The first five years of practice, after completing our training, are difficult for a host of reasons. We are clinically trained to conquer the next step, but we lack the experience to handle the tough pitfalls that we encounter as working physicians. A broad number of issues provide significant challenges: choosing a practice, analyzing contracts and handling legal and financial issues. Sometimes the best advice to help with these potential pitfalls comes from light conversations with experienced colleagues over a cup of coffee or a beer. This series will attempt to share a few pearls that you would hope to pick up during that conversation.
Through the rest of the year, we will try to formally address a number of issues that face the new ophthalmologist, and to transfer opinion and advice from experts in a codified manner. We hope that these lessons will allow for a more uniform distribution of knowledge. We look forward to a vibrant exchange of ideas.
- Jonathan Prenner, MD, and Rick Kaiser, MD, Series Editors
To borrow a phrase, it is the best of times and the worst of times. After a dozen or more years of higher education and medical training, we complete our residency in ophthalmology with clinical skills that are second to none. Unfortunately, we are not as well prepared for what's next: finding a first job that is the best possible entree to a personally and professionally rewarding medical career.
Our experience, and that of many of our colleagues, indicates that those of us who "got it right" with the first job may have done so more through happenstance than any other factor. Most of us do not get it right the first time (in fact, about 80 percent of us leave the first job within the first three years) but many do find our way to the appropriate path—although the journey is even more likely to be shaped by coincidence and chance.
Now, with that first job search behind us, and about five years into our careers, we've observed that there is a somewhat typical process that every newly minted ophthalmologist follows. The process won't take each person down the same path, but it will move you in the direction that's best for you.
In addition, we'd like to share what we've learned about "trial and error" and how to make it a productive part of the process.
The number of physicians completing ophthalmology residency has plateaued, while the demographics of an aging population combined with a plethora of new eye procedures are creating higher demand for eye surgery and medical eye care—and it's likely to continue. Even as Medicare and managed care attempt to control the cost of medical care, practices are growing, and demand for ophthalmologists is up.
A Defining Question Douglas Rhee, MD, When looking for your first job, the most important thing is to be honest with yourself. What do you want? Sometimes it's hard to know. Sometimes your first job doesn't work out because it wasn't the right fit. The more you can identify what you want to do, the sooner you can identify the right opportunity. • Academia/research. Teaching and running clinical or laboratory research projects are intellectually rewarding and provide a setting where you can rub elbows with the best and the brightest. These jobs can lead to highly prestigious, tenured positions, and also offer the potential to help large numbers of patients by answering fundamental questions. Dr. Rhee spcializes in glaucoma at the Massachusetts Eye & Ear Infirmary in
It all leads to one conclusion: There's never been a better time to be a young ophthalmologist. Practice management consultant John Pinto of
Is private practice truly the best avenue for you?
During residency, many physicians assume private practice (and eventual practice ownership) is where they're headed. But are you interested in the business side of medicine? Running a practice is much more time- and energy-consuming than most of us realize.
There are other career paths to consider:
• Hospital positions. Staff specialists and surgeons get to practice "pure" medicine, insulated from headaches such as staff management, billing/coding and insurance issues, malpractice insurance and the bottom line. When combined with teaching positions, they offer an interesting balance of professional duties.
• Health maintenance organizations. These may seem a little bit "old news," but in some parts of the country, HMOs are very strong players. Practicing in this setting offers plenty of cases and none of the private-practice stress. This can be a good fit for those with family responsibilities or a time-consuming avocation.
• Pharmaceutical or medical device industry. These are corporate jobs with all the perks. A medical degree brings you in at a high level, one at which you are a critical decision-maker. You most likely would be involved with research and development of new products that have the potential to help large numbers of people.
• Large group practice. Working for a mega-practice can also insulate you from private-practice headaches. Most doctors in a really big practice just practice medicine, and do not get involved in practice management.
A Defining Question
Douglas Rhee, MD,
When looking for your first job, the most important thing is to be honest with yourself. What do you want? Sometimes it's hard to know. Sometimes your first job doesn't work out because it wasn't the right fit. The more you can identify what you want to do, the sooner you can identify the right opportunity.
