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Published 3/1/2015
John Gramer

Employment Contracts for Orthopaedic Surgeons

John Gramer

With rising hospital employment of physicians, unfolding reform policies, and tightening reimbursement, medical practices need actionable data that practice managers and surgeons can use to help find, create, and promote more beneficial practice opportunities. A survey conducted by Cejka Search reflects how orthopaedic surgeons feel about hospital employment, including their expectations of benefits, incentives, and contract terms.

Employment landscape
Approximately 40 percent of the 118 orthopaedic surgeons surveyed have been in practice for more than 21 years, with fairly equal numbers in self-employed and employed practice arrangements. Among the more than 49 percent of respondents who are employed, 67.9 percent work for a hospital or health system, 17 percent work for a medical school or university, and less than 8 percent are employed by a physician-owned medical group.

Benefits and incentives
Table 1
shows the most common benefits included in employment contracts between hospitals and orthopaedic surgeons. Nearly all of the employed orthopaedic surgeons surveyed have malpractice coverage and pension/401K plan (95.9 percent and 91.8 percent, respectively) included in their hospital employment contract. Most (61.2 percent) also receive paid vacation. One-third of respondents also noted recruiting benefits such as relocation assistance and signing bonuses. About one-quarter of respondents are paid for on-call coverage; that number may continue to grow due to the scarcity of talent and an aging physician population.

Beyond benefits and incentives, common terms for an initial hospital contract include the following:

  • salary guarantee with production incentive for the first 2 years
  • shift to full production in year 3, based on work relative value units (RVUs) and other “citizenship” criteria, such as patient satisfaction scores and keeping charts up-to-date
  • noncompete clause
  • requirement of no vested interest outside of employer, such as surgery centers, physical therapy service lines, etc.
  • average contract length of 4 years or less

Looking ahead
Many hospitals and health systems are interested in closer collaboration with well-respected orthopaedic groups. Those that do offer employment standardize their physician contracts; the only variable is base compensation. Base salaries are tied to national benchmarks and sometimes blended between compensation surveys and national or regional compensation data.

Today, production is a primary factor in physician pay; in the future, nonproduction bonuses will determine a larger percentage of total compensation. These incentives are based on patient satisfaction/HCAHPS (Hospital Consumer Assessment of Healthcare Providers and Systems) scores, practice growth, margin goals, utilization, and compliance with organizational goals, such as electronic medical records, coding, recertification, and meeting attendance.

The bottom line is that orthopaedic surgeons and physicians overall will have to meet greater requirements in the future to earn the same amount of income as they do today.

John Gramer is president of Cejka Search, a physician, advanced practice, allied health, and healthcare executive search firm.