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In this episode, Jon Appino and I discuss the top mistake physicians make regarding contract review. So if you want to ensure you are being compensated fairly and define your benefits more clearly to live the life on your terms. As well as peace of mind while you continue to practice.
About Jon Appino:
Jon Appino is an expert in employment contract review who grew up in a small town where his parents were physicians. His company Contract Diagnostics offers an educational process to reviewing and negotiating their contract with understanding the nuances of different specializations for physicians.
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Full Transcript Below:
Catherine Magaña, CFP®:
Welcome to the Savvy Doc Podcast. I’m Catherine Magaña, Certified Financial Planner professional, here with my amazing partner, Managing Partner, Steve Wolff. Today we have a very special guest with us, Jon Appino, who’s the owner of Contract Diagnostics, who helps physicians with contract reviews.
Catherine Magaña, CFP®:
In the past, we’ve heard from doctors we know that it’s really important to negotiate, and not only just contracts, but we know all different aspects of life, whether it be buy/sell agreements, leases, cars, you name it. One of the most important reviews is the contract. So we’re really happy to have Jon Appino here with us today. So welcome, and why don’t you share with us a little bit about your background?
Jon Appino:
Yeah, thanks for having me guys. Always fun to talk to listeners and talk about what we do, what they need to know, how we can help, everything else. So, thanks for having me.
Jon Appino:
My background, I don’t know, colorful maybe, I guess you could say. I grew up in a small town in the Midwest and I thought I wanted to be a physician. My mother was in medicine for 36 years and I thought that maybe that was the path that I wanted to go. I was a biology pre-med major going through my undergrad, and I talked to a lot of physicians who kind of dissuaded me from going away from it. It’s funny, back in the late 90s they said, “Go into computers, those are the next big thing.” Maybe I should have listened to them, but here we are.
Jon Appino:
I ended up graduating with a premedical focus, but I didn’t want to go into medical school. I started working for industry. I worked for pharmaceutical and biotech companies because I loved the science, I loved interacting with great physicians. I had a lot of different experiences and exposures to all different kinds of healthcare and medicine in those organizations. From contracting to research to everything in between.
Jon Appino:
I got to know a lot of physicians and during that time I kind of found different needs. So we thought that there would be a need around an educational based approach to contract reviews. That’s where Contract Diagnostics came out. It wasn’t just about looking at a contract from like a lawyer might do, looking at a contract and just redlining it and sending it back. We thought there’d be much more of a wholistic process, an educational approach, that a physician would appreciate. We put this company together and we created a national brand where we know small nuances between states. But just as important, maybe more important, we understand the nuances between cardiology and dermatology and everything in between. This is what we do. Pretty simple, not easy.
Steve Wolff:
I’m curious about something. You said you’re from a small Midwest town. What town and where was that?
Jon Appino:
Brookings, South Dakota. It’s always relevant, right? I say small. I live in Kansas City now. Kansas City is 2 million people or so. That’s a small town for my friends in San Francisco and in New York. I grew up in a town Brookings, it was about 20,000 people or so. That’s a small town. But then if you ask my wife, who’s from a town of about a thousand people in Kansas, my town of 20,000 is a big metropolis.
Steve Wolff:
My wife was from Hastings, Nebraska, which was a town of about 25,000, and that was the fourth largest city in this state.
Jon Appino:
We were number we number six at about 20,000, I think. And I think it’s grown a little bit. But yeah, always those good Midwestern roots that we love to have.
Catherine Magaña, CFP®:
It’s interesting, here you are looking at contracts for physicians and the impact is so big. I mean, obviously if you’re looking at the compensation and if you look year over year. If you can negotiate even tens of thousand dollars more, the impact over a lifetime is pretty phenomenal. Is this something that you help doctors with the beginning or the middle? Is it something they should look at more often than not?
