What is in a physician employment contract
Signing the first contract out of residency or fellowship can be both exciting and anxiety provoking. Employment agreements, or as they are often referred to, physician contracts, are not as frightening as you think. However, with most things in life the devil is in the details. There are a lot of legal terms that are in the paperwork. Some contracts range from very verbose (the longest contract I received was 34 pages long), to quite short (shortest I received was 2 pages long). This post will explore what an employment agreement for physicians usually includes and will briefly go over each section. There will be subsequent posts that will go in details above specific sections since contract negotiation and salary can easily be a post by itself.
Start date and date of the agreement
- There will always be an introduction that describes when the contract was written and valid from. There may also be a term about how long the agreement is valid for in this section and if the agreement will self renew or not. This may seem self explanatory but it is wise to have a start date and potential end date to the contract to better protect both the employer and employee.
- In every contract I received, the start date was left blank and they allowed me to fill in the date. Of course, the contract is not binding till the employeer signs it as well so if I put something outrageous they most likely would not have signed.
- I took almost 2 months off post residency to give myself time to move, take boards, and have a little rest and relaxation before starting my new chapter in my life. If you can financially do the same I think it ended up being a great decision in the end.
Duties and job requirements
- This section will describes what you are expected to preform as part of your job. There may be a number of shifts expected, organizations that may be required to be a member of, or anything else that your employer deems necessary for its employees to take part in. The employer can put anything they want that is within legal reason in this section. You may be required to be on call every other weekend or live within a certain radius of the hospital to be available for STEMI page if you are a cardiologist.
Licensing and Board Certification
- The contract should define what are the requirements for being licensed in regard to keeping the position with the job. Most jobs will give one year to become licensed but read carefully if your job requires you to be board certified from day one of employment. You would hate to move cities, buy a new house, and create a new life for yourself only to accidentally fail boards and then find yourself without a job. Know what is expected of you from day one.
Outside agreements or activities
- It is in your employers best interest to spell out what other agreements you may or may not be able to enter into. From their standpoint, they would not want a physician under their contract not preforming 100% at their job secondary to other other agreements entered into by the employed physician. This section should tell you if you can moonlight, start other businesses, or be a representative for pharmaceutical companies. The list is endless for side jobs that physicians can potentially have. Most contracts will stick to medical jobs but I did receive one job offer that did have strong wording about not being associated with any other job that required a large portion of the physicians time. The wording was vague and could be used to cover a lot of different types of businesses. My lawyer at the time told me that this particular contract could be a red flag for me if I ever wanted to do any kind of work on the side. You will find that most of the wording of these contracts will be in a similar fashion.
- Often the first part that new graduates gravitate to. Lets me honest, this is the most exciting part of becoming a new attending short of practicing medicine on your own and helping patients. The compensation portion of the contract should be detailed in how you will be getting paid and if any costs will be taken out of this. For example, this section could also include if any of the business overhead will be taken out of your paycheck. Does the company have a clinic and 2 nurses that you will only be paid once these business needs are met? This section should be well spelled out as to how you will be getting paid with no questions left over. It should be very clear if you are an independent contractor, W2, RVU based, straight salary, or some sort of mix with salary plus incentives. If there are any questions it is well advisable to have a lawyer review the contract to ensure that the physician is protected. Dr. Jurica wrote a good article about contract negotiations that is a great start for those concerned with how to maximize their potential pay.
- Know how money exchanges hands from billing to employee. I have a friend who entered into a pulmonary critical care position this past year and his contract did state that he would only get paid after expenses were met. Turns out that the company had a lot of debt and debt repayment was one of the expenses. This has turned into a touchy situation which I hope will work out for him in the long run. He is having to work extra weekends to pay off the company debt without seeing any pay for himself. He did not have a lawyer review his contract and now is making <$200k a year at this position and quite unhappy. Do not let this happen to you.
