Podcast Episode 26 | Effective Employee Contract Negotiation

With Dr. Jason Goebel

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The Prosperous Doc® podcast by Spaugh Dameron Tenny highlights real-life stories from doctors and dentist to encourage and inspire listeners through discussions of professional successes and failures in addition to personal stories and financial wellness advice.

Shane Tenny, CFP® is our podcast host and Partner at SDT. He has lectured numerous times for hospitals and physician groups and, most importantly, helped hundreds of clients develop strategies to navigate through turbulent times toward their financial goals.

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Jason Goebel:               00:00                I negotiated other things that I looked at as a guaranteed source of income that was over the term of the contract, as opposed to tying myself to an RVU conversion.

Intro:                            00:10                From Spaugh Dameron Tenny, it's the Prosperous Doc Podcast, real stories, real inspiration, real growth, a show for doctors who are ready to improve their overall wellness in every aspect of life. Now here's your host, Shane Tenny.

Shane Tenny:                00:32                All right, so a couple of years ago I was working with a client of ours who had finished residency, finished fellowship, and ended up joining a small specialty practice with about four or five partner physicians. Like a lot of times, he started on a contract, it was a two-year employment contract with the option to become a partner, and things were going well. When that third year came up, he was approved as a partner and had the expectation of higher income, but what he wasn't anticipating was beginning to see all the things that took place kind of behind the scenes.

Shane Tenny:                01:09                Through the partnership meetings and being involved in different type of conversations, he realized that he had some real concerns with how the practice was treating patients, in some cases, how they were treating staff. He became aware of some infidelity between one of the other partners and a nurse, and began to get really uneasy with the culture taking place but then just also concerned about the impact on the community if things began to become public, and in fact that's exactly what happened. The news kind of started leaking because medicine and dentistry are kind of small circles, and then the reputation of the group started to roll down, his referral streams started to dry up, and within about three years, this option with this group that looked so promising in the out started to feel really unstable and he started wondering what the options are, what's his contract say, what are the implications if he tries to leave, is his noncompete enforceable, and it was just really stressful and exhausting.

Shane Tenny:                02:19                Maybe some of you have gone through a similar situation or known someone who has. I know it seems almost commonplace nowadays for us to hear from clients that the hospital system they work through is unilaterally adjusting the true-up formula or the bonus formula or holding cash back. Well, of course, everybody else gets paid except the providers, and you just start to wonder, is this fair? What can I do about this? And so we've decided to do an episode on contracts, employment contracts. Rather than having a contract attorney on the show with me, we decided to be true to form and actually talk with one of your colleagues, good friend of mine, Dr. Jason Goebel. Jason's a physician in the low country of South Carolina and is known locally. In his community he's kind of the godfather of contract negotiations, and so I thought it'd be great to hear his story and pick his brain a little bit on some of the choices and conversations he's been able to have over the years. So Jason, thanks so much for being with us today.

Jason Goebel:               03:23                Thanks for having me.

Shane Tenny:                03:24                Absolutely. Yeah, it's a privilege. Not every day I get to have the godfather on the show.

Jason Goebel:               03:27                I don't know if I'd go that far, but I'll provide whatever lack of wisdom I have.

Shane Tenny:                03:33                Yeah, all right. Well, that's good. Well, let's start with a softball here. Why did you get into medicine in the first place?

Jason Goebel:               03:38                It's something I wanted to do since I was a little boy, really. I didn't grow up in a medicine family. I don't know what initially drove it to me early on, but I like doing things with my hands. I liked really being in control of situations. I liked having a bearing on helping other people or having an effect on people's lives longterm. I felt that medicine was something that I could do where I could help people out, I can make people feel better. It's very social. You get a lot of interaction with people. You get to know a lot of people. You get to watch families grow and you get to see people get older, you get older with them.

Jason Goebel:               04:21                Ultimately, I made a decision to go into a specialty where I can put all those things together, I could follow people long term, take care of the same people long term, but also kind of combine some surgery type skills in that together. And so I chose to go into cardiac electrophysiology, and that field to me was the perfect hybrid between longterm care of patients over a continuum while still being able to do surgical procedures where you see an abrupt benefit what you do to help these people. I mean, that's ultimately why I decided to do what I do.

Shane Tenny:                05:04                Yeah. And so let's just, I guess, jump into the beginning of your journey. After finishing fellowship at the Medical University of South Carolina, you were courted by a private multispecialty group. Talk a little bit about that and just what that process was like as you were looking for a job and decided to go there.