Jon Appino:
Yeah, it’s a great question. Physicians come out of training, and obviously they spend tons and tons of time and years on clinical medicine, right? How to look at a study and evaluate is it best for my patient or not? If I have a patient in front of me with this ailment, what are the procedures? What are the medications? What’s the knowledge I can use to make him or her feel better?
Jon Appino:
They don’t get trained on the business aspects of medicine. What to do with their finances, what kind of insurance they need to buy. They don’t understand what they need to know about their contracts. We love to teach them about that. Obviously, the first contract you sign out of training is one of the most important. The stats show that almost six out of 10 physicians will not stick around the job that they start after training. So there’s that high transition rate.
Jon Appino:
Well, from a financial perspective, it could be very costly. If you have tail insurance to buy, it could be $10,000, it could be $150,000. And you guys know the impact that $150,000 or $70,000 could have early in the physician’s career as far as throw them off on their finances. Obviously how much money you’re making is super important. So not just the risk associated with the contract, but the reward.
Jon Appino:
What’s the financial impact that I have? How much money am I going to earn? What do I have to do to earn the money? Can I have more? How does it compare to other markets? Those are all things that a physician needs to be very, very savvy about. Not just first contract, or even if they’re there for five years, they go find another contract somewhere else. We feel like the physician should reevaluate and dig into it every other year, every third year.
Jon Appino:
I don’t want to throw stats the whole podcast, but the last one I read a couple weeks ago was 38% of physicians haven’t had any pay raise or adjustments in over four years. Again, physicians, they don’t have an annual review like maybe a salesperson would or a somebody that works at a normal corporation. They just kind of have their contracts automatically renewed. Whether it’s a new contract, whether you’re moving from one job to the next, or whether you love your job, you just want to raise your hand every other year and reevaluate the compensation. There’s lots of things that the physicians should know as far as the terms that are included in their contract.
Steve Wolff:
In your business, you exclusively work for the physicians, correct?
Jon Appino:
We do, yep. We don’t take any money from the hospitals or any private equity firms or anything else.
Steve Wolff:
Okay, and your job is to look at their contracts and negotiate if need be, correct?
Jon Appino:
We talk with them about what it says. We inform them what it doesn’t say. Maybe what standard is. There might be something either that scares the physician, but it might be very industry standard. So we inform them what it says. If it’s not clear, we of course let them know that they need to clarify with the employer. We provide them compensation data, and then we just make sure that they understand everything. And we coach them on how either they can go talk to the employer, which is most popular. If the physician doesn’t have time, if they feel nervous, if they think that somebody else would just do a better job, then they can have us go and do the clarification for them, absolutely.
Catherine Magaña, CFP®:
So what do you think the number one mistake physicians make regarding contract negotiations?
Jon Appino:
Number one? I’d say the number one would be maybe a blend of two. It would be saying that the contract is nonnegotiable, which may also mean I’m not going to have it reviewed. I don’t know what percent of physicians have their contracts reviewed. I think a lot of them don’t have it reviewed, whether they get too busy, whether they think it’s too costly, whether they think it’s not important. Maybe because they think, “Look, it’s my first job out. This is not my permanent job. I’m only going to be here for a couple years. I’m going to move on. Why would I spend any money to have this contract looked at? I’ll have my next one looked at.” Big mistake, right?
Jon Appino:
So I think one mistake would be not having it reviewed. Another would be just because it’s non-negotiable, even if the employer says, “Here’s a contract that’s nonnegotiable, or we don’t change it. This is our standard for everybody.” That they either don’t have it reviewed or they don’t ask questions. We think there’s a big difference between what’s negotiable and what needs to be clarified. There are many contracts that are nonnegotiable, for sure.
Steve Wolff:
What is negotiable?
Jon Appino:
It all depends on the deal. I mean, you’re working for a large organization, they’ve got 2,000 physicians, they likely have a standard contract maybe with a standard compensation plan and a standard benefit plan. When they say it’s nonnegotiable, it absolutely 100% could be nonnegotiable, meaning if you have a change that you request or you’re going to walk away, they say, “See you.”
