Guidance and pearls for associate/employee ophthalmologists
There are many areas, from compensation to practice viability, that young ophthalmologists need to consider when joining a practice.
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“The production of wealth is the result of agreement between labor and capital, between employer and employed. Its distribution, therefore, will follow the law of its creation, or great injustice will be done.”
– Leland Stanford
If memory serves, a bit more than 10 years ago, an American Society of Cataract and Refractive Surgery poll of residents and fellows showed that the vast majority of ophthalmologists-in-training wanted to work the rest of their careers as owners of a private practice.
I have not seen an update of this poll, but I am certain the results would be different today.
Many young eye surgeons still aspire to ownership, but somewhat fewer private practices exist today. One by one, independent practices are joining in with health systems and private equity firms, and such conglomerations are growing their provider staffing faster than private practices, so the number of “classic” partner-track openings is on a downtrend.
It remains to be seen if COVID-19 will be a headwind or tailwind to this trend.
Many young surgeons have been conditioned by what they hear on the street — “private practice is doomed” — and presume that they will be working for others the rest of their careers. It is not true, of course, the “doomed” part (“challenged” is closer to the mark), but it is likely that more new grads will be posted to non-equity, durable associates positions with each passing year.
And of course, even the most ambitious eye care entrepreneurs have to pass through at least a couple of years as an employee-associate before “making” partner.
So, let’s look at a list of transaction trends, pearls and pitfalls for employee doctors. The perspectives that follow come from more than 40 years of negotiating on behalf of client practices with young surgeons, as well as negotiating on behalf of young and mid-career surgeons who hire us as a talent agent and career scout. We work both sides of the fence.
1. Do you like the community? It is perfectly reasonable, perhaps even wise, for a young or mid-career job-seeking ophthalmologist to rank “place” highest when choosing a new position — to rate this higher than earnings, professional satisfaction or a shot at ownership. The basis for these preferences is different for all of us. Nearby family, great schools or recreation may count more for young families. A vibrant religious community or proximity to a hub airport may count more for others.
2. Do you like, admire and trust the practice’s owners and lay leaders? No matter whether you are an owner or an associate, next to your immediate family, who you work with drives your happiness and life satisfaction. Patients come and go in an endless parade. But in the four walls of a clinic, the people you work with are a circular parade, day after day. Even if the contract you are being offered is generous, walk away if your prospective teammates are unpleasant or self-dealing.
3. Is the practice you are joining financially viable and well run? This is a delicate question to ask unless you are on a partner track, in which case the contemporary expectation is that you and your advisers will be furnished with a wide range of financial and volumetric performance data, enough to determine if it is worth investing 2 or more years as a junior doctor for a shot at becoming a partner. But even for durable associate positions, it is reasonable to make a shallow inquiry: What is the practice’s profit margin? (It should be 30+% in almost all cases.) How secure are the practice’s contracts? In the present COVID-stressed environment, are leaders and managers keeping up with the strain? Does the practice have sufficient capital reserves to make it through the expected pandemic pulses in the next year or two until a vaccine or effective treatment is found?
4. Does the practice have enough work to keep you busy? It is critical (especially if you are being paid a flat percent of collections) that you go in understanding whether you will have a ready-made practice or will have to develop your own patient base. Whatever the answer, make sure it aligns with your skills. If you find outreach and practice development uncomfortable, find a practice with enough internal volume to keep you busy from the outset.
5. Is your compensation fair? The widely adopted base plus bonus approach has many variations, but the common arrangement for a general ophthalmologist is a base of ±$225,000 (lower in urban coastal centers, higher in rural/central states) plus a bonus (paid annually) of 25% to 35% of collections over 2 to 3.5 times base salary. In the average setting, this means the associate MD will be earning ±30% of every net dollar collected as a result of their work. If the practice has a profit margin higher than this 30% figure, it makes money on every patient visit. And vice versa. It is fair for retina and plastics providers to make a higher percentage of their collections. It is fair for doctors who choose to join urban practices with adverse economics to accept a lower income as a percent of their collections because the practice owners cannot run a business in the red.
6. How about termination? Aside from the usual gross-cause recitals (loss of license, not being paid your salary, etc), which warrant immediate contract termination for both sides, most contracts allow either party to terminate without cause on anything from a 30-day to 6-month notice. Sixty and 90 days are the most common. Study carefully this dimension of your contract, and realize that even if your contract reads at the top “One Year,” the contract’s practical duration is no longer than the termination-without-cause provision. For obvious reasons, we are now seeing more “force majeure” clauses, allowing the contract to be terminated by the practice with essentially no notice for things such as epidemics. It is just one more adjustment in this COVID era and reasonably self-protective for the employing practice.
