Newly graduated physicians found the top stressors in seeking employment to be job fit (60%), contract negotiation (58%), and compensation negotiation (56%) [1]. These concerns are justified, as more than 50% of physicians leave their first jobs after residency within the first 5 years [2]. Although contract types and negotiations are not a part of the traditional medical education, the Accreditation Council of Graduate Medical Education (ACGME) has since stressed the importance of practice management as a core competency [3]. Existing literature and formal training on this topic are limited. Przkora et al. found that 59% of surveyed Pain Medicine fellowship programs lack business education, although some offer didactics on billing and documentation [4]. Furthermore, it is often difficult to pick up relevant business management skills during clinical duties, as many training facilities are based in large academic centers, whereas most practices are office based [4]. Some advocate for a formal course at national or regional meetings [5], while others advocate for using market prices to benchmark one’s value through resources such as the Physician and Provider Compensation Data from the Medical Group Management Association (MGMA) [6]. The present commentary outlines a variety of contract types that are commonly seen within pain medicine, including academic-based practices, hospital-based practices, independent practitioners, and private practice groups. The goal of this article is not to define appropriate salaries or compensation packages, nor is this an exhaustive discussion of various contract types. Instead, salary numbers are placeholders that provide clarity as we discuss common contract structures. There is no one “best” compensation model. Each model has its own positive and negative attributes that must be weighed against a physician’s goals and preferences. At first glance, this is the most basic contract: Show up, provide care, and then get paid the predetermined amount. This model theoretically puts less pressure on providers to keep up with the production demands and financial management of the practice. As such, it is often attractive to new physicians who do not yet have a sense of their practice style and would like a guaranteed income. It is also a more common option for those going into academics, where publications, leadership, and teaching will demand their time. The caveat to this contract type is how “providing care” is defined. Although not advertised in the name, fixed-salary contracts can contain smaller-print details, such as relative value unit (RVU) targets, minimum hours or shifts required, or other quality metrics (such as patient satisfaction scores) that must be met. Failing to meet these requirements can have consequences either implied or explicitly stated in the contract, such as clawback clauses, whereas exceeding these targets might or might not be associated with financial compensation. Some contracts might start with a fixed-compensation model to allow a new physician to build a patient panel and then change to a variable model after a predetermined time period (e.g., 1–2 years). From the physician’s perspective, this is the simplest of the productivity-based reimbursement models: Deliver a service, assign a Current Procedural Terminology (CPT) code to the service, and get paid a physician fee (Table 1). The physician fee is calculated as the product of a negotiated multiplier and a set RVU assigned to the CPT code. In this model, the multiplier is negotiated in the contract and can vary by geography or the goals of the practice. The total RVU is fixed and is assigned to each CPT code as defined by Medicare and Medicaid [7]. Of note, the physician is generally paid on the basis of work RVUs (wRVUs), which are different from the total RVUs charged per patient encounter. Straight RVUs reimbursed at $60 Straight RVUs reimbursed at $60 This contract type can be attractive because it does not rely on a third party to negotiate, bill, collect, and distribute the income. The downside is that physicians lose some flexibility in exchange, as RVUs are defined by Medicare and Medicaid (e.g., cash-based procedures might not be compensated as well in as other models). This is the proverbial “eat what you kill” model: The physician provides a service, assigns a code to the service, submits the bill to insurance, and awaits reimbursement—typically collecting some percentage of the physician fee (Table 2). In this contract model, the patient demographics, insurance provider, and geography are critical for calculating compensation [8]. Reimbursement standards are typically set by Medicare for each CPT code and reevaluated annually [7]. Although private insurance follows Medicare trends, for the majority of services, private insurers pay more than Medicare and other government-based insurers. However, private insurances might require prior authorization, which increases administrative load and delays collections. Other factors in determining pay include the setting of practice (office, ambulatory surgery center/ASCs, hospitals) and the types of service provided (new patient, follow-up, procedure visit). For instance, typically, injections performed in the clinic have a higher reimbursement structure than do those performed in ASCs or a hospital setting. Straight collections at 65% Straight collections at 65% One distinct downside of collections is that there can be a differential in payer types assigned to provider panels. For example, more established providers might