Career Center

Contract Negotiation

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Most of us work because we want to pay our bills and improve our quality of life, but issues other than money are integral to our satisfaction at work. It is possible to address many of these issues in your employment contract.

This article is designed to help you navigate the world of contract negotiation. But when used as a guide, this information will also equip you to increase your satisfaction in the workplace.

A caveat about contracts: Unless you understand and agree with every word in the document, do not sign it until you have had your lawyer review and explain it to you. It is appropriate to ask for clarification or correction.

Do the Math

A conservative example of your earning potential in a physician-owned office would look something like this:

  • Billing for an established patient (99213) = $49.
  • You see 20 patients a day, 4 days a week for 50 weeks a year.
  • Thus, your earning potential for this practice is $196,000 annually.
  • On a good day, collection rates for medical services range from 70% to 90% ($137,200 to $176,400).
  • Now calculate the practice overhead - typically 25% to 30%.
  • This would bring your annual contribution to a plausible $132,300.

    Since the average NP works more than 4 days a week and sees more than 20 patients a day (and typically several patients of higher acuity each day), you can clearly demonstrate your significant worth to such a practice.

  • Salary
    Base salary is typically the first issue an employer addresses when offering you a job. The salary should be based on the average NP salary in your geographic area, as well as your particular specialty. Review data collected specifically from practicing nurse practitioners, such as the National Salary Survey of Nurse Practitioners conducted by ADVANCE. It is also a good idea to network with other NPs in your city to get a sense of a typical salary for someone with your experience and specialty. (See the sidebar titled "Do the Math" for guidance on deriving a salary number.)

    Should you be paid a salary or at an hourly rate? If you are paid hourly, you come in at a set time and leave at a set time. This arrangement requires that you track your time and report discrepancies - and it places you in the same employee category as lab technologists, medical coders and custodians.

    If you are salaried, make sure you set the boundaries and specifics. If you come in late, do you have to work longer that day? If you stay late one day, can you come in late the next day? If you work 60 hours a week, will you be compensated for the excess hours? Or, are you simply expected to do what it takes to get the job done? Does the staff understand the difference between an hourly employee and a salaried employee? Will you be treated differently from the other medical providers?

    Independent contractor status is another option to consider. Research your requirements as an independent contractor before you agree to this arrangement. For example, all money earned as a 1099 contractor is paid directly without taxation. You are responsible for paying the required local, state and federal taxes, as well as a self-employment tax. Consult your tax adviser to determine what is expected in your state, and derive your desired salary figure appropriately.

    What if the employer offers you a lower salary than you expected? For example, you believe you should be making $85,000 per year. Based on a 40-hour work week, this would be approximately $41 per hour. Your employer offers you a salary of $65,000. Try negotiating a 4-day work week for this salary, which would be equivalent to $39 per hour. Everything is negotiable. Employers appreciate someone who is willing to negotiate rather than blindly accepting what is offered and resenting it later.

    A true professional is involved in the business of the practice. Will you be informed of quarterly performance numbers for the practice? Will you be able to see how your productivity compares with others? Even in a large physician group, you should be in the loop.

    Health Insurance
    If the employer doesn't offer health insurance, how much will it cost to buy it yourself? That premium should be rolled into the salary you are seeking. Does the prospective employer offer insurance for you alone, or for your family as well? Does the insurance plan offer prescription drug coverage? Some practices lure you into a false sense of comfort by telling you that your entire family will be treated for free at their facility and that you don't need to worry about insurance. What happens when your medical needs cannot be managed in their outpatient setting? Keep yourself and your family covered, even if you have to pay for it yourself.

    Vacation
    As a hospital floor nurse, you may have been happy with 2 weeks of vacation a year. But most primary care providers burn out faster with the increased responsibilities and liability. You may need more time away to recuperate mentally and physically. Find out what the physicians in the practice receive, and ask for the same. Be flexible. If the physicians get 6 weeks of vacation and they offer you 4 weeks, ask for 10 days of personal time in addition to the 4 weeks of vacation time. Sometimes it is simply a matter of semantics. Are you required to take vacation time when you are ill? If so, negotiate more time.

    Sick Time
    You are likely to be sick more often the first year of your new career than you have been in the prior 5 to 10 years. Why? You are now exposed to myriad viruses and bacteria from your primary care patients. Take your vitamins, get as much sleep as you can, and exercise to keep your body healthy. After the first year, the illnesses tend to level off.