Jon Appino:
But again, if it’s a private practice, if you’re the 27th hospitalist into a program versus you’re the only pediatric gastroenterologist that wants to go to rural Iowa, you may have different negotiating capitals based on the deal. It does vary from place to place, contract to contract, physician to physician. But in general, most things like benefits aren’t negotiable. Here’s their medical insurance plan, here’s their disability plan, here’s their retirement plan with contributions. Those things are non-negotiable. We often see 401k plans, they don’t start for a year until the physicians worked, and physicians want to change that. Well, that’s a plan document thing. Those things are usually non-negotiable.
Jon Appino:
Often times salaries are negotiable. Signing bonuses are negotiable. There may be certain parts of the contract, like tail insurance or non competes that may be negotiable. It all just depends on the situation and the physicians, what their frame is. Some physicians take a job, they only want to be there for a year or two, and then they want to leave. Maybe their points for negotiation would be much different than somebody who’s from that market that wants to remain there long term until they retire.
Catherine Magaña, CFP®:
If this is something you’re not used to doing, and it sounds like you mentioned coaching. Do you walk them through the process of these are the steps, this is what you need to do? Because I think that might be part of it is maybe not knowing where to begin or how to do this. So I think having somebody, a resource like yourselves, it seems like you have a lot of experience doing this.
Jon Appino:
Yeah, so we have all kinds of great tools. Some places may just take the contract and redline it and say, “This is what you need to send them.” We don’t do that. That’s something for a lawyer in a state to do. We feel it’s an educational process, and so we don’t… And we also feel like employers don’t just want a red line copy of the contract. They want to have a conversation. So we go through it all and explain them to them what’s normal, what’s not normal.
Jon Appino:
Then yeah, to your point, we coach them on how they could ask. Sometimes we’ll tell a physician, “We think that the signing bonus is low. You could ask for another 10,000 or 20,000.” Of course the physician says, “Jon, how in the heck do I do that?” We have to process where we’ll tell them, “This is how you could step through it.” We give them verbiage and we say, “Here’s a way to soften it up. Here’s a way if you’re nervous, here’s how that verbiage could sound.” They like having almost like a coach because then it’s not just them sending an email saying, “I know you’re offering 10,000, I want 20,000.” It’s much more of a conversation as far as how the ask is going to come.
Steve Wolff:
Do the clients, do the physicians, need an attorney in addition to you?
Jon Appino:
Most often not. We recommend it if necessary. We do have great attorneys in Contract Diagnostics that look at all contracts, and they go through it for some of the basic things, they just don’t drive the process. So if a physician feels like they need legal advice in the state, we always send them to a local attorney. We have a fantastic list of folks here that don’t work for us, we have no conflicts with them. We could send people if they need someone state side.
Jon Appino:
But most employers offer standard contracts, and so we can review them and say, “Look, this is normal and not normal.” Then, like I said, the important part comes down to the how you have that conversation with the employer. Then, of course, what questions to ask. Then each physician’s individual story matters. There might be certain questions that we would ask the physician to bring to the front of the line versus put to the back of the line.
Jon Appino:
To answer your question, we have attorneys in house that look through everything at Contract Diagnostics, they just don’t drive the process from a legal review perspective.
Steve Wolff:
So you work in all 50 states, is that right?
Jon Appino:
We do, yes.
Steve Wolff:
Okay. Do you have people like yourself in all 50 states? How does that work?
Jon Appino:
We’re spread out. I’m not alone, but we’re still a boutique company. We don’t have an office in every 50 states, but we’ve got folks throughout the country. We don’t have dedicated attorneys in each state, but we do have a list of folks that are not affiliated at all with Contract Diagnostics that we could send somebody to if they needed a state based attorney.
