Everything You Need to Know About Medical Employment Contracts | Employment Agreement

Before starting a new job as a physician, it is essential to sign an employment contract. Such a contract not only states your duties but it sets clear guidelines on what you and your employer should expect from each other.  

While you and your employer can communicate the grounds of operation through emails, phone calls, or texts, a written contract will legally protect you. And it covers your rights in situations such as contract termination or unfair employee benefits coverage, among others.  

In this article, we’ll cover: 

• What is a medical employment contract? 
• Who needs a medical employment contract? 
• What to look out for in a medical employment contract 
• How to navigate an employment contract 

What Is a Medical Employment Contract?  

A medical employment contract is a written agreement between you (the physician) and your employer. The contract entails what is expected from you before, during, and after your working time with your employer. It also details what you should look forward to from your employer. 

The contract highlights the type of medicine being practiced, the number of working hours, your availability, your duties, compensation, arbitration clauses, and benefits. 
It is essential to read and understand your medical employment contract before signing it. You should never dismiss something in the agreement and think “that won’t be enforced,” as that may be a good recipe for disappointment later on. An employment contract lawyer or a practice management consultant familiar with medicine employment law should review your contract before agreeing to it. 

Who Needs a Medical Employment Contract? 

Anyone interacting directly with patients to provide medical assistance must sign a medical employment contract before starting the job. These can be new employees, full-time employees, part-time employees, independent contractors, or Locum tenens physicians. Therefore, the following healthcare workers, among others, should sign medical employment contracts: 

• Nurse Practitioners 
• Licensed Practical Nurses 
• Physician Assistants 
• Internists  
• Nurse Anesthetists (CRNAs) 
• Registered Nurses 
• Optometrists 
• Psychiatrists 
• Nursing students  
• Pediatricians 
• Obstetricians
• J-1 Physicians  

What to Look Out For in a Medical Employment Contract? 

Medical employment agreements can seem complex and challenging to understand due to legal terminology and considerations. However, it is essential to understand the contract no matter what. This is especially true if your hiring contractor has stayed for an extended period without hiring.  

For example, a physician– let’s call her Dr. Lisa- learned the hard way after accepting her first job through a “handshake agreement.” “I was focused on the medicine I would practice and didn’t know the right questions to ask. I worked without a contract for seven months. I didn’t get paid until I’d been there six weeks, and I never had any health benefits,” she said.  

Some of the crucial things you should look out for include: 

Term and Termination 

You need to take note of the start and end date to know the term length of the contract. Also, check if there are any conditions that need to be satisfied before the start date. This can be things such as obtaining licensure in the practicing state. 

An employment contract can be terminated or voided if conditions are not met by the starting date. It can also be terminated due to malpractice, incomplete restriction, and issues tied down to compensation, among other things. Be sure to read and understand every reason your employer may have for the termination of the contract. 

Expiration 

Take note of when the contract will expire. Sometimes the expiration date can be forgotten or left out. Such cases can cause a lot of pressure due to job security. Therefore, if the contract doesn’t renew automatically before the end of the term, remember to renew it manually before the expiration date.  

Non-competes 

Non-competes hinder you from practicing within a specified geographical area after your contract has been terminated. Usually, the radius can be within 2-50 miles, depending on your place of employment (rural or urban area).  

It is always important to negotiate a larger radius, say 50 to 100 miles, especially if you’ll be working in a densely populated area. 

What Are the Pros of Medical Employment Contracts

Apart from a clear established relationship between the employer and an employee, an employment contract creates other benefits such as: 

Clear Compensation Model 

Your employment contract should detail your total compensation, including your basic salary and any incentives and bonuses. The model can either be salary with a minimum wage guarantee, salary plus bonuses, or equal Shares Compensation. 

Employee Benefits 

Once you sign the contract, you will be eligible for several employee benefits. These benefits may include the following: 

• Paid time off 
• Health insurance coverage 
• Life insurance 
• Medical malpractice insurance 
• Liability insurance 
• Continuing Medical Education reimbursement 
• Retirement plans 
• Relocation Expenses 

Suppose you need to relocate before starting your new job, and your employer has agreed to help you move. In that case, you should include those expenses in your employment agreement. According to Meritt Hawkins, healthcare practitioners offered a relocation bonus were offered an average of $10,533. 

How to Navigate an Employment Contract 

Here are five summarized steps to help you fully understand and navigate your medical employment contract: 

1. Understand common contract terms such as Indemnification, return of records, Intellectual Property, etc.  
2. Comprehend the provided compensation model 
3. Discern fair benefits and compensation packages 
4. Understand the legal consequences that come with signing a contract 
5. Understand working conditions, liability, and restrictive agreements in your contract 
6. Determine if there are elements of an independent contractor agreement.

