Your Physician Contract: Everything You Need to Know | MD&D #11

Evidence based insights into physician compensation, RVUs, contracts, healthcare economics, and personal finances. For residents, fellows, and early-career attendings.

Life and Finances, in Medicine.

A physician contract can feel intimidating. It is usually the first serious step into the new life that you are embarking on. Maybe it is the end of your residency or fellowship. Or perhaps you are just changing jobs after years in practice. Regardless of your situation, those few papers could dictate what your professional life will look like for the next several years, and they ask you to read it and sign it. So here is my first piece of advice. Do not panic. A physician employment contract is important, but there is nothing mysterious about it. And you do not need to become an attorney to understand the basic structure of your agreement. You simply need to know what you are looking at, what questions to ask, and which portions of it deserve particular attention. That is what this series is about.

Let’s start with a simple question: what exactly is a physician contract, and what is it supposed to regulate? Your employment contract defines the basic relationship between you and your employer. It tells you what you are expected to do, what the organization is expected to provide, how you will be paid, how long the agreement lasts, and how either side can end the relationship. But it also can control much more than that. Depending on the contract, it may also determine some or all of these factors:

That is why the contract matters. But you may have noticed that above this long list I wrote that, depending on the contract, it may also determine some or all of those factors. Not necessarily determine all of those factors. It is because some contracts don’t explicitly mention these items. And that does not make them bad-faith contracts. They are just designed that way.

Now, please remember that although the number at the top of the compensation section may get most of your attention, your salary is only one part of the agreement. A physician can receive an excellent salary and still sign a bad contract. So let’s dissect the basic parts of a physician contract.

Basic Provisions of a Physician Contract

Physician contracts vary between organizations, specialties, and states, but most of them can be understood by breaking them into six major areas:

There may be additional provisions, of course, but if you understand these six areas, you will understand much of what actually governs your employment relationship.

1. Duties, Schedule, and Expectations

This section defines what you are being hired to do. It may describe your specialty, title, clinical responsibilities, administrative responsibilities, work locations, supervision requirements, call coverage, and other expectations. Read this carefully. If you were recruited to work primarily in one office but the contract allows the employer to assign you anywhere within its entire health system, that distinction matters. If you were told that call would be one weekend every six weeks, but the contract simply says that you will participate in call "as reasonably required," that matters too. This part of the contract may also describe your schedule indirectly rather than explicitly. It may reference full-time status, required sessions, office hours, hospital responsibilities, administrative time, or policies established elsewhere by the organization. Do not assume that something discussed during recruitment automatically becomes part of your contractual arrangement. The written contract is ultimately much more important than what someone casually told you during an interview.

2. Compensation

This is usually the section everyone reads first. And understandably so. But physician compensation can become complicated very quickly. This details not only the amount of your compensation, but the type of compensation you will receive. A few examples of types of compensation you may be offered include:

Now, it is important for you to ask how this salary was calculated. Regardless of the type of salary you are being offered, especially if there is a productivity clause included. Key questions include:

This distinction between compensation based on collections or the work performed is important. In a true wRVU-based compensation model, the physician is being compensated for the work performed according to the agreed-upon dollar-per-wRVU methodology. The organization assumes the collection risk. A collections-based model is different: physician compensation is directly tied to what the organization actually collects. Where things become confusing is when an organization describes the compensation model as wRVU-based but then reduces physician credit because of payer reimbursement, denials, or collection performance. At that point, the model begins to incorporate elements of collections-based compensation. Neither model is inherently wrong. The important thing is that you understand which risk you are actually assuming under your contract.

Although these are basic questions, they can have a much greater financial impact than a small difference in starting salary. We will discuss compensation models separately in this series because they deserve much more attention than a few paragraphs.

3. Benefits

Your contract may also describe your benefits, including health insurance, retirement plans, disability coverage, life insurance, paid time off, CME allowances, and professional expenses. But there is an important distinction. Sometimes benefits are described directly in the contract. Other times, the contract refers to separate employer policies. That distinction matters because employer policies can sometimes be changed more easily than contractual provisions. Look at more than health insurance and retirement contributions.

