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Business advice for residents and fellows

By Bruce D. Armon, Esq.

After the completion of medical training, many senior residents and fellows embark upon the initial phase of their professional career: joining a private practice or institutional setting. For some senior residents and fellows, they have the additional challenge of establishing their own medical practices.

This time of year can be both an exciting and anxious time for senior residents and fellows. After years of clinical training with very limited “real world” exposure, these residents and fellows are suddenly confronted by the Stark (pun intended!) reality of a variety of decisions: choosing where, and in what setting, they want to practice; how to be credentialed by third-party payors under their respective reimbursement rules; adhering to an employer’s compliance program; becoming a member of a hospital(s) medical staff; understanding and navigating health care’s fraud and abuse laws; and negotiating their first employment agreement.

Individually, each of these tasks can be daunting. Many residents and fellows have received very little formal education regarding these non-clinical subjects as part of their residency or fellowship program. This is not surprising, given the purpose of the residency or fellowship program. However, a senior resident or fellow is likely to be surprised as they transition to the “professional world.”

Below are five survival tips which will assist residents and fellows make a smoother transition to a professional career.

Be a good networker and self-starter; don’t necessarily rely only on the residency coordinator. Most residency programs do not focus their energies on post-residency employment opportunities for their residents. While the residency programs usually keep an “alumni” network list and retain a binder of available job listings of which they are aware, most residency programs do not have the staff resources to act as a career office.

It is largely up to each individual resident or fellow to identify their own opportunities. Personal networking is a wonderful way for physicians to position themselves for opportunities when they become available. Surfing the Internet for job openings, reviewing the ads in professional journals and speaking with the attending physicians are all useful means of keeping “in the loop” for potential job openings.

There is no guaranteed strategy for a physician to find that first job. One client recently found her job through a colleague who had completed the same residency program a year ago and alerted her to the job opening. Another physician located his job by relying on his spouse who grew up in the area they decided they wanted to settle and she knew many of the physicians in the community. Some physicians may rely on professional recruiters/headhunters to do the searching for them.

It is important to start the job search process early. Residents and fellows should begin searching for employment up to a year before the completion of their program. The longer a resident or fellow waits to start, the fewer opportunities there will be to be selective about the job which they will take.

Finding a job is likely, but knowing it is the right job is more difficult. Since 1996, the American Medical Association surveys have reported that approximately 93 percent of all new physicians had jobs within six months after completing their residencies. However, a 1999 survey by Merritt, Hawkins & Associates of primary care residents in their final year of training found that their principal concern was with finding a job (32 percent of respondents). Doubts about the medical setting (21 percent), educational debt (15 percent) and availability of free time (13 percent) were the other significant concerns of the senior residents.

Determining whether the opportunity is the right job requires physicians to perform their own due diligence research. Like all good shoppers, the senior resident or fellow must know the right questions to ask of the prospective employer. Typical questions include: what is the reputation of the practice in the community? Is there a turnover in new associates? Are there enough examination rooms to accommodate a new physician? How many new patients does the practice see in a week? If the physician is new to that particular community, what is the quality of life for physicians and are there any sections of the town/city that they recommend to search for housing?

There are no wrong questions to ask a prospective employer, but there are wrong ways to ask a question. A new physician should not be confrontational, but can be persistent, to make sure they have addressed all of the issues which they consider to be important. The unasked question may never be addressed by the employer during the job search process and the new physician will only have him or her self to blame. For each physician, the list of these key issues will be different, but still needs to be addressed.

An employment contract is a right, not a perk. While a handshake between the parties is nice, an employer should present an employment contract for the physician to sign. If a contract does not appear to be forthcoming, the resident or fellow should request a contract well in advance of the prospective start date for employment.

There is no uniform, standard employment contract for new physicians. However, the employment contract should include several major provisions, including the entire compensation package (especially the benefits, including the vacation and CME), the term and termination factors (for cause and without cause), the rights and responsibilities of the new physician and their employer and potential partnership opportunities.

A new physician should review their contract carefully and seek outside assistance if there are provisions which are not understood. If the contract is properly constructed, every paragraph, in fact every word, is in the contract for a particular reason. Disregarding a provision or ignoring it because the physician is not sure what it means could have short-term and long-term effects.

For instance, a physician did not understand and was therefore going to disregard a liquidated damages provision. This provision would have resulted in him paying a one-time penalty of up to 75 percent of the salary he received from his employer for the preceding two years if, upon termination of the agreement for any reason, he contacted any of the patients he brought in to the practice. Because the new physician grew up in the community where he was going to practice and knew many people, this liquidated damages section could have been a very costly oversight had it not been significantly modified during the negotiations with his employer.

It is, of course, easier for a new physician to attempt to renegotiate a particular provision(s) before the employment contract is executed rather than wait until it becomes an issue and the physician is already bound by its terms. An employer has little incentive to modify an executed employment agreement, particularly non-competition, non-solicitation and other restrictive clauses favoring the employer. Moreover, unilateral changes favorable to the physician may turn out to be unenforceable depending upon the jurisdiction.

Quality of care for patients remains the most important issue for a new physician, but the physician must also recognize his or her role as a businessperson. The systemic change from a fee-for-service payment system to one increasingly reliant upon managed care has impacted physicians and the way they view themselves in the marketplace. Many physicians are frustrated by their stagnant or decreasing income and are seeking new opportunities within their medical practices. These new opportunities include investing in an ambulatory surgery center, establishing multi-disciplinary practices, expansion of practice locations, the provision of ancillary services and increasing referral relationships.

Each change by an entrepreneurial physician may implicate the Anti-Kickback and Stark statutes or individual state provisions. New physicians must be cognizant of the legal standards and scope of potential inappropriate conduct and be sure they are comfortable with the business approach taken by the prospective employer.

For instance, a new physician joining a practice which has invested in an MRI and owns its office building and leases space to other physicians should make sure he or she has an understanding of the flow of dollars to and from their prospective employer and the nature of the referral relationship, if any, between the parties. If the entrepreneurial business arrangement is not structured properly, it could potentially implicate both the Stark and Anti-Kickback provisions.

There is no one right way that a practice should be structured, but there are lots of ways in which it should not be structured. Increasingly, physicians view themselves as businesspersons who practice medicine. New physicians may be exposed to the business of medicine for the first time when they start their professional career.

Beginning a professional career may be a new experience for this year’s group of senior residents and fellows, but they are not the first group of doctors to make this transition. According to the most recent statistics of the Pennsylvania Department of State, as of January 1, 1999, there were approximately 52,000 licensed physicians in the Commonwealth. In addition, there were over 7600 residents in Pennsylvania. New Jersey’s Board of Medical Examiners reports their state has over 31,000 licensed physicians and 1400 residents.

Physician-employers should remember they were “green” at one point in their career and that the anticipation leading up to, and the beginning of, a physician’s professional career can be a nerve-racking experience because the physician is exposed to so many non-clinical situations for the first time.

A senior resident or fellow can learn a great deal about professional practice and the business of medicine by observing how more senior physicians respond to a set of circumstances. It is unlikely that a senior resident or fellow will be confronted by a situation—clinical or non-clinical—never before encountered by their more senior colleagues. New physicians should trust their instincts and seek guidance from those doctors who have “been there before.”

Residents or fellows looking to join a private practice or institutional setting should start their employment search early, ask the right questions, conduct due diligence and carefully review their contract to help ensure a smooth transition to the beginning of a productive and exciting medical career.

Bruce D. Armon, Esq., is a member of the Health Law Department of the mid-Atlantic law firm, Saul, Ewing, Remick & Saul LLP in its Philadelphia office.

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