| | Income Guarantees
Your contract will be different if you are being recruited as an independent contractor. It is important to realize that much of the physician recruitment that takes place today is driven by a hospital in a given community. Even if you are joining a group, the group's affiliated hospital may be funding the recruitment and overseeing the recruiting process. The hospital is involved because it wants to ensure quality patient care in its area and ready access to physician services. And, of course, the hospital also wants to ensure its own financial viability by recruiting physicians who may refer it patients.
Please keep in mind, however, that physicians are under no obligation to refer patients to the hospitals that are recruiting them and it is in fact illegal for hospitals to require this. You can learn more about federal physician requirements in the article Federal Physician Recruiting Laws and Regulations, which we encourage you to read.
Part of the hospital's role in physician recruiting is to provide independent physicians with an income guarantee. It is the hospital, then, not the group, that is providing physicians with the economic incentive to come to the community. It is the hospital that is taking the economic risk of providing a new physician with money. But the hospital is willing to take this risk because it is confident that a need for a physician exists. The income guarantee is, in fact, the hospital's way of saying it knows there is a need for another physician and they are willing to put their money where their mouth is. The hospital may be confident that a need for your services exists based on a community physician needs assessment it has conducted. For more information on this topic, please see the article How to Know if They Really Need You on this site.
The income guarantee, then, serves as an inducement to attract an incoming physician and is a testament to the need for new physician services in the community. The guarantee ensures that the physician will earn a certain amount of income per month, after practice expenses. For simplicity's sake, let us say that amount is $10,000 per month, or $120,000 per year.
Each month the physician is guaranteed to receive $10,000 after the physician has paid all practice expenses. If the physician only makes $7,000 in a given month, the hospital will make up the difference. At the end of the guarantee period, which usually runs one to two years, the physician may have made more in his or her practice than the hospital guaranteed. The physician can, of course, keep this additional amount, and it is desired that he or she will make more than the guarantee.
If not, the physician owes the hospital the difference. In our example, if the physician made $100,000 the first year and the hospital "made up" the remaining $20,000, the physician owes the hospital $20,000. However, the majority of income guarantees include a forgiveness clause.
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