Note that you don’t have to accept everything that is offered, nor should you negotiate every part of the contract. Study the agreement and decide which points are most important to you, be firm on those points and a bit flexible on the less critical points.  

Conclusion 

Starting a new job with a favorable contract can place you in a suitable work environment where your job security, finances, and practice are well protected. The first step to ensure this happens is understanding the contract thoroughly and negotiating where needed. To make the process much more convenient, you should consider having an experienced and knowledgeable attorney by your side. Contact Chelle Law for assistance if you need help with a physician contract review. He will help you every step of the way!

Other Blogs of Interest

• How Much are Resident Physician Salaries? | Physicians Salary
• How Physicians are Paid in a Productivity Model | Physician Salary

What Can You Negotiate in a Physician Contract? | Doctors Contract Negotiations

What can a physician negotiate in an employment contract? The short answer is everything. It ultimately depends upon the willingness of the employer of whether they’re willing to negotiate terms or not. I find big hospital networks are less likely to make major changes in an employment agreement. Whereas if a physician is looking into a physician with a smaller physician-owned practice, there’s much more leeway for major changes. What are the things that are important to the physician, and then what are the things they can get changed? When I’m talking to a physician, I think the things that stick out as most important would be:

• Signing bonus
• Relocation assistance
• How to terminate the agreement
• Making certain there’s without-cause termination that’s a reasonable length.
• Compensation
• Productivity bonuses
• The non-compete 
• Tail insurance
• Who pays for tail insurance if it’s a claims-made policy?

Physician Employment Contract Negotiations

Let’s go through each of those and come up with some tips on negotiating. First, as far as compensation goes, the physician needs to know the value and their specialty’s value. Getting the MGMA data is helpful. It is helpful to talk to colleagues about what they’re being offered or what they’re currently making in different organizations. Sometimes, the associations for each specialty can provide information as far as what’s a normal salary in your specialty. That’s one way to look at it. As far as productivity goes, this is a little more difficult. It’s going to be completely based upon, I guess, the arrangement. Is it kind of a hybrid of a base salary and RVU production? Is it a base salary and net-collections? Or is it all RVU? Is it all net-collections?

This one is dependent upon what’s the type of structure. If it’s net collections, if it’s a hybrid model, meaning you’re getting a base plus a certain amount. Let’s say, for instance, the expectation was 20,000. Anything collected over 20,000 by the practice, the physician will then get 15 to 25% of that. That would be a normal percentage. If the physician is purely on net-collections, around 40 to 45% is standard. As far as RVUs go, there are two things you can negotiate. The threshold, meaning, how many RVUs you must generate to get a certain amount. Then the compensation factor is the monetary value associated with the RVUs. That has some leeway as well. Regarding signing bonuses and relocation assistance, the main things are the actual number and the repayment schedule. 

Forgiveness Period

Almost every contract is going to have a forgiveness period. Let’s say the physician gets a $20,000 signing bonus, and the initial term of the agreement is two years. Usually, they’ll have to stay for that initial two-year term to have the entire 20,000 amount forgiven, so they don’t have to pay anything back. The same goes for relocation assistance. Relocation assistance should be somewhere between 10,000 to 15,000. The signing bonus can vary widely from 10 up to 75. That one is specialty-dependent. 

As far as non-compete goes, this does vary state by state on what’s considered reasonable. There are a few states where it’s completely unenforceable, California and Mexico for instance. Normally, the non-compete shouldn’t be any longer than a year and the geographic restrictions should be somewhere between 5 to 15 miles from your primary practice location. Where to negotiate with this?

Terms That Matter for Physician Contracts

The length, you want to keep it one year or shorter. You want the non-compete to only apply to a few locations. Some employers will say the non-compete attaches to every facility we own in the entire city. Instead of having one office within 10 miles, you could have 30. So, that’s very important. And then specialty as well. Some specialties can do multiple things.

Let’s say you are internal medicine. You can be a hospitalist. You can go to family practice. Or you can do urgent care. If the non-compete states that you can’t practice medicine within that geographic restriction, you’re out of luck. Whereas if you just keep it to the specialty of what you’re providing to that employer, specifically, in this case, let’s say your hospitalist, then you could go in family practice or do urgent care for a year, and then when the non-compete ends, go back to being a hospitalist. That’s something to think about.

