Avoiding Physician-Employment-Contract Pitfalls
Published: Oct 14, 2011
Career Resources articles posted on NEJM CareerCenter are produced by freelance health care writers as an advertising service of the publishing division of the Massachusetts Medical Society and should not be construed as coming from the New England Journal of Medicine, nor do they represent the views of the New England Journal of Medicine or the Massachusetts Medical Society.
Career Resources Editor’s Note: Taking into account your own employment priorities, give careful consideration to individualizing language of an employment contract so it meets your specific needs. Understanding the clinical and administrative culture that you’re about to enter will also help clarify expectations and avoid misunderstandings. If you have questions, seek the counsel of senior colleagues, medical and specialty societies, and/or a legal professional.
— John A. Fromson, M.D.
Non-specific, vaguely worded provisions can create problems down the road.
By Bonnie Darves, a Seattle-based freelance health care writer
Residents who finally encounter what looks like the perfect practice opportunity are often tempted to sign the contract and start packing. But remember, the contract you sign will dictate the professional and practical aspects of your working life for the next several years. Because the “devil is in the details,” it’s imperative to thoroughly review the contract (with professional guidance, if necessary) to ensure it doesn’t contain — or leave out — provisions that could turn the perfect opportunity into a bad deal.
Industry professionals offer the following tips on how to avoid some of the most common contract pitfalls:
- Request a “letter of intent” before receiving the contract. A letter from the hiring organization that outlines the basics of the offer — salary, job obligations, and termination provisions — can save you time and money in attorney’s fees. It helps ensure that what was agreed upon verbally ends up in the final contract. “With a letter of intent, you can make sure you and the practice are on the same page before a contract is drafted,” says Julie Sherriff, head of the Kansas City, Kan., recruiting firm Sherriff & Associates and a former president of the National Association of Physician Recruiters.
- Don’t hesitate to negotiate. Fearing they will lose the offer if they don’t sign the contract “as is,” many young physicians are reluctant to negotiate. But they shouldn’t be. “Ask for what you want, especially if you feel strongly about it,” says Mark Bair, M.D., a Utah emergency medicine physician and immediate past chair of the American Medical Association’s Young Physicians Section. Adds attorney James D. Wall, a contracts specialist and partner with Bell, Davis & Pitt in Winston-Salem, N.C., “This is a business proposition in which other people want to make money on your services. What you agree to in the contract sets a tone for the future relationship.”
- Beware of one-size-fits-all contracts. A “boilerplate” contract might work well for one physician but not for another. Make sure the contract reflects the actual position and scope of work, and that it doesn’t contain unreasonable provisions. For example, a non-compete clause that prevents a physician from working within a 50-mile radius for two years after leaving the practice might make sense for a neurosurgeon, but it’s inappropriate for a family practitioner.
- Make sure the guaranteed compensation is adequate. Production- or collections-based compensation formulas might be a bad deal for physicians new to practice because it takes time to build a patient base and start collecting receivables. If you work in shifts — in emergency medicine or urgent care, for instance — the contract should guarantee enough work each month to pay your bills.
- Consider the total compensation package. Don’t compare contracts based solely on salary. Factors such as benefits, malpractice coverage, and the time-frame for and conditions of a partnership can profoundly affect earnings over several years. “The difference between a rich benefits package and none at all may amount to more than $1 million over the course of a career,” says Brad C. Jones, J.D., president of MedAccord, a Charlottesville, Va., firm that negotiates contracts for physicians. Mr. Jones also advises physicians to double-check disability policies and to be alert for indemnity clauses that require the physician to pay out of pocket for a judgment if the practice’s malpractice coverage is inadequate. Also, beware of vague language regarding partnership potential. “Wording such as ‘the physician can become a partner at some future date’ gives you no basis for comparing two partnership-track offers,” says Dr. Bair.
- Never accept a verbal offer or move based solely on a letter of intent. Do not make a physical move before seeing — and signing — an actual contract. The contract may be unacceptable or worse, may not materialize at all.
Physicians preparing to negotiate their first contract should contact their state medical society as well as national and local specialty societies. Many of these organizations provide model contracts for reference and contract-analysis services to their members
Other helpful resources include the following:
Contracts: What You Need to Know and the Annotated Model Physician Employment Agreement, both published by the American Medical Association, www.ama-assn.org.
2001 First Year Physician Starting Salary Survey, National Association of Physician Recruiters, www.napr.org.