Jason Goebel:               05:23                Well, it started in fellowship and the group that I joined has always recruited from within, which really had worked very well because instead of looking for recruiters, they purely went by experience and word of mouth and getting people who other fellows had trained with who they had worked many years with side by side and knew how they practice, they knew their personalities, they knew if they'd be somebody they liked to work with. That started probably two years before the end of my fellowship. One of the guys that was a year ahead of me, he does a little bit different specialty but within cardiology, he always told me, he's like, "You're going to move to Myrtle Beach," and I was like, "Ugh, no, I'm not. I don't want to go to Myrtle Beach." Growing up in the Carolinas, I was like, "That's where I go for spring break and I've grown way beyond that now. I don't think that's where I'm going." He said, "Yeah, we'll see." My wife also said, "We're not going to Myrtle Beach."

Jason Goebel:               06:21                I decided to keep my mind open, and the time came to start interviewing. I knew I wanted to be on the coast of the Carolinas. I went and looked at four or five different practices. Honestly, you go to practice and you meet these people, a lot of whom you've talked to on the farm before, you might not know yet, but they are, and then some other people who got there before you but you trained with, and you realize, this is a really good group of people and it's a really good community, and there's a huge need, which is very, very important in terms of a contract and how you negotiate a contract. But I knew there was a big need for me to go there and I felt like the niche there was better than probably anywhere else I was looking by far. Ultimately, my buddy was right, and I ended up joining that practice.

Jason Goebel:               07:04                It really was not a difficult decision at all. I just felt like I belonged there, I felt like they were good people to work with. It has always been a great decision. I'm happy where I am and hope to never leave here until I retire.

Shane Tenny:                07:16                Actually, I want to pick up on something that you just touched on, which is, since we're talking about contracts, and you just mentioned there was a need here. Talk a little bit about the importance of understanding the need in the community for your specialty as we lead into this topic of contracts.

Jason Goebel:               07:32                Well, I think there's probably two big issues. First of all, just like any kind market, I think your value is determined by the need and the supply. For example, there's other communities in the Carolinas that are great places to live and they're fairly saturated with physicians. It's not that you can't go to a job in those locations, but if you go to a job in those locations, you may get a good contract upfront, but at some point you have to start paying your own way. If you go to a place where there's not enough demand and you're fighting for volume and you're fighting for patients, it makes your job much more stressful, it makes the reassurance of having longterm financial security and knowing you have a longterm revenue stream where you can move and raise your family and build a house and do all those things. It makes it a lot better to go to a community where you know there's a need for you.

Jason Goebel:               08:31                The greater the need in that community and the longer they look, the higher the demand is, the supply is unchanged, and so the reimbursement for what you get paid to go to that community typically will be better. If you go to a community where there's 10 other people who do what you do and you're simply trying to take a piece of a pie that's been divided amongst a lot of people, obviously your salary in that job is going to be much less. Now, you may have a lot less work, so you may have a better quality of life, and that may be what's most important, but the other thing is, in terms of both the private practice and working for a healthcare system, either one, an employment model, bringing a service line that no one has had before and bringing procedures or a certain skillset that no one has had before can provide a significant job opportunity that you may not be able to find in another community.

Shane Tenny:                09:30                Yeah, all really good points. I mean, even before you get into the technical intricacies of a contract, just from a business aspect, the laws of supply and demand. If you have something unique, then there will be more demand there. So in joining the group where you started, I imagine they had an employment contract for you, and if memory serves, you started on employment basis and then had the opportunity to consider partnership. Talk a little bit about that and then the work that you did to just look at that contract.

Jason Goebel:               10:00                You know, I was given a fairly simple five page contract. It was a two-year term, as a two-year guarantee. It was non-declining. It was the same number. It was the same salary every year. It was not based on productivity. They had an understanding, which I think is really important, that especially when you're trying to start an entirely new service line in the healthcare system that's never been done before, it's going to start slow. And so I felt good security in the fact that they were going to guarantee me salary income regardless of what my productivity was coming out of the gate.

