Medical Practice Management
Jan 28

Why should an incentive bonus be included in a new doctor employment agreement?

Last week I had the opportunity to review the employment contract for a resident who is looking at a group practice opportunity in northern California. The doctor wanted me to follow up with the practice regarding some minor issues I wanted clarified. One issue was the lack of an incentive bonus clause in her employment agreement. Here is what I asked the practice:

Section 3 – compensation: Just curious why there isn’t a proposed incentive bonus arrangement in the contract. This is pretty standard since if the doctor works hard and is successful, then maybe the doctor can somehow be rewarded for those efforts over and above the base compensation. The normal incentive bonus clauses I see are based on collection target goals.

The following was the reply I received back from the managing physician:

Mr. Tinsley thanks for your inquiry.

A bonus section isn’t by any means standard out here.  We don’t have one in any of our contracts.  I didn’t have one in mine.  I know of no one out here that has them in their contracts.  And quite frankly, due to the large influx of managed care here in California, ie Kaiser, Sutter etc., the odds that Dr. ___ can even generate her own salary in the first year, never mind in addition cover her practice expenses to the point that she could get a bonus, would be quite unusual.  I might add, that if Dr. ___ is such a star that this appears to be happening, it is only in our interest to keep her happy, and her contract would most likely be renegotiated.  Dr. ___ has chosen our group to join based on a variety of issues; our integrity is one of them.  She will have to rely on that, as I rely on her integrity. 

Hmmmmm………….pretty terse response wouldn’t you say? This begs the question: Why wouldn’t ANY medical practice include an incentive bonus arrangement in its associate employment agreements? To me it only makes sense, no matter what part of the country you are in, to incentivize a new doctor to work hard right out of the gate and if that associate is successful, then why wouldn’t you reward him or her for it. The response above leaves the whole issue of incentive bonus as purely discretionary. Is that really a motivator? It seems that putting an incentive clause in "black and white" that a doctor can see and digest makes more sense……..BELIEVE ME it does based on my experience working with residents and fellows on employment contract issues for the last 20 years and speaking to them at medical schools all across the country!!

About Reed Tinsley, CPA

As a top advisor to physicians, I help increase practice profits by delivering hands-on, expert medical accounting/tax support, practice counsel, and revenue-building strategies. Read more →