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4/27/20 – Important Considerations When Reviewing a Physician Contract

Physicians look at their contract twice – when they sign it and when they want out (or are terminated).  How things work out between those two points in time is dictated by this essential document.  It’s vital to understand every detail, regardless of how and where you are employed.  There are dramatic differences between Academics and Hospital Employed physicians, Private Practice and Independent Contractor work, and of course state-to-state differences.  There are also specific variances that should be in Dermatology contracts that don’t need to be in Hospitalist contracts.  While there are many moving pieces to these documents there are a few that stand above the rest.

Knowing the expectations around your duties, schedule (including call), and location should be documented and understood.  While these are often verbal commitments, having specific documentation can prevent any disputes or misunderstandings in the future.  They may also have a direct impact on the non-compete or post-employment restrictions and compensation.  As hospitals and practices expand their outreach into a community, sign additional service agreements with affiliates, and expand to treat more patients your schedule and location can be dramatically impacted – and it is possible you will not have any control over these changes.  In addition, the language in a non-compete could restrict you from multiple locations.  As the practice grows, so could some post-termination restrictions.

Understanding the compensation is vital.  As healthcare goes through constant change the manner in which physicians and hospitals are compensated for services is under change.  Because of this uncertainty there have been vivid changes to how physicians are paid over the recent years.  This trend is likely to continue as the fee-for-service model is revisited and changed over the coming years (i.e. MACRA).  Are you paid on wRVU or collections?  Pay per shift or pay per hour?  Quality bonus?  What is reasonable for your particular area? While some may seem simple and easy to understand on the surface, there are many factors that come into play on how an employer sets the compensation and how those factors could change that compensation in the future.  Understanding all the variables and inputs are important when negotiating current and future payment rates for yourself.

A 2016 survey by The Physician’s Foundation stated that 54% of physicians rate their moral as negative or somewhat negative in their daily jobs.  Numerous studies show greater than 50% of physicians leave their first job out of training.  While most physicians take jobs and sign contracts with long-term goals the data shows reality is different.  Knowing how to exit the practice and what your responsibilities are is important. Most contracts allow a no-cause termination period that is between 60-120 days.   This may or may not be adequate time to find a new position and transition your practice.  What happens during and after this time can dramatically impact a physician in many ways.  Are you losing out on any bonus payments?  If and how a bonus is paid upon termination can be a very important consideration when reviewing and negotiating an employment agreement.  You should understand how partial years are calculated or paid, if payments are pro-rated or ‘all or none’ and if there have been any disputes over these payments in the past.  Is there a requirement to repay any upfront compensation like signing bonuses, relocation, or income guarantees?   These items can often be negotiated out at the time of termination but are most beneficial to understand and negotiate upfront. There are often post-termination restrictions on your practice or solicitation for patients.  These vary greatly by region and specialty but should be flexible based on how the relationship ends with the employer.   Making sure you are covered for any malpractice claims is also an important consideration.  Who is responsible for ‘tail’ insurance? Is this negotiable?  What are the estimated costs? Again, understanding the details, loopholes, and fully negotiating before you sign your agreement is best to prevent any future disputes or misunderstandings.

While there are certain points of an employment agreement that are more important than others, the entire document should be fully understood and questioned.  Whether or not a contract is negotiable is not the exclusive question here  – it is how well you understand all the commitments it makes (and those it doesn’t).  Taking the time and investing in the process upfront can prevent problems or issues later in your career.

 

Jon Appino is the Principal and Founder at Contract Diagnostics, the only firm in the country that is 100% dedicated to assisting Physicians in the understanding and negotiation of many types of agreements.