Podcast Episode 34 | How To Make the Most Out of Your Healthcare Employment Contract

With Anu Murthy

About the Prosperous Doc® Podcast

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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Intro (00:02):

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 (00:20):

Welcome back to this episode of the Prosperous Doc Podcast. I'm Shane Tenny and glad to have you with us. In episode 26, a couple of weeks ago, we talked with Dr. Jason Goebel about his experience in negotiating his employment contract. We've talked about it from a physician's perspective, but today we're here to talk about partnership and employment agreements from an attorney's point of view. And so I'm joined today with Anu Murthy, a long time friend and a healthcare attorney and practice consultant, and a former lobbyist, who has a lot of experience with healthcare contracts, healthcare systems, medical systems and health care policy. She has several close family members who are in medicine, and it's just really intimately familiar professionally and personally with the challenges they face. And so I'm excited to get her two cents on your employment contract questions. And so Anu, thanks so much for being with us today.

Anu Murthy (01:19):

You're welcome, Shane. And thank you so much for having me on. It was great to reconnect with you, as I moved back to North Carolina from D.C. and restarted what I call my hybrid healthcare law practice, because as you mentioned, I'm a healthcare attorney, but I'm also a consultant dealing with practice management issues, practice formation, et cetera, et cetera. So I'm so glad to be here today because there are lots of exciting things going on for physicians in this healthcare economy.

Shane Tenny (01:52):

Yeah, absolutely. Well, I thought we'd maybe start with the nuts and bolts on the contract and then maybe it will get up into some policy issues by the end of the show here.

Anu Murthy (02:00):

That sounds good. That sounds good.

Shane Tenny (02:01):

All right. Well, my lead off question, I think is the lead off question for most healthcare providers coming out of residency, coming out of fellowship training and facing their first job with the healthcare system. And they're presented with eight or nine or 15 page employment contract from a billion dollar healthcare system. And the feeling is this is the standard contract, I probably can't change it anyway. Fact or fiction?

Anu Murthy (02:26):

A little bit of both.

Shane Tenny (02:28):

Okay.

Anu Murthy (02:29):

And I listened to the podcast that you had with Jason and I actually listened to it a couple of times. He brought up the fact that one of his attorneys I think told him, okay, there's just certain things in your contract that you can't negotiate. And I agree with that, but if you're a new physician and you have not ever gone through an employment contract, there is inherent value in speaking to a healthcare attorney to understand the anatomy of the contract, the nuts and bolts, and primarily what are your rights under the contract? But also what are your responsibilities under the contract? You may not be able to negotiate very much in terms of language, but you could negotiate some compensation matters. One of the things that a lot of physicians don't always look at is the RVU conversion factor.

Anu Murthy (03:25):

For example, again, Jason brought that up in the last podcast, so I won't go into it. But there are things certainly that you will be able to negotiate, it also depends on what the market is. I had a really successful negotiation a couple of weeks ago with a local physician here in North Carolina, who was able to negotiate quite a high signing bonus and some other incentives because the practice that he was joining that belonged to a health system, that vacancy had been there for more than a year. So they really needed a physician in that position. So it helps to speak to a health care attorney who has some understanding of the healthcare landscape as well.

Shane Tenny (04:09):

You bring up a good point, which is on the one hand, if nothing else, which there is, but if nothing else, having the healthcare attorney can help you understand what's in the thing you're signing, which helps manage your own expectations for the future. But at the very best, your point about the RVU conversion rate is a question that we hear all the time. The healthcare attorney is the source of information about that, tell me what range is reasonable or tolerable in your area, your specialty, right?

Anu Murthy (04:35):

Absolutely. Because once you transition away from a guaranteed salary, then you are in productivity and that RVU conversion factor is going to make the difference in how much you're going to make overall. There's only so many hours in a day, there's only so many patients that you can see. So you want to make sure that you set yourself up for success from the outset. Another thing that I really like to focus on with my clients is because I've been on what I call the employer side, the buy side of the transaction, I've overseen and developed physician acquisition teams, recruitment teams, et cetera. I know where the sweet spots are in contract negotiation with those large health systems. It's very, very important to understand how the health system works in terms of how they're contracting with physicians. And that's something that's knowledge that you can get by networking with your colleagues, whether at that particular health system or in other health systems. I think the more knowledge that you have going in, the better that it is for you as a perspective employee of the system.

Shane Tenny (05:52):

Yeah. Now, are there other, or maybe I'll ask, what are the other most common myths that you hear or know when you are approached by a physician saying, can you look at my contract?

