Finally, you’re off to an exciting new job! You aced the interviews. You love the area. And you’ve found the perfect next step for your career. There’s just one detail left to sign: the contract.
A physician employment contract is written confirmation of everything you and your future employer verbally agreed to—a roadmap for your new position. Most are several pages long, but don’t be surprised if yours is shorter. You might even receive it in the form of a letter. But no matter how it’s delivered, you need to be sure that you agree with everything included and that nothing important is left out.
Line up some experts
Expect to stumble across unfamiliar concepts and terminology as you start reading your contract. No amount of research can substitute for an experienced lawyer. After all, these terms could affect your career well beyond your tenure at this job.
A good lawyer, one who specializes in physician employment contracts, can help you understand each concept and protect your long-term interests. Be sure to tell your lawyer about any major concerns. For example, you should mention if your spouse needs to stay in the area long-term or if you have a side job or interest you want to continue.
“You can’t just trust that your lawyer knows what you’re thinking,” says Patrick McEneaney, owner and CEO of Northern Illinois Foot & Ankle Specialists and medical director and principal investigator of their Center for Research & Clinical Trials. Your specific goals and concerns should guide the contract review.
What to look for when reviewing a physician employment contract
You’ve coordinated with your attorney and cleared your calendar. Now it’s time for your own detailed review. Pay attention to the following:
- Sections that are confusing or vague.
- Language or clauses you don’t understand.
- Language regarding any special requests you made.
- Sections that don’t line up with what you were told verbally.
- Anything that just doesn’t seem right.
You should also pay attention to what’s missing.
“Get anything that is an absolute must-have or an absolute dealbreaker in writing,” says Kevin Kathrotia, M.D., COO of Millennium Neonatology in Charlotte, North Carolina. It’s nearly impossible to prove a verbal promise after the fact.
A brief overview of contract terms
The assignability clause explains what will happen if your employer is bought by another company or otherwise changes ownership. An assignable contract simply transfers your job over to the new owner without any changes for you. A non-assignable contract does not. Before you sign a non-assignable contract, the American College of Physicians recommends that you add language to help in the event of a change, such as a cash settlement or release from the restrictive covenant.
A physician employment contract may include any number of enticements, such as a sign-on bonus, an annual performance bonus, student loan repayment, relocation reimbursement or other cash benefits.
Make sure you understand the details: Do you earn bonuses as a set dollar amount or a percentage? Is the relocation reimbursement given upfront or after the fact? Do any of these bonuses have a cap? Most importantly, are there any strings attached?
“With some bonuses, such as relocation or a sign-on bonus, you may be required to pay back a certain amount if you don’t remain employed for a defined period of time,” says Danielle M. Carter, M.D., family physician at Ascension St. Vincent’s Riverside in Jacksonville, Florida, and physician member of the American Academy of Family Physicians Board of Directors. With other bonuses, the funds may not be available until you’ve completed a certain number of days of employment.
If a bonus is tied to objectives, those should be laid out clearly. Don’t hesitate to ask for details about bonuses in previous years. Employee benefits package
As with any job, your employer will offer you their standard benefits package, which may include medical and dental coverage, disability insurance, life insurance, vacation days, 401(k) and more. You may be able to make some choices within these offerings, but this area of the contract is often difficult to change or negotiate. Be sure you understand and can live with the existing terms.
Notice of termination
Even before you start, you should be thinking about the terms of your eventual departure. Contracts define how much notice you and your employer must give each other before ending the employment. For a physician, this is often a lengthy window.
Make sure the criteria are fair for both parties. You shouldn’t be required to provide 120 days of notice if your employer can terminate you with only a 60-day notice.
The wording may also distinguish between two types of termination: for cause and without cause. Often, termination conditions are different during the first year of your contract, so be sure these are acceptable. If you and your family pack up and relocate for a job, an early termination can cause significant upheaval. Discuss protecting yourself against this with your attorney.
An indemnification clause is one of the more complicated contract sections, with dense wording that can be difficult to interpret. This can cause some of the biggest headaches in contract negotiation. The general idea of this clause is that each party promises to hold the other harmless in the event of wrongdoing or negligence.
As a physician, you might be unable to ask your employer to help with any legal fees, claims or damages you incur while employed. These clauses can also nullify insurance coverage in some circumstances. Most professionals agree that this can be financially or professionally damaging, which is why having a legal expert on your side is essential.
Look for as much information as possible regarding job expectations. The contract should outline your responsibilities, including which duties you are expected to perform, key roles or procedures, supervisory expectations, administrative duties, reporting structure and non-clinical expectations, such as committee work.
“Hospital committees and performance improvement are generally considered part of the physician’s credentialing requirements, which are generally addressed in contracts with such language like ‘will adhere to all medical staff requirements as per hospital bylaws,’” says Kathrotia.
The contract should also spell out what, if any, support staff you’ll be responsible for working with and supervising.
You already know how important malpractice insurance is. This protects you financially if a legal dispute arises while you are providing care. Most states dictate what coverage a physician is required to carry, so this is another area where a local attorney is most helpful.
There are two types of malpractice policies: 1) claims-made and 2) occurrence-based. A claims-made policy only covers you for claims filed during your employment. If a claim arises the day after you leave the company, you will not be covered. With an occurrence-based policy, on the other hand, any claim resulting from care during your employment is covered—even if that claim is filed hours, days or years after you’ve left the company.
Claims-made policies are less costly, so employers offer them more commonly. But because malpractice claims may arise years after care, you’ll need to consider tail insurance to go with any claims-made policy. This extends your coverage to include any claims that arise after you leave. Tail coverage can be expensive, so consider negotiating it with your new employer as an incentive for you to sign.