Jason Goebel:               10:35                The contract they gave me, it had been the same way for years and years and years. So my contracts read exactly like everyone else's in the practice did except for the number. The way my contract was is after two years after your guarantee, then you would then be allowed to make partner if you wanted to become a partner. That partnership was purely based on the practice itself. It didn't involve real estate. It didn't involve anything else. It didn't involve the building that we were in. The practice was a multispecialty practice, so I joined a practice with non-interventional cardiologists, with interventional cardiologists and with gastroenterologist. That practice over time had kind of evolved. It was previously a multispecialty practice that had primary care. Over time, primary care had kind of merged out of the practice as some of the partners had retired.

Shane Tenny:                11:34                You said the contract was fairly simple coming from the group. Did you have an attorney look at it?

Jason Goebel:               11:38                Yes.

Shane Tenny:                11:38                Yup.

Jason Goebel:               11:39                Absolutely. I had an attorney look at it and really what the attorney provided for me was just making sure I... It really wasn't so much advice as it was. They looked at the contract and made sure that I understood the verbiage in the contract and what that meant. I was not so concerned about the noncompete in my first contract, but we'll talk about that later. That becomes very important. I wasn't so concerned about that primarily because I trusted the people who I was joining, which is sometimes very hard to do and you really don't know until you really, I mean, a lack of better terms, in bed with these people, living with them every day, but I had an attorney look at it. I think I paid maybe $1,200 to have my contract reviewed.

Jason Goebel:               12:24                To be honest with you, they didn't really provide any recommendations for anything to change in the contract. They just wanted me to be very clear as to what the contract involved. One piece of advice on that is I used a local attorney and I think if you're going to a big city like Atlanta or Charlotte or New York or Dallas or something like that, I think that's a little less of an issue. But when you're in a smaller town, everybody knows everyone. When you're trying to figure out what best to do, you got to make sure that whoever you're using has your best interest in mind. When they play golf with the other partners and everything else, they just kind of say, "Yeah, this is what the contract says." That was my first attorney experience with a contract.

Shane Tenny:                13:10                And so, to your point, in that case you didn't change anything. You didn't make any requests, but at least you went in more educated, understanding what the ramifications were.

Jason Goebel:               13:19                I did. Another thing, and obviously there's always folds to the story, but going in, it was made very clear to me how much I was getting paid versus how much everyone else in the practice was paid. So I knew how much every partner in the practice outside of their quarterly bonuses, which I knew about what those were too, and I knew how those were distributed and how that was determined, but actually knew how much all the partners in the practice were making, which in a lot of ways kind of establishes what the fair market value of that contract is, at least within that practice.

Shane Tenny:                13:57                Was that because you thought to ask, or was that just the culture of transparency that you were joining?

Jason Goebel:               14:02                That was the culture, and they paid me well compared to... Basically started me at what the head of the practice was making, though I obviously didn't have a productivity bonus or anything like that.

Shane Tenny:                14:15                But I guess, to your first point about just knowing the supply and demand in that market. Now, you ended up not moving into a partnership role there. Talk a little bit about that and then what you began to realize as time progressed there.

Jason Goebel:               14:31                Over time, my specific situation was very, very quickly I became quite busy. In the field of electrophysiology, the procedural reimbursement for practice is very good if it's billed appropriately. I saw myself doing a lot of procedures and generating a lot of revenue and I was going to meetings and being told, "It's costing us money to pay you this." The numbers didn't make sense to me. On top of that, it seemed to me like our goal as a practice should be to be as profitable as possible while focusing on taking care of patients the way they're supposed to be taken care of.

Jason Goebel:               15:20                Every... I forgot what it was. Every five days or six days or something like that I was put on general cardiology call and I would spend my time seeing consults for general cardiology, half of which was unfunded while taking me out of the lab, which is where I generate revenue for a practice just to kind of relieve the burden of call on the other partners. That didn't make a lot of sense to me. I was more than willing to take all of the call every day for by specific service line for all heart rhythm issues, and I felt like I could generate a lot more money for the practice doing that because when I looked at what was billed, let's just assume billed and not collect it, but if I just looked at what was billed on a day on call versus what I billed doing procedures, the difference was four and five fold different. When I was doing procedures, the majority of what I did was all covered by either Medicare or private pay insurance. Whereas when I was on call, half of what I was doing was unfunded and non-reimbursable.

Shane Tenny:                16:29                Now, Jason, I know your group, like most private around the country, was approached regularly by the local hospital asking if they wanted to be bought out or merged in or whatever you want to call it. At some point, I know that rubs against the grain of all independent docs out there, but at some point I think they caught your ear and you started listening to their message. Talk a little bit about what you started to see that made you think that perhaps being part of the healthcare system would in fact be better for you, your family, your patients, than staying with the practice.