Anu Murthy (06:05):

Well, one of them is to do with non-compete provisions. I think a lot of physicians feel like either they cannot be changed or negotiated, or they feel like, well, I'm going to sign it. But I'm sure that when I want to leave, I'll be able to negotiate out of it. And those are both, there're truths to both of those ways of thinking. But my feeling is that if you are not going to be able to live with the non-compete as written don't sign the contract, it's not always easy to negotiate out of a non-compete. So go in with the assumption that this is what the non-compete is. Unless of course you've had an attorney successfully able to renegotiate or eliminate the non-compete.

Anu Murthy (06:55):

Now with COVID, all of that is changing, I'm seeing non-competes being waived across the country, because practices are being shut down. I have a sports medicine client right now whose practice is shut down and they're going to waive her non-compete, because the practice is no longer there. So there's some special circumstances that COVID is bringing from an economic perspective that you may be able to get out of certain non-competes. So be creative.

Shane Tenny (07:27):

Yeah. Non-competes are definitely a big one. Now, I'm thinking about scenarios. What about just the actual compensation formula? I'm thinking of scenarios that we had a couple of years ago with a group of clients that worked at a hospital system. And then they noticed that they didn't get their bonus checks and then the next month they didn't get the bonus checks and then the hospital, oh, we're still tabulating things. And then, Oh, come to find out, we're now charging you for your mid-level providers instead of us providing them. And it's this unilateral change to the whole compensation formula. Talk a little bit about those types of scenarios.

Anu Murthy (08:02):

Sure. Again, I think that it's really important at the outset to understand how your compensation methodology works. I've been in institutions where even the vice-president of operations of the medical group didn't understand how the compensation methodology worked. So first and foremost, get a good understanding of that. Sit down with the folks at the health system and have them explain to you in real numbers, in writing how that works. And if you do find errors, discrepancies, bonuses not being paid, you need to address that very early on. As soon as you don't get a bonus, whether it's a monthly or quarterly ask to see the numbers, ask to see the spreadsheet, figure out what's going on early on, because yes, employers do sometimes reserve the right to unilaterally change compensation methodology. And it's always communicated, especially in larger health systems, but that can also happen if you're an employee in a private practice situation.

Anu Murthy (09:04):

I had a client who missed her bonus for three quarters before she came to me. And it turned out that, that it was an accounting error. It was a very simple thing, it wasn't anything that was malevolent, but it is you as the physician, and as a physician, you're almost just a small business owner, right? Even when you're employed, you're looking at balance sheets, you're looking at what you're making and what your expenses are. It's important to keep the control and understanding of what's going on in your line of business, even as an employed physician. I think that's really, really important. So do you have recourse? Yes. You do have recourse. You go back to the employer and you talk about it and you try to negotiate whether it's an expense, that's now being attributed to you, whatever the situation that has led up to this, usually decrease in compensation and income. Sit down and talk about, be active in speaking with the people who are controlling your compensation.

Shane Tenny (10:12):

Yeah. I should. And to put a point on it, it's always a decrease in compensation, nobody ever complains about increases in compensation.

Anu Murthy (10:19):

Right. Right.

Shane Tenny (10:19):

A specific question, which is, as we know, billing is complicated, billing departments change, billing vendors change. How long does a physician need to wait to get something fixed? I'm thinking of the scenarios where you have providers that go to the billing department or go to their regional representative, like this is not working. Oh, well, let's look into it. And then it's months and months, and months, and that sort of thing. At some point you get antsy or frustrated. Is there a fixed amount of time or as soon as it seems like there's no progress, is it appropriate to reach out to an attorney or to their original healthcare attorney?

Anu Murthy (10:55):

That's a great question. I think that, again, it depends on the frequency of how you're being bonused out. If it's a monthly bonus and it's decreased or diminished a couple months, I think that you certainly bring it up. You give them some time to fix it, explain it to you, et cetera, et cetera. And then I think if a quarter goes by that you're seeing discrepancies, then I think it's absolutely appropriate to reach out to both an attorney and potentially an accountant as well.

Shane Tenny (11:25):

Talk a little bit about the employment contract is the agreement between two parties, to each other's rights and responsibilities. What are we going to do? At some point though, the intent there is to avoid any breach of contract, but talk a little bit about what a breach of contract is, how it can happen on either party and then what the steps are on the part of the physician or the provider.