The non-solicitation clause only becomes relevant after you’ve left your employer. It prevents you from encouraging any patients from one practice to follow you to another. Wording and definitions make a big difference here. Be sure you understand what actions are considered encouragement and what happens if a patient decides to follow you to a new practice without your encouragement.
People don’t just need doctors between 9 and 5. Being available after hours is usually part of the job. “Call hours are dependent on specialty,” says Kathrotia. “For example, a neonatologist’s every day at work can be considered on call. For an outpatient-based specialist, such as a dermatologist or ophthalmologist, call can be entirely optional, though essential in building a patient load.”
Be sure your contract spells out what’s expected of you. Will you have to be available in person, by phone or virtually? Do all physicians get equal call distribution, or is seniority a factor? Consider how this duty might affect other areas of your life.
If you provide certain procedures or services—such as C-sections or colonoscopies—you may want to ensure these will continue to be part of your caseload. But sometimes, the situation pans out differently.
“An opt-out clause protects you if the employer stops offering these services or, completely unrelated to your competency, the employer just doesn’t grant you the credentials to perform them,” says Carter. “This is important because you might not be happy if you are tied to a job that doesn’t enable you to be doing what you wanted to be doing.”
Employers don’t usually add this clause on their own. You’ll have to ask for it. If there’s an element of your practice that you’d be upset not to do, talk with your lawyer about adding it to your contract.
It may be too early to discuss partnership, but it’s never too early to find out if the potential exists. “Sometimes, practices are managed by an outside entity, so partnership is not always an option,” says Carter, adding that you should ask: “What is the governing structure of the practice?”
If partnership is an option, ask for details. “For example, what is the expected buy-in price?” Carter says. “What kind of shares would you get for that price? What kind of role would you have in decision-making? Does every partner have a vote?”
In many cases, partnership details aren’t included in the initial employment contract. Instead, they’re provided after a certain number of years of employment. In such a case, you can ask for the contract to specify when this conversation can take place. That way, it won’t be postponed indefinitely.
Restrictive covenant/noncompete clause
The restrictive covenant—also referred to as the noncompete clause—can have a significant impact on your future professional freedom. This clause prohibits you from practicing medicine for a specific period of time within a specific geographical area following the termination of your employment. Most experts recommend minimizing these restrictions as much as possible, both in terms of geographic radius and number of years. This is especially important in a densely populated area, adds Carter.
“In a state like Florida, even a five-mile restriction can rule out a lot of potential employers,” she points out. “Also, consider other issues affected, like your children’s schools, traffic areas.” You should also think about what ties your spouse has to the area, whether these are family obligations, employment or otherwise.
Some states don’t enforce restrictive covenants stringently, and some even deem it illegal. Even so, you should never sign an agreement assuming something won’t be enforced. State laws and leadership change over the years, so you should be sure you can live with the terms.
Salary is always one of the first things applicants want to ask about. But when it comes to physician employment, Kathrotia says to consider factors beyond the base salary.
“It’s important to look at the term length, the noncompete clause, as well as the composition of the compensation structure,” he explains, adding that you should ask if compensation is a fixed salary or if it varies based on productivity.
“The contract should spell out how long you will keep your base salary,” Carter explains. “Find out if there is a cap on the amount of bonus money you can earn [beyond base salary]. Don’t let it be a surprise to find out what your earning potential is.”
If you are relocating, be sure to consider how far your salary will go in the area. An online cost-of-living calculator can help you adjust your expectations.
Some employers may ask for tests or screenings—such as criminal background checks, drug screenings, health screenings and proof of vaccinations—before or periodically throughout your employment.
Be sure your contract specifies what is required. Find out where you are expected to receive the screenings, how often, who pays and who is responsible for assessing the results.
Gather your questions
Once you and your attorney have both scoured the document, get together for a discussion. Don’t mail this in. It’s a valuable way to educate yourself in the fine details.
“Too many times people send the contract away to their lawyer and then talk to him for a couple minutes. But until you’re familiar with contracting, you should have your lawyer read through it section by section, explaining what each section means,” McEneaney suggests.
If your lawyer doesn’t offer you a walkthrough, be sure to ask for one even if it adds time to your bill. “The most important thing is to understand your contract,” McEneaney says.
Prioritize points for discussion
If you’re feeling self-conscious about the long list of issues you want to address with your employer, don’t worry. Employers have been through this cycle many times, and they expect you to circle back with questions. That said, they’ll be more likely to meet your requests if you’re willing to give and take. To prepare, prioritize your requests.
- Top priority: These are your potential dealbreakers. Discuss all your top-priority issues in detail with your attorney, who can help you craft wording in your favor and formulate the best approach.
- Flexible: These might sway your decision, but they aren’t quite as imperative. With these issues, you’d be willing to bend a little to reach a compromise.
- Bargaining chips: These extras are nice-to-haves, not need-to-haves. They won’t prevent you from signing a contract. In fact, they can be effective negotiating chips if you trade something from this list in favor of something more important.
Take your time
“You don’t have to sign and return the document quickly,” says Carter. “In fact, if they are pressuring you to sign it right away, that may be a red flag.”
Don’t worry about going through numerous rounds of review. You want the contract as close to perfect as you can get it. However, if the contract is edited multiple times, be sure to confirm that all your changes are in the final version. And be open with your recruiter about where you are in the review process. Be mindful of their deadlines.
Reading and negotiating your physician employment contract can be a nerve-wracking process, but do your best to stay level-headed, calm and professional. You’ll thank yourself later—both for getting a contract you’re happy with and for making a good impression on your future employer.
Once you’re ready to sign, congratulate yourself and get ready to celebrate!