Jason Goebel:               17:02                Well, in the practice model that I was in, the bonuses were distributed evenly amongst all the partners, and not because of a difference in work ethic or anything like that, but there're simply intrinsic differences with job descriptions of different fields within cardiology of how much you have to work. The people who are working four and a half days a week, nine to five, were getting the same bonus as the people who were working 80 hours a week. I just didn't think that was going to be long term the right thing for me, and I felt that I was generating a substantial revenue stream for the practice but was not being really fairly reimbursed longterm for what I was generating in revenue. I mean, I would have felt more comfortable in a practice model where the bonus is determined based on your individual productivity and your individual overhead versus splitting the profit of the entire practice. That's just a difference of opinions, but that was my thought on it.

Jason Goebel:               18:09                I think also there was an overall, I hate to put it this way, but I think there was an overall lack of understanding of really what was generating the revenue for the practice. Because of that, it made it where I felt that in my practice I was not really recognized as the person who was generating a substantial revenue stream and almost was a burden to the practice because of what they were paying. I was like, "This is just not going to work longterm." At the same time, the hospital saw the revenue stream that I was bringing in because 80% of the productivity that I generate is generated in the hospital, not in the office. I think, A, they didn't want me to leave because they realized the value in what they were getting in a new service line that they didn't previously have, and I think they also realized, in reality, compared to other physicians doing what I was doing with the volume that I was doing, what they felt I should be fairly paid. Those numbers were substantially different than what I was being paid in practice.

Jason Goebel:               19:19                I did not want to work for the hospital. Like anywhere else, there was always the constant battle between private practice and the hospital, and who's pushing who around. They're had, in the past, been some bad blood with my practice and the hospital, and everybody had kind of dug their feet in, saying that basically under no circumstances am I ever going to work for that hospital. And so no one really ever opened their eyes to an employment model, but I knew that it was not sustainable for me to keep working like I was doing, getting paid what I was getting paid and my family was suffering.

Jason Goebel:               20:00                I have a very good marriage with two children that I care everything about. That wasn't falling apart or anything like that, but I was just never at home. I was never home, I was killing myself. When you start to look up some simple numbers, I felt like I was getting paid a third of what I really should be getting or at least half. And so then I looked at, because again, I didn't really want to go to work for the hospital, I wanted to remain independent, I wanted to maintain my leverage, which is very important, I looked at going into private practice by myself.

Jason Goebel:               20:35                I called a colleague of mine who would be in the exact same situation, a standalone subspecialty cardiologist in another town in the Carolinas who was kind of the only show in town, for the most part, for what he did. He told me, he said, "I've considered going to work for the healthcare system as well, six or seven times, but you know I'm in my mid 50s and I've survived this long and I'm just not going to do it." Now actually I think he's employed. That was eight years ago, but I think now at about 60, I think he's employed. But I felt like I really wasn't educated enough to be able to run my own business and run my own practice and do so effectively while minimizing overhead. I got scared of all the billing and how to handle the contract negotiations with insurance companies and realized that really the only way to do it would be to join a different practice, which I didn't want to do because I love the partners who I had. I didn't want to be in anyone else's group and we were the big premier group in town.

Jason Goebel:               21:33                The only other option was to work for one of the healthcare systems. And so I started talking to the hospital and I did it with complete open disclosure too, which I think is really important because I knew that these guys who were going to be my partners were all of a sudden in a practice that wasn't affiliated with me, and it will be very easy for them for me to go work for the hospital and them, saying, "Well, we're just going to hire another electrophysiologist," and then all of a sudden, I've got no one to send me volume, and an electrophysiologist can't survive without cardiologists that support them. So before I even went to the hospital, I told them that I had a hard time understanding how the numbers are working in the practice and it wasn't clear to me, and I felt like I can provide better service working for the hospital because of the way overhead works and the way support staff works. At that point I started talking to the hospital.

Shane Tenny:                22:33                You mentioned earlier just the noncompete. You had a noncompete in your contract, but it never really became an issue because of the openness with which you approached the conversation. Is that what you're sa?

