Looking for a Job: Guide to Contract Negotiation for Ophthalmologists
By Albert P. Lin, MD
Looking for the first job as an ophthalmologist can be a daunting experience. While we have had guidance on how to perform surgery and take care of patients, most of us have not had a lecture on how to get a job. This article will focus on the later portion of this process and provide you with the basic framework of an ophthalmology contract to join an existing private practice.
Salary and contract are rarely mentioned during the initial interview, whether over the phone or in person. These topics should be broached by the practice, not the perspective employee. Once the practice is sufficiently interested in you as a candidate, they will likely ask you how much salary you are expecting and whether you are interested in becoming an associate or if you will eventually want to become a partner in the practice. Once an oral agreement is reached here, a formal detailed written contract will be sent to you for your review. You and your lawyer can negotiate the terms of the contract until an agreement is reached between you and your future employer. Once you sign your contract, you will be on your way to becoming a practicing ophthalmologist!
A list of some of the more important aspects of the contract is as follows:
1. Salary: the annual salary can vary widely based on geographic location. Generally, large cities and desirable living areas will command a lower salary. For example, in Los Angeles, starting salary can vary from $90,000 to $200,000. A good starting salary in a large city such as Los Angeles will be $120,000 to $150,000 for a comprehensive ophthalmologist or an anterior segment specialist. Retina specialists will command a higher starting salary. In rural areas, salaries can start as high as $250,000.
2. Status: associate vs. partnership option. Some practice may seek permanent employees called associates. As an employee, you do not need to worry about running the practice or collecting the bills. You receive a salary along with a production bonus. Most of us eventually want to become a partner in a practice to share in the income of the entire practice. Most practices will want you to work as an associate for 1-3 years before allowing you to buy into the practice. Buy-in option can be included but the specific buy-in terms are not specified in the initial contract. After you have worked well with the existing partners for a few years, you will then be expected to buy into a fair share of the practice to become a partner. For example, as the 4th partner to join a practice, you are expected to pay ΒΌ of the value of the practice. If the practice is valued at $2 million, you pay $500,000 to the first three partners (usually divided over a number of years taken out of your salary). The practice can be valued from 1-2.5x the annual practice income. The buy-in can also vary depending on whether the practice owns the office, land, or the ASC. It is not customary to examine the books until just before the buy-in. The best way to determine if the buy-in will be fair will be to speak to the last 2 people who joined the practice and to find out whether people have left after working 1-2 years on the partnership track. Partners also divide the income in different ways- production bonus vs. profit sharing. A practice that has the profit sharing model (less common) will likely have a fair buy-in. Lastly, it maybe more difficult to negotiate a fair buy-in with a solo-practitioner who has built up the practice over many years.
3. Production bonus: a fair production bonus will be 30-35% starting at 2-3x base salary. If your starting salary is $150,000 and your production bonus is 30% at 2x base and you bill $450,000 the first year, you will get a bonus of $150,000 x 30% = $45,000. When looking at production bonus, you need to be realistic about whether you can achieve the bonus. A practice where an older partner has left and needs you to take over his or her patients right away will likely allow you to bonus. A practice that is only booked out 1-2 weeks ahead will not likely allow you to bonus.
4. Vacation: two week vacation is standard in most contracts. You may also get 1 week for CME and national meetings. Vacation time will gradually increase in most practices. Some practices allow some flexibility, such as allowing you to work and take less vacation for more income or vice versa.
5. Call: this is something many people overlook when considering a practice. While most of us have no problem covering our own patients, the potential pitfall here is covering ER, trauma center, and hospital consults. The ideal situation would be for you to operate at an ASC and be privileged at only one hospital (for your sicker patients). However, some practices may have privileges at 3 hospitals and one of them may have an ER and the other maybe a trauma center. This means that in addition to taking call to cover patients in your practice, you will also be asked to cover ER and trauma (open globes) and see hospital consults. Make sure you understand the call structure before you commit yourself.
6. Malpractice insurance: as a starting ophthalmologist, your premium will be graduated. This is important because you want your practice to provide tail coverage in case you decide to leave the practice. For example, as a starting ophthalmologist, your first year premium is $3,000 and it increases by $1,000 per year to $8,000 after 5 years. If you decide to leave the practice after 1 year and your employer does not provide tail coverage for you, you will have to start at $8,000 at the next practice, making you a much less attractive employee. If you have tail coverage, you can start at $3,000 again. If you stay with the same insurance company, this does not apply and you will graduate to $4,000. However, it is difficult to guess whether the next practice will be using the same insurance company.
7. Disability and health insurance: I encourage physicians to buy personal disability insurance as most practices purchase policies that cost less and cover less as well. Practices generally allow physicians to choose the best health insurance policies available to the practice (may not be the same for other non-physician members of the practice). Examine the types of coverage you will be able to obtain and whether you will be able to cover your family if necessary.
8. Restrictive covenant: if you decide to leave a practice, your contract can specify a certain range (i.e. 5 miles from the practice) within which you cannot practice ophthalmology. Be sure to work with your lawyer to determine what the appropriate range is. For example, in Manhattan, the range maybe 2 city blocks. On the West Coast where cities are more spread out, it is usually indicated in miles. Make sure the clause also specifies distance measured from which office(s). If a practice has 1 main and 2 satellite offices, a 5-10 mile radius from each office can cover the whole city!
There are many other finer points to negotiating a contract. Hopefully, this article has provided you with some basic guidelines to help you ask the right questions as you start interviewing for your first job. Perhaps the most important aspect to contract negotiation is to get yourself a good lawyer- ideally this person looks out for your best interest and is experienced in working with ophthalmologists.