    Retirement
    Does your employer offer a 401K? Will the practice match any portion of your contributions? Is the money you contribute to the retirement account taxed? Is your employer's stock publicly traded? If so, can you buy shares at a discounted rate, or are they given as part of your bonus plan?

    Profit Sharing
    You will be working hard to make your practice a success. Larger practices usually provide their physicians with a share of the profit, and you should be included in this program. Your percentages may be less, but if the sharing is based on productivity, make sure you have access to your numbers. Check them at least monthly to make sure they are accurate. A good rule of thumb is to request a printout of the previous week's work every Friday morning. Make sure all the patients you saw are on your list. Any discrepancies can then be corrected weekly, and the quarterly reports are no surprise to you.

    When NP services are billed incident to physician services, the NP's work is documented under the physician's name. Correct this error the moment you are aware of it. Such billing affects your long-term productivity numbers and could impact your career at this practice.

    Bonus Plans
    Bonus plans are intended to reward people who overachieve. Make sure you understand how the numbers are calculated and that you have access to them prior to the calculating. Request everything in writing, and review it for clarity and content. Could there be multiple ways to interpret it?

    Consider the examples presented in the following two bonus plans. The first practice takes the NP's billable services (only codes 99202 through 99215) for 3 months (one quarter) and comes up with a dollar amount. If that amount is between $125,000 and $150,000, the NP gets a bonus check for 5% of his or her base salary. If the amount is between $151,000 and $175,000, the NP gets 10%. If the amount is between $175,000 and $200,000, the NP gets 15%. Any amount over $300,000 provides a 20% bonus. The bonuses are calculated for each quarter and paid in a lump sum with no taxes taken out. The NP is responsible for paying the appropriate taxes.

    Did you notice that the bonus is only being paid on the service codes? What about the additional revenue the NP generates from ordering lab or radiology tests or other procedures, such as removing a skin tag or suturing a laceration? These were not included in this particular plan. Also, the NP was not penalized for overhead or delinquent collections. This is a simple method for bonus calculation but certainly one that a small practice could manage and everyone can understand.

    The second practice (a large specialty practice) developed a formula in which the employer keeps an accounting of the NP's fee-for-service billings, the practice's receipts from capitation, the number of visits by patients whose fees are capitated, the per-visit charge for capitated patients, and the number of visits conducted by the NP with capitated patients. The practice agreed to provide the NP with a quarterly accounting of her billings and the practice's collections on her billings. This organization defined total practice billings as the total amount billed by the practice relating to professional services performed during each quarter, including without limitation all charges for office visits, nursing home visits, home visits, hospital visits, x-rays, laboratory charges directly billed for by the practice, and all collections from capitation.

    Excluded from these calculations were charges and collections for transfer record requests, medical record requests, reports and insurance requests completed by staff or provider, rent from subleasing of office space, refunds, rebates and any practice income not directly related to professional services. For this, the practice defined total NP billings as the amount each quarter that was directly attributable to services rendered by the NP. Fee-for-service billings would be attributed to the NP only if the NP submitted an encounter form that included the patient name, date, CPT code and ICD-9 code.

    Collected billing was defined as the actual amount collected by the practice during the quarter and attributable to the total practice billing. Attributable income was defined as the product of collected billings multiplied by the total NP billing divided by the total practice billings. As if that were not confusing enough, this practice developed a bonus threshold of $1,000 for each quarter and stipulated that this number could change without notice based on practice needs. The amount that management calculated as available for the NP bonus for any quarter was the NP's attributable income minus the bonus threshold.

    So how did this practice calculate the NP bonus based on the numerous definitions listed above? The amount of the NP bonus would be equal to 50% of the amount available for NP bonus. The practice would provide the NP with a statement of the total practice billing, total NP billings, collected billings, NP attributable income, bonus threshold, and the NP amount available for bonus each quarter.

    Here is an example of how this might work. For this NP, the total practice billing was $300,000, the total NP billing was $150,000, the collected billing was $240,000, the NP attributable income was $120,000, and the bonus threshold was $1,000. So $119,000 minus salary and benefits (usually 25% of salary) would be the amount available for bonus. The NP's salary was $85,000. The benefit package would equal $21,250. The amount available for bonus would equal $12,750. Fifty percent of this amount would equal a $6,375 bonus for this quarter. You may think this is a lot of money, but look at the income the NP contributed to the practice. Does it seem fair?