Ask about:

Individually, some of these benefits may seem relatively small compared with your salary. Collectively, however, they can represent substantial value.

4. Rules for Termination

Most contracts specify how long the agreement lasts. You may see a one-year, two-year, or multi-year term. Some agreements automatically renew unless one party provides notice that they do not want to continue. But do not assume that a three-year contract means you are guaranteed three years of employment.

On the other hand, physician contracts commonly contain several different ways the employment relationship can end. There may be termination for cause, meaning one party can terminate the agreement because of a specific event such as loss of medical licensure, exclusion from Medicare, serious misconduct, or violation of the contract. And there may also be termination without cause. This is enormously important. A without-cause termination provision generally allows either you or the employer to end the relationship without proving that the other side did anything wrong, provided adequate notice is given. The notice period might be 60 days, 90 days, 120 days, or something else. And it must be specified in the contract. So, you could technically sign a three-year employment agreement that either party can terminate after giving 90 days' notice. That is why you must read beyond the contract term.

You also need to understand what happens financially when employment ends. Will you still receive productivity compensation you already earned? If there was a signing bonus, do you have to repay it? What happens to retention incentives? Who pays malpractice tail? Do certain benefits disappear immediately? The termination section affects far more than the date you stop working.

5. Restrictive Covenants

Your agreement may contain restrictions affecting what you can do during and after your employment with the organization. These may include:

You may also want to understand what the contract says about consulting, teaching, expert witness work, speaking, writing, or other professional activities. Can you do them? Do you need permission? Can the employer claim ownership of income or intellectual property associated with them?

Many physicians never think about these questions until an opportunity appears later. By then, the contract has already been signed. The enforceability of restrictive covenants varies significantly by jurisdiction and continues to evolve. But whether or not a particular provision is ultimately enforceable, it is important that you understand what you are agreeing to before you sign it.

6. Malpractice Insurance

Do not skim this section. You need to know what kind of malpractice insurance the organization provides. This part of the agreement, in my opinion, is much more important than the income you are being offered. Because the type of insurance offered can have profound financial and professional implications. General questions include: Are you getting occurrence or claims-made insurance? In the case of claims-made coverage, you need to know who will be responsible for tail insurance when the employment relationship ends.

Because tail coverage—insurance coverage for malpractice lawsuits filed after you leave the practice—can be very expensive. A seemingly small paragraph in your contract could represent tens of thousands of dollars in potential future costs.

In summary, important questions include:

This is one of those provisions that may seem unimportant when you are excited about starting a new job and become very important when you eventually decide to leave.

How Long Do You Have to Review a Physician Contract?

A common question I get is what the average amount of time is to review a contract that was presented to you without being disrespectful. As a matter of fact, there is no universal number of days that applies to every physician contract. An employer may give you a deadline, and sometimes recruiting circumstances create legitimate time pressure. But receiving a contract on Friday does not mean you should feel obligated to sign it over the weekend.

When you get the contract, ask when the organization needs a response. If you need additional time to review the agreement or have it reviewed by an attorney, ask for it. That is absolutely fine. A reasonable employer should understand that a physician employment agreement is a significant financial and professional commitment. Just remember that the organization may also have other candidates for the same position who may also be waiting to be presented with a contract, and unnecessary time spent before responding could be viewed as a sign to the organization that you may be using the contract with another employer to negotiate a higher salary. Something that is not ethical but unfortunately continues to happen. Good faith on both sides is paramount for a successful match.

 You Do Not Have to Negotiate Everything

This is where physicians sometimes create unnecessary anxiety for themselves. Even if you take the time to perform a thorough review of the contract, remember, receiving a contract does not mean you have to immediately negotiate every sentence. First, understand the contract. Then, decide what matters to you. Negotiation does not mean fighting over every provision. Some parts of an employment agreement may be standardized and essentially non-negotiable. Others may have considerable flexibility. Your job is to understand the details of the contract and to identify the provisions that materially affect your career, finances, or ability to leave the organization if things do not work out.

If the CME allowance is $4,000 instead of $4,500, that may not change your life. A poorly structured productivity formula absolutely can. So can an unfavorable termination provision, an unexpected call obligation, or being personally responsible for malpractice tail coverage. Focus your attention where the consequences are greatest.