• Academia/research. Teaching and running clinical or laboratory research projects are intellectually rewarding and provide a setting where you can rub elbows with the best and the brightest. These jobs can lead to highly prestigious, tenured positions, and also offer the potential to help large numbers of patients by answering fundamental questions.
Dr. Rhee spcializes in glaucoma at the Massachusetts Eye & Ear Infirmary in
"Now it's taking longer to find qualified candidates [for practice associates], and base salaries are being bid up, Mr. Pinto notes. "It's particularly difficult in secondary markets to find young ophthalmologists."
He says demand is up due to multi-faceted reasons:
• Baby boomer surgeons want to slow down and implement their exit strategies.
• There are more new eye procedures, expanding the number of potential patients.
• Boomer patients have reached the age at which they need more eye care and surgery.
"Utilization of ophthalmology services is going up," Mr. Pinto says. "While we once saw 20 to 30 cataract surgeries per 1,000 seniors, we now see 60 per 1,000."
There's another sea-change that is affecting the marketplace. As the GenX and Millennium physicians come into practice, they are demanding greater work-life balance. More doctors are interested in part-time positions and job sharing than ever before.
Another factor is a diminished perception of medicine as a big-bucks profession.
"The physicians are not any less intelligent than before, because board scores are not going down," says Mr. Pinto. "What we're seeing is that people who are gung-ho ambitious are driven to other commercial domains. There's a realization that if your first priority is financial success, medicine is not the destination."
Ironically, the overall effect has pushed starting salaries way up. Lauren Simon of the Eye Group, a
• $125,000 to $175,000 for general ophthalmologists.
• $175,000 to $200,000 for cornea, and up to $250,000 for plastics and glaucoma.
• Retina is often running at $200,000-plus, with reports of first-year base salary deals above $300,000, and offers hitting $400,000 (Mr. Pinto notes that every year spent in retina fellowship training can boost lifetime earnings by $2 million or more).
What's Fair? A Guide to Compensation John Pinto, Eye surgeons, by their very nature, are math-heads. And no number is quite so interesting to the young associate than personal compensation. Here are a few perspectives on physician compensation. Mr. Pinto founded J. Pinto & Associates, a health-care management consulting firm, in 1979. For 15 years, more than 95 percent of his services have been to ophthalmic practices ranging from modest solo ophthalmology practices to higher-volume LASIK and cataract market leaders and teaching centers.
Let's start with the simplest approach, where the practice's profits are split up equally among the doctors. Let's say there are three partners in a practice generating $2,000,000 in collections and $900,000 in distributable profits—so each doctor receives $300,000. Equal-split compensation works only with small groups of doctors who are very close in their production levels and potentials, and who are very compatible partners, working in an environment of economic expansion or at least agreed stasis.
The problem with equal-split compensation is that no two doctors are ever truly economically equal. One doctor is always faster, or more aggressive or more popular with patients. Trying to maintain equal compensation collides with this obvious truth. In reality, most practices using an equal-split approach are subject to either the defection of the most productive members (especially if there is no non-compete provision in place), or to a different kind of competition, for example, for who can take the most vacation time, to equalize production. Either way, productivity suffers, overhead climbs as a percentage of revenue and profit margins are reduced sharply.
The practice can avoid major upsets with simple modifications. For example, a part of each monthly or quarterly profit can be held back and divided up based on a majority or super-majority vote of the board. This might give the practice enough flexibility to reward higher producers who might otherwise be on the verge of leaving unless they are better compensated.
A far more common approach today to compensation in a group practice is some variation on the "Eat What You Kill" model. The purest form of EWYK is to first pay for all of the practice's expenses, and to then index profit distribution to each doctor's personal production (based on charges, collections, patient visits or Relative Value Units).