    No matter what is offered or negotiated, be sure you understand every aspect of the bonus plan. Get the plan in writing, and have it signed by all parties concerned. Your accounting department also needs to understand how the plan is calculated. If the department doesn't gather the data, you will not be compensated properly.

    Pregnancy Leave
    If you are thinking about starting a family, you may or may not want to discuss it with your employer. Successful relationships are based on open communication and understanding. Most providers are willing to work with you, especially if you are a good match for their practice. Ask for the standard 6 weeks off, preferably with pay. Sometimes this arrangement can be achieved by pledging that you will be with the practice a minimum of 2 years prior to taking your leave. Make sure you understand your benefits before you become pregnant. Would the practice offer part-time work after your leave?

    Travel
    Will travel be a part of your job? Will you be rounding at several facilities during the week? Will you be making house calls? Will you be compensated for the wear and tear on your car, as well as gasoline? Will you be compensated at federally established rates for mileage, or does your employer have another way to calculate mileage? What are the record keeping requirements?

    Parking
    Does the practice have dedicated parking for its providers? Do you have to pay to park? Many of us take this for granted, but if your employer is located at a large medical center or anywhere with parking challenges, this issue can be a deal breaker. When I worked at an international airport, I had to arrive 30 to 45 minutes early to be able to park, walk, proceed through security and walk yet farther to my work location.

    Call Duty
    Are you required to take call? How often and for how long? Will you be compensated for the time you are on call? What are your recording requirements? Can you bill for these services? Does your malpractice insurance cover you for advice given over the phone?

    Electronic Communication
    Will you be responsible for having your own cell phone, or will the practice provide one? Will you be required to carry a beeper, and if so, will the practice provide one? Can you easily and without delay contact your collaborating physician? Do you have all the necessary emergency numbers for your collaborating physician? Does the practice use e-mail, and if so, will you have access from the office and at home? Will the hardware and software be provided, or are you responsible for acquisition? Do your patients have the ability to ask questions and receive lab reports via e-mail? If so, what are the requirements for checking e-mail messages?

    Holidays
    Will the office be closed on standard holidays? What about the day after Thanksgiving and on Christmas Eve? Do you celebrate religious holidays that you would prefer to take off instead of the standard ones? Do you get paid for holidays?

    Disability
    If your employer does not offer short- or long-term disability, invest in your own policy. It is well worth the money, just in case you need it.

    Continuing Education
    Continuing education is mandatory for certification and to maintain and improve your practice. Who is going to pay for it? Do you have to use vacation time to get these credits? Do you have to pay for your transportation and lodging while away? Smaller practices may not pay for transportation and lodging, but might be willing to give you an allowance for at least one CE course per year. Ask for the price of the conference plus airfare, hotel, cab fees and a per diem meal allowance. If the practice wants to give you a set amount, start with $5,000 and negotiate down. Don't go below $2,500 because that is a standard minimum for a 3-day conference in a large city.

    Professional Liability Insurance
    Will the practice include you on its malpractice policy? If you are covered by the employer, the limits of coverage might be shared by others in the practice, leaving you liable for more. It may not provide coverage for off-duty or volunteer activities.

    Will the practice reimburse you if you purchase your own policy? The benefits of having your own policy include having your own lawyer and the ability to get paid if you are unable to work due to legal proceedings. In addition, a personal policy would cover you for any payout amount that exceeds the employer's plan.

    Policies are sold in two forms: occurrence and claims made. Occurrence policies cover you for any incident that occurs while you are covered. Claims made policies only cover you while the policy is in effect. Consider this possibility: A complaint is filed 3 years after you dropped your policy to change to another company with lower rates. If you had an occurrence policy, you would be covered because coverage was in place when the incident took place. If you had a claims made policy, you were covered at the time of the incident. But since the claim wasn't filed until 3 years later, your old policy would not cover you. If you only have a claims made policy, make sure you purchase a tail. This will cover you for anything that might occur later. Make sure you understand your policy when you purchase it.

    Collaborating Physician
    Most states still require physician supervision for prescriptive authority, so who's it going to be? If you are in a solo physician practice, you know the answer to this question. But who is your physician back-up? If your collaborating physician is severely injured, you would be out of luck. In a larger practice with 12 physicians, do you report to one directly or all 12 at different times?