- Always ask if the books are open to you or a representative to review. This question does not need to be said on the first interview. However, when I was applying for jobs I asked to take a look at the average pay per group, how healthy the group was financially, and payment breakdown. The company was happy to provide such documents after I signed a waver with no other questions asked. It might have been overkill, but you need to be able to have access to the financial books if need be. For some large groups that are publicly traded or are in many different hospitals this may be less of a concern depending on how secure the group appears to be.
- Read this portion carefully since retirement and health insurance can add up to large amounts of money, especially as your family grows.
- Of my pay, 15% works out to be from benefits. This is including health care, CME, disability insurance, IT stipend for things such as internet/phone/computer.
- This section can add up to big numbers.
- Know if you are W2 or 1099 since this will affect benefits.
Right to bill
- Who will do your billing and if this will be contracted out may be outlined in the contract.
- Will you have a chance to audit these bills or question the bills if you feel that you are down coded for unjust reason.
- Who is expected to cover your liability insurance during and after your employment? For some specialties, (OB/GYN, Surgery, ER), these premiums can be very high depending on the state. You don’t want to find yourself in a situation where you can not afford to quit your job due to the high cost of tail insurance.
- Tail insurance can run into the six figures for certain specialties.
- Most (Read almost all) locum jobs cover tail. I personally would think twice and a third time before even thinking of accepting a locum jobs without tail coverage.
Medical staff privileges
- There will often be a clause that if a physician is to lose privileges at the place of employment, that the contract will be terminated.
- This is not something that any physician or employer ever dreams of happening, but it does happen from time to time.
- Know what will happen if your privileges are suspended. No one ever enters into marriage expecting to get divorced and the same goes for getting privileges at a hospital. Its best to protect yourself and the employer to protect themselves in a worst case situation.
Malpractice claims, board investigations and peer review notices
- This section is separate from insurance coverage for medical malpractice. If claims will be paid or not, that is up to the insurance company and your agreement with them. The agreement relating to claims of board investigations may be present to protect the company in event that the physician has a claim or board investigation and does not disclose this to the company itself.
- Full disclosure is always best.
Restrictive causes (Non compete)
- These have been controversial in the past decade or more. In some states they are illegal and others may or may not be difficult to enforce. Read this portion very carefully and if there are any questions review with a lawyer.
- There will usually be a section where a physician can “buy out” of the non compete and be excused from this restrictive clause. Expect this to be a very high figure that most physicians would not be willing to pay.
- Do not enter into a contract with the hope that you can fight the non compete later in court if need be as you may feel that it may not hold up in a court of law. Unless you are a lawyer, seek professional advise.
- These will usually be under 3 categories: Automatic, non cause, and for cause.
- These are in event of breaching the contract in regards to failure to become board certified (if required), licensed, credentialed by the hospital, inability to be insured, or death. There may be other reasons but these spell out the way that the contract will be automatically terminated if any of these were to happen.
- This is where one side has a reason to terminate the agreement. This can range from a doctor refusing to abide to the guidelines and contract that was signed to the company not complying from the contract. An example of this would be failure of the employer to pay, filing bankruptcy, or failure of the group to comply with any other terms of the contract.
- This section will inform the employee how much of a heads up the company expects in event that you need to quit for whatever reason. Lets say your wife or husband gets a job in another state and you wish to move there with them. This part of the contract will inform you how many days or months need to be given prior to quitting.
- Some contracts will spell out what it takes to be considered for partnership and what this may entail. This section may also include any stock options that can be obtained and what will happen with those stock options upon leaving the company.
- If there is a buy in to become a partner this will be explained here.
The contract can have anything and everything that the company that is writing the contract wishes to include. It is in the employees best interest to fully understand the legal implications of what the contract entails. I wrote a previous post about why physicians should have a lawyer review contacts prior to signing them and I stand by that post. The average physician fresh out of residency will need someone advocating for them to help them navigate what are reasonable terms to red flags in the contract. One of the largest groups that I interviewed with sent me only a two page contract while many others contracts were greater than 10 pages in length. Take your time to review the contract. Once the offer is given, there is usually 2-4 weeks to review the contract before having to inform the employer if the employee is accepting the job or not. This can be an exciting time, try to enjoy it.