advice for physicians seeking positions in the pharmaceutical industry, considering accepting an academic appointment, or joining a private medical practice.

Contracts and the Pharmaceutical Industry

Gregory Dennis, MD, Medical Affairs, Human Genome Sciences, Inc., presented “Contract Negotiations for Industry,” during which he discussed the various career tracks and opportunities in the pharma and biotech industry that are available to physicians, outlined the typical salary structure associated with these positions, and offered advice on how to conduct contract negotiations. Dennis said that there are many employment opportunities for physicians during the development cycle of pharmaceuticals, from general research during drug discovery and preclinical research, to clinical research involving clinical trials, to post-approval positions in medical affairs.

Compensation is in part determined by the career path chosen in the industry, but also by the physician’s skill set and experience. Dennis said that there is a fair amount of variability in salary structure, and that bonus or incentive payments are an important part of the compensation package. By way of example, he said that a level 1 or 2 general researcher might make $120,000-$140,000, plus a bonus of 20% or more. A level 1 or 2 clinical researcher could make $200,000-$225,000, plus bonus. Positions in medical affairs may pay in the range of $160,000-$180,000 annually, plus bonus. Management-level positions within these tracks would make more, both in base compensation and size of bonus.

The size of the salary package is often the main focus of contract negotiations, with base salary, amount of sign-on bonus, and size of the initial stock option award being the most negotiable elements of compensation. Dennis noted that elements such as an annual bonus target, restricted stock options, and long-term cash incentives are often less (or even non-) negotiable. However, he advised the audience members not to forget other reward elements when negotiating a deal, including such easily overlooked matters as how often they receive a paycheck, and the timing of salary review. Other total reward elements to consider include 401k matching, employee stock purchase plans, vacation time, health and dependent care flexible spending accounts, and cost of medical, dental, vision insurance.

Once an offer is made, Dennis advised candidates to ask for it to be put in writing, break down the full compensation package and make sure they clearly identify which areas they would like to see improved, refrain from making strong demands, investigate the compensation elements for individuals in similar positions, and, finally, determine what is needed for them to give their immediate acceptance and a start date.

Entering Academia: Is it the Right Fit for You?

During “Contract Negotiations for Academics: How to Optimize Your Academic Letter of Offer/Contract,” Richard M. Pope, MD, Northwestern University Feinberg School of Medicine, offered litany of useful advice based on his experiences at Northwestern. He said that an academic contract will encompass many elements beyond salary, and that the decision to accept an appointment should be based on a full consideration of the job requirements and compensation package.

Pope said that in order to secure an academic position that best fits their needs, applicants need to clarify the institution’s goals as well as their own expectations, based on the job they are seeking. Clinician educators should ask whether there is salary support for education at the institution, how much education they will be expected to do, whether they will be expected to do any clinical research, how their future salary will be determined, whether there is incentive compensation and how it is determined, what if any portion of their salary is “at risk” if certain goals are not met, and is there institutional support for CME?

Clinician investigators should find out what the expectations are surrounding the research component of their job, whether it will eventually be funded by extramural support, how the current research component will be funded, how long support for that research will last, what aspects of the research will be supported, and if there is tenure involved with this position.

Pope said that in the end, most elements of a contract are minimally negotiable, but applicants may be able to make adjustments to their starting salary and how it will change over time, and to other aspects of the benefit package. The contract should definitely specify the vacation policy, maternity leave policy, and expectations of in-patient hospital coverage.

When negotiating, Pope said that physicians should ask themselves “What does the organization need/want? What do I want? Is this organization a good fit for me, and am I a good fit for it?” He advised the audience to ask for what they want during negotiations, but to be prepared to hear “No.”

Private Practice Contracts: It's All about the Partnership

During “Contract Negotiations for Private Practice,” Herbert Baraf, MD, managing partner of Arthritis and Rheumatism Associates, said that contracts are about relationships, and that physicians considering joining a private practice should ask themselves to whom they want to be related professionally.

Physicians should be aware of the ways in which the internal dynamics of multi-specialty practices differ from those of single-specialty groups. Baraf said that with multi-specialty groups, there is a complex division of revenue and expenses, and that rheumatologists should understand that income division within multi-specialty practices may devalue cognitive relative to procedural services. There are also often competing interests regarding ancillary service revenue. Group expenditures may serve some interests more than others (especially when it comes to the purchase of big-ticket items of equipment), and potential applicants should be prepared for ther to be variable member productivity, contribution, and valuation.

Single-specialty practices offer the potential for office efficiencies, cost-sharing, and investment, stable coverage, improved negotiating power with payers and suppliers, and better access to ancillary services.

When evaluating a practice, Baraf advised physicians to ask themselves “Do I like these people? Do I like the facilities and location? Do I want to spend my professional life here? Does my spouse?” He said that conducting proper due diligence means spending time to find out if you are compatible with the group, by checking references, looking at the practice’s history of hiring and firing (or physician members leaving voluntarily). Other questions to ask when evaluating whether to accept an offer at a private practice include:

When will I get to partnership?

How old are the partners?

Who joined last, and under what terms?

Are the younger physicians in the practice happy?

Are the partners open to new ideas?

What will I get paid?

What is the call schedule?

Will I get incentives?

How much vacation?

Will I get help with moving expenses?

Can I afford the buy-in?

The key elements of the contract include:

• The term (important factors here include effective date, length of the contract, whether the contract automatically renews or is subject to renegotiation, expression of intent to offer partnership)
• The physician’s duties in the practice (hours, call schedule, hospital coverage, exclusivity of service, etc)
• Compensation (What is the base salary? Does it increase after the initial term? What incentives are included?)
• Benefits (pension and profit sharing, malpractice, life/health insurance, vacation, sick leave, maternity leave, meeting coverage, society dues, etc)
• Non-compete clause/Covenant not to compete (enforceability varies by state, the clause can include restrictions based on time or geographic location. Key question: Can you buy out of it or modify it?)
• Termination (Key questions: Can you or the employer terminate without cause? How much notice is required? Can you be held accountable for under-performance losses? What conditions trigger automatic termination?)

Physicians should always have an attorney review the agreement. Baraf reminded the audience that attorney selection is an underappreciated aspect of contract negotiations, and suggested that physicians consider several factors when selecting an attorney, including how accessible the attorney will be, and whether they understand the nature of the medical profession in general and the group the physician is joining? He said that an important part of the attorney’s job during negotiations is to preserve the physician’s relationship and standing with the practice with which he or she is negotiating.

In closing, Baraf reminded the audience that when it comes to contract negotiations, “Everything is negotiable, but some things are more negotiable than others.” He said it is also important to keep in mind that “all parties to the negotiation have to win,” meaning that both sides must be satisfied with the terms of the final agreement. Finally, he advised physicians joining a private practice to “use the initial term to build a strong practice and strong relationships with your patients, your future partners, and the community at large.”

This activity is not sanctioned by, nor a part of, the American College of Rheumatology.