Most physicians have little to no formal business training. The only negotiating we do is with our patients, trying to convince them to take a statin to bring that total cholesterol value back under 300.
On the other hand, those that prepare our contracts often have business degrees. They negotiate contracts for a living, and their incentives and interests are rarely aligned with yours. It’s not a fair fight.
Fortunately, there are physicians and physician advocates looking to level the playing field, arm you with the data you need, and help you negotiate a deal that falls in your favor.
The following guest post on the topic was submitted by Dr. Kathryn Sarnoski, MD, OBGYN with Compensation Rx, an innovative compensation solution from Contract Diagnostics, a longstanding sponsor of this site.
I Thought I Was Paid Well…
When I graduated from my residency in OBGYN in 2017, I went from making $49,000 per year to $250,000. If my math is correct, that’s around a 500% raise?! I was thrilled, to say the least.
Suddenly, that paycheck-to-paycheck lifestyle converted to one of comfort and ease. I could go out to eat without fretting over credit card limits, and it didn’t just have to be happy hour deals. I felt like a million bucks, even if it was technically only a quarter million.
Little did I know, one of my fellow residents was only making $235,000, at basically the same job, while another just got offered upwards of $350,000 just a few miles up the street. We didn’t talk about any of this until months later (maybe it was years) when I finally started feeling comfortable understanding contract language and negotiating for myself and my values.
I was fascinated to know what others were seeing and negotiating.
The Impact of Below Market Pay
Understanding how differences in income can impact our lifelong wealth and ability to achieve FIRE is critical. Especially in my field of OBGYN, we’re a field heavily dominated by female physicians. Female physicians are historically known to have drastically lower salaries than our male counterparts and women are also known to be less likely to negotiate.
According to Doximity’s 2021 Physician Compensation Report, published in January 2022, the physician gender pay gap has been growing over the past 5 years. In 2021, the gender pay gap was 28.2%, which represents a $122,000 pay difference in that single year!
We also see regional differences that have massive impacts on physician income as well. The recent MGMA 2022 Physician Compensation Survey report shows, as an example, that surgical specialists in Nevada (the state with highest median physician income rates) are on average paid $612,630 a year more than their counterparts in Idaho (the state with lowest median income).
Given the effects of compounding growth, a relatively small difference in gross annual income now can generate a difference of millions of dollars over a career.
Knowing Your Value
How do we even begin to address all of these discrepancies and conundrums? How do we know what we are worth?
I’m not talking about your value as a human; we know there is no price tag on that, but as a physician, there are metrics and expectations that have a monetary value, and we should be compensated appropriately to reflect that.
Keeping in mind that every job, with its call schedule, clinical duties, patient volume, and complexity is a little different. The differences further abound when you begin to consider location differences, private practice versus hospital employed, or W-2 versus independent contractor roles.
To weigh all of these considerations, there are a few best ways to know your value and know what’s fair. Your primary go-to’s should be physician compensation surveys and other job offers in the same region and field.
If you apply widely in your current location and receive offers, you can compare what neighboring jobs are offering in terms of the clinical position and expectations as well as compensation and benefits packages. Essentially, you are doing your own market research!
This approach is great, yet certainly not without dedication to the time and enthusiasm required to interview so abundantly. A great alternative (or supplement to individual market research) is to review the main comprehensive physician compensation surveys, such as MGMA, AAMC, and SullivanCotter, of which MGMA is likely one of the most frequently utilized by employers.
Get Your Hands on the Data
Because these survey data sets are expensive to purchase, they are often prohibitory for individual clinicians to access. In order to obtain information that is pertinent to your field and situation, you can contact a physician contract lawyer or company who owns this data set and can pull and share the MGMA data on your behalf.
One weakness in these large national surveys is that they always lag, as there is a 12-16 month delay between the survey data collections and publication. As a result, you may be making decisions for 2022 or even 2023 or beyond based on 2020 or 2021 data.
At Contract Diagnostics, we have a product called Compensation Rx that provides the MGMA data with the added bonus of also receiving our internal, real-time data. In addition, physicians receive a phone call to review the data, interpret how it compares to their current position, and brainstorm ways to negotiate an improved compensation package, all based on your unique situation.
With this, we are providing thorough and up-to-date data about average physician compensation for all specialties and all practice settings and compensation models. As a fellow physician, I can advocate that this is a tool that physicians should utilize at least every 3-4 years!
Looking at MGMA data will display average incomes by region and specialty. The set shows what a new graduate versus an established physician should be earning, and breaks it down by percentile.
The survey also shows additional metrics such as wRVU production by percentile, compensation to wRVUs ratios, patient encounters, collections, and even retirement benefits. This gives you the opportunity to compare, for example, your productivity metrics relative to your compensation and confirm they align, or negotiate to better align them.
Reviewing this data, physicians can be educated and empowered to negotiate a brand new contract and also to renegotiate a current contract. Few physicians renegotiate their salary after they sign their contract. We know that more than 40% of physicians haven’t received a raise in over 4 years!
Reviewing a compensation data set helps physicians to learn what they should be earning so that they can negotiate with a purpose.
What Would You Do With a 41% Raise?
In 2021, we at Contract Diagnostics worked with Dr. Taylor, who was a full time physician working for the same practice for seven years. He originally signed for $170,000 and had been receiving that same income since his original contract.
He had helped to grow the practice, he was the most significant producer in the group, and always demonstrated that he was a genuine team player. He suspected new grads were earning more than he was, but was not entirely sure. He reached out to Compensation Rx to help with his review and negotiations.
We pulled up-to-date compensation data for him and helped him with formal requests and an internal committee review. When all was said and done, Dr. Taylor ended up with a 41% raise – a new annual salary of $240,000, a $30,000 retention bonus, and a new conversion model rate per wRVU.
Dr. Taylor was brought from about the 40th percentile to the 80th percentile, where he belonged.
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Your Advocate for Fair Pay
As a fellow physician, I cannot emphasize enough how impactful and helpful I find this data. Most hospital systems have access to this information; we should be equally informed. The compensation rates between communities, states, and even simply from year to year within the same job are dramatic.
Just as I mentioned, when I first started negotiating my own contracts, I had no idea how vastly different the offers were that my friends and colleagues were receiving. It felt taboo to talk about (it’s not!) and as a result, I was perpetually uninformed or underinformed. Let’s make compensation a routine part of our vernacular and let’s advocate for what’s fair.
All physicians should do all they can to maximize their compensation, especially those in the FIRE community as it will help accelerate your goals and dreams of achieving true financial independence. We have all worked hard to get where we are, we work hard every day to stay where we are.
Achieve your worth…you’ve earned it.
Contact us to learn more about Compensation Rx and its money-back guarantee. We can discuss and compare your current compensation to national and internal data sets and evaluate strategies to negotiate a raise.