Compare Physician Job Offers
Physician training programs do not typically include information about how to compare physician job offers effectively.
The first step in comparing physician job offers is to understand them from Uncle Sam’s perspective. Is the physician an independent contractor, self-employed, or employed by a separate entity?
Why is this so important? It’s essential to understand the differences before the offer is accepted. The difference in classification is significant in expendable income for the physician.
A physician must learn to compare apples to apples and oranges to oranges when comparing offers. A significant dollar offer as an independent contractor compared to a salary offer as an employee may seem like a no-brainer. However, many times upon closer examination, the employed salary offer may exceed the higher dollar offer as an independent contractor.
Any person who operates as an independent contractor is responsible for filing quarterly taxes and must pay both sides of employment taxes. An independent contractor can also not receive health insurance, retirement contributions, and many other benefits from an organization. Aside from paid malpractice insurance, an independent contractor is at risk of a tax audit for receiving additional paid employee benefits. The organization that has paid benefits while classifying the physician as an independent contractor will also be subject to a tax audit.
Compare Benefits of I/C versus Employed Model Physician Job Offer
The physician operating as an independent contractor must consider the cost of benefits and additional taxes when comparing offers. An employment offer with lower salary than an independent contractor offer is not always the lowest overall offer.
The physician must make a list of the value of all benefits and taxes paid by the employment offer, then compare to the independent contractor offer. The cost for the independent contractor to replace the employee benefits are significant.
Physicians covered under spouses health benefits can often benefit from an independent contractor model of employment. Since these physicians do not need the health insurance benefit, it is no longer an additional cost. Through the spouse’s policy, the insurance benefits could make the independent contractor agreement add up to more dollars.
With only employed salary offers, physicians can request funds set aside for insurance converted to cash payment when the spouse covers the insurance benefits through their employer.
Get Legal and Accountant Advice Regarding Tax Matters Before Accepting the Physician Job Offer
Independent contractors do have tax deductions that an employed physician cannot take. Tax laws are ever-changing. It is prudent to get advice from an accountant. Still, in general, independent contractors may take certain tax deductions such as travel expenses, telephone expenses, internet expenses, and possibly expenses related to a home office.
It is also advisable for the independent contractor to set up an official LLC, or professional corporation and enter into contracts with employers as part of the professional corporation. The independent contractor is working for themselves and has additional benefits to being classified under an entity they own.
One benefit of being an independent contractor is the ability to establish a retirement plan that will allow more cash to be set aside for retirement tax-deferred. This benefit must be balanced against employment offers, considering employers often contribute to retirement plans, and as an independent contractor, the physician is responsible for all contributions.
Physicians should consult an attorney to understand these benefits altogether.
What is An Income Guarantee
Another method of attracting physicians into communities to practice medicine is the offer of an “income guarantee.” At one time, the income guarantee was a common and popular method of attracting physicians, mainly to move to rural communities. Many physicians do not understand the income guarantee. Some do not know it exists. An income guarantee is a loan of sorts. There are a couple of different types of medical practice guarantees.
The Gross Income Guarantee
One is a gross guarantee. This type of income guarantee means that the hospital administration will loan money to the physician in equal installments monthly. The funds loaned must be managed by the physician to cover all overhead costs, including building lease, staff payroll, and the physician’s income. As the physician builds the practice, the revenue generated must first go to the hospital to pay back the guarantee. During the first year or two of business, the collections made by the practice will pay back the income guarantee. The medical practice will use all funds received after payback to pay overhead, salaries, and physician income.
The Salary Income Guarantee
The second type of income guarantee is a salary guarantee. With this guarantee, the hospital administration will assist the physician with a lot of the legwork to set up the practice. This arrangement includes finding and paying for office space, paying marketing expense for the physician, and general office overhead. A separate line item apart from these expenses is a guaranteed monthly salary paid to the physician. This guaranteed monthly salary requires payback to the hospital administration once revenue begins to flow through the medical practice. Eventually, the practice revenue exceeds the hospital guarantee reimbursement, and the physician is financially on their own.
What happens if a physician does not pay off the entire amount loaned? It is not uncommon for the contract to specify a forgiveness period. This forgiveness period is a sort of ‘golden handcuffs’ for the physician. The agreement will write off all debt owed back to the administration if the physician continues to practice a specified time in the community. This period is typically around three years.
Another exciting twist exists to the physician guarantee. The hospital administration can often make this income guarantee with an existing practice. When this occurs, the managing physicians and the new hire will sign a contract with the hospital agreeing to guarantee payback terms. The hiring group of physicians may have a secondary employment agreement with the physician directly, which will outline terms of employment and possible future partnership in the group.
What About Partnership Potential
Partnership is one of the last considerations a physician should ponder when reviewing physician job offers.
Some physicians are pleased to be an independent contractor or an employee with no ownership. This type of arrangement allows the physician to focus on patient care, and only patient care, unless they have also accepted an administrative position. There is little to no risk of being an independent contractor or employee. The physician does not need to deal with the intricacies of running a business and patient care. Office politics still exist, but the physician is not responsible for taking action when two employees can’t get along, or some other annoying human resource issue pops up.
Alternately, other physicians are excited about the prospect of partnership and a piece of ownership in a medical practice. These physicians view this type of arrangement as providing them with more independence. They like the idea that if they work harder, they keep the profit. No third party benefits from their services. They also like the idea of not reporting to a third party about their schedule. The physicians who have ownership in a medical practice are business owners. Yes, they may also be employees of the medical practice, but they own either the entire medical practice or its portion.
Physician Practice Partnership Structure
If a physician owns the entire medical practice, the physician is in complete control of the business. The physician may be an entrepreneur, hire other physicians as employees, and open additional offices in other locations.
Alternatively, the physician owns the practice with a group of other physicians working in the medical practice office. There could be a two-physician partnership or a partnership with many physicians. The structure of these arrangements will vary.
Usually, one physician will assume the role of managing partner. This physician is the go-to physician responsible for managing the medical practice and overseeing its financial operation. Often, this physician is the founder and may hold majority ownership in the business.
Profit Split Amongst Physician Partners
Not all medical practices are created equal in terms of profit split. The question of compensation is one of the most difficult for a physician medical practice to sort out. This issue is incredibly difficult when the partners practice in different specialties. Some specialists generate more income than others. Often physicians in the same specialty have income disparity based on productivity.
The most common arrangement is for each physician to have individual income based on productivity and insurance reimbursements. The practice profits are split based on percentage ownership. Sometimes this formula is based on actual dollars received as a basis for productivity or on RVUs. There may be some additional consideration given if one physician produces less substantial income but is responsible for referring patients to the physicians with more procedures and the opportunity to bill more.
Some practices pay a competitive wage to each physician employee of the medical practice, then split the profit equally at the end of the year. These medical practices operate more as a “team.”
In truth, there are far too many different partnership financial arrangements to pinpoint in one article.
Find Physician Job Opportunities to Maximize the Number of Physician Job Offers
To sum it up, there are many types of physician job offers available. The importance of understanding each physician job offer cannot be understated.
Medical doctors searching for physician job opportunities can find many options by registering to Doctor Jobs. Doctor Jobs is a nationwide physician and advanced practice job board. Doctor Jobs offers many tools allowing physicians to be notified of practice opportunities. A small investment of time to register saves time on the overall job search. Doctor Jobs provides many job opportunities and will maximize a physician’s exposure to many physician job offers.