The Contract Is Only One Part of the Deal

Another important point: not everything about your employment relationship will necessarily appear in the contract itself. Please don’t get obsessed with having the details of every single item discussed during the interview process put in writing in the contract.

The contract may refer to other resources for specific portions. These may include:

If your contract incorporates another document by reference, you must understand what that document says as well. For example, if your employment agreement states that your compensation will be determined according to the organization's "Physician Compensation Plan, as amended from time to time," you should know what that plan contains at the moment you receive the contract and how much authority the organization has to change it. Those few words can matter.

Verbal Promises Are Not Enough

Just like any other serious relationship, words are not enough. During recruitment, you may hear things like: "We usually give everyone Fridays off." "Call is very light." "You'll probably make another $75,000 in productivity." "We would never make you work at that other location." "We always pay tail." And perhaps all those statements are completely sincere. But people change positions, administrators leave, policies change, and memories may differ. Although not each of these aspects belongs in the contract, if something is sufficiently important to you that it affects your decision to accept the job, you should determine with your legal counsel if it belongs in the written agreement.

Do You Need an Attorney?

There are certain moments in life when having legal counsel is not only recommended but necessary. For example, when signing a prenuptial agreement, buying a house, or dealing with a lawsuit. I would definitely add to this short list signing a physician employment contract. Having an attorney experienced in physician contracts review the agreement is often worthwhile. Not simply because an attorney may negotiate on your behalf—not commonly necessary—but because a good attorney can identify provisions you may not recognize as important. Ideally, use someone who regularly reviews physician employment agreements and understands healthcare employment issues in the state where you will practice. But even if you use an attorney, do not outsource your understanding of the contract. It is your career. You should know what you are signing. Get all the education necessary to understand the provisions of the agreement presented to you.

Before Reviewing the Contract, You Must Know Your Priorities

Before getting lost in pages of legal language, it is paramount that you ask yourself a few basic questions. It will save you quite a bit of time. These questions can better direct your attention to the most relevant portions based on your personal priorities. For example:

If you ask yourself these questions—or, even better, write them down—prior to reviewing the agreement, you will be a much more efficient reviewer, and your chances of missing something that you consider significant may decrease substantially. You will already understand much of what actually matters to you in the agreement.

It Is Much Simpler Than You Think

Although physician contracts are legal documents, and they should be taken seriously, they should not be feared. When you break the contract into its major components, it becomes much easier to understand.

That is the basic framework. There will be additional details, and some of those details can be very important. But once you understand this structure, a long physician employment agreement starts looking considerably less intimidating.

Over the next several episodes of The Truth About Physician Contracts, we are going to tackle these components one by one.

We will talk about compensation models, RVUs, benchmarks, termination provisions, non-competes, malpractice tail coverage, signing bonuses, call responsibilities, PTO, side gigs, productivity thresholds, clawbacks, and some of the small clauses that can become very expensive later.

Remember, you do not need to become a contract lawyer. But before you sign a document that may govern several years of your professional life, and potentially hundreds of thousands of dollars of career income, you should understand exactly what it says. And you absolutely can.

A physician contract becomes much less intimidating once you break it into its major parts: duties and expectations, compensation, benefits, termination, restrictive covenants, and malpractice insurance. You do not need to become a contract lawyer. You do need to understand what you are agreeing to, and which provisions could materially affect your career, finances, and ability to leave.

✓ Your salary is only one part of the contract.
Schedule, call, productivity expectations, termination rights, malpractice coverage, and restrictive covenants can matter just as much financially and professionally.

✓ Understand exactly how you are being paid.
Know if compensation is based on salary, wRVUs, collections, or a hybrid model. And understand thresholds, conversion factors, reconciliation, and who assumes collection risk.

✓ Know how the relationship ends before you enter it.
Understand without-cause termination, notice requirements, bonus repayment, tail coverage, and any restrictions that apply after you leave.

“A physician can receive an excellent salary and still sign a bad contract”.

Next: Physician Salary vs. RVU Compensation: How to Evaluate a Job Offer
Your salary and your compensation are not the same thing.

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Life and Finances, in Medicine.