And then malpractice insurance is always a big discussion with the physicians I’m working with. First, you need to identify whether it is a claims-based or occurrence-based policy. If it’s a big hospital, they might be self-insured. And then, after you determine what type it is, if it is a claims-made policy, then tail insurance will need to be purchased after the contract terminates. And then who pays for that? Most of the time, if you’re in a small private physician-owned practice, the physician must pay for tail insurance when they leave. You rarely have to pay for tail insurance with a big hospital network. Now, tail insurance usually costs about twice what your annual premium is.

Physician Employment Contracts Negotiation Tips

Let’s just say you’re in family practice. Your annual malpractice premium is somewhere between $6,000 to $8,000. If you had to pay for tail insurance, it’s somewhere between 12,000 to 16,000. That’s one thing you can negotiate, who pays for tail insurance coverage? Sometimes an employer will put if you’ve been with us for one year, we’ll pay for a quarter and then two years, half, and then three years, 75%.

There are some ways of getting out of having to pay the entire amount, just depending on the situation. Now, the first thing that I talked about was, is the employer willing to negotiate or not. There will be some employers that simply say, this is a take-it or leave-it deal. I don’t think those employers will be great to work with. If an employer is unwilling to budge on anything, they will likely be difficult to work with.

Meaning that they’re not going to accommodate the physician in some way. So, I caution any physician who has been given a job offer, we ask for some clarification or certain concessions, and they simply say no. This is it. That’s usually a red flag. And I tell the physician that you may want to continue looking for a job because this might not be a good fit for you. Anything in the contract is negotiable. You need to figure out what’s most important to you. Sometimes, the non-compete is absolutely the number one thing. For others, it’s the compensation. For others, it’s not having to pay tail insurance. It really is dependent upon the physician’s wants and needs and then tailoring the negotiations to get them to that point.

How to Negotiate a Physician Salary | Negotiation for Physicians

How can a physician negotiate a better salary? As an initial matter, I don’t personally believe that the salary should be the driving factor in a decision for a physician. Suppose there’s an enormous gap, a hundred thousand dollars, maybe 50. But if it’s $10,000 just going with the job that offers the most when maybe the benefits are different. The work environment is different. The ability to learn, have a good mentor, a good teacher. I think all of those things are probably more important than just the absolute base salary amount, but it certainly is important. And so when someone asks me, all right, what do I do?

Physician Compensation Negotiations

How do I get a better salary? There are a couple of ways of doing it. One, you need to know your worth. How does a physician find out what’s a reasonable salary? Well, there’s data. The MGMA medical group management association is the industry standard regarding compensation numbers. It is not the be-all and end-all of whether something is fair or not. They break it down into regions: West, East, Midwest, Southwest, and those quadrants have different salary numbers. But the base salary could be great or not be great. That depends on whether there’s productivity compensation in the agreement or the potential for partnership. So, there are many scenarios where a physician is out of training and given a two-year, three-year agreement.

Physician Contract Salaries

That’s probably below what’s a reasonable or average amount for someone just coming out of training. With the carrot on the stick, if you take below market for these two or three years, you’ll get away above-market. Once you become a partner, be careful of the situation. Do you need to find out how many people are partners? How many people have they not offered partnership to? And then what will you make once you’ve become a partner? That’s certainly important. Now, as far as the MGMA numbers go, you can Google around and find them. I would say data from maybe a year or two old. I found that people are relying on 2020 numbers. They’re in trouble due to COVID. 

Some of the RVU compensation factor numbers are way out of whack. Some of the comps are just way out of whack. I would not use 2020 data. 2019 is probably the safest and most reliable number we have right now. 2021 wasn’t out yet while I was making this video. So, Google around. You can try and find some numbers. I’d say the best way to do this is to go out there and find multiple job offers and see what your initial offer is. And then also, anyone in training has other people in their specialty that are also looking for jobs. Talk to your colleagues and the people you’re training with. What offers have you received? Where have you been offered this? One difficult thing is that some people automatically think that they’re in a high-cost city and that they’ll make more.

Salary Rate in the City

And that’s not the case. It’s almost the opposite. Suppose you’re looking for a job in a city that’s a desirable location. The salaries are usually, or at least sometimes the salaries will be depressed. I live in Scottsdale, Arizona, which is a great place to live. And when I speak to physicians who are moving into the area. They get surprised sometimes because the salaries may not be adjusted to the cost of living in the area, California as well. Suppose you’re in San Diego or LA or even in San Francisco. In that case, the cost of living and housing is very high, but the salaries are not commensurate. You need to be aware that just because you’re in a bigger city with a higher cost of living doesn’t mean you’ll be making more. It’s the opposite.

