Recognize a Suitable Employment Offer

Physician's Money DigestMay 15 2004
Volume 11
Issue 9

According to industry experts,it's becoming more difficult torecruit qualified physicianstoday, due in part to intensecompetition. As a result, a variety ofincentives are common in most doctor employmentoffers.

According to Pinnacle Health Group(PHG), a physician recruitment firm,physician recruiting laws aren't alwaysclear. In fact, they can sometimes be verydifficult to interpret.

How does a doctor determine agood offer of employment? Accordingto PHG, in general, physicians shouldnot agree to refer patients to a facility inexchange for money or other benefits.They should also not accept financialincentives significantly higher than currentnorms.

However, according to the new rules,hospitals can offer the following:

  1. A one-time signing bonus that physicians may spend as they want
  2. Tail coverage, or physicians being paid by recruiting entities
  3. Practice liability coverage for a limited period of time
  4. Below-fair-market-value office rent, which is highly frowned upon bythe Department of Health and Human Services, but approved by the IRS for a set number of years
  5. Start-up financial assistance if the aid is documented, reasonable, and for a limited period
  6. Moving expenses, including reimbursement for meals and house-hunting trip expenses
  7. A new income guarantee for a limited number of years, with a reasonablecap, and with the terms negotiated on paper well in advance
  8. An incentive compensation or signing bonus, which is more permissibleif the physician becomes a hospital employee and is capped at a reasonable salary level
  9. A loan guarantee and inducement. Note: If the physician stays in the community,loans can be forgiven; however, the terms should be documented and the payback terms indicated.
  10. An office space guarantee if all the compensation, including below-market rent, is reasonable

According to PHG, it is usually easierfor tax-exempt hospitals to justifyincentives provided to a physician whobecomes a hospital employee. Whilenot specifically prohibited, recruitingincentives provided to physicians enteringprivate practice should be more limitedas they invite closer IRS observation.


The information from PHG was adaptedfrom its article "Pushing the Envelope: How FarCan We Go to Get That Physician?" by MichaelBroxterman and Jacques Couvillon. For moreinformation on PHG, call 800-492-7771 or

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