Anu Murthy (11:48):

Sure. So under a standard employment contract, both parties have certain rights and responsibilities. And when one party does not perform under the terms of the contract, then there is what we call a breach. You're not performing up to your end of the bargain. Some breaches can be fixed or what we call cured almost immediately. For example, if there's a physician who has led board certification labs or something like that, it can be something that was inadvertent and can be fixed, you get a notice of breach. Some breaches say, you lose your license. That's something that you're no longer able to perform under the contract, your duties as a physician that's would be a cause for an immediate termination. But I think that the breaches that you see on the employer side, while they're not impossible to address, it's a little bit harder.

Anu Murthy (12:55):

If you look at most employment contracts, you will see a whole bunch of reasons why a physician can be terminated, but you don't really see as many reasons to allow the physician employee to terminate the contract for a cause. And yeah, most employment contracts with the health systems tend to be weighted heavily in favor of the employer. I personally think that's going to get worse because at least for the past few decades, when there's been a perceived or real shortage of physicians and specialists, physicians have had some power with employers. But now as you know, COVID has brought us unprecedented levels of physicians who have been furloughed and now not employed. And so that equation has turned on its head. So I'm worried that physicians will be signing contracts that will be even more weighted heavily in favor of the employer.

Shane Tenny (14:07):

I guess one final question on the breach maybe before we take a quick break, which is if one party in the circumstance that you are alluding to there. If there's a circumstance where the hospital or the healthcare system is not fulfilling some element of the contract, they're obligated to whether it's timely payment of call pay or things like that. If they are found to have breached the contract first, does it then absolve the subsequent breach by the physician who says, well, forget this. I'm going to work for a competitor anyway. Therefore my non-compete isn't enforceable?

Anu Murthy (14:35):

No, I wish it was as simple as that. It wouldn't likely happen that way. If there is a significant breach, then you as the employee is still need to give notice and notice to cure and allow them to cure the breach and come to the table. It doesn't necessarily mean that the other responsibilities that you have under the contract are absolved. It's usually not that simple.

Shane Tenny (15:00):

Right. Yeah. I think key takeaway you don't get a free hall pass, just because the other guy screws up.

Anu Murthy (15:04):

Exactly. Yeah.

Shane Tenny (15:05):

Perfect. Well, right after this, I want to go deeper into what you've been seeing with COVID and its impact on compensation and employments and things. So we'll hit that right after this break.

Shane Tenny (15:18):

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Shane Tenny (16:01):

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Shane Tenny (16:48):

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Shane Tenny (17:20):

All right. So Anu Murthy, a healthcare attorney, a lot of experience around this topic. You were lobbying last year in Washington around value-based healthcare. I want to talk about that in a minute, but talk a little bit about what you've been seeing with the impact of COVID on the healthcare system and practitioners and the choices that they're needing to make.

Anu Murthy (17:39):

Well, as I alluded to just a couple of minutes ago, the ecosystem in terms of employment opportunities for physicians has changed dramatically. It used to be that physicians were sought after, they were being bombarded with opportunities by recruiters on a daily basis, sometimes dozens of opportunities. That's changed, that slowed down. Again, we're seeing many systems that have furloughed physicians early on, and now they're turning those furloughs into permanent terminations, closing of clinics, et cetera. And there's unfortunately very little recourse that these former employed physicians have against the healthcare systems. They're utilizing the force majeure clauses, basically saying that, well, we don't have the business anymore to keep this practice open or to keep this practice open and have six physicians. So we're going to terminate two of them or however many. But the problem that I'm seeing is that employers are also terminating without giving proper notice.

Anu Murthy (18:52):

So they're doing an immediate termination after furlough rather than give a 90 day or a 120 day, whatever the contracted notice provision is. Because at least that then gives the physician some compensation while they're continuing to look for other work. And of course, we've all seen the meteoric rise in the use of telemedicine. So many physicians, especially in primary care, have turned to working for the big telehealth companies, if they're employed, places of practice have not adopted tele-health on a large scale. Those are two changes that I'm seeing, also seeing unilateral changes in compensation methodology, again, going down, typically not up. And that's been something that a lot of physicians are facing, but they feel stymied. They feel like their hands are tied because they want to hold onto the job and benefits, et cetera. So as a result of some of these trends that I'm seeing, especially during furlough and we're talking that March, April, May, I had a number of physicians reach out who said, you know what? I can't do this.