Jason Goebel:               22:48                Yeah. That was one of the first things that I brought up with them because I knew that that would be an issue and part of this I think is based on your track record. So I think they appreciated me. They ultimately said... The practice I joined was very, very family oriented. My first obligation was to my family and what was best for my family, and they openly allowed me to go talk to the hospital.

Shane Tenny:                23:17                Yeah. So the art of diplomacy plays in here too a little bit. Now let's shift gears and talk a little bit about negotiating an employment contract with a hospital system. That's a little different animal, isn't it?

Jason Goebel:               23:29                Don't go in there trying to squash a bug that's a whole lot bigger than you are because ultimately whether it's a practice or whether it's a healthcare system, they have a lot more power than you have and they usually have a lot more money than you have to fight legal battles. So the first thing I did was figure out the person who makes the decisions about the contract and I got to know him well. I was always really good to him. I was really open with him and kind of befriended him more so before I even started negotiating a contract. I also worked with a physician recruiter that was employed by the hospital to try to get to know her well and honestly to try to get as much information as I could. That knowledge of knowing all the facts is really where your leverage comes from.

Jason Goebel:               24:22                They then presented me with a contract, which was a boiler plate contract for the healthcare system. It had some specifics in there for me. The contract was 22 pages long in about size eight font. So I read through the entire contract from front to back, which is, the first thing I'll tell you, I think you have to be an idiot to sign any contract without reading every single thing that's in the contract. And then I went through the contract and figured out things that I thought were points of negotiation. The whole entire time you've got to think of what your bailout strategy is, and so you have to look at the contract as in terms of how can I get out of the contract? That's probably more important than anything that's actually in the contract, because if you get into an agreement and you either can't get out of it, or if you get out of it, you get crucified trying to get out of it and you can no longer provide for your family, then the contract's worthless.

Jason Goebel:               25:22                So I looked at my contract and I figured out, at least to me, without independent counsel or anything like that, what were the parts of the contract that I felt were too restrictive that could keep me from getting out of the contract, what were the parts of the contract that may be negotiable? And we're not talking about just money. We're talking about how staff is allocated. Will they provide the mid-level support for you? How was my call going to be structured? What's my responsibility of being on call? And then ultimately obviously how you're paid and the RVU model.

Jason Goebel:               26:01                Once I figured out what I thought were the key points, instead of kind of filtering down what are the main things to try to negotiate, I said, "All right, I'm just going to hit all these points and get the VP to explain to me why is the noncompete radius, why is it 14 miles? Why are these numbers like they are?" And then I found out that some of the things they would simply change, they were like, "Well, that's just the way we always do it, and some of the things were surprisingly easy to get them to change if you had a good, rational reason for doing it because I think the important thing to remember is no one is trying to hose you in your contract. They want to employ you. It's in their best interest to get you to sign the contract, so they're not trying to screw you, they're trying to simply protect their interest and you have to understand in this discussion it's a bipartisan decision to come up with a piece of paperwork to sign. I found out there were some things on there that I really didn't like. They were like, "Okay, yeah, we'll change that," which is really surprising working for a huge corporation.

Jason Goebel:               27:13                And then other things just figured out that there is no way they were going to change that and you've got to figure out the personality of the person that you're negotiating with and really figure out are they very upfront? Are they telling a cheek? Are they poker face? And try to figure out what things you're wasting your time trying to argue about, because you don't want to be like, "Man, this guy complains about everything on the contract." Once you figure out things that you think that they may have some give on, then work on those and then maybe pick two things you think they're not going to give on and fight for those, and the other thing is simply accept because they're not going to change everything to suit you because why would they do that? It doesn't protect them.

Shane Tenny:                27:57                Right. Yeah, great takeaways here, which are, even before you have an attorney looking at the contract, read through it yourself and just write question marks next to the things you don't understand, and then without any animosity, just going and ask for explanations, and you're able to get a fair amount of work done just with that, without paying a lawyer the hourly rate to review the paper themselves.

Jason Goebel:               28:21                What my issue with it was, and one thing I think it's really important negotiation is don't bring up that you don't like it, come up with a solution that's reasonable, because it has to be reasonable. If it's not reasonable, you're wasting your time.

