Contract Negotiation Tips for Employers

Define your goal and position

  • Hiring someone quickly to generate needed billings or waiting for the perfect candidate
    • There are no “perfect” candidates
    • How long can you wait and how much can you afford to lose
    • Determine the outline of an offer based on practical business needs.
  • Is your position a lifestyle opportunity or potential for above average earnings?
    • Shorter hours, less call, no rounding, moving a potential new hire from owning or managing a practice to working as an employee.
  • Is your opportunity a chance for a new hire to get well financially?
    • Retiring student loans
    • Getting out from under and underwater mortgage
    • Moving from a poor payer mix area to a community with a lucrative payer mix
  • Determine what are “deal killers” and what is negotiable
    • The “deal-killer” list should be much shorter than the list of negotiable points.
  • Objectively evaluate your position’s strengths and weaknesses and base your negotiating strategy around that evaluation.

Do your Homework

  • Objectively research the need for the specialty you are recruiting nationwide, by state and then in the your local market
  • Ascertain the physician/patient ratio in your area
  • How long are patients waiting to see a physician in the specialty you are recruiting for?
  • How long have you been attempting to fill this vacancy? How much have you lost or will you lose in billings if this position isn’t filled soon?
  • If you have had several candidates turn you down, try to learn what the stumbling blocks are. Realistically assess the leverage you have going into the negotiations.

Avoid Pitfalls

  • Leave your ego at home. When emotions get involved, bad business decisions follow. This is business; you are a well educated professional, don’t let your emotions reduce you to a pouting, temperamental teenager.
  • Don’t let perfect be the enemy of good. If a candidate doesn’t match every criteria you’ve laid out, remember how much is at stake financially if you let a position remain vacant.
  • No handshake deals. Memories fade, language is imperfect and subject to misinterpretation. A miscommunication now can cause hard feelings later. Essentially, if it isn’t in writing, it isn’t real.
  • Concentrate on closing the candidate you are speaking with versus putting out several generic offers and hoping someone accepts.

Compensation

  • Determine what a fair offer is for your area. Note: MGMA is only a very rough guide.
  • Salary or other compensation models
    • Will this be a salary, income guarantee, hourly rate, RVU formula? Is that clear in the contract?
    • Generally the more complicated, the less transparent the plan, the candidate will see red flags.
    • Is a portion of the “salary” or income guarantee actually a loan? Is that clearly stated.
  • Risk should be shared . “A good contract hurts each party equally.”
  • Be flexible and willing to negotiate. Remember the larger context; a million or even millions of dollars in potential billings may hang in the balance. Losing that for a disagreement over ten or twenty thousand dollars is not good business.

Benefits

  • Determine the true value of the benefits package you’re offering as part of the entire package.
    • A lucrative pension plan or extremely comprehensive medical insurance offer may more than offset a starting salary that is less than the national average.
  • Bonuses for sign on, moving, marketing, etc. are one time events and must be considered separately from the salary offer.
    • Ensure the candidate understands how taxes associated with the bonuses will be handled. Ensure they don’t wind up with an unexpected tax bill at years end.

Restrictive clauses

  • Almost all contracts contain restrictive covenants/non-compete clauses.
    • As the employer it is understandable that you desire to prevent a situation where you’ve paid to bring someone into the community, helped them weather their first year, only to see them become your competition.
    • Avoid a contract with clearly unreasonable time or geographic restrictions. (Most non-competes are for a single year and a distance under thirty miles.) Extreme restrictions are easy to overturn in court.
  • Clarify any requirement to share earnings from work done outside the employer’s practice (clinical trials, speaking, consulting, publishing, operating a medical business unrelated to the practice). This prevents hard feelings later.

Conclusion

  • If want to hire the candidate, but there are sticking points; communicate that to them. Don’t assume the candidate will voice their concerns first. Keep talking, stay positive and solution oriented.
  • Don’t let the clock rob you of a new hire. In recruiting, we have an expression, “Time kills deals.” If you don’t work vigorously to close the negotiations, the process stagnates, the candidate begins to suspect you aren’t interested and moves on to other opportunities.
  • Remember, if everything works out, you’ll be working with the person you are negotiating with. Preserve a positive, friendly, professional relationship throughout the process.