Anu Murthy (20:02):

I need to diversify. I need to find some alternative streams of income. And I've been sitting on this idea, whether it's a patent or whether it's an idea for a new type of business. And so this entrepreneurial spirit and creative spirit has really come to fruition with a lot of physicians. And so I'm actually seeing that trend continuing to grow. I think it's important though, as a physician, if you have been furloughed or terminated in any way to speak with an attorney. You want to make sure that you negotiate the best possible exit package that you can. Don't just assume that if you have a termination letter that that's it and final, there are ways to negotiate the terms of that exit package, especially in terms of the non-compete we talked about that. You should be able to get a waiver of your non-compete. You should try to get them to pay your tail coverage if that's not already covered under your contract. And I think the most important thing is make sure that you are given the contracted for notice period, and that you're compensated during that time.

Shane Tenny (21:16):

And with physicians that either have been furloughed, been terminated, or maybe just seeing a decrease in their income or their schedule or their procedures or things like that that are exploring side projects or side gigs or those sorts of things. What do they need to be aware of there in terms of starting their own entrepreneurial gig on the side?

Anu Murthy (21:38):

Well, again, we always start with the contract. So if you are still employed and you have an employment contract, make sure that what the side gig, side hustle that you are looking into, doesn't violate the terms of the employment contract. So first and foremost, I would start there and if it doesn't, your employer says, no, that's fine. You can go ahead and do that, get it in writing as well, and make sure that you're not, again, violating anything that they could later terminate you for. Then sit down and make a business plan. Make sure that what you're trying to do is viable, that you're going to get a return on your investment. Lots of tools out there for business plans, but I always recommend that you work with either a business advisor, an accountant, an attorney, to make sure that you're doing things in a legal way.

Anu Murthy (22:27):

Protect your financial health by setting up the proper business vehicle, whether that's an LLC or other legal entity, make sure that you're going to continue to protect your assets that way. Talk to your insurance advisor and make sure that what you're doing is not going to impact either your malpractice insurance, or if you perhaps need some other types of insurance, business interruption insurance, an umbrella policy, et cetera, et cetera, because even with an LLC you're still going to be exposed. So the more layers of protection that you have, the better. Once you start the business and you're either selling a service or a product or whatever that happens to be, you're creating a brand and you are going to later be able to monetize that brand.

Anu Murthy (23:18):

So it becomes an asset, so it's very important to protect that brand, not just so that you may be able to sell it down the road, but you also want to protect your brand so that if there's somebody else out there with a similar type of intellectual property, whether it's a trademark or copyright or patent, that you're not going to get sued for infringing upon their intellectual property. So there's two sides to that type of protection, protecting yourself, protecting and monetizing your brand as well. So those were some of the things that are really important to look at. And again, always want to make sure that whatever you're doing is legal in terms of having any other business permits or anything like that.

Anu Murthy (24:04):

You may be a neurosurgeon who decides to sell the recipe for strawberry jelly, that his grandma left him, and he wants to monetize that and is doing it out of the basement of his house. So you want to make sure that your homeowners association allows you to do that. I think it's also particularly important if you have invented something or a process that requires patent prosecution, very, very important to be able to speak with a good patent counsel, to make sure that you're able to protect that and potentially monetize that going forward.

Shane Tenny (24:39):

Yeah. Side gigs are definitely an area we get asked about a lot. It's a lot of fun. It's an outlet for creative energy that a lot of providers have, but you don't want to get too far down the road and realize you missed a step with intellectual property protection or brand protection or things like that. So healthcare is constantly influx and somebody is constantly under attack or being scrutinized. We're in the midst of... As you and I are recording this, we're in the midst of awaiting election results to see which way Washington is going to tip following the recent voting and election process. You spent the last year in Washington lobbying for health care and value based healthcare. What are some of the themes that were coming across your desk that were part of the conversations that our listeners need to be aware of?

Anu Murthy (25:24):

Oh, that's a great question. So I think first and foremost, what is the fate of the Affordable Care Act? We have a new Supreme Court justice and this case will go to the Supreme Court. So it'll be interesting to see what happens as a result of that case. So even if the ACA is invalidated, what's it going to be replaced with? I think that, that's a really big question right now that people are talking about. Contrary to popular belief, change in administration at the White House is not going to have a dramatic effect in terms of some healthcare legislation that is in play. For example, surprise billing, which I think that's something that a lot of your listeners and my clients are interested in, especially those in ED, anesthesia, et cetera. Surprise billing is a bipartisan effort. And it was with the Senator Lamar Alexander and his Democratic counterpart, Patty Murray.