Pure EWYK leads to competition rather than collaboration among partners. But it has another, more insidious vice. EWYK allows doctors to step away from active practice without a proportional economic punishment. I was recently in a practice where the senior doctor was taking two days off a week, yet the practice was staffing as though he was there full-time. The wasted overhead was being carried by his partners.
Depending on the compensation model used, especially those rewarding individual productivity, bad feelings can emerge when group resources are spent for equipment, marketing or staff resources that benefit individuals unilaterally. This is an increasingly common problem in groups in which one doctor is the LASIK surgeon.
A far less common approach, but one we"ll see more of in the future, is to trifurcate compensation, with roughly one-third of each doctor's personal income coming from:
• A base salary. This can be equal for all physicians, indexed to national averages based on subspecialty, or indexed to tenure in the practice.
• A production-based bonus. This can be indexed to collections, patient visits, charges, RVUs or a mix. This appropriate "eat what you kill" holdover, as part of a partner's compensation, maintains an important reward for being clinically productive.
• An owner's dividend. In few practices is there a direct, tangible reward for being a partner. A dividend, paid pro-rata for percentile ownership of the business, can provide a direct incentive for new doctors to buy in, even if they are minority shareholders.
There are many variations on these basic compensation models and nuances too numerous to fully catalog here. Some practices use a point system, in which years in the practice translate into a larger share of the pie. Some have a deferred compensation plan, so that dollars are withheld and paid at a later time to lock in a doctor who might otherwise leave. Some pay specific bonuses for work on management committees or special projects. Like our country's highly complex tax system, every practice's model should be designed to consciously reward desired behaviors.
Sorting It Out
What's Fair? A Guide to Compensation
Eye surgeons, by their very nature, are math-heads. And no number is quite so interesting to the young associate than personal compensation. Here are a few perspectives on physician compensation.
Mr. Pinto founded J. Pinto & Associates, a health-care management consulting firm, in 1979. For 15 years, more than 95 percent of his services have been to ophthalmic practices ranging from modest solo ophthalmology practices to higher-volume LASIK and cataract market leaders and teaching centers.
Although the market is positive, it's just as difficult as ever to sort it all out. You've likely narrowed your options just by selecting whether you'll be a comprehensive ophthalmologist or subspecialist, but there are still some critical choices to make.
The first question you need to ask yourself is whether you will be guided by the best place to live or the best job available. You might answer that you want both, but in our experience, that rarely happens with the first job.
Perhaps there's a climate you prefer, you may want to return to your hometown or your spouse's hometown, or perhaps you want to be close to skiing, golf or some other personal interest. These are all valid reasons, but remember, there will be fewer open positions on either coast and in major cities.
Most likely, the demand for ophthalmologists will be greater in smaller cities and rural areas, which translates into higher starting salaries and more leverage when you negotiate an employment contract. On the other hand, there may be fewer career opportunities for your spouse, and fewer cultural amenities.
One of us had experience with putting location first, and it was the Big Apple itself. You probably won't find a less welcoming market than
The other one abandoned a desired location (
The take-home message is that either method (best location or best job) can work very well. You just need to be aware that you will most likely accept some compromises along the way. However, if you stay focused on your ultimate goal (I really want to live here or I really want this particular job), those compromises can lead to the overall life you want to lead within five years or so.
A great place to begin your job search is with the
There's another great network to tap into, and that is all the colleagues you know. One of us got his first job from a tip supplied by a woman who happened to be attending the same out-of-town wedding. After pursuing several other job leads and performing due diligence, it turned out this recommendation from a stranger was the best option.
Certainly, medical professionals have their own very strong network, so ask every doctor you come in contact with (personally or professionally) to recommend ophthalmology opportunities. Even physicians you interview with are often willing to share information about other practices that are looking for young ophthalmologists.
Resist the urge to grab the first opportunity that comes along. Although you may be eager to get out there and see patients (and earn a paycheck), this is an important time to learn and explore. Every interview is a chance to look inside a practice and compare it with others you've seen. Do pay close attention to the interaction among doctors, the interaction among doctors and staff, and staff attitudes in general. Does this seem like a place where people are happy? Don't ignore the gut feeling that tells you "no."
