How Long Should a Physician Contract Be? | Term Length
The term of the employment agreement refers to how long the contract lasts. Most physician employment agreements are between 1 to 3 years, with automatic renewal after the initial term ends.
Contract duration clauses are often found in employment contracts to outline how long the contract will last. This is typically done for an indefinite amount of time, but if there was a specific date stated on when it would end then that could be included as well. An example of this might include someone being hired with no specified term length and them coming back after they have completed their degree or reached some other goal set by both parties so that work can resume again more easily without having to start from scratch every time something happens outside their control like graduating college in four years instead of six because you were able to go part-time while working during your first two years before going full-time once classes stopped for summer break.
Use a Duration Clause
You will be wise to use a duration clause when defining an agreement’s effective period. This can help you protect your interests should the contract need early termination and also helps clarify what type of early termination is possible for both parties involved. It includes things like whether or not it will end on its own accord at some point, if any specific events trigger an automatic expiration date (such as a breach), and more!
When creating a contract, both parties should know what the terms are. If there is a duration clause in place, it’s common for either party to be able to renew with one another if they desire. And as long as you spell out your conditions within the duration clause, this can also prevent confusion about when their time will expire and how much notice must be given before termination of service takes effect.
Not every contract has an exact end date, but those that do usually allow flexibility on behalf of both parties who may have desires to continue after expiration or wish not to terminate prior to its conclusion. You could always include these personal clauses into the main document, explaining them clearly, so everyone knows where they stand at all times- including yourself!
Without Cause Termination for Physicians
Nearly every physician employment contract contains a provision that allows either party to terminate the agreement for any reason with a certain amount of notice to the other party. The typical amount of notice is either 60 or 90 days. Therefore, the initial term of the agreement is meaningless if either party can terminate the agreement for any reason at any time with proper notice.
Terminating employees is an important business decision. There are two types of terminations: with-cause and without-cause. To fire someone for violating company policies or committing unethical acts can be justified as termination with-cause. But firing them for poor performance alone may not be enough to discharge the employee. This type of dismissal should instead fall under “termination without call.” You must understand which kind you’re terminating before deciding whether it would adversely affect other departments within your organization.
Terminating an employee without cause is a common practice among private employers. This type of dismissal can occur for any number of reasons, such as budget problems or operational restructuring and downsizing. The phrase “termination with cause” might be more accurate since the employer has grounds to fire someone who isn’t performing up to expectations or meeting certain criteria laid out in their contract; however, they do have this right under work at-will laws present in some form across all 50 states unless moving forward would violate state or federal employment law.
For Cause Termination
Companies usually have an employee handbook to outline the standards of behavior expected from their employees. A separate code of conduct may also be in place, outlining specific incidents for termination should they happen within a company or on its premises. Common causes that lead to immediate dismissal include violence and drug abuse but theft is not uncommon either as well as sexual harassment depending upon the severity and number of offenses committed by one individual. The more severe cases typically result in automatic termination with lesser violations which might require progressive warnings before finally being terminated if it reaches a point where other options are no longer viable
Term Lengths | When the Contract Length Does Matter
The one instance where the initial term of the agreement matters is if the physician must repay a sign-on or relocation bonus if they leave within the initial term of the agreement. The agreement will dictate how much of the sign-on bonus is forgiven based on the physician’s employment length. For instance:
- If the initial term is 24 months, each month 1/24 of the sign-on bonus is forgiven.
- If the initial term is 36 months, each year completed will forgive 1/3 of the sign-on bonus.
- If the physician does not complete the initial period, they must repay all the sign-on bonuses.
Set Term of the Contract
Simply put, not all employees enjoy the same protections when it comes to employment. This is why it’s so important for individuals negotiating a contract to be fully aware of their options before committing themselves and signing on that dotted line. For example, an at-will employee can get let go with no notice if they don’t do what their employers want them to do—think back from your favorite show where someone gets fired because she didn’t sell enough lemonade in one day! Meanwhile, some contracts specify fixed terms like two years or more; these agreements will detail specific reasons and probation periods (if applicable) for termination without-cause should either party fail to uphold certain obligations set forth by this agreement.
When an employee must quit their job, they are obligated to give notice that the relationship is ending. It’s typical for a physician to give between 60 to 90 days’ notice before terminating employment so both parties can prepare accordingly.
