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What to Watch Out for in a Physician's Employment Contract

Posted by Erick Cutler, CPA on Apr 27, 2017 10:53:11 AM

You’ve finally taken the Hippocratic Oath and are ready to begin your career. Or, you’re a seasoned physician entertaining new employment

opportunities. In either case, you’ll be presented with an employment contract unless you have the resources and desire to open a practice of your own. Before you sign, make sure you understand the details of that legally binding document. Here are six line items to scrutinize.

Compensation

Compensation is top-of-mind for anyone considering a job offer. Sometimes, a physician contract is straightforward and offers a guaranteed annual salary. However, many medical practices subscribe to more complex compensation models: practice income is divided equally among all physicians (with no incentives for physicians who are extra productive), or physicians are compensated on their individual productivity (minus costs of overhead and expenses). The ideal compensation scenario will vary from physician to physician. Do productivity incentives motivate you or stress you out?

Non-Compete Clause

As excited as you may be to accept the job offer, there’s a good chance you’ll eventually want to move on – to another group or to begin your own practice. A non-compete clause can throw a wrench into those plans. A non-compete specifies that once your contract ends, you agree to not work within a certain geographic radius for a specific period. Such a clause may or may not be a deal-breaker, depending on how restrictive it is. If you decide it is too restrictive, consider renegotiating a non-solicitation clause instead. That would prohibit you from soliciting former patients but wouldn’t place geographic restraints on where you can practice down the line.

Termination

Most employment contracts state that either the employee or the employer can terminate the employment arrangement at any time, without reason. Verify the contract regarding your compensation in the event of termination. Make sure your contract specifies a generous compensation policy (several months’ salary) if you’re terminated without cause (due to a merger or slowdown in business, for example). Your contract should also state that before you can be terminated for cause, you must a receive written advance notice of why your employer wants to fire you. This gives you time to respond to allegations related to your performance. Finally, your contract should detail what happens to pending bonuses in the event of termination with or without cause.

Indemnification

Consider an indemnification clause a red flag. Essentially, this clause means that if you are sued for malpractice, you release your employer from any related losses or liabilities. You alone would be responsible for court costs, attorneys’ fees, and the cost of any jury verdicts or settlements against you.

Employee Responsibilities

Make sure you understand exactly which functions you agree to carry out as an employee. Often, physician employment contracts specify that employees not only practice medicine but also supervise clinicians, participate in audits or marketing functions, and complete administrative duties. Additionally, make sure your contract spells out responsibilities involving call and coverage duties.

Insurance Coverage

Your employment contract should specify that your employer will provide professional liability insurance and should detail the exact coverage rates. Another important coverage every physician needs is tail coverage. This insurance protects you in the case of a lawsuit after you leave the practice (and after your professional liability policy has ended). Determine that your contract specifies that your employer will purchase this coverage for you. If the employer doesn’t offer it, make sure your compensation is adequate for you to purchase this insurance on your own.

Your negotiating power is strongest before you sign an employment contract. If you’re uncomfortable with any of the contract’s provisions, don’t hesitate to speak up; most employers expect candidates to challenge contract provisions or ask for concessions. Once you sign, you’re locked into the contract. Make sure you’re comfortable with it!

If you are considering joining a practice, selling a practice or acquiring a practice, contact the medical CPAs at Goldin Peiser & Peiser.

Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.

Topics: Medical, Employment Contract