    Be up front with your collaborating physician, just as you want him or her to be frank with you. Ask how many malpractice cases have been brought against the physicians in the practice and what the dispositions were. This is not being nosey, it is good business. If the physicians are not willing to share this information, check with the board of medical examiners in your state or the National Practitioner Data Bank at www.npdb-hipdb.com/index.html.

    Office Management
    Office management is another issue to explore before signing a contract. Who manages the office? Who schedules the patients? Do you have any say about the length of appointment times? When is the last scheduled appointment for the day? Does it realistically coincide with the time you are supposed to end your work day?

    How is the patient flow organized? Does the practice double- or triple-book? Is your morning open for walk-ins? Will you have your own patients, or will you simply pick up the slack for the physicians? Do you dictate your reports, write in a paper chart, or have an electronic medical record? The time commitment for each varies slightly, but once you get accustomed to the system, you should have a good idea what that time will be.

    Who cleans the office? In some small practices, you might be required to pitch in. These issues are not typical topics of conversation for the first interview, but they will affect you if you decide to take the position. Clarify everything prior to signing the contract.

    Support Staff
    Will a nurse or medical assistant be assigned to help you? Of course, RNs are preferable. Putting your patient in the room and gathering vitals and information about the visit will certainly help maximize your productivity. Will your assistant help you return calls, triage calls, report labs, follow up, etc.? These are important issues to your quality of life at work, as well as your productivity.

    Licensure and Certification
    Who will pay for your license renewal and recertification costs? It is your professional responsibility to keep up with your renewal and provide your practice with a copy for their records.

    Hospital Privileges
    If you are allowed to apply for hospital privileges, do so. Who will pay for the application fee? Most practices consider this their responsibility, but be sure to ask.

    Credentialing Fees
    Many insurance companies charge to be considered as a provider with their companies. These fees can range anywhere from $50 to $500.

    Paying the fee does not necessarily mean you will be added to their networks, however. In some states, it is illegal to prohibit an NP from being a provider if his or her collaborating physician is a provider. However, several companies still refuse to follow the law. If you encounter this challenge, enlist the help of your state NP organization and one of the national groups, if necessary.

    Resource Materials
    You'll need standard reference materials, as well as any specialty texts that might be appropriate to your practice. Will you bring in your own resources, or will the practice have them available for your use?

    Supplies
    Most practices provide all the supplies you need. Look around when you tour the office, and make sure you see most of the things you will be using day to day. This is not typically an issue, but sometimes independent contractors are expected to provide their own supplies. Clarify if you believe this might be a problem.

    Workers' Compensation
    Larger companies sometime opt out of state workers' comp programs, but smaller companies are required to carry this insurance. Workers' comp protects you if you are injured or acquire an illness on the job. Consider purchasing your own policy if the practice does not carry workers' comp insurance.

    Restrictive Covenants
    A restrictive covenant is a written promise that you will not compete with the practice by setting up your own practice nearby. Most contracts state a radius within which you cannot practice and a time frame (usually 1 year) for this restriction. These clauses are typically upheld in court if they are deemed reasonable. Make sure you can live with the language, whatever it is.

    Termination
    Many employment contracts include language about termination. The term of a contract should be specific, and renewal options should be spelled out in detail. The contract should spell out when you will be evaluated and when you will be expected to renew your contract. Benefits should be negotiable at these points, as well as any time in between, when circumstances change.

    A contract may include specific reasons for termination, typically death, disability, loss, suspension, revocation of license to practice, felony conviction, unprofessional or unethical conduct, etc. The practice can add anything it deems necessary. Can you live with the requirements?

    A contract that allows for termination without cause doesn't give you any job security and is not considered prudent. Avoid contracts that give the practice the right to make modifications at its discretion without notice. Avoid contracts that do not have renewal clauses.

    Recommendations
    Finally, a few basic recommendations. Don't start listing your requirements at the first interview. Instead, focus on answering questions and asking questions. Ask about the mission statement of the practice.

    Never talk salary during the first interview. Explain that you are more interested in the job fit than in salary. Be ready to negotiate.

    Research the practice prior to that first meeting. Always request time to think about an offer, and never rush into signing anything without proper consultation. v

    Lisa Green Taylor is a family nurse practitioner with a PhD who has spent much of her career providing primary health care to people in rural Texas. She is an assistant clinical professor at the University of Texas at Arlington and the corporate director of clinical operations for MedXpress.


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