Anu Murthy (26:25):

Now Lamar Alexander has retired from the Senate and so it will be interesting to see whether that bi-partisan efforts going to continue on. I think it will. The president in an executive order recently has asked Congress to continue to go down that path for surprise billing. But as we know, there are lobbyists on both sides that are going to weigh in and influence. The other issue that we will be looking at closely is prescription drug pricing. And again, that's another bipartisan effort with both Democrats and Republicans that are supporting it's the Grassley-Wyden bill that I'm specifically talking about. So we'll see what happens with that as well. I haven't seen a lot of press talk about this is if Biden ends up winning the white house, one of the things that he's talked about repeatedly is decreasing the Medicare eligibility age from 65 to 60.

Anu Murthy (27:26):

That's going to have a huge impact on the way that physicians are going to be paid. If we have tens of millions of patients that are going to be bringing us Medicare reimbursement, that's going to change the business model quite significantly. There's lots of things that are in play and that we have to just wait and see how the house and the Senate are going to interact with the next president of the United States.

Shane Tenny (27:54):

Anu, when we were talking before the show, you brought up a topic that I've sometimes jokingly referred to as the Achilles heel of surgeons and some healthcare providers, and that is Stark Law. Can you give us a little background on what the genesis of Stark was back in the 90s and then why it's been a point of frustration and what you are seeing might be some reform to that next year?

Anu Murthy (28:16):

Sure. So the Stark Law is a 30 year old piece of legislation that was enacted to prohibit physicians from referring patients to entities that they or immediate family members have a financial relationship with. And this, again, refers to Medicare and Medicaid patients primarily. And a lot of things have changed in 30 years, especially with the advent of a movement towards value-based care, bundled payments, those type of innovative payment models. And what's happened is that Stark Law has disincentivized physicians from coordinating care in order to have better patient outcomes, because they were worried about referral relationships that would run a foul of Stark Law restrictions.

Anu Murthy (29:15):

So last year Health and Human Services, recognizing that physicians and other entities in healthcare there was a chilling effect on innovation. They put forth a modernization of the Stark Law that would provide some waivers to Stark Law regulations based on physicians and other entities taking more financial risk. For example, full financial risk would be capitated payments, not everybody is ready to go to that path. But value based arrangements that had some meaningful downside financial risk, they would make those arrangements just easier to enter into without being worried about criminal penalties that often come up under and to kickback statues in the Stark Laws.

Shane Tenny (30:10):

All right. So break it down for us lay people. Can you give me an example, what would be a scenario that right now is challenging and how would it be improved if some of these reforms get passed?

Anu Murthy (30:21):

Well, one of the things that comes to mind is telemedicine, especially under COVID the rise in telemedicine and the compensation, the reimbursements that are involved with telemedicine were very limited, especially in terms of geography they were really just looking at telemedicine, being delivered to patients in rural areas that has changed significantly. So that even patients that are in traditionally non-rural areas are going to have access to telemedicine and physicians, including procedural specialists as well. We'll see higher reimbursements for telemedicine. The other issue that often comes up is just the furnishing of wearable devices, like a smart watch or some kind of a monitor, et cetera. Cardiology sees this as well, that they're able to provide those to their patients. And it won't be considered illegal or run a foul of Stark Law. It's not an inducement to the patient anymore. And those are things that people have those types of technology now that they didn't even contemplate 30 years ago. So the new Stark Law again is going to be more in line with the way that physicians practice and that where patients are today.

Shane Tenny (31:42):

Well, Anu, I always feel whenever we talk like, Oh, wow, there's a whole well of topics we didn't even cover, but I am so grateful for your time today to talk about contracts and Stark and COVID, and just the trends that you're seeing, we appreciate your help. How can folks get in touch with you if they'd like to connect or have a question about something, how can people track you down?

Anu Murthy (32:02):

Absolutely. So my email is anuesq@yahoo.com. That's the best way to reach out to me. I'm actually in the process of changing my website. Yes. Email's the best way to reach out to me. And I'm happy to have a quick chat with anybody who has an issue, legal or business or otherwise.

Shane Tenny (32:21):

Excellent. Yeah. And we can put that information in the show notes as well. So thanks again for being with us.

Anu Murthy (32:25):

Thank you.

Shane Tenny (32:26):

And thank you for joining us today for this episode of the Prosperous Doc Podcast. We appreciate it. I hope you found the conversation helpful and as always welcome your comments, your feedback, your reviews, please subscribe. If you subscribed through Google Play or iTunes, then you'll not only be alerted to regular topics as they come out every other Monday, but also a chance to give us a feedback and reviews. You're welcome to email me directly, shane@whitecoatwell, if you have any ideas for guests or topics or stories that you want to tell on the Prosperous Doc Podcast. Thanks so much. We'll see you back here next time.

Outro (33:03):

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.