Jon Appino:
The great thing about us being a little bit spread out is we can accommodate time zones. I’m based in Kansas City, so depending on a physician in San Francisco or a physician in Baltimore, the times are much different as far as they’re available early morning or they’re available only on Friday nights. If we were all in New York and we had a physician in San Francisco that needed a Friday night time slot at 7:00 PM, and we’re looking at 10:00 or 11:00 Eastern, it might be challenging. So it’s nice to be spread out because then we can accommodate times from 6:00 in the morning until 9:00 PM at night many days of the week to make sure that the physician can get times with us that align with their schedule needs.
Catherine Magaña, CFP®:
Do you work with private practice as well? Is it all different types of physicians and practices or is there certain specialty?
Jon Appino:
Yeah. I mean every specialty. We work across all states and all specialties. We understand small nuances between states, but like I said, we understand the major nuances between how a dermatology contract is much different than a hospitalist contract, is much, much different than a retina surgery contract. We understand this because this is all we do. We understand inflows of, to your point, private practice. How those are different than a hospital based position, even in the same specialty. We’re able to track and follow what private equity firms are doing. So what specialties in what markets are getting bought up by private equity and how can we coach the physician to understand if that’s a risk on their end if they’re signing up with a private practice thinking they’re going to be a partner, but maybe the practice is purchased beforehand?
Jon Appino:
We work with academic facility… I’m sorry, we don’t work with the facilities, we work on the contracts for academic facilities. We pretty much work on any kind of situation that the physician would need guidance on. What are good questions to ask, and then how do I ask those questions? Then more importantly, or maybe not more importantly, but just as important is what’s my compensation? What is my time worth? What’s typical, what’s normal? Are they paying me at the median or the 90th percentile or the 10th percentile? How much vacation time do they offer? How does that pair up with what averages are? Again, knowing that California is not California, if you’re pediatrician versus a radiologist, there might be big differences in how much time off the physician has.
Catherine Magaña, CFP®:
So what is maybe the number one myth or misconception that physicians have with regards to contracts?
Jon Appino:
Oh, I don’t want to go back to that they’re non-negotiable, because some of them are non-negotiable. But I think the misperception might be the differences between what’s negotiating and clarifying. Even if a contract is non-negotiable, it doesn’t mean that there shouldn’t be a lot of questions asked. It doesn’t mean that everything is clear in the document and that the physician understands everything. So even if it’s non-negotiable, or even if they don’t have any negotiation points, they think the salary’s fantastic, they like the vacation time, they think the facility is great. It doesn’t mean that they shouldn’t have an awful lot of questions.
Jon Appino:
I feel like one of the misconceptions is if you can’t negotiate or you don’t want to negotiate, or you feel you don’t need to negotiate, that there should not be a very robust conversation with the employer or the contracting entity on your expectations and questions that you have around your future with that organization.
Catherine Magaña, CFP®:
Well, I could see potentially maybe you don’t want to rock the boat if you’re happy, but the reality is you might be leaving some compensation around other things on the line for your future.
Jon Appino:
Yeah, or even if not. Even if you’re saying, “This is more money than I ever thought I’d have. I have no asks on the compensation.” Again, understanding and having those expectations very clear. We always tell people that contracts are for expectations. If you’re purchasing a home on this date, I will drop off my house with three bedrooms and a bathroom and a backyard and you’ll, on return, give me this much money, right? That’s the equation.
Jon Appino:
In a physician contract, the equation is I’ll give you my time and my opinion, which is valuable with their training, and the employer will return money and benefits. So we feel both of those things need to be very clear. Again, do we need to clarify what the schedule is or how much call the physician has? If it says calls 10 days a month, what happens if one of their peers leaves or has a baby and steps away for four months? Do you get an extra burden of call? If so, do you get paid for it? Again, maybe we’re not negotiating any of that, we’re just asking good questions on what happens if, because we can’t predict the future and a physician can’t control their colleagues.
Jon Appino:
Even if they say this is more money than I ever thought, maybe the salary goes away in two years and you go onto production. So a robust line of questioning around what happens at that time? What’s the average for my colleagues? What are your expectations in the first couple of years? How does compensation change? Do you update it every year with new data sets? All of those, again, we’re not negotiate… We haven’t had one can I have question. We’re just asking good questions and clarifying things about the employer.
