Physician Contract Negotiation

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What Is a Physician Contract Negotiation?

Physicians are required to sign a legal document, known as a physician contract, with their employer that outlines the terms of their employment, such as hours expected to work, medicine being practiced, code of conduct, and their benefits package.

All physicians have the right to negotiate their contracts before signing. The employment agreement is a proposal, not an obligation, and you can discuss options with an employer before accepting a position.

The employment contract governs how a physician will be compensated for their practice through a benefits package, which is one of the most important elements for you to review. Being paid fairly as a physician is something you must be an advocate for, especially when you are new to the medical field.

The negotiation process allows you to discuss benefits, incentives, and responsibilities with your potential employer. Whether it is a hospital, group practice, or private medical facility, there should be an opportunity for you to discuss your options without feeling concerned about your eligibility.

Here is an article with 4 tips for successful physician contract negotiation.

What Should You Look for in a Physician Contract?

There are many unique elements of a physician employment contract you need to know if you want to successfully negotiate its terms and conditions with an employer. Review each of these sections carefully to better prepare yourself for reviewing and negotiating your agreement’s terms.

1. Key Terms

There are some specific phrases that you will often find in physician contracts, and you should carefully look for these when you receive your document.

A physician services agreement can include the following aspects:

  • Work status
  • Productivity
  • Income and forgiveness guarantees
  • Hours and duties
  • Benefits
  • Partnership requirements
  • Termination terms and conditions
  • Expiration date
  • Noncompete agreement
  • Code of conduct

It can be helpful to review a contract by each section, rather than pouring through the entire document at once. As you review each part of the employment agreement, take notes on any points you don’t understand or would like to address.

By having a streamlined, organized list, you can have a much more efficient conversation with the employer. You should also have any alternative arrangements listed if you want to negotiate different terms, such as a higher salary or different work hours.

Here is an article with a guide on reviewing physician employment contracts.

2. Credentials and Licensing Requirements

Your employment agreement should clearly outline what your role is in the organization, what your job requirements are, and what services you will be allowed to provide patients. There should also be clearly defined obligations for your role, such as a valid medical license and board certification.

The most important thing to clarify at the beginning of your contract negotiation is your role. Make sure you fully understand the position you are being offered, as well as the expectations, responsibilities, and limitations of that position.

3. Compensation and Benefits Package

Many physicians focus solely on their salary as the most important part of their benefits package, but that is not the case. While you should be given fair pay for your medical services, there are many benefits physicians can benefit from their employer.

Some important benefits include insurance coverage, such as health and malpractice insurance. You should understand not only how much you will be paid but how often, and what extras are included along with your salary. For example, is there coverage for continued medical education (CME), and paid time off (PTO)? How are your vacation days structured? Do you receive a retirement account?

You should also understand the incentives for bonuses, such as work relative value units (wRVUs). Work relative value units are a type of formula that some medical practices use to calculate a physician's compensation based on productivity and performance.

If an organization uses wRVUs, make sure that you understand the value of each unit, the conversation rate, and how your paycheck will be calculated.

4. Productivity

Many people (and new doctors) are often unaware of how physician payment really works. Rather than receive a fixed payment, many are compensated based on their productivity. This could be the number of hours worked, but it is usually more closely linked to the number of patients seen.

Physicians’ production bonus is often based on “billings” or “collections.” This means that you will be compensated higher for either patient volume or insurance reimbursement. Many new physicians do not want to try and calculate these figures, so they opt for a fixed base salary with applicable bonuses for other behaviors.

Make sure that you understand how productivity is calculated, compensated, and awarded in your organization. For example, some facilities may only allow physicians to keep 50% of their productivity while others pay 100%. The amount you’re awarded can also vary depending on how much experience you have, your specialty, and other medical services you offer.

5. Income Guarantees and Forgiveness of Guarantees

A physician who signs on a 1099 independent contractor may be compensated differently from one who joins a practice as an employee. An income guarantee ensures that physicians are paid a minimum amount of money each paycheck after expenses are deducted.

The income guarantee can bring peace of mind to doctors of all levels, especially if your patient load might vary extensively. For example, if you are awarded $10,000 a month in a guarantee, but you only made $6,000 a month, the hospital will pay you the difference.

The only caveat here is that the physician must make the guaranteed amount throughout their contract’s term, otherwise they will owe the practice money. So, if your guarantee was $125,000, but you made $100,000, you would owe the hospital $25,000.

