Is a resident stipend right for you?

AS YOU LOOK AHEAD to your first job, you’ve probably noticed that some organizations offer “resident stipends.” The details around resident stipends vary, but once you sign an employment agreement—usually in your third year of training—you receive a monthly payment, typically a couple of thousand dollars.

Resident stipends are similar to other incentives medical recruiters use to attract physicians, like sign-on bonuses and relocation assistance. But resident stipends are unique because they give young physicians money when they need it the most—while they’re still training.

“Once they begin employment with us, doctors work off the stipend just like they would a sign-on bonus.”

~ Annie Fowler
Sound Physicians

While it may be hard to argue with the idea of getting a monthly check for committing to a job a year or so down the road, experts urge physicians to think carefully before they accept. That’s because stipends come with some serious baggage, including the provision that you have to pay back some or all of them if things don’t work out.

Courting young doctors
While some health care systems have used resident stipends to recruit young physicians for years, stipends are nowhere near as widely used as other employment perks like sign-on and relocation bonuses. But health care attorney Christopher J. Shaughnessy, JD, says he’s seeing more and more employers offering resident stipends to get young physicians on board early.

Mr. Shaughnessy thinks the rise in the use of stipends may be due to the growing consolidation in health care. As hospitals and health care systems buy physician practices to establish dominance in their markets, they need physicians to staff these practices. These organizations are courting physicians aggressively, and resident stipends are an easy way to get the attention of new doctors.

Mr. Shaughnessy, who practices with McBrayer, McGinnis, Leslie & Kirkland, PLLC in Lexington, Ky., says he’s seen stipends used more in areas that can be difficult to staff, which typically means rural and underserved parts of the country.

Schneck Medical Center in Seymour, Ind., isn’t in a rural location—the hospital is located less than an hour’s drive from two large cities—but it has nonetheless found that resident incentives are a valuable recruiting tool. Fayeann Hurley, director of physician recruitment and retention, explains that Schneck pays residents who sign an employment agreement $2,500 a month for a maximum of 10 months.

“Stipends are a nice incentive that we offer in addition to a sign-on bonus,” Ms. Hurley explains. “Residents come out of training with so much pressure because of debt, so a job offer that improves their personal finances while they’re still in training is a nice incentive.”

Stipend options
Another organization that offers resident stipends is Sound Physicians, a physician-led group employing more than 3,000 providers nationwide who specialize in emergency medicine, critical care and hospital medicine.

“My earliest signers are typically physicians from this area. They’re confident that they want to return.”

~ Fayeann Hurley
Schneck Medical Center

In some instances, residents who sign with Sound Physicians in their third year of training receive a monthly stipend until they finish training. “They’re essentially getting their sign-on bonus early,” explains Annie Fowler, vice president of physician services for Sound Physicians, which began using stipends two years ago. “Once they begin employment with us, doctors work off the stipend just like they would a sign-on bonus.”

But in addition to that fairly traditional stipend, Sound Physicians has created the Compass Program for doctors interested in leadership development. The competitive program evaluates candidates who demonstrate strong leadership skills and who are entering their PGY-3 or chief residency year.

For those who are accepted, Sound Physicians provides a more generous stipend. Those residents also interface with the company’s leadership team, receive mentoring, and participate in monthly journal clubs and conferences, contributing to quality improvement and leadership projects.

Ms. Fowler says that the Compass Program, which began three years ago, has been a huge success and that many physicians in the program have gone on to become chief hospitalists. That’s because when they start working at a Sound Physicians practice, they are already comfortable with the organization’s goals and culture, and many are fast-tracked into leadership.

“They have worked with us already on projects that range from quality improvement to change management,” Ms. Fowler explains. “They know what we’re trying to accomplish.”

Another Sound Physicians program called Medical Corps offers PGY-2 residents or those in their first year of a fellowship a generous stipend (a sum Ms. Fowler describes as “fairly substantial”) in exchange for a more intense commitment with the organization. “After their residency training, physicians agree to take a position anywhere we need them to work as payback,” she says. “We try to provide a few geographic options. It gives us a lot of elasticity in filling openings in our partner hospitals located in 41 states.”

Yes, there’s a catch
The catch with stipends is the same caveat physicians ace with sign-on bonuses and other commonly used recruitment incentives: You need to work for that organization for a set amount of time, usually two to five years, depending on how much money you received. If you leave before that time is up, you’ll have to repay a prorated portion of the bonus.

“If a better offer comes along, you’re stuck. So there are definitely some downsides.”

~ Christopher J. Shaughnessy, JD
McBrayer, McGinnis, Leslie & Kirkland, PLLC

In other words, if you agree to stay at a group for four years but leave after only two, you’ll likely have to pay back half the bonus money you received. “These bonuses are essentially like forgivable loans,” says Mr. Shaughnessy, “where the amount is forgiven over several years.”

There’s another caveat about leaving a group that has given you one of these bonuses early. While you might have accrued the stipend money over a year or so, you won’t be given that much time to pay it back if you break the agreement. Mr. Shaughnessy says employers usually want the bonus money returned in 30 or 60 days.

Ms. Fowler from Sound Physicians says that doctors who decide to leave a job before they’ve paid back bonuses—like resident incentives—may be able to turn to their new employer for help. The next employer may sometimes pay any amounts that are left over, depending on how badly they want to hire that physician. You may be able to use a new sign-on bonus, for example, to pay off any amounts you owe your previous employer.

Committing too soon?
Perhaps the biggest drawback of resident stipends is the fact that they require residents to make decisions now about their future and the future of the organizations they plan to work with. If you sign on to your first job with a year left in your training, for example, how do you know that a much better job offer isn’t going to come along?

“This is a commitment you’re making before you’ve even completed your residency,” Mr. Shaughnessy says. “If a better offer comes along, you’re stuck. So there are definitely some downsides.”

Before you decide to accept a resident stipend, make sure you’ve thoroughly vetted your future employer. Who are you going to be working with? Who are your colleagues going to be? Are you going to get along with the staff? “All of these things are variables that you really can’t assess so far in advance,” Mr. Shaughnessy says. “It is certainly a risk to commit to an agreement when you don’t know what’s going to happen.”

He also points to this issue: Employment agreements are often in draft stage when residents agree to accept stipends. Key issues like call—how much you’ll take once you’re working—are unresolved. “One of the first things I look at when reviewing contracts is the call obligation,” he says, “and if there are any upward limits on call so they can’t be working you to death.” Once you’ve taken thousands of dollars in resident stipends, you have very little leverage to change the terms of a contract that you don’t like.

“I tell physicians that they need to understand their call obligation because when you’re on call, you’re stuck,” says Mr. Shaughnessy. “Here in Kentucky, rural hospitals recruit physicians and tell them they can go to Cincinnati for the weekend, but it turns out they always are taking call. You don’t want to take a resident stipend without a finished employment agreement and then find out that you have to take a huge amount of call each month.”

Hometown advantage
Which residents are most likely to benefit from resident stipends? The consensus is that stipends might be the best bet for physicians who know the area where a group or organization is located, so they’re aware of the community they’re committing to.

Mr. Shaughnessy says he’s seen physicians in such situations successfully accept stipends. “It was their home town where they grew up,” he notes, “and they had family there.” Because these doctors were committed to moving back, it was a no-brainer to take stipend money while they were still in training.

Ms. Hurley from Schneck agrees that physicians who have local roots are usually the first to commit to resident stipends. “My earliest signers are typically physicians from this area,” she explains. “They’re confident that they want to return.”