How Doctors Negotiate

If you’re in a rural location that’s hard to recruit, you will almost always make more money in those scenarios. So, if money is the bottom line you’re looking for. Then it would help if you looked in the smaller cities that are difficult to recruit. You will make more money on average if you’re going to a small rural community. That’s a fact. Once you have a number in mind, what do you do with the employer? You ask them for more. If the offer is 300 and you want 325, don’t ask for 325. You ask for more than that. So if they offer 300 and you want 325, then ask for 350, easy arithmetic, try to meet in the middle. 

Now there is a point where you will look either greedy or potentially just dumb if you’re asking if you received an offer of 300. You ask for 450. They’re going to say, well, that’s ridiculous for, it may even yank the offer.

Negotiation Based on Leverage

You need to know your value, and then specialty is also a big part of what kind of leverage you have. Leverage as the basis of any contract negotiation. Do you have it, or do you not? You have more leverage if you’re in a specialty that’s hard to recruit or in high demand. If you’re in a specialty that is plentiful or saturated in the market that you’re looking in, your leverage is less. So, you need to take that into account as well. Suppose you’re switching jobs in the community and bringing your patients with you. Then you’re worth more than someone coming into the community, like peds or primary care, that has to build up a patient base that takes time. 

Learn to Walk Away From Unworthy Offers

Those are tips on getting a better salary and where to start. Contacting an attorney and getting a feel for the area might be helpful.

It’s fairly specialized in people that focus on physician contracts. You may not find somebody within the area you’re looking at, so maybe do a broader search. But anyway, the last point is that some employers will not negotiate. They’ll say it’s a take-it-or leave-it-to offer. You’ll then have to be willing to walk if you’re unhappy with your salary, but there are just simply people out there that say, no, we’re not negotiating. We’re offering what we offer, and I wouldn’t be offended by that. That’s just kind of the tech that they’re taking as far as employing somebody. 

So, don’t be surprised if you have an employer that says no, but if you’re unhappy with an offer, you need to be willing to walk as well. Accepting a deal that you think is well below your value is never a good feeling. Don’t just accept that because you need a job. Find the right job.

What to Look Out For in a Medical Employment Contract? 

Medical employment agreements can seem to be complex and difficult to understand due to some legal terminologies and considerations. However, it is important to understand the contract no matter what. This is especially true if your hiring contractor has stayed for a long period without hiring.  

For example, there’s a physician– let’s call her Dr. Lisa- who learned the hard way after accepting her first job through a “handshake agreement.” “I was focused on the medicine I would be practicing, and I didn’t know the right questions to ask. I worked without a contract for 7 months. I didn’t get paid until I’d been there 6 weeks, and I never had any health benefits,” she said.  

Some of the crucial things you should look out for include: 

Term and Termination 

You need to take note of the start and end date to know the term length of the contract. Also, check any conditions that need to be satisfied before the start date. This can be things such as obtaining licensure in the practicing state. 

An employment contract can be terminated or voided if conditions are not met by the starting date. It can also be terminated due to malpractice, incomplete restriction, and issues tied down to compensation, among other things. Be sure to read and understand every reason your employer may have for the termination of the contract. 

Expiration 

Take note of when the contract will expire. Sometimes the expiration date can be forgotten or left out. Such cases can cause a lot of pressure due to job security. Therefore, if the contract doesn’t renew automatically before the end of the term, remember to renew it manually before the expiration date.  

Non-competes 

Non-competes hinder you from practicing within a specified geographical area after your contract has been terminated. Usually, the radius can be within 2-50 miles, depending on your place of employment (rural or urban area).  

It is always important to negotiate a larger radius, say 50 to 100 miles, especially if you’ll be working in a densely populated area. 

What Are the Pros of Medical Employment Contracts

Apart from a clear established relationship between the employer and an employee, an employment contract creates other benefits such as: 

Clear Compensation Model 

Your employment contract should detail your total compensation. This includes your basic salary and any incentives and bonuses. The model can either be a salary with a minimum wage guarantee, salary plus bonuses, or equal Shares Compensation. 

Employee Benefits 

Once you sign the contract, you will be eligible for several employee benefits. These benefits may include the following: 

• Paid time off 
• Health insurance coverage 
• Life insurance 
• Medical malpractice insurance 
• Liability insurance 
• Continuing Medical Education reimbursement 
• Retirement plans 

Relocation Expenses 

In case you need to relocate before starting your new job and your employer has agreed to help you move, you should include those expenses in your employment agreement. According to Meritt Hawkins, healthcare practitioners offered a relocation bonus were offered an average of $10,533. 

