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A couple weeks ago we started a new series on breaking down physician compensation, and followed up with our second installment which discussed production compensation models. In the final installment in this series, we are addressing some of the details of your physician production compensation that you must keep in mind, and which can make an enormous difference in how and when you get paid.
When you have your physician employment contract reviewed, certain elements in the compensation language should be at the top of your mind! If you will be paid production compensation, either exclusively or in addition to a base salary, it is critical that the contract outline the method and timing for the payment. For example, it may be well-established that you will be paid 70% of your gross collections, but what does that really mean for your monthly or bi-weekly paycheck? Ideally, you should be able to tell simply by reading the language in your physician employment agreement, how each paycheck will be calculated. Suppose for example that your employer will pay you a "draw" each month, and then your overall compensation will be reconciled later. You must consider on what data the "draw" amount will be based. Perhaps it is based on a one-month look-back period, taking into consideration your previous month's collections, and paying you a set percentage of that total amount. This method can be problematic, as on a month to month basis, your collections could vary greatly, taking into consideration being away from work at a CME conference or on vacation. So it might be safer to have your "look-back" period be a longer amount of time, providing a more even-keel monthly average collections number on which to base your "draw" amount.
Also pay close attention to when and how the reconciliation will occur. In some physician employment agreements, the reconciliation happens just once a year. This may not be the best case scenario, as if you are over-earning your monthly "draw" amounts, you might not want to wait until the end of the year to be paid the difference you have collected. Likewise, if you are under-earning your draw amounts, it can be devastating to face an enormous repayment amount that you could owe in one lump sum.
Again, these are only a couple points that must be considered when you hire a physician contract review lawyer to analyze your agreement, and every physician employment contract is different.
For further information, please contact Leigh Ann O'Neill at loneill@lauthoneill.com or 317-989-4833.
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