Are Restrictive Covenants Good Business? John Pinto, In medical practice employment contracts, the terms "restrictive covenant" and "non-compete agreement" are used interchangeably to label terms prohibiting a doctor from leaving his employer and directly competing. In the seller's market that currently exists, eye surgeons seeking jobs can be expected to be in a relatively stronger position to water down or eliminate non-competes. However, I do not advocate doing away with non-compete agreements. I actually believe it's more than reasonable—and more important than ever—for employing practices to hold the line and apply the strongest possible non-compete contractual language supported by case law in their jurisdiction. There are a number of justifications: • Since it's becoming harder to find new doctors, it's taking much longer to hire replacements; we're in an era when practices should be increasing their risk management efforts, not watering them down.
When you are seriously considering a job, but before you get to the employment contract, do your due diligence. For an associate position, you may not be given access to practice financials (but ask, because they may be open to showing you the books), so the diligence is mainly in speaking with doctors who have left the practice. This is critical. The employing physician should be forthcoming about how to contact the previous associates. If he beats around the bush, be suspect.
These agreements typically forbid the departing doctor from an array of competitive or potentially competitive behaviors: taking away proprietary business methodologies, making lists of patients to subsequently solicit, setting up a nearby practice or aiding other competitors in the region. Most such agreements stipulate a geographic area, which may be a few miles or several counties, and a length of time, which can stretch to five years or longer.
In states where it is difficult or impossible to enforce an absolute prohibition on competing, a so-called "liquidated damages" approach is taken, saying in essence: "You may indeed set up a competing practice, but we'll all agree in advance that the damage you do to us is worth X dollars." It's common for this figure to exceed one year's wages of the departing physician.
The courts are often skeptical about the fairness of these agreements. There are three good reasons for this: 1) the era of slavery is gone, and courts don't want to deprive doctors of the opportunity to practice their profession; 2) the courts are aware of the unequal bargaining power most employers hold over their employees (even doctors); and 3) the courts, first and foremost, serve the interest of society, which in some circumstances may benefit from a little extra doctor-to-doctor competition.
And the courts are not alone in this sentiment. The American Medical Association and its Council on Ethical and Judicial Affairs "discourages any agreement which restricts the right of a physician to practice medicine for a specified period of time or in a specified area upon termination of an employment, partnership or corporate agreement. Restrictive covenants are unethical if they are excessive in geographic scope or duration … or if they fail to make reasonable accommodation of patients' choice of physician. Covenants-not-to-compete restrict competition, disrupt continuity of care, and potentially deprive the public of medical services."
However, case law in the majority of states does allow frank non-compete clauses—or in the alternative, liquidated damages clauses that provide reasonable practice owners with reasonable protections—and the ability to constrict the competitive behavior of both partners and associates.
Only in a very few settings (for example,
• The recourse of having a non-compete agreement in place if the relationship does not last tends to increase the willingness of employers to go out on a limb and hire a new doctor earlier rather than later.
• A non-compete agreement in a medical practice setting is a little like property settlements and alimony payments in family law. Constructing a high economic fence, and making it painful to leave either kind of relationship, increases the odds that society-at-large will benefit from the stability that ensues when associates and partners are forced to stick around and work out their differences.
• While having a doctor leave and compete with your practice can be relatively painless in large, urban markets, a provider leaving a suburban or rural practice and going across the street to compete can be financially crippling. This argues for greater efforts to impose a non-compete agreement or liquidated damages clause in such smaller, secondary markets.
• If you're a young associate, who might reasonably balk at the notion of a non-compete agreement, your feelings will reverse when you become a partner and want the protection of a non-compete.
This discussion shines a light on the vital importance of young doctors' matching themselves very carefully, and then working with the senior doctor and all of your colleagues to build a strong, cohesive, successful group practice. The hard work to accomplish this includes regular doctor-to-doctor meetings, getting everyone on the same page regarding the strategic destiny of the practice, proper management of the enterprise for optimal profits, and careful attention to the compensation methodology to assure its continued fairness.