Most physicians don’t want to risk owing thousands of dollars, which is why forgiveness of guarantees is important. The forgiveness of guarantees means that the hospital will forgive the physician of any amount they owe if the doctor agrees to stay as an employee for a certain amount of time (usually 1 to 3 years).

6. Noncompete Agreement

A noncompete agreement helps hospitals and medical practices maintain a competitive advantage in their geographic region. Make sure you carefully read this portion of an employment contract; signing a document with a strict noncompete clause could make it impossible for you to work as a physician in your area for years after leaving a job or termination.

7. Tail Coverage

Tail coverage should be included in any good physician contract as it protects you against future litigation. Tail coverage is a type of malpractice insurance that offers coverage if you are sued by a former patient after your policy ended.

Under a typical claims-made policy, your employer only must cover the cost of claims during the active coverage period. Tail coverage, however, offers extra protection, and allows you to still receive financial coverage years after your effective coverage ended.

Since most physicians change practices throughout their career, having tail coverage between employers is an important element of malpractice protection.

8. Termination Language

Make sure that you are clear about what how a facility may terminate your employment. There are generally two methods they can use:

  • With-cause termination. With-cause termination requires the employer to give clear reasoning for their decision to formally end your physician services agreement.
  • Without-cause termination. Without-cause termination is a legal provision that grants the employer the right to end termination on their own volition; they must provide a warning between 30 to 180 days. State laws will influence how much advanced notification companies must provide employees for termination.

You should also have a severability clause within your document that lets you leave your position without stating the cause, so long as you provide notice.

9. Code of Conduct

Lastly, the code of conduct will outline the expected behaviors and policies a physician must always maintain. The code of conduct links closely to the quality of patient care, so make sure that you fully agree with the company’s code and are comfortable adhering to it throughout your work.

The code of conduct ultimately shapes your practice as a physician, so you should be comfortable with it and fully support the behaviors it endorses.

Here is an article with 11 things you should look for in a physician employment contract.

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What Can You Negotiate in a Physician Contract?

You can negotiate anything in a contract, but keep in mind, there are some legal requirements that an employer cannot change. Contracts must respect local, state, and federal laws, so you won’t be able to change any parts of an agreement if it violates medical laws and ethics.

The most common terms in physician contract negotiation are hours and compensation. You may want more flexibility in your schedule, or a greater benefits package. Make sure that you have an alternative proposal in mind before opening the conversation to negotiate.

Here is an article with what you should be wary of in a physicians’ contract.

Can You Negotiate a Salary as a Physician?

Yes, all physicians are able to negotiate terms of their salary. That being said, you may not always be given the salary you want depending on:

  • Your experience
  • Location
  • The medical facility’s compensation structure

What Should I Ask to Be Included in a Physician Contract?

The most important elements to include in a physician’s services agreement are protections and benefits. Protection from your employer through malpractice insurance, tail coverage, and income/forgiveness guarantees are the best ways to look after yourself while you practice.

You can consider requesting additional modifications to a contract, such as higher pay or less rigid work schedules. This will depend on your personal needs and your level of comfort negotiating with an employer.

Here is an article on how to negotiate a physician contract, written by a medical doctor.

How Do I Get Out of a Physician Contract?

If you are trying to perform physician contract negotiation after signing, then you will likely need to work with an attorney. Physician lawyers help medical professionals leave contracts that are unjust, unethical, or unfair to them based on specific legal criteria.

If a contract is not legally valid, then the lawyer can help you leave it without any obligations or penalties. For example, no severability clause in an employment contract could render it legally void.

Generally, you should be allowed to break your contract without giving a reason, so long as you provide written notice to the employer. You will the terms and conditions of this agreement in the termination portion of your contract.

Here is an article with a more in-depth explanation about how to break a physician’s contract.

What Type of Lawyer Can Negotiate a Physician Contract?

Contract lawyers for physicians are excellent resources for physician contract negotiation. They can review the terms and conditions of your contract, and help you reach the fairest employment agreement.

Hiring a lawyer for employment contract review will ensure that you get the best arrangement with an employer. You can look for a lawyer who has experience reviewing different types of employment contracts to ensure they are well-versed in medical employment and its unique elements.

Here is an article on what to look for in employment contracts for physicians.

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