Jon Appino:
I do think that the employer appreciates, again, we’re not having specific requests and asks, we’re showing interest, right? What happens in my fifth year, in my fourth year? We’re asking about the future, so the employer should welcome those conversations and they should be open and honest with their thoughts.
Catherine Magaña, CFP®:
Well, it got me thinking because what if you are five years in or 10 years in and then you realize, I’ve been working my tail off or I’m getting burned out. What’s going to incentivize you to want to work more? Because also the other side of it is that you’ve given your life and your time and commitment. We hear a lot of times there’s a lot of sacrifices too that are being made. So I could see potentially-
Jon Appino:
Or you just end up blending in. A quick story. We had a physician contact us we worked with four or five years ago. They get back on the phone with us and we have a new product called “compensation,” or actually it doesn’t look at the contract, just talks about their compensation and it’s really cool. They called and they used Compensation RX.
Jon Appino:
One of those conversations they said, “Hey, we worked together on my contract four years, five years, whatever it was. I love my job, I love my patients and my staff. I really enjoy what I’m doing. Since I was the first family practice sports medicine physician, there’s now four of us. I am the highest producer in the group. I’m on this committee and that committee and everyone loves me. But I haven’t had a raise since I started.” He said, “Every year they come to me and they say, Hey, would you like to do this? I say, yes. Would you like to do this? I say, yes.” He goes, “I’m a yes man.” He said, “And I think there should be some changes.”
Jon Appino:
Not to do all the story, but his base compensation was around 170 and he had a… We’re seeing new grads come out at 210, 225 in that market. So immediately were like, “You’re well underpaid,” even though he had some bonus structure. The employer thought that he was in the 40th percentile. We ended up actually contacting the employer for him and walking through the numbers because, again, he’s a yes man. He didn’t want to have that conversation. We walked through the numbers with the employer. The employer had no idea that he was producing that level because he had just blended in.
Jon Appino:
At the end of the day, he was able to get a salary bump from 170 to 240, plus have a retention bonus to keep him there and happy. It reset the entire compensation structure. I think he’s probably going to make an extra 70,000 next year because he took the time to raise his hand and call us. Not about us, about somebody else. But I think that’s an example of somebody blending in.
Steve Wolff:
Maybe I should have you negotiate my contract with Catherine.
Jon Appino:
I don’t know anything about your guys’ contract or what your worth is.
Catherine Magaña, CFP®:
Good answer. Just kidding.
Steve Wolff:
So you’ve been doing this for about 10 years I read on your website.
Jon Appino:
Yeah, we’ve a lot of fun. We’ve had a lot of fun.
Steve Wolff:
How many doctors have you worked with?
Jon Appino:
I don’t know the exact count, but I know we’ve done over 10,000 deals. I mean, this is all we do. We run a full-time business, busy as we can be, and this is all we do. We don’t have any recruiting divisions, we don’t sell any data, we don’t sell them investments or disability insurance. We just look at contracts and compensation structures, and of course love to do stuff like this to help out as well.
Steve Wolff:
Okay. The big question I’m sure everyone wants to know, how much does it cost?
Jon Appino:
It varies. Like anything else you have good, better, best, or cheap in the middle and an expensive one for contract reviews. They start at a little over $400, which again, from an investment perspective is literally nothing on a physician’s already investment in their training. Our most popular package is $725. We have an expensive package that’s $1,900 if the physician just doesn’t want to deal with any of the back and forth or any the work themselves because they don’t do this every day. They want somebody who does it every day to do it for them.
Jon Appino:
Our new Compensation RX product is fantastic. It’s less than $300. They get compensation data and then 30 minutes on the phone to talk about their current situation. So we don’t go back to look at their contract, but we do say, “As an Oncologist in the Bay Area, here’s what you should be paid.” We can look at their numbers, their RBU’s are 7,600. We can talk about conversion rates and retention bonuses. We can tell them new grads are seeing signing bonuses of this much, and we can kind of go through that and talk about their specific story for a half an hour for under $300 and give them a ton of suggestions to go back to their employer if they want to raise their hand and have that conversation.
