Physician Employment Agreements
First job out of residency/fellowship? Take the time to understand your contract with your future employer.
A Word about Representation.a. Don't just get a lawyer, but get the right lawyer. Your Uncle Bob who specializes in trusts and estates may not be the right person to advise on or to negotiate your first job with a specialty group practice or hospital. It is a much better plan than getting no legal advice whatsoever, but Bob may not know to request OR block time or what a reasonable noncompete clause for a physician looks like. Also, an experienced attorney (100+ physician employment agreements) will be able to tell you which provisions of your agreement are usual, reasonable and customary for the industry or your specialty and also whether the terms being offered are generous, fair or subpar. Finally, the right lawyer will be responsive, flexible in accommodating your schedule (i.e., be available during non-business hours) and will have a quick turnaround time, if an attorney can't get to your contract for a week, keep looking. Employers will not wait forever for your attorney to review your contract.
b. Remember that you are an equal party to the Agreement. Coming from an environment of medical training that is based on unequal power relationships and deferring to one's superiors, it is intimidating at best to assume a role where you are standing up for yourself and your best interests in a contract. Having a qualified representative takes the pressure off of you and helps to balance the perception of power in the eyes of both parties.
c. You will benefit from remembering that the employment relationship is exactly that--a relationship. It requires some finesse to navigate between being too friendly, informal and accepting of what is offered and being overbearing, stubborn and uncompromising. You want to negotiate a deal that you will be happy with, but you must also take care not to make a bad impression on your future employer by being too strident or inflexible or nitpicky about the contract language. Having a representative to negotiate your interests allows you to take tough positions without compromising your reputation as a desirable colleague--"scapegoat" is a hat that every good attorney wears from time to time to ensure that his or her client does not take the blame if negotiations become heated.
d. Most large employers are savvy about the laws and regulations affecting health care providers, so it is normal to see language in the contract that pertains to laws such as HIPAA/HITECH, Stark, AHCA, federal and state anti-kickback laws and IRS considerations for 501(c)(3) corporations. Your knowledgeable attorney can explain this language to you or review the contract for potential pitfalls if these laws are not addressed in your contract but should be.
Understand the Goals of Your Potential Employera. Every situation is a little bit different. The potential employer may be a hospital or health care network, a university, a large group practice with multiple specialties, a single specialty group practice, or a solo practitioner who is looking for a partner. Your negotiating strategy will differ depending upon the situation as each of these different types of employers will have different agendas. For example, a hospital employer may want to maximize revenue to its physicians (their referral source) without violating provisions of the Stark law. A large group practice needs to ensure that their contracts are consistent among their shareholders or employees and, if they are well-managed, will usually elevate the best interests of the group over the needs of the individual physician while remaining fair to all. A smaller practice or solo practitioner will likely be looking for a good fit and will be more flexible with the contract language, but these can also be some of the more difficult contracts to negotiate.
b. In sum, there is no one right way to negotiate an employment agreement. The best negotiation strategy for a physician joining a small practice will be different than for a physician joining a large health care provider network. Being open-minded, reasonable and fair (considering how to make the contract a win-win for both sides) is a good starting point.
Contract Termsa. Some employers like to discuss key terms with their prospective employees, or send a letter of offer, ahead of developing the contract. In this situation, the negotiation is actually happening before you receive the contract so bring your attorney in at this stage. For a physician agreement, I view these key terms to be:
i. Initial Term
ii. Base Salary/Compensation (if Production-Based)
1. Signing bonus
3. Quality Incentives
iv. Professional Liability Coverage
1. Occurrence; or
a. Tail coverage provisions--who pays?
v. Physician's Duties
1. Location of practice
2. Call coverage responsibilities
3. Scope of duties
3. Moving Expenses
5. Employer-provided benefits (retirement, health, disability, etc.
vii. Medical Records
1. Make sure you will have access after termination for any legitimate purpose
1. Adequate office and clinic space with appropriate services and general supplies, equipment, etc.
2. Administrative and scheduling personnel
3. Specialty needs (equipment or personnel)
ix. Termination Language
1. "Without Cause"
a. How many days' notice required?
2. "With Cause"
a. Are the "with cause" provisions overly broad or too vague?
x. Restrictive Covenant/ Noncompete (These clauses restrict a terminated physician employee from practicing within a certain geographic distance or with certain competitors of the employer for a specified period of time; may also include restrictions on soliciting the employees or patients of the employer).
1. Must be "reasonable".
2. Is there a buy-out?
xi. Other--Specialty Dependent (e.g., OR Block Time--surgeons; general surgery call--breast surgeons; overlap of procedures with neurosurgeons/radiologists--neurointerventional radiologists; credit for incident to services--oncologists, wRVU credit for charity care--hospitalists, etc.)
xii. Other-Long term: Partnership potential, advancement, compensation growth
b. There are a few often contested terms in physician employment agreements (e.g., restrictive covenants, obligations upon termination--e.g., tail coverage, and call obligations); however, what is important to an individual physician will vary. Do you value security over flexibility? Compensation over lifestyle benefits? Are you in the military or planning an adoption or maternity leave? Will you leave the area if your employment is terminated or will you need to stay in the area for personal reasons? Do you have immigration issues in connection with your employment? All of these considerations should go into negotiating an employment contract that will work for you individually.
c. Once you receive the contract there will be a lot of boilerplate and legalese in addition to these key terms. Make sure that you understand what these terms mean and ask questions if you don't to ensure that know what your rights, your risks and your responsibilities will be under the contract.
Special Situationsa. Multiple Offers. You may receive multiple offers for positions. I am often asked how these should be handled. Usually, one offer will stand out to you as the superior offer due to location, salary or type of employer. I would encourage you to select one offer to go forward with that offer based on the terms that are most important to you. If negotiations move quickly, you may be able to defer action (i.e., stall, buy time) on the other offer(s) pending the outcome of the first negotiation.
b. Physician Recruitment Agreements. These agreements are an accommodation under the Stark law that allows hospitals to subsidize a physician's salary and direct expenses for a year in exchange for the physician's service for a given number of years (usually 3-4) in an underserved area for that physician's specialty. These arrangement can be very beneficial for a physician who is looking to start his or her own practice or for a group that wants to expand its service to patients in a particular specialty without having to front the incremental up-front costs of hiring a new practitioner. However, these arrangements can be quite complex, particularly where the physician is joining an existing group, and must follow the letter of the law. There are also significant tax implications for both the physician and the group practice. A physician considering an arrangement like this should have both an attorney and an accountant to avoid problems down the road.
Common Pitfallsa. Negotiating key terms on your own, then hiring an attorney to review only the final contract. You have eliminated your attorney from the most important aspect of the negotiations. The attorney will likely have changes to key terms that you have already agreed to, thereby potentially irritating the potential employer.
b. Being afraid to assert yourself with the potential employer. This is a business relationship. The employer expects you to stand up for yourself and represent your best interests and should respect you for that. It helps to have a buffer between yourself and the employer. Two attorneys negotiating the contract between the two parties is the best situation; it allows the parties to remain "above the fray". If you are the only party using an attorney, then this calls for a slightly different approach. Either way, don't be afraid to assert yourself when negotiating your employment contract.
c. Not doing the research on your potential employer.
d. Not realizing that verbal assurances are not enough. Yes, at the end of the day it is about the relationship and we hope that the employer will follow up with verbal promises. But if it is important, get it in writing.