Different Types of Physician Employment Agreements
An employment contract is a formal agreement between an employee and employer in which the two agree to work together. Fixed-term contracts are one type, but there are other types for jobs with more fluid timelines, such as hourly wages or commissions based on performance. A J-1 contract’s term is set for three years.
Employers can terminate employees early in a fixed service contract if the employer provides valid reasoning and proof. However, employers must provide evidence that an employee was not fulfilling their obligations before termination can occur. For instance: suppose an employee wasn’t providing services agreed upon in a contract but had been given sufficient time for absences due to illness or injury. Then they could cancel it without giving notice; however, if there is no reason provided by either party this will fall under “constructive dismissal.”
An employee who signed a fixed term of employment has certain rights when considering being dismissed from work earlier than expected based on agreement with the company during negotiation stages- one such right relates back to whether or not duties were met as per the original terms set.
Physician Employment Agreement Review
Contracts are a pervasive and obligatory part of nearly all business and legal transactions. Well-drafted contracts help to enumerate the responsibilities of the involved parties, divide liabilities, protect legal rights, and ensure future relationship statuses. These touchstones are even more crucial when applying their roles to the case of a physician employed by a hospital, medical group, or other health care provider. While contract drafting and negotiation can be long and arduous, legal representation is necessary to protect your rights.
The present-day conclusion is simple: A physician should not enter into any contract without having a physician contract reviewed by legal counsel.
There is simply too much at risk for a physician to take contract matters into their own hands. In addition to the specific professional implications, contract terms can significantly impact a physician’s family, lifestyle, and future. There are many important contract terms and clauses which can present complex and diverse issues for any physician, including:
- Non-compete clauses
- Verbal guarantees
- Insurance statements
Benefits of Getting an Attorney to Review Contract Terms
Additionally, often the most influential terms and clauses in any employment contract are the ones that are not present. With the advent of productivity-based employment agreements, any physician must have an employment agreement reviewed before its execution. Attorney Robert Chelle has practical experience drafting and reviewing physician contracts for nearly every specialty.
A thorough contract review can benefit new residents, attending physicians, doctors entering their first employment contract, or established physicians looking for new employment. By employing experienced attorneys for your representation, you can ensure that you will be able to fully understand the extensive and complex wording included in your contract. By fully understanding the contract, you will be in a better position to decide whether you want to enter into the agreement, which will affect your career life for years to come.
The financial benefits gained from having your contract reviewed and negotiated by an experienced healthcare attorney far outweigh the costs associated with a review. You are a valuable resource, and you should be treated and respected as such. Chelle Law will personally dedicate time to ensure that you are fully protected and assist you in the contract process so that your interests are fairly represented.
Reviewing Contracts Help Avoid Possible Conflicts With the Employer
Every physician’s contract is unique. However, nearly all contracts for health care providers should contain several essential terms. If these essential terms are not spelled out in contracts, disputes can arise when there is a disagreement between the parties regarding the details of the specific term. For instance, if the doctor is expecting to work Monday through Thursday and the employer is expecting the provider to work Monday through Friday. Still, the specific workdays are absent from the agreement. Who prevails?
Spelling out the details of your job is crucial to avoid contract conflicts during the term of your employment. Below is a checklist of essential terms that contracts should contain (and a brief explanation of each term):
- Practice Services Offered: What are the clinical patient care duties? Are you given time to review administrative tasks? How many patients are you expected to see (like in pediatrics)?
- Patient Care Schedule: What days and hours per week are you expected to provide patient care? What is the surgery schedule? Are you involved in the planning of your schedule?
- Locations: Which facilities will you be scheduled to provide care at (outpatient clinic, surgical sites, in-patient services, etc.)?
- Outside Activities: Are you permitted to pursue moonlighting or locum tenens opportunities? Do you need permission from the employer before you accept those practice medicine-related positions?
- Disability Insurance: Is disability insurance provided (short-term and long-term)?
- Medical License: Will the practice offer reimbursement for your license? Will an advisor be provided?
- Practice Call Schedule: How often are you on call (after-hours office call, hospital call (if applicable))?
- Electronic Medical Records (EMR): What EMR system is used in the practice of medicine? Will you receive training or time to review the system prior to providing care?