How to Navigate an Employment Contract 

Here are 5 summarized steps to help you fully understand and navigate your medical employment contract: 

1. Understand common contract terms such as Indemnification, return of records, Intellectual Property, etc.  
2. Comprehend the provided compensation model 
3. Discern fair benefits and compensation packages 
4. Understand the legal consequences that come with signing a contract 
5. Understand working conditions, liability, and restrictive agreements in your contract 
6. Determine if there are elements of an independent contractor agreement

Note that you don’t have to accept everything that is offered, nor should you negotiate every part of the contract. Study the contract and decide which points are most important to you, be firm on those points and a bit flexible on the less critical points.  

Additional

What are the consequences of breaking an employment contract? The first issue is what is considered breaking a contract? I think some people think that just exercising their right to terminate the agreement is breaking the contract. I don’t think of it that way. When I think of breaking a contract, meaning, you don’t give proper notice, you just simply leave the job without following the terms of the agreement. In that scenario, what are the potential consequences? Let’s say professionals at a job and it’s not working out for whatever reason. In almost any employment contract, there’s going to be a section that kind of discusses the ways the contract can be terminated. And then within that section, there’ll be what’s called without cause termination. Without cause termination simply means either party can terminate the agreement for any reason at any time with a certain amount of notice to the other party, normally somewhere between 30 to 90 days.

Let’s just say the professional walks in on Monday and says, I’m leaving tomorrow, but they had a 60-day without cause termination notice requirement. Well, if that does happen, the employer could then potentially go after, and when I say go after, I mean legally go after them, sue them for breach of contract. And when you sue somebody for breach of contract, there can be several damages involved. There could be lost profits for what they would’ve expected that employee to generate during that 60-day period, they could also go after the replacement value. If they had to find a short-term replacement that was very expensive, they could go after the employee for that. There could be damages for recruitment fees in trying to find that employee’s replacement. They could maybe go after them to get back a signing bonus, relocation assistance, licensing fees, and credentialing if they’re a healthcare provider.

So, yes, if you do break a contract, meaning, you just simply walk out and don’t fulfill the terms of the agreement, there could be several things that the professional could be liable for. Now, a lot of times when I’m having a consultation with somebody who is unhappy, they just say, well, these are all the things the employer is not doing right. They’re not paying me my bonus in time, or they’re making me work more than that in the contract or I’m having to take twice as many calls as they said I would. Okay, well, just because they’re doing it or they’re breaking the contract, doesn’t mean you can just leave and then cite that as a reason. If you believe the employer is in breach of contract, you need to provide them with written notice that states you are in breach of contract for these reasons.

And then normally, there’d be some language that states you can cure the breach, usually somewhere between 15 to 30 days. And if the employer does fix whatever the problem was, then the employee cannot terminate the contract for cause. If you can terminate it for cause, usually, it can be immediate, meaning, you give the employer written notice that they’re in breach of contract and if the employer does nothing, then it would be the option of the employee to terminate it immediately. That is simply different than the employee just breaking the contract. You must go through it to protect yourself under the terms of the agreement. And even if the employer is not fulfilling their terms, you still must give them notice. You still must wait for the cure period. Then if they fix whatever the problem was, you still can’t just break the contract and jump immediately to a new position.

To protect yourself, read the contract, see how the contract can be terminated either for cause or without cause and follow the requirements. If you must give 60 days’ notice to terminate the agreement without cause, you must give 60 days’ notice or you can potentially open yourself up for a lawsuit in damages. The last thing, there will be a section in the contract that states how effective notice can be given. What I mean by that is it will state to give proper notice. You must send either certified mail, hand delivery, a written letter to the address of the business or the attorney of the business or whatever. If you don’t give effective notice, meaning, you don’t follow that notice section, it would not be considered a proper termination. And in that scenario, the employer can simply say, well, you owe us another 60 days until you give us effective notice or whatever.

So, follow the termination section, and follow the notice requirement. In that way, you can avoid having to either pay anything back to the employer or must pay damages for lost profits, recruitment fees, and the things I went over at the beginning of the video.

Consultation with Chelle Law

Starting a new job with a favorable contract can place you in a suitable work environment where your job security, finances, and practice are well protected. The first step to ensure this happens is understanding the contract fully and negotiating where needed. To make the process much more convenient for you, you should consider having an experienced and knowledgeable attorney by your side. If you need help with a physician contract review, feel free to contact Chelle Law for assistance. He will help you every step of the way!