Jon Appino:
All said, I don’t know if that’s a lot of money or a little money, but the great thing that we have… I don’t think you guys have a whole lot of residents and fellows that listen to the podcast, but for people who are younger who maybe don’t have the financial resources of an attending for five or 10 plus years, we have something really cool. It’s called flex pay. For the middle package and the higher end package they can pay, I think it’s $200, and they can pay the rest of it over five or 10 months with no interest. It’s great because it takes that barrier away from a resident or a fellow to say, “I can’t afford this. I’ll worry about it on my next contract.” And we’ve said, “No, no, no. This is an important time in your life. We’ll take the financial hit by having no interest payments over five or 10 months so you guys can have a product that’s going to serve you best today.” That’s available for younger physicians as well.
Steve Wolff:
We’re hoping that after this podcast is over that you’re going to tell all those residents and fellows and stuff about us so we’ll have a lot more people listening to our podcast.
Jon Appino:
Yeah, that sounds great. We’ve got a resource page coming to the site and we’d love to do more of these that we can put up there, and you can get your guys’ perspective on how you guys help physicians. I know that anybody that helps physicians and wants to hang out with these fun folks are definitely in my inner circle. Even though our frames are much different, our visions and our missions are the same.
Catherine Magaña, CFP®:
So physicians that want to work with you, what’s the first step or how do they get in touch with you?
Jon Appino:
It’s easy. contractdiagnostics.com is our website. There’s all kinds of stuff on there. You can download free stuff. You can have a free 15 minute call with somebody. You can set up a contract review or a compensation analysis. We’ve got a blog that is not about us, it’s about CMS changes and non-compete changes and all kinds of things that are value added to the physician. They can sign up for a newsletter. We have free educational series that we run every other Thursday, every third Thursday night or so, where we just hop on a Zoom call and we give it all away. We talk about contracts, what they need to know, how they need to know it, talk compensation, negotiation ideas. They can always join us for one of those free seminars as well. They can sign up. All under our resource page on our website.
Catherine Magaña, CFP®:
Great. Well, I know we’ve covered a lot of information today. You obviously have a lot of resources and have done a lot of these contracts. Is there one takeaway or one key point you’d like to share with our listeners before we wrap up?
Jon Appino:
I would say that as a physician goes about doing, again, take the negotiation word out of it. As they go through doing due diligence on their contract, I think they need to have the frame that for the most part, everybody has the same goals. It’s a job the physician wants, or is interested in anyways, they’re going to make likely enough money to support their family. The employer, or the contracting entity, wants a physician to work there, wants them to participate in the community, wants them to provide value to their patients, wants to be able to pay the physician, have a robust practice. They don’t want to lose money, just like the physician doesn’t want to lose money. Everyone has the same goals as far as helping patients and having a sustainable financial future for their own individual reasons.
Jon Appino:
I think understanding that they have the same goals as the employer, it’s just how do you ask the right questions to make sure that you understand everything so there’s no surprises? Whether it’s around call or future compensation or partnership or something in between, I think it’s about that due diligence and making sure that they both have the same goal. It shouldn’t be this I won and you lost, or you won and I lost. It should be this discussion for mutual gain and benefit.
Catherine Magaña, CFP®:
Great. Well, thank you, Jon Appino, for a great podcast. We really appreciate your perspective and you definitely know your stuff and have a lot of great resources. So thank you so much for being on our podcast today. Thank you to our listeners for joining us and listening to our podcast. Know that at Savvy Doc Financial Planners we’re here to help you take smart control of your money and your life. Thank you, Steve, and thank you, Jon, for being here today.
Jon Appino:
Absolutely.
Steve Wolff:
Thanks. Jon. Bye-bye.
Jon Appino:
Thanks for having me.
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