Over the past 15 years, the Medical College of Georgia (MCG) Family and Community Medicine has obtained over 150 physician contracts for recent residency graduates. In the last five years, a trend has been observed in which relocation expenses, signing bonuses, tail coverage, and loan repayment have been excluded from the majority of initial contracts offered to graduating residents. This change places graduating residents at an increased disadvantage when negotiating their first contracts, while employers are able to take advantage of residents’ naivete. The transition from residency to professional practice signifies a transformative moment for resident physicians as they enter the medical workforce.(1) However, a troubling pattern has emerged over the last decade, revealing that resident physicians often lack a comprehensive understanding of the business aspects of medicine.
In recent years, there has been a notable transformation in the employment landscape for physicians. Traditionally, many would opt for individual or small physician-owned practices, but the trend now leans toward larger health systems and physician groups. In 2020, a remarkable 50.2% of physicians were working as employees, reflecting a significant increase from 41.8% in 2012.(2) This shift holds substantial implications for new residency graduates, as evidenced by 93% of them securing employment in larger organizations.(3) The move from individual practices to larger entities emphasizes the importance for residents to have a clearer understanding of their employment contracts.
The lack of business acumen among resident physicians becomes evident when assessing their confidence levels in crucial aspects of contract negotiation. A survey was conducted with the aim of gauging the confidence of Family and Community Medicine residents at MCG regarding various topics related to contract negotiation. A mere 11.7% of residents expressed confidence in negotiating their first contract, highlighting a significant gap in their understanding of the negotiation process. Furthermore, only 17.5% of residents felt confident in determining the compensation model for their employer, emphasizing the need for a comprehensive understanding of the financial aspects of their employment.
Only 5.9% of residents feel confident in understanding how to secure additional income in practice, revealing a substantial knowledge gap that could have lasting financial consequences.
To tackle these challenges, residents should be provided with the knowledge and skills essential for navigating the intricacies of contract negotiations. A grasp of compensation models, work schedules, and the definition of “full-time” status is crucial, because these components directly influence a physician’s professional and financial well-being.
Methods and Findings
At MCG, Family and Community Medicine residents sat in on multiple lectures aimed at assessing the need for resident education in contract negotiation. The objective was to enhance their understanding and confidence in navigating physician contracts. The lectures covered various topics, including but not limited to compensation models for physicians, payer mix (such as private insurance, Medicare, and Medicaid), base salary, possible additional earning potential based on geographical location, productivity, loan repayment, and taxes. A post-lecture survey was conducted to gauge the confidence levels of these residents following this comprehensive education.
In their quest to equip residents with essential tools for success, the educational team at MCG initiated discussions on salary dynamics. They emphasized the importance of exploring local benchmarks and delved into the nuances of production-based compensation. Going beyond mere financial figures, the focus extended to the tax implications of sign-on bonuses and relocation expenses. Additionally, the discussions covered the intricacies of loan repayment arrangements and potential tax considerations, providing residents with a comprehensive understanding of the financial aspects of their contracts.
The educational initiative thoroughly explored the clinical landscape, demystifying the decision-making process between inpatient and outpatient responsibilities. Special attention was given to comprehending hospital volumes and understanding patient load expectations, emphasizing the substantial impact these factors can have on a physician’s daily practice.
The sessions focused on shedding light on contractual elements that might seem opaque to the uninitiated. The educational sessions covered guaranteed pay structures for the initial years, elucidating incentive structures based on performance metrics such as medical records, the Consumer Assessment of Healthcare Providers and Systems Consumer and Group Survey, the Hospital Consumer Assessment of Healthcare Providers and Systems, and the Healthcare Effectiveness Data and Information Set. Discussions also covered the pathway to partnership, outlining criteria, associated costs, and potential involvement in ancillary services.
A cornerstone of the initiative was financial transparency. Residents were encouraged to scrutinize organizations’ financial records, ensuring transparency through audited financial statements from the past two years. The program delved into the intricate details of practice infrastructure, examining EMR systems and understanding overhead costs related to building and equipment ownership or leasing.
The discussions prioritized balancing professional life with personal well-being. Navigating through on-call responsibilities; benefits packages encompassing health, dental, life, and disability insurance; as well as retirement plans such as 401k, pension, and profit-sharing, were explored. The logistics of daily practice, including office space availability and details of nursing staff, also were addressed.
Residents were guided through the finer points of contracts, including legal considerations such as “no compete” clauses, determining contract duration and terms. The initiative underscored the significance of academic affiliations, exploring relationships with medical schools or universities, and potential oversight of nonphysician providers.
Data and Discussion
After implementing the comprehensive educational initiative on physician contract negotiation, MCG conducted a thorough assessment to gauge the impact on resident confidence, knowledge, readiness, and familiarity with contract-related topics (Figure 1).
Figure 1. Resident confidence before and after education.