- Base Compensation: What is the annual base salary? What is the pay period frequency? Does the base compensation increase over the term of the Agreement? Is there an annual review or quarterly review of compensation?
- Productivity Compensation: If there is productivity compensation; how is it calculated (wRVU, net collections, patient encounters, etc.)? Is there an annual review?
- Practice Benefits Summary: Are standard benefits offered: health, vision, dental, life, retirement, etc.? Who is the advisor of human resource benefits?
- Paid Time Off: How much time off does the job offer? What is the split between vacation, sick days, CME attendance, and holidays? Is there an HR guide?
- Continuing Medical Education (CME): What is the annual allowance for CME expenses and how much time off is offered?
- Dues and Fees: Which business financial expenses are covered (board licensing, DEA registration, privileging, AMA membership, Board review)?
- Relocation Assistance: Is relocation assistance offered? What are the repayment obligations if the Agreement is terminated prior to the expiration of the initial term?
- Signing Bonus: Is an employee signing bonus offered? When is it paid? Do you have to pay it back if you leave before the initial term is completed? Are student loans paid back? Is there a forgiveness period for student loans?
- Professional Liability Insurance: What type of liability insurance (malpractice) is offered: claims made, occurrence, self-insurance?
- Tail Insurance: If tail insurance is necessary, who is responsible to pay for it when the Agreement is terminated?
- Term: What is the length of the initial term? Does the Agreement automatically renew after the initial term?
- For Cause Termination: What are the grounds for immediate termination for-cause? Is a review provided to dispute the termination?
- Without Cause Termination: How much notice is required for either party to terminate the agreement without-cause?
- Practice Post Termination Payment Obligations: Will you receive production bonuses after the Agreement is terminated?
- Non-Compete: How long does the non-compete last and what is the prohibited geographic scope?
- Financial Retirement: Is a financial retirement plan offered?
- Non-Solicitation: How long does it last and does it cover employees, patients, and business associates?
- Notice: How is notice given? Via hand delivery, email, US mail, etc.? Does it have to be provided to the employer’s attorney?
- Practice Assignment: Can the Agreement be assigned by the employer?
- Alternative Dispute Resolution: If there is a conflict regarding the contract, will mediation or arbitration process be utilized? What is the standard attorney review process for conflict? Who decides which attorney oversees the process?
Coming into a new organization with a favorable contract can put the physician in a positive financial situation for years to come. Before you sign the most important contract of your life, turn to Chelle Law for assistance.
Other Blogs of Interest
- What to Know Before Signing Your First Physician Contract
- What to Do When Your Physician Contract Is Not Renewed
Average Physician Contract Length
There are also some considerations if the physician decides to terminate the agreement without-cause. One, are there any repayment responsibilities? Let’s say a physician has a three-year initial term and received a signing bonus, relocation assistance, and maybe student loan repayment. There usually would be some language that states that if they terminate the contract before the end of the initial term. They would owe some repayment on those bonuses. And usually, it’s prorated. It’s not an all-or-nothing thing. For instance, since we’re using a three-year term, they would say one-third forgives each year. So, if you had a $30,000 signing bonus, $10,000 on year one would be given, then $10,000 on year two. And then let’s say you left sometime between the second and third year. Then you would owe them back $10,000. Who pays for malpractice insurance?
An Employment Agreement Term for Doctors
If the contract gets terminated without-cause, the restrictive covenants will apply. The initial term is not that important. Most contracts also have language that states that the agreement will automatically renew for one-year terms after the initial term expires. That’s pretty standard as well. Rarely would a contract end. It would always automatically renew. If the contract has a fixed term, it will not automatically renew. Then, usually, somewhere between 60 to 90 days before the end of the term, the parties would meet and then discuss whether they want to continue or not. Especially as a physician, continuity of care is important, and that’s why they have notice termination provisions in the contract so that a physician can’t one day state, Hey, I’m leaving.
Physician Employment Contracts
I won’t be in tomorrow. Suppose they have patients scheduled, or if they need to offload all of the patients, new providers. The physician must provide some notice to make that a smooth transition. And assure that the patients receive continuity of care. So, as far as how long a contract is, as I said before, one to three years. However, almost any physician can get out of the contract with a certain amount of notice. If you have any questions about a physician contract, maybe you’re entering into a new agreement, coming out of training, or perhaps you’re in a current agreement. You want us to take a look at the contract. We’re happy to do that.
