Physician employment contracts: assessing the value and risks to urologists

Based on a partnership with Urology Times®, articles from the American Association of Clinical Urologists (AACU) provide updates on legislative processes and issues affecting urologists. We welcome your comments and suggestions. Contact the AACU government affairs office at 847-517-1050 or info@aacuweb.org for more information.

On July 9, President Joe Biden signed an executive order on “Promoting Competition in the American Economy” that includes 72 initiatives designed, in large part, to discourage consolidation in the health care industry.1 The order directs various federal agencies to take action to reduce the cost of prescription drugs and hearing aids, promote hospital price transparency, loosen licensing requirements, standardize health exchange plan options, and curtail the use of non-compete clauses in employment agreements, among other things.

Non-compete agreements (NCAs), which are now common in physician employment contracts, are a divisive issue in the health care provider community, often pitting employed physicians, who generally oppose the restrictive covenants, against physician-owned practices who view NCAs as necessary to protect their legitimate business interests.

The executive order does not explicitly ban or invalidate NCAs, but rather encourages the Federal Trade Commission (FTC) to exercise its rulemaking authority to limit NCAs:

“To address agreements that may unduly limit workers’ ability to change jobs, the Chair of the FTC is encouraged to consider working with the rest of the Commission to exercise the FTC’s statutory rulemaking authority under the Federal Trade Commission Act to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.”

Based on the wording in the executive order, it’s likely that the FTC will take a modest approach toward curtailing NCA’s such as prohibiting their use with lower-wage employees (consistent with statutes in 11 states) or make changes to the way that non-compete provisions are used, such as instituting disclosure requirements upon employers. Indeed, the Biden administration recently signaled its support for prohibiting the use of NCAs among workers with lower income or educational levels.

The issue is certain to remain a controversial topic in health care circles as the long-term trend toward provider consolidation has only accelerated2 during the COVID-19 pandemic. A survey3 by the American Medical Association found that 2020 was the first year in which less than half (49.1%) of physicians worked in a private practice. A report4 by Avalere released earlier this year showed an even more drastic split finding that just 30% of US physicians still practice medicine independently whereas the other 70% are employed by hospital systems or other corporate entities such as private equity firms and health insurers.

As policymakers debate the merits of restricting NCAs at both the state and federal levels, they will need to strike a balance between the interests of younger, employed physicians who seek career flexibility, and employers who say NCAs provide assurances that the physicians they hire and provide with specialized training, referral sources, and sometimes proprietary information won’t leave after a short period of time and establish a competing practice in the same vicinity.

Physician valuation

Although urologists may not have much bargaining power over the inclusion of non-compete clauses in their employment contracts, they will likely have the chance to negotiate their compensation and benefits package with their employer at some point in their career.

The challenge, especially for young urologists looking to join a hospital or group practice for the first time, is understanding their value, and accordingly, how they should be compensated. Physician valuation is nuanced and requires the presence of “apples to apples” data and information. Urologists need to consider a range of factors including their sub-specialty area, geographical location, setting (e.g., hospital, private practice, health insurer), case load, credentials/certifications, and years of service.

For example, an academic urologist seeing patients, teaching students, and conducting research might command a very different compensation package than a urologist working in a private practice and treating a large volume of patients each year. A rudimentary Google search for “urologist salary” brings up ranges, depending on the website you choose, between $143,668 to $467,043, $297,620 to $511,896, and $169,000 to $615,000 – not particularly helpful information.

In recognition of the need for high-quality compensation data, the AACU partnered with Phairify, to offer access to their Physician Value Exchange. The web-based platform offers physicians free access to sub-specialty specific compensation and productivity data that urologists can use to define their professional value across different markets. The goal is to arm urologists with specific and reliable data they can use to back up their compensation requests during contract negotiations.

Compensation structure

This question of physician value will be a topic of discussion at AACU’s annual meeting being held virtually on October 16, 2021. Reflecting AACU’s strong contingent of employed urologists in its membership, the meeting will feature a panel titled “Employed practice: Do you know your value?”. The panel will be moderated by Employed Urologist Committee Chair Charles Mark Jackson, MD, and include panelists representing academia, a community hospital, and a large health system.

The session will provide guidance on the ways in which compensation and benefits can be structured in employment contracts, such as how salary and productivity are weighted, and explain how a performance component, such as scoring on specific quality measures, can impact overall compensation. Panelists will also discuss how to go about benchmarking salaries based on factors such as geographic region and the competitiveness of the market, as well as incorporating subspecialty-specific compensation and productivity data.

Urologists entering contract discussions with potential employers should have a base understanding of the multiple factors that impact how compensation is structured in physician contracts. Ultimately, physicians need to identify what is most important to them in terms of compensation, whether it is guaranteed income or long-term growth potential, and most importantly, make sure they understand the terms of their contract before they commit to a long-term arrangement.

References

1. Fact sheet: executive order on promoting competition in the American economy. The White House. July 9, 2021. Accessed September 1, 2021. https://www.whitehouse.gov/briefing-room/statements-releases/2021/07/09/fact-sheet-executive-order-on-promoting-competition-in-the-american-economy/

2. Ladika S. Pandemic may lead to further provider consolidation. Managed Healthcare Executive®. May 12, 2021. Accessed September 1, 2021. https://www.managedhealthcareexecutive.com/view/pandemic-may-lead-to-further-provider-consolidation

3. Kane CK. Recent changes in physician practice arrangements: private practice dropped to less than 50 percent of physicians in 2020. American Medical Association. Accessed September 1, 2021. https://www.ama-assn.org/system/files/2021-05/2020-prp-physician-practice-arrangements.pdf

4. PAI-Avalere health report on trends in physician employment and acquisitions of medical practices in 2019-2020. Physicians Advocacy Institute. Accessed September 1, 2021. http://www.physiciansadvocacyinstitute.org/PAI-Research/Physician-Employment-and-Practice-Acquisitions-Trends-2019-20