The data highlight a noteworthy positive shift, indicating that, following the educational intervention, residents exhibited increased confidence in negotiating contracts, demonstrated enhanced knowledge about essential contract components, and displayed improved familiarity with the intricacies of physician contracts. Initially, only 5.9% of residents felt confident about increasing their income in practice. This increased significantly, to 66.7%, after the educational sessions. Similarly, confidence in negotiating their first contract started at 11.7% and rose to 58.30%. Additionally, only 17.5% of residents initially felt confident in determining the compensation model for their employer, but this figure jumped to 75% after the lectures. These data clearly demonstrate the positive impact of providing residents with knowledge about these crucial topics in the medical field. It not only boosts their confidence but also emphasizes the importance of being well-informed when making decisions about their professional contracts. The evident improvement in residents’ confidence levels highlights the effectiveness of the educational intervention in preparing future medical practitioners for the complexities of their contracts.
However, the assessment conducted after providing education revealed a surprising reality. Many residents were discovered to be approaching contract negotiations with a degree of naivete, underscoring the crucial need for education in this area. Anecdotal evidence from various residency programs, including those at the Medical University of South Carolina, Emory, the University of Missouri, and the University of Kansas, pointed to a widespread gap in practice management education.(4) Harvard Medical School, with 702 medical students in 2023, has taken a pioneering role in integrating business education into its residency programs.(5,6) Through incorporating coursework on healthcare economics, financial management, and leadership skills, Harvard ensures that its resident physicians graduate with a well-rounded skill set. This approach not only has improved the decision-making abilities of their graduates but also has produced a cohort of physicians adept at navigating the business aspects of healthcare.
The current healthcare landscape underscores the critical need for such education. The rise of employment-based models, alongside the growing scale of employers because of mergers and the vertical integration of health systems, has led to a situation where new attendings often are hired as employees rather than entering into practice ownership. Additionally, the dynamics of for-profit medicine, private equity ownership, and other trends toward corporatization intensify the pressure for increased profits, further diminishing the negotiating leverage of new attendings.
The Mayo Clinic has introduced an extensive Business of Medicine Program designed to give resident physicians a deep understanding of healthcare finance and management intricacies. This program incorporates practical workshops, case studies, and mentorship opportunities, enabling residents to apply business principles to real-world situations.(7) The success of this initiative is evident in the enhanced comprehension of healthcare systems and policies among Mayo Clinic’s resident physicians.
Physicians who lack experience in contract negotiation face serious consequences. Employers, aware of residents’ unfamiliarity with business matters, take advantage of this vulnerability by eliminating previously included benefits and compensation from initial contracts. This strategic move complicates the understanding of compensation models, placing new attendings in a precarious position.
Given the challenges at hand, it is crucial to educate resident physicians about the business aspects of medicine, particularly when negotiating their initial contracts as new residency graduates. Providing them with the necessary knowledge and skills to navigate the complexities of the business side of medicine is not just important; it is essential for ensuring the success and well-being of physicians in today’s competitive and evolving healthcare environment. Moving forward, placing a priority on educating residents in practice management and contract negotiation will undoubtedly contribute to the long-term success and fulfillment of physicians in their professional journeys.
Conclusion
The changing landscape of physician employment, with a notable shift toward larger health systems, emphasizes the crucial need for resident physicians to understand the business aspects of medicine, especially in contract negotiation. The data indicate that targeted educational initiatives positively impact residents’ confidence and knowledge in this area. However, widespread naivete among residents across programs underscores the systemic nature of the issue, necessitating standardized practice management education.
Leading medical institutions such as Harvard Medical School and the Mayo Clinic have pioneered efforts to integrate business education into residency programs, producing well-rounded physicians capable of navigating the complex healthcare finance and management landscape. With the healthcare environment increasingly influenced by employment-based models and corporate dynamics, new attending physicians face compromised negotiating leverage because of limited experience in contract negotiation.
Recognizing the potential long-term consequences of this imbalance, it is imperative to prioritize education in practice management and contract negotiation for resident physicians. Equipping them with the necessary knowledge and skills to navigate the business side of medicine is not just beneficial but essential for the success and well-being of physicians in the competitive healthcare landscape. Moving forward, a concerted effort to make practice management education a fundamental component of medical training will undoubtedly contribute to the sustained success and fulfillment of physicians in their professional journeys.
References
Adler E. Navigating physician employment contracts. Family Practice Management. 2021;28(5):17-20. https://aafp.org/pubs/fpm/issues/2021/0900/p17.html
Kane CK. PRP: Recent changes in physician practice arrangements: private practice dropped to less than 50 percent of physicians in 2020. American Medical Association. 2021. https://ama-assn.org/system/files/2021-05/2020-prp-physician-practice-arrangements.pdf
Greenawald MH, Jeremiah M, Mertes C. How to be employed “well”: optimizing your professional satisfaction. Fam Pract Manag. 2022;29(5):29-34. https://aafp.org/pubs/fpm/issues/2022/0900/being-employed-well.html
Understanding physician employment contracts. American Medical Association. August 7, 2023. www.ama-assn.org/medical-residents/transition-resident-attending/understanding-physician-employment-contracts
Facts and figures. HMS by the numbers. Harvard Medical School. 2023. https://hms.harvard.edu/about-hms/facts-figures . Accessed November 24, 2023.
Soled D, Goel S, Barry D, et al. Medical student mobilization during a crisis: lessons from a covid-19 medical student response team. Acad Med. 2020;95:1384-1387. https://doi.org/10.1097/ACM.0000000000003401
The high stakes of outsourcing in health care. Mayo Clin Proc. 2021;96:2879-2890. https://doi.org/10.1016/j.mayocp.2021.07.003