There is obviously much more to physician employment agreement analysis than a simple checklist, and I have a 9-hour course to prove it. However, if you’re looking for a quick summary of some of the most important terms that are likely to apply broadly to almost all physician contracts, here is a good starting point!
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The Three Big Questions
Every physician contract can be summarized into three big, overarching questions:
Work Obligations: What does this job require of you?
Consider your interview process. Does this job allow you to practice what you want to do, and does it match your career goals and life plans? What were the key work obligations as discussed during the interviews? If there were a handful of key issues that made you very excited about this position, it’s often prudent to evaluate whether the contract includes them and whether to negotiate for their inclusion.
Compensation: What are you paid to do these work obligations?
Most physician contracts start with a base salary and advanced incentives, like a signing bonus and/or a moving stipend. While those are important, they often do not tell you the total future package. This is often tied to clinical volume and, to a much lesser extent, to quality of work. Most employers are looking to macro compensation data and other local competitors when determining their long-term compensation package, and it often hinges on how much you’re paid for your clinical volume. Employers are typically paid by payors on clinical output – not on quality, seniority, access, loyalty, patient satisfaction, etc., and that reality is often reflected in physician compensation packages. Don’t expect implied ‘raises’ in medicine, evaluate your compensation plan.
Exit Strategy: What are the legal and financial penalties if you or the employer wants to end the relationship?
This isn’t just about wanting to leave. Your ability to renegotiate in the future often hinges on 1) whether you have established value in clinical care (making the employer money), and 2) whether you can take your value somewhere else. Look to noncompetes, nonsolicits, termination rights, malpractice tail coverage, moonlighting and outside activity rights, and compensation clawback and waiver issues. Consider how legally and financially problematic it might be if you or the employer wants to leave! Consider matching your exit strategy costs to your personal financial plans, particularly your emergency fund, so you always have enough money to freely leave your current employer.
A good physician contract offers a fair balance of compensation for the expected duties with a fair opportunity to exit without disrupting your life. Most physician contracts fall short in some respects, and it’s important to have clarity about the pros and cons of your deal before you sign.
Work Obligations
- Volume Expectations: How much clinical volume is expected, and how is it measured (wRVUs, patient panel size, # of patients, # of hours, net collections, or something else)?
- Work Location: Where are you required to work? Where can your employer make you work? Is any change to be made only by mutual agreement? Is it all in-person, or are there any tele options?
- Call: How much call? Call for what? Is it evenly distributed in the group? Is there a call cap? Where must you provide call? Does the contract provision match the interview promises?
- Time Off: How many days per year are you expected to work? (Note the flip here of thinking about it as “Time On” instead of “Time Off”).
- Clinical Schedule: How many hours are you expected to work? What weekend/night/holiday work should you expect? Are you anticipating a 7-on-7-off, weekdays only, modified 4-day schedule, or something else, and is it defined in the contract? Also consider clinical v. administrative time. A typical primary care duty definition might be 36 clinical hours, 4 admin hours. Surgeons often don’t have this.
- NP/Managerial Responsibilities: How are your non-clinical duties defined? Are any managerial responsibilities defined and compensated?
Compensation
- Base Salary: What is your Base Salary? Is it guaranteed or subject to Negative Accrual/Draw? How long does your minimum guarantee last?
- One-Off Sweeteners: Signing, Relocation, Commencement, Student Loan, Training, Retention, what opportunities are presented? How much in full? When are they paid? Is there room to get these paid earlier?
- Bonuses: What additional compensation are you entitled to? NP/PA Supervision, Call Pay, Production-Based, Quality Metric-Based, Managerial Stipends, or something else?
- Volume / Compensation: How does your total compensation match up against your total volume expectations? What is you base, bonus, and effective $/wRVU or $/volume rates?
- Local Options and Market Data: How does your total compensation and total work expectations match up against market norms (specialty, practice setting, geography, volume) and other competing offers?
- Ownership (Business Ownership opportunities-only. Note: Not all of these will be in the contract, but they are important due diligence questions to consider):
- What is the pre-ownership compensation (it’s often lower than market data)?
- How long is the pre-ownership track? Is that a normal length of time for your specialty?
- What are the odds that ownership will be offered, and what must you do to get there?
- What and how much are you eligible to buy? Practice only, or Practice + Real Estate + ASC + Ancillary + Anything else?
- How much will this cost to buy, and how is buy in determined?
- What should you expect as total owner remuneration? How does that compare with market norms and the purchase price?
- Is there any protection for the practice if it is bought out or merged with a hospital or a PE group? Acceleration into ownership clause?
Exit Strategy
- Noncompete: Where else can you work, both during employment (think moonlighting) and after employment? When and how long does it apply? Did you check the map? Is this a likely-to-leave-town level restriction or nbd? Does it apply in all instances of termination, or does it not apply if the employer terminates? Is there a sunrise or sunset clause? Are there any other helpful enforcement carveouts?
- Nonsolicit: What happens to the valuable relationships developed during employment? Are you taking something you built with you, or are you starting from scratch? Does it apply to some or all of the patients, employees, referral sources, facilities, and payors? Does it apply only to direct solicitation, or must you turn away patients regardless of how they found you?
- Term and Termination: How can this relationship end? Do you have an income-protected off-ramp and sufficient lead time under the Termination Without Cause clause, or is it effectively ‘optional’ on the employer’s side? Is there any nonsense in the Termination for Cause clause? Do you have the right to terminate at any time, or are you locked in for an initial period (i.e., 1-3 years ‘No Out’)?
- Malpractice Insurance and Tail Coverage: Who pays for malpractice coverage during and after employment? Is malpractice expense a deduction against your compensation, or separate? Is tail coverage ‘perpetual’ or ‘term’, and is it the same coverage as provided during employment or something less?
- Moonlighting and Outside Activities: Is this your sole source of remuneration, or will you have access to other sources? How do they handle non-clinical medical-related consulting/activities? How important is this for your specialty and practice setting (Hint: moonlighting is less common in pre-ownership, and may be more common in certain specialties)?
- Compensation Clawbacks and Waivers: How much money will you lose upon termination, and how long must you stay for these to be reduced? Check one-off sweeteners and details on bonus payments, and map out what an exit in the 6-18 month range would entail. How much in emergency funds do you need to have to always be free to walk away?
All in, this is a good starting point for you to consider and a good checklist for gauging how to approach your contract. Can you talk about each of these and identify a few important key points in each?
If you’d like help, feel free to connect with us! Best practice is to get a Compensation Consult before or during your interview process, so we can break down the data and help you understand compensation norms for your specialty and subspecialty, practice setting, geographic region, and volume expectations. We can coach you on how to have these discussions during the interview process. Nobody should be surprised or blindsided by compensation questions during your interview process, and we can help prepare you. Additionally, before you agree to any offer letters or sign any contracts, the best practice is to get a lawyer who knows what they are doing in physician contracts, and get it evaluated and negotiated. Feel free to connect with us here!