Jason Goebel:               28:34                And then I also went through the contract and highlighted the things that could get me in trouble, the things that if something happened to make me lose my job could allow them to basically terminate my contract without me having any control, because I thought those are the things that were the big issues. Ultimately, that's really what the attorney ended up pointing out. But the thing is, is if you read the entire contract more than once, read the entire contract twice, you're going to find a lot of those things yourself. Like you said, save yourself a lot of attorney fees in reviewing a contract, because my first contract, I didn't pay a lot of attorney fees for. My second contract, I paid a lot of attorney fees for, but it was a big contract that was a big deal longterm.

Shane Tenny:                29:25                Now, you brought up a topic that I know is always a point of confusion or often a point of confusion in contracts, and that's just the rate, the RVU formula. There's always a number in there that seems to have been concocted in the dark of night or with smoke and mirrors and it's hard to know where that came from. Is it fair? Is it not fair? How do I know the difference? Is that a point that can be negotiated or try to focus on the other things? What's been your experience with RVU formulas and rates?

Jason Goebel:               29:54                Well, so first of all, so the contract that I signed was purely an RVU contract. Now, there was salary guarantee for two years exactly like I had in private practice. There was nothing deducted out of that if you didn't meet your productivity, that type of thing, and then after two years, you were on your own. My contract was exclusively RVU except for some things that were negotiated into it, which we can talk about, but it wasn't a hybrid model. You see a lot of these practices where maybe 75% of your income as RVU, and then part of it is based on some other type of productivity model or overhead or that type of thing. So all I was really having to negotiate was the RVU, and I've found twice now after doing two of these with the same healthcare system, there is definitely some play in the range for what that RVU is.

Jason Goebel:               30:52                The thing that is incredibly difficult is to figure out what the RVU number for you in your circumstance should be. I think that that is probably the most valuable thing to be able to figure out in negotiating a contract. Those numbers are very protected. The contract actually has verbiage in it that if you discuss your RVUs, what your conversion is, that it's an offense that's fireable, and that is actually in the contract. The problem with that is that protects who you're negotiating with because it makes it hard for you to figure out, well, what are the other guys making? Their job descriptions are not the same, so the RVU is going to be different.

Jason Goebel:               31:41                What I did was, and I spent probably a month trying to figure out what my RVU conversion should be. I started with just talking to people. I started by calling all my friends in the same specialty, in the same region and if they would tell me, tell me what they were getting paid for RVU. That kind of gave me a range. The thing that's important with that though, is if their reimbursement bottle had other things factored into it, it makes the RVU conversion very different. I think at least with the system that I'm in, and I doubt that it would be any different in any other system, is what it really comes down to is whoever you're negotiating with has a range of what they're willing to pay you for an average amount of work. They may come up with that number with a lot of different things.

Jason Goebel:               32:40                Let's say they're going to pay you $500,000. Well, they may give you a contract that says, "We give you 50..." And they in their head expect you to do 10,000 RVUs. They may give you a contract that says, "We're going to give you $50 in RVU, and that's how you're going to be paid." They may also give you a contract that says, "We're going to give you $44 in RVU. You're going to work 10,000 RVUs, or we're going to pay you $30,000 for call and we're going to pay you $30,000 directorship," and guess what? They're still paying you $500,000. And so I think that's important in understanding what that number is.

Jason Goebel:               33:21                But then after I talked to other people to figure out kind of what they were making, then basically I consulted Mr. Google. I went online, I found what the big companies were that did fair market values. I think it's crazy not to spend a little bit of money to try to get the facts straight so you can go into a negotiation with hard facts and not emotion and what you think you're worth. I called six companies and all six companies that I called have contracts with the corporation I worked for and said they could not provide me a fair market value analysis because it would be a conflict of their interests. And so that made it very difficult.

Jason Goebel:               34:09                What I ultimately ended up doing was the physician liaison who was in charge of physician recruitment, I befriended her enough to get an idea from her what their range in RVU that they were willing to pay. I don't know how I got that information, but that helped. And then I went online and I did research about so what determines what an RVU is. There's actually a lot of PowerPoint presentations that are online that you can look up that really tells you how a fair market value analysis for your pay is determined because the issue is not the RVU. The issue is what are you going to be making, doing the work you're going to be doing? And you figure out that... You start with getting MGMA numbers, you get SGMA numbers, and SGMA numbers are, at least for the Southeast, higher than MGMA numbers. They basically give you a chart, and the chart, they give percentiles. They say, this is 25 percentile, this is 50 percentile, this is 75 percentile, and this is 95 percentile for median RVUs for physicians and what they're paid.