Looking for the first job as an ophthalmologist can be a daunting experience. While we have had guidance on how to perform surgery and take care of patients, most of us have not had a lecture on how to get a job. This article will focus on the later portion of this process and provide you with the basic framework of an ophthalmology contract to join an existing private practice.
Salary and contract are rarely mentioned during the initial interview, whether over the phone or in person. These topics should be broached by the practice, not the perspective employee. Once the practice is sufficiently interested in you as a candidate, they will likely ask you how much salary you are expecting and whether you are interested in becoming an associate or if you will eventually want to become a partner in the practice. Once an oral agreement is reached here, a formal detailed written contract will be sent to you for your review. You and your lawyer can negotiate the terms of the contract until an agreement is reached between you and your future employer. Once you sign your contract, you will be on your way to becoming a practicing ophthalmologist!
A list of some of the more important aspects of the contract is as follows:
1. Salary: the annual salary can vary widely based on geographic location. Generally, large cities and desirable living areas will command a lower salary. For example, in Los Angeles, starting salary can vary from $90,000 to $200,000. A good starting salary in a large city such as Los Angeles will be $120,000 to $150,000 for a comprehensive ophthalmologist or an anterior segment specialist. Retina specialists will command a higher starting salary. In rural areas, salaries can start as high as $250,000.
2. Status: associate vs. partnership option. Some practice may seek permanent employees called associates. As an employee, you do not need to worry about running the practice or collecting the bills. You receive a salary along with a production bonus. Most of us eventually want to become a partner in a practice to share in the income of the entire practice. Most practices will want you to work as an associate for 1-3 years before allowing you to buy into the practice. Buy-in option can be included but the specific buy-in terms are not specified in the initial contract. After you have worked well with the existing partners for a few years, you will then be expected to buy into a fair share of the practice to become a partner. For example, as the 4th partner to join a practice, you are expected to pay ΒΌ of the value of the practice. If the practice is valued at $2 million, you pay $500,000 to the first three partners (usually divided over a number of years taken out of your salary). The practice can be valued from 1-2.5x the annual practice income. The buy-in can also vary depending on whether the practice owns the office, land, or the ASC. It is not customary to examine the books until just before the buy-in. The best way to determine if the buy-in will be fair will be to speak to the last 2 people who joined the practice and to find out whether people have left after working 1-2 years on the partnership track. Partners also divide the income in different ways- production bonus vs. profit sharing. A practice that has the profit sharing model (less common) will likely have a fair buy-in. Lastly, it maybe more difficult to negotiate a fair buy-in with a solo-practitioner who has built up the practice over many years.
3. Production bonus: a fair production bonus will be 30-35% starting at 2-3x base salary. If your starting salary is $150,000 and your production bonus is 30% at 2x base and you bill $450,000 the first year, you will get a bonus of $150,000 x 30% = $45,000. When looking at production bonus, you need to be realistic about whether you can achieve the bonus. A practice where an older partner has left and needs you to take over his or her patients right away will likely allow you to bonus. A practice that is only booked out 1-2 weeks ahead will not likely allow you to bonus.
4. Vacation: two week vacation is standard in most contracts. You may also get 1 week for CME and national meetings. Vacation time will gradually increase in most practices. Some practices allow some flexibility, such as allowing you to work and take less vacation for more income or vice versa.
5. Call: this is something many people overlook when considering a practice. While most of us have no problem covering our own patients, the potential pitfall here is covering ER, trauma center, and hospital consults. The ideal situation would be for you to operate at an ASC and be privileged at only one hospital (for your sicker patients). However, some practices may have privileges at 3 hospitals and one of them may have an ER and the other maybe a trauma center. This means that in addition to taking call to cover patients in your practice, you will also be asked to cover ER and trauma (open globes) and see hospital consults. Make sure you understand the call structure before you commit yourself.
6. Malpractice insurance: as a starting ophthalmologist, your premium will be graduated. This is important because you want your practice to provide tail coverage in case you decide to leave the practice. For example, as a starting ophthalmologist, your first year premium is $3,000 and it increases by $1,000 per year to $8,000 after 5 years. If you decide to leave the practice after 1 year and your employer does not provide tail coverage for you, you will have to start at $8,000 at the next practice, making you a much less attractive employee. If you have tail coverage, you can start at $3,000 again. If you stay with the same insurance company, this does not apply and you will graduate to $4,000. However, it is difficult to guess whether the next practice will be using the same insurance company.
7. Disability and health insurance: I encourage physicians to buy personal disability insurance as most practices purchase policies that cost less and cover less as well. Practices generally allow physicians to choose the best health insurance policies available to the practice (may not be the same for other non-physician members of the practice). Examine the types of coverage you will be able to obtain and whether you will be able to cover your family if necessary.
8. Restrictive covenant: if you decide to leave a practice, your contract can specify a certain range (i.e. 5 miles from the practice) within which you cannot practice ophthalmology. Be sure to work with your lawyer to determine what the appropriate range is. For example, in Manhattan, the range maybe 2 city blocks. On the West Coast where cities are more spread out, it is usually indicated in miles. Make sure the clause also specifies distance measured from which office(s). If a practice has 1 main and 2 satellite offices, a 5-10 mile radius from each office can cover the whole city!
There are many other finer points to negotiating a contract. Hopefully, this article has provided you with some basic guidelines to help you ask the right questions as you start interviewing for your first job. Perhaps the most important aspect to contract negotiation is to get yourself a good lawyer- ideally this person looks out for your best interest and is experienced in working with ophthalmologists.
posted by MedRounds Publications at 9:44 PM
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