For many residents transitioning to practice and negotiating their first job offer, it may be easy to think of the employment contract as just a formality. It is, in fact, a highly complex document with dozens of terms, many of which can have a huge impact on a physician’s professional success both immediately and long term.
An episode of “AMA Update” features a discussion of the complexities of physician employment agreements and why it is so important to hire a health care lawyer to help with contract review and negotiation.
It is paramount to avoid fixating on “the number on the page of the salary or compensation, which, of course, is many times what a resident had just finished earning,” said attorney Richard Levenstein, JD, a health care attorney at Nason Yeager, in Palm Beach Gardens, Florida.
“That is not the most important part of the contract,” he noted. “What's behind the dollars is the most important part of the contract.”
The AMA Transitioning to Practice series has guidance and resources on deciding where to practice, negotiating an employment contract, managing work-life balance, and other essential tips about starting in practice.
One example: Compensation itself
Even your salary needs to be scrutinized beyond its bottom line. For example, is it a guaranteed salary or a draw against productivity?
“If you're on a guaranteed salary, you know you get paid a certain amount every year,” Levenstein said. “But if you're on a productivity basis where you have a draw against productivity, if you do not make whatever the productivity level is, you can owe your employer money back.”
You never want to be in the situation of owing money back to your employer “because it means that the first money that you earn in a paycheck, or a portion of it, goes to your employer before you take home money, because many of the contracts will provide as such,” he said.
In addition, sign-on and relocation bonuses may seem like nice perks, but they can become liabilities.
“In the event of termination, you need to know the repayment clauses—particularly, what the obligations are to repay all or part of the funds you received,” he said.
For residents preparing to enter the job market, the AMA provides many resources to help physicians understand employment contracts, such as the Annotated Model Physician-Group Practice Employment Agreement (PDF) and the AMA Physicians’ Guide to Hospital Employment Contracts (PDF), both free to AMA members.
Dive deeper:
- What to ask when physician employers start talking compensation
- 6 questions to ask before signing a physician employment contract
- What employed physicians should know about noncompete clauses
- Look out for these land mines in hospital employment contracts
Consider all these other terms too
There are many other contract terms to be aware of, Levenstein noted, detailing a few of them.
Covenants not to compete or not to solicit. These specify what happens to the physician in the event of termination and “can limit their ability to leave, depending on what triggers it, and keep them in the location where they are because of the economic factors involved and the fear of having to move and start again.”
Fair market value. “This is a very important clause, because one does not want to have a contract which has a clause that enables your compensation to be changed without safeguards.”
Coterminous clauses. These can require physicians to resign medical staff privileges they held in connection with their employment.
Dispute resolution. “Very important. Whether the contract calls for arbitration or litigation in the event of a dispute or requires mediation, I think mediation is a great clause to have.”
Private equity. “If you are going to own stock or other equity ownership, the terms of a shareholders or other agreement, which would be concomitant with the employment agreement, need to be looked at.”
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Outside activities. Many physicians have outside activities, such as teaching or testifying as an expert. They need to be specified in the contract.
Medical liability insurance. Physicians need to be covered for malpractice claims made between the time they leave one job and start another—what is called nose insurance on the way into a job and tail insurance on the way out of one. “Anything you can get towards payment of those costs from your employer is a gain and a win.”
Take time to learn about the “AMA Principles for Physician Employment” adopted by the AMA House of Delegates, which are designed to help physicians and employers address challenges such as contracting, conflicts of interest, payment agreements, and advocacy for patients and the profession.
Where to look for help
“My advice would be to always hire a lawyer—a health care specialist attorney—with regard to a physician's employment agreement, whether it's the first agreement out of residency or whether it's an agreement well into one's career,” Levenstein said. “Representing yourself in a situation like that is not a particularly good idea, because without knowing what to look for in those agreements, it's very difficult to protect one's interests.”
There are several ways to find a health care attorney. One is to contact your state bar association, which may have a health care law section.
Other places to look include your state and local medical societies, as well as the American Society of Medical Association Counsel.
“You can also ask fellow physicians who have dealt with health care lawyers and their practices and experiences to make a recommendation of one that they've been happy with,” he said.
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