You need to find out why the previous associates left the practice. Some key questions you want answered are: "Why exactly did you leave? What did you like, what didn't you like? Were you treated fairly as an employee? What were the circumstances under which you left?"
Are Restrictive Covenants Good Business?
In medical practice employment contracts, the terms "restrictive covenant" and "non-compete agreement" are used interchangeably to label terms prohibiting a doctor from leaving his employer and directly competing.
In the seller's market that currently exists, eye surgeons seeking jobs can be expected to be in a relatively stronger position to water down or eliminate non-competes.
However, I do not advocate doing away with non-compete agreements. I actually believe it's more than reasonable—and more important than ever—for employing practices to hold the line and apply the strongest possible non-compete contractual language supported by case law in their jurisdiction. There are a number of justifications:
• Since it's becoming harder to find new doctors, it's taking much longer to hire replacements; we're in an era when practices should be increasing their risk management efforts, not watering them down.
If a response doesn't make sense, try to uncover the real reason. Ask if the day-to-day workload is fair (too busy or too light), or if there is an extreme hierarchy. Find out if the person was discussing partnership before he left. That's where the relationship often breaks down. Here are a few "red flags" to watch for:
• Associates who were there two or three years and left (this is usually when partnership is broached);
• Too many associates have left, indicating the senior doctor really doesn't want a partner;
• A "cult of personality" surrounding the senior doctor (patients won't want to see you);
• The existing doctors don't seem to get along;
• The staff is fearful of the doctors; or
• There is a general air of reserve (lack of trust).
The Employment Agreement
In a seller's market, you have more leverage to negotiate a favorable agreement. Do not immediately accept the agreement as it is presented. Make sure you think carefully about what is covered and what is not covered (this can be extremely important). It may be in your best interest to pay a consultant to evaluate it for you.
"We're experiencing a boom of young doctors who are now asking us to evaluate offers they have been given," says Mr. Pinto. "Previously, this was unheard of. Junior doctors used to accept the offers on the table at face value. Now they are much more likely to ask an expert to evaluate the offer."
Here are some tips from those who have been there:
• Don't put too much weight on the salary and bonus structure. You may feel pressured by your loans, wondering how you will pay them off. When one practice is offering $30,000 more, it's impressive. But if the practice offering less is a good practice that will grow, you may make more in the long run.
• How willing are the partners to negotiate? Don't be afraid to ask for an extra $5,000 in base salary or an extra week of vacation just to see how they react in negotiations. This will give you a feel for their personalities.
• Bonus structure: Is it attainable? It's hard for a first-year doctor to assess this. You need to talk to past employed doctors about this.
• Restrictive covenant. If you are really tied to this area and you feel you have to leave, what will you do? In most states the restrictive covenant is not enforceable, but most young doctors are not willing to go through the legal process. (See sidebar, above.)
• Malpractice coverage should be included. Be sure to look at the limits of the policy. Make sure your limit of coverage is the same as the senior partner's. Year one and two in practice has a discounted rate for coverage, so it does not cost the practice as much. The malpractice premium should not come out of your salary or bonus.
• Health insurance, professional dues, travel expenses to meetings, license fees, 401K. All should be included and the details worked out before signing the contract.
• Call. Be sure it's shared by the doctors and not dumped on you.
• CME. They should pay for it.
• Start dates. Most want you to start ASAP. Try to take a little time off; most young physicians have not had time off (if your start date is later in the calendar year, be sure any productivity-based bonus is pro-rated for the months you work).
• Strongly consider hiring an experienced health-care attorney or practice consultant to answer questions about your contract and also provide insight on what is a "fair" contract.
As you take that first big step in your medical career, remember that even if you make some mistakes (we all do), the dynamics of the marketplace are in your favor.
"A young ophthalmologist can make a living anywhere in the country that he chooses," says Mr. Pinto. "I advise physicians to just get out a map and look at the markets they are really interested in. Given today's market, you can find a position or start a practice anywhere you'd like to go."