Will I Be Paid My Bonus if I Terminate the Physician Contract Early? | Termination of Contracts
The first question is, what type of bonus is the physician thinking about? Like bonuses when you sign the contract, productivity bonuses are involved once the contract is ongoing. Let’s take the signing bonus first. Almost any physician will receive a signing bonus and relocation assistance when signing an employment agreement. Let’s say there’s a $20,000 signing bonus, and then the employer will provide up to $10,000 for relocation. Normally, there would be language that states if the physician leaves before the initial term ends.
The initial term is just how long the contract lasts. Let’s say it’s a two-year term. Normally, there would be language that states that if they leave early, they must pay back a prorated portion of that amount. Monthly is probably the most standard way of doing it. Let’s say the physician lasted a year, and then they have one year left on that two-year term, then they’d owe back half of whatever the bonus was. So, they’d have to pay back 15,000 in total. 5,000 for the relocation assistance, and 10,000 for the $20,000 signing bonus. It can be quarterly. Some places do it yearly. From the doctor’s perspective, the shorter forgiveness period and the shorter interval are more advantageous. If you stay for 11 months, then leave, and it was yearly forgiveness, well, you’re out of luck.
What Are the Productivity Bonuses of Physicians?
You just missed out on that whole year of forgiveness. Whereas if it’s monthly, no matter where you leave, it’s about as up-to-date as it can be. So, that’s one way of not getting your bonus. If you leave early, you have to pay a portion of that back. Now, the other bonuses are productivity bonuses that a physician would receive. There are different types of productivity bonuses, and there are different types of compensation models. The two most common productivity models are net-collections for private practice and RVU-based compensation, used mainly by hospital networks. Let’s say a physician had a contract for RVUs, and it said, any RVU generated over 6,000 in a year, you’ll make $45 per RVU, but it’s a yearly bonus.
There’ll be language that states the physician has to be employed when the bonus is paid. So, there’s a possibility that there might be a window where the physician earned the bonus towards the end of the year they give notice. Then the contract is terminated before they receive the bonus and out of luck. The physician wants to ensure there’s a language that essentially states the bonuses. If they earn a bonus, they will receive the bonus no matter whether the contract is terminated early or in some way. It would help if you really thought about that. If it’s net-collections, usually, that would be a hybrid where there would be a base salary. Then the physician would get a percentage of what the practice collects. Let’s say a physician has a $240,000 base.
The Benefit of Getting a Paid Bonus Earlier
One normal way of doing it would be the practice states, alright, after you’ve collected $20,000 monthly, which covers your base salary. You would get a percentage of net-collections after that. In that scenario, a normal percentage will be somewhere between 15 to 25%. And then it would state to pay within this many days of the end of the month, or perhaps it’s quarterly. It’s rare for it to be annual. But if it is, you want to make certain.
Once again, just like with the other bonuses, the shorter period where you get paid protects you if you leave early. If you have a yearly bonus, as I said, and then you leave in month 10, even if you earn that bonus, if there’s no language there, you’re not going to get it. So, you want to tighten that interval. Preferably, it would be a monthly payout. You’d set the interval or whatever the level is where you’ll get paid so that you receive a monthly payment.
And that way, you insulate yourself from amassing a bonus but not getting it. So, those are the two main productivity ways. The RVUS, and net collection. And in the agreement, it’s going to have a termination section, and this will state what happens in the event either party terminates the agreement.
What Happens to Payment Upon Termination?
And normally, there’ll be a section at the end of the termination section that states what happens to payment upon termination. You need to pay attention to that language. It will most of the time dictate if/when and how the physician will receive those bonuses. As I stated before, their timing is whether they get it at all, even if it’s earned but not paid out before they leave.
It would help if you gave specific attention to that section. I find some places try to kind of screw the doctor out of the money. This is because the doctor doesn’t understand the timing of the payment or how to earn the bonus. So, it’s something to think about. I mean, it feels bad to work hard, earn a bonus, and then, due to timing, not actually receive it.
Questions About Contract Terms?
If you have questions about your current medical malpractice policy or are interested in having your employment agreement reviewed contact Chelle Law today.
Physician Contract Questions?
Contract Review, Termination Issues and more!