disproportionately hold patients with high-paying insurance companies, which would potentially disadvantage a provider new to the practice. This risk is mitigated if collections are specified to be shared equally in the employment agreement. Other factors that will affect the reimbursement amount include the strength of the contract negotiation power with individual insurance companies. Larger multispecialty private practice groups are able to negotiate a better professional reimbursement contract rate than a single private practice provider can, resulting in better reimbursements and higher collections. However, an independent provider can remain independent and negotiate to sign payer contracts under the umbrella of a group of providers. One of the most common contract structures in private practice, a fixed-salary-plus-incentive model is a variation on the fixed-salary compensation model. In this case, a fixed-salary-plus-incentive contract guarantees a base salary while maintaining the opportunity for additional work and compensation (Table 3). Usually, the base salary is associated with a minimum production target, such as RVU or collections. Base $200,000 + $60 per RVU over 3,500 There might be consequences to not meeting the base RVU or collections target. Base $200,000 + $60 per RVU over 3,500 There might be consequences to not meeting the base RVU or collections target. Like any business, a pain management clinic will have both fixed costs (e.g., rent, insurance) and variable costs (e.g., disposable equipment, employee bonuses). After breaking even, the profit margin increases dramatically, as fixed costs are already covered, and additional revenue has to cover only variable costs. As such, incentives are often graded in structure (Tables 4 and 5). In an RVU-based example, higher marginal RVUs produced lead to higher earnings per RVU. Alternative incentives might include billings of ancillary services, ownership of in-office ancillary services, and ownership in the facility. These bonuses are commonly paid quarterly. Base $200,000 + $20,000 administration fee+ 50% of remaining collections There might be consequences to not meeting the base RVU or collections target. Base $200,000 + $20,000 administration fee+ 50% of remaining collections There might be consequences to not meeting the base RVU or collections target. Base $200,000 + graded collections-based salary There might be consequences to not meeting the base RVU or collections target. Base $200,000 + graded collections-based salary There might be consequences to not meeting the base RVU or collections target. Academic centers are typically associated with medical and graduate schools, residency and fellowship programs, and research institutions. Academic-based contracts can include variations and combinations of the aforementioned models. There might be promotion tracks designated as “academic” vs “clinical,” which can determine the type of contract. “Academic” tracks typically trace a route that follows a form of gradated professorship (normally increasing in rank from assistant to associate to full). Some institutions require grant funding for academic-track professorships, whereas others do not. Often if a higher amount of patient care is expected (with fewer teaching and research responsibilities), the track might be deemed “clinical,” following a similar route of professorship. Academic contracts can vary—often, they can be more standardized per the institution on the basis of the full-time equivalent (FTE) concept. For example, a physician who works 4 clinical (patient care) days with 1 nonclinical day would be considered 0.8 FTE. Depending on the ratio of the FTE level, various wRVU minimum baselines might be required to maintain a set salary. Additionally, contracts can include more means to achieve a higher level of compensation by gaining wRVUs over the set baseline, with a numerical dollar amount associated per wRVU. Academic contracts might also set compensation values on the basis of various other administrative (e.g., chair) and academic (e.g., program director) roles or scholarly activities. Of course, this is not an exhaustive list of possible contracts. Other contract types include locum tenens options, which have been increasingly common during COVID-19 [9]. A newer type of reimbursement model is the holistic focused practice or integrative medicine practice. Another emerging model is the capitation-based model, in which a provider has a panel of patients and is paid yearly per patient. The profit is the amount remaining after provision of care. There are certainly other important considerations in contract models besides salary types, such as work–life balance, geography, auxiliary income opportunities, and separation clauses. These topics are beyond the scope of the present commentary; however, they are important considerations. The transition from trainee to independent practice can be one of the most exciting moments in a physician’s career. It can also be the most stressful, leaving some wishing there was yet another MATCH with a defined process in place. Understanding the basics of contracts can offer both confidence and understanding for physicians as they approach the negotiations process. Funding sources: No funding was received in relation to this work. Conflicts of interest: Trent Emerick is CEO/President of and holds stock/equity in Vanish Therapeutics, Inc. Alex Dressler consults for Channel Dynamics.
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Wang et al. (2022) studied this question.