How Will the Employer React When MGMA Benchmarks are Cited in a Physician Employment Agreement Review?

The bottom line is that physicians must know the bottom line. You don’t always achieve all of the MGMA benchmarks in negotiations, but knowledge is power.
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Many physicians are concerned about the employers’ reaction to legal review of a physician employment agreement. One of their concerns in this regard is how an employer will react if a review indicates that one or more terms are below the Medical Group Management Association (“MGMA”) benchmarks’ median for starting physicians in that specialty in that geographic area. Will the employer view the physician as greedy for pointing out this discrepancy between the offer and MGMA benchmarks?

As I’ve noted before, having a legal review of a physician employment agreement means that the comments given to the employer are coming from the attorney, not the physician. Politicians refer to this as “plausible deniability.”  The physician is not commenting on the compensation or benefits – his or her attorney is.

In my experience, the reaction to a comment concerning MGMA benchmarks is likely to fall into one of two camps, based on the type of organization that is making the offer. Health systems sometimes contend that the compensation has been precisely calculated based on numerous benchmarks –hence the discrepancy. In addition to MGMA, Sullivan Cotter and the American Medical Group Association (AMGA) also produce benchmark surveys. The results of these surveys can be startlingly different. Sullivan Cotter, for example, includes academics in its survey numbers, as does AMGA (although you can filter out academics in AMGA). I have been told by a health system negotiator that the proposed compensation was based on a “weighted-average” of those three benchmarks. That sounds extremely scientific, as long as you don’t dwell too long on how one would produce such a number. I suspect that tea leaves and animal entrails may have also been read to develop the precise number (which was significantly less than MGMA benchmark median). In spite of claims that the offer was carefully and scientifically developed, most health systems will change the salary (or increase a signing bonus, or both) if confronted with objective data that some aspect of the compensation is not comparable to a reasonable benchmark.

Private practices tend to have an entirely different reaction to the benchmarks. Especially in smaller practices, the first offer tends to be based on one or two calls to colleagues in the same field (who may or may not be in the same geographical area). I have actually pulled MGMA benchmarks for a small practice I represent, who instead chose to offer what the “other guy” was offering. I have also been told by a practice that the initial salary offer was what all the other physicians were offered when they joined. In chatting with the practice’s attorney, it became clear that some of these physicians had been there for seven years. I gently suggested that salaries had increased a bit in that time. Physicians tend to be reasonable people, and are generally willing to factor objective benchmarks into a revised offer. I have never gotten the impression that a private practice was upset by the introduction of objective data that was not available to the practice when they developed their offer.

The bottom line is that physicians should know the bottom line. You don’t always achieve every MGMA benchmark in negotiations, but using objective data to negotiate is never viewed as greedy or unreasonable. In fact, I think that utilizing these MGMA benchmarks in negotiations is a sign of good faith. Citing a benchmark that is not being met certainly comes across as more reasonable than simply saying “I want more money.” Knowledge is power!

You may also be interested in my posts about physician employment contracts and hospital negotiations.

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Dennis Hursh

Dennis Hursh

Dennis Hursh has been providing healthcare legal services in Pennsylvania since 1982. Since 1992, he has been a physician's lawyer serving as Managing Partner of Physician Agreements Health Law. Dennis has devoted his life to serving physicians and medical practices. He is the author of the definitive book on physician contracts "The Final Hurdle - a Physician's Guide to Negotiating a Fair Employment Agreement, and a frequent lecturer on physician employment agreements.

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