Jason Goebel:               35:27                And then the other thing to remember is that the RVUs are different if you're in an employed model than if you're in a private practice model, which I think a lot of people are probably not aware of that. I don't know if they pay you a little bit extra because you're giving up some of your autonomy in some situations. I didn't in my situation, which is about leverage, but in an employed model, the typical RVU conversion was about four dollars per RVU higher than in a private practice model across the board, no matter where you were.

Jason Goebel:               35:58                And then the other thing is the RVU conversions for cardiology are different regionally. Cardiologists in the Southwest on average had a little bit higher RVU conversion than everywhere else in the country, but in the Southeast, they were number two. And so I knew that whatever numbers they had falling in 50 percentile, the numbers should be a little bit higher than that because they're doing a nationwide RVU average.

Jason Goebel:               36:26                And then you have to look at the RVUs in terms of what your productivity is going to be. This part makes absolutely no sense, and that is that a person who generates less RVUs, as a general rule has a higher RVU conversion ratio than someone who is very busy. So when you look at those charts, unless say, you're very busy, let's say that the average electrophysiologist does 10,000 RVUs a year and you say, "Well, I'm going to be doing 18,000 RVUs a year." You say, well, then you look at the charts and look at what 90 percentile for productivity for an EP is, and that answers about 18,000, and you say, "Well, then I should be getting the 90 percentile for RVU conversion." That is actually not the truth. That actually makes your RVU conversion lower, which to me, when your overhead is relatively fixed and your revenue stream is higher, your accounts receivable are higher, it would make sense in the private practice world that you're going to get a greater pay, so that number should be higher. But the simple fact is, it is not. I don't know why that's how it is.

Jason Goebel:               37:41                So don't go to the table negotiating, say, "Well, I'm so busy. I'm going to do all of these numbers, so my RVU conversion should be higher." In that situation, it was educational to me because I realized that I should be very happy if I'm going to do a high volume, which I do to get 50 percentile RVU, because based on the typical RVU model for MGMA and SGMA, I should probably be at 30 percentile for an RVU conversion.

Jason Goebel:               38:09                And then the other thing is looking at the job description because the job description determines your fair market value. And so if you're in a place like I am where you take call all the time and you have more responsibility when you're home, away from work, then your RVU conversion should be higher. If you're having to cover multiple hospitals, your RVU conversion should be higher. If the typical amount of calls that you get on call is busier than another program, your RVU conversion should be higher. If your payer mix is bad, your RVU should be lower. If your payer mix is high, because a lot of people don't think about that, you just think, "Well, I get our views for the procedures I do." Well, the hospital can't pay you or anybody else can't pay you if they don't get reimbursed. So if you have a bad payer mix, your RVU conversion is lower.

Jason Goebel:               39:01                And so I wrote down all those facts and said, "All right. Well, this is what's unique about my job opportunity." My particular situation, I work at one hospital, but I get calls from four different emergency rooms at different hospital systems. I'm on call a lot. And so because I'm on call a lot, that increases the conversion for what you should get. I look at how you utilize space, how much does it take for the hospital to get you to generate the revenue that you do in four and a half days in terms of the staff that they have to bring? If you can prove efficiency, all that are points of negotiation that you can use as leverage to change your RVU conversion.

Shane Tenny:                39:43                So, Jason, I guess to maybe bring us closer to home on the topic, you've mentioned a couple of times just the work that you need an attorney to do, ultimately, with a contract. I think you've laid out a great roadmap for folks that are needing to look at a contract, whether they're coming out of fellowship or changing jobs or whatever. There's a lot you can do yourself and there's a lot of common sense that you can bring to it. At the end of the day, you got to hire an attorney. So what are your tips about working with an attorney to make sure you've got somebody who's knowledgeable, somebody who doesn't have a conflict, make sure to keep the cost as reasonable as possible?

Jason Goebel:               40:16                I think, first of all, you look through the contract and likely discuss, you find the issues that you have with the contract. I think you need to go right up front. Remember, you're paying by the hour to talk to an attorney, so you should have bullet points written down like, "These are my points with the contract." In fact, just email it to him. You don't have to talk about it. They know about it a lot better than you do. Just email them the points that you think in the contract... They're going to bill you 20 minutes for read the email, but it's better than going on and on and on about all these different things over the phone. There's a lot of language, especially when you get into these big corporations and these contracts that to me, I don't understand, and having them outline that.