7. Are noncompete provisions fair? In a word, yes. Mostly. It depends. The enforceability of noncompete agreements is different from state to state. Their reasonableness is dependent on state case law, which your local attorney can help you better understand. That said, you should attempt to not be held to a noncompete if you are terminated without cause or if you terminate with cause, or if a force majeure is declared. You should only be held to a radius of those offices in which you regularly work (not that you are sent to one time only in order to broaden your noncompete). The duration of the noncompete should not exceed your duration of employment (eg, if you leave after 6 months, the noncompete period should only be that long, even if the contract says 1 year). Also, it should be noted that a noncompete is less often reasonably applied for a part-time doctor, who would reasonably want to fill out their professional week with other nearby activities.
8. Assure ongoing access to your billing records. Most associate contracts today provide for a base wage plus a bonus indexed to collections. (And some practices are shifting to a straight percent of collections to hedge against revenue volatility in the COVID era.) Either way, you should receive full productivity and billing records monthly. Specifically, this includes your monthly CPT report showing codes, units, charges and payments; your monthly aging report (aged by date of service, not date of posting) showing line-by-line entries for each patient (not just a payer roll-up); write-off and missing/open ticket reports; a regular report showing denied claims (with the percentile breakdown for why claims are denied); the time lag between date of service, date of posting and date of submission (it should not take more than 72 hours for most claims to go out); and open access to staff to allow you to question the status of old/large balances.
9. Make sure you are allotted reasonable time off. In the average setting, paid time off, which includes continuing education, sick leave and vacation time, amounts to 4 weeks (20 days) in the first year and 5 weeks in subsequent years. If you work part time, expect a pro rata reduction.
10. Signing bonuses were increasingly common until COVID-19 hit. Such bonuses, ranging from $10,000 to $50,000, will come back again as business picks up. Expect a signing bonus from practices in hard-to-recruit-to locations. Do not expect a signing bonus in Miami, Boston or Los Angeles. The signing bonus may be repayable if you are terminated with cause or if you terminate without cause in the first year.
11. How about relocation costs? These are quite reasonable for the employing practice to pay out, and the typical upper limit is $10,000. Like a signing bonus, do not be surprised if this is recouped should you decide to leave the practice without cause in the first year.
12. Do you have any special equipment, facility or staffing needs? Is the EMR program satisfactory? Settle these questions before you sign your contract, especially if you are a subspecialist. In the present environment, some practices may have enough capital on hand to hire you but not enough money on hand to prepare for your subspecialty patients. If your request is exotic, it is reasonable for the practice to say, “We’ll purchase that on your first anniversary with us.”
13. Working smarter is only a partial substitute for working harder. Nobody becomes an ophthalmologist without being very smart. But 20 years of harsh academics leads some young surgeons to believe that intelligence can make up for hard work and long hours. Smart practices would rather employ a hard-working, middling student than a top-of-class doctor with a PhD. Arrive earlier and leave later than is expected of you. Maintain an intense work pace. Move purposefully throughout the day. Avoid leaving the clinic pod for non-business texting, emailing or journal reading. Observe high-achieving fellow surgeons to learn their efficiency and tempo secrets.
For more information, you can watch a five-part video series produced by the University of Iowa in which I expanded on these topics: www.eyerounds.org/video/practice-management/index.htm.
- For more information:
- John B. Pinto is president of J. Pinto & Associates Inc., an ophthalmic practice management consulting firm established in 1979. John is the country’s most-published author on ophthalmology management topics. He is the author of John Pinto’s Little Green Book of Ophthalmology, Turnaround: 21 Weeks to Ophthalmic Practice Survival and Permanent Improvement, Cashflow: The Practical Art of Earning More From Your Ophthalmology Practice, The Efficient Ophthalmologist, The Women of Ophthalmology, Legal Issues in Ophthalmology, Ophthalmic Leadership: A Practical Guide for Physicians, Administrators and Teams, Simple: The Inner Game of Ophthalmic Practice Success and a new book, UP: Taking Ophthalmic Administrators and Management Teams to the Next Level of Skill, Performance and Career Satisfaction. He can be reached at 619-223-2233; email: pintoinc@aol.com; website: www.pintoinc.com.