Jason Goebel:               40:59                And then the other thing that's important is the legality of some of the terms in the contract, legality of the noncompete, how enforceable is this non-compete? And make sure that the attorney understands your situation and what your bailout plan would be if you were to leave. Knowing what that plan would be, does this contract allow you to do what your plan B would be if you have to get out of the contract? I had them do that. I had them go through the points that I had concerns with the contract.

Jason Goebel:               41:32                My first contract with the healthcare system, I actually did have the attorney reach out to the attorneys for the corporation, which obviously had to pay to do that. Because of all the peculiarities in the contract, I think I spent $5,000 on attorney fees, which was worth every penny with my contract, which helped me negotiate my big concerns, which were, number one, the noncompete, number two, if I leave the practice and I'm in a community where I'm the only person providing the service, how can they legally prevent me from practicing which would involve abandonment of my patients, which I think is against the law? And how can they keep me from soliciting my staff if I leave and want to take people with me who I've trained for years to work with me, and hopefully if they like me, want to go with me when I leave?

Jason Goebel:               42:30                Those were my biggest things. That is what I spent the entire time of my contract negotiating. The other parts of my contract, I did not use an attorney to negotiate. I simply had them read them and just make sure they pointed out any terms in there that I didn't understand. But what I used an attorney for were the legal grounds for how I would get out of the contract. That's actually all I used the attorney for, but it took a lot of work and time to do that because it took the attorney working with the other attorneys discussing my concerns. It resulted in changing some things in the contract that made the contract much more protective for me. Because the buyout from my contract was huge, so the buyout for my contract was basically whatever you made in the last year.

Jason Goebel:               43:22                So that was something that was very scary to me. It's not something they were willing to change, but I got it set up where basically if I left, as long as I didn't abandon the hospital, and again, the goal in this was not to try to fight with the hospital. The goal was to protect both of our interests, and I knew that. I was like, "Look, if I leave and I go into private practice by myself and I'm in the community and I'm still serving your hospital, will you enforce the noncompete against me?" Of course, they say no, and no means absolutely nothing if it's not in the contract, but they made it clear where verbiage in the contract said that if I provide at least 50% of my services at the hospital that I was at for one year after leaving, that they would not enforce the noncompete against me.

Jason Goebel:               44:07                I further protected myself with that because I became involved in a surgery center which was owned by the same hospital system. I knew that even if there was something that went wrong with the hospital, that if I did 50% of my procedures and 25% were at the surgery center and 25% were at the hospital, that was still 50% at an affiliated facility which will still keep me within the protection from a noncompete. That is what I used an attorney to help me do.

Shane Tenny:                44:36                That's super. As we wrap up here, any parting thoughts or suggestions to folks out there struggling with their contract or wondering about it? Any final tips or trick?

Jason Goebel:               44:47                When you negotiate your contract, do not become fixated on RVU conversion. Think of your contract as what can I do to guarantee my income if I lose half of my volume and still get the best revenue guarantee long term? I negotiated other things that I looked at as a guaranteed source of income that was over the term of the contract, as opposed to tying myself to an RVU conversion.

Shane Tenny:                45:15                I was going to say help to protect you in the event of a global pandemic as well if the practice is shut down.

Jason Goebel:               45:22                Yes, that's right. That's true.

Shane Tenny:                45:22                Well, Jason, I'm super thankful for your time. I've always enjoyed our conversations together and good cheer and good form even in negotiating contracts. So I believe as the old saying goes, a smart man learns from his own experience and a wise man learns from the experience of others. So hopefully we got a bunch much wiser listeners now as a result of your stories, so thanks for your time today.

Jason Goebel:               45:46                Absolutely. Thank you very much for having me.

Shane Tenny:                45:47                Absolutely. Thank you for joining into this episode of the Prosperous Doc Podcast. We've got more episodes queued up every other Monday coming out for you. You can find us on all social media channels. Of course, as always, if you have any suggestions, questions, topics for future podcast episodes, you can email me directly, shane@whitecoatwell. Thanks for being with us today. We'll see you back here next time.

Outro:                          46:10                This episode of the Prosperous Doc Podcast is over, but you're not alone on your journey. Spaugh Dameron Tenny has been helping physicians and dentists prosper through financial planning for over 60 years. To connect with us, visit sdtplanning.com today and take your financial wellness to new levels. Join us on the next episode of the Prosperous Doc Podcast.