You received an offer for a new employment position – what do you do next? Before signing a physician or dentist employment contract, I recommend consulting with an experienced health care attorney. All terms guiding your relationship with the hospital or practice group should be explicit and in writing. Never accept a statement dismissing something in the contract, such as, “Oh, that provision is never enforced,” or “That won’t ever apply to you.” Here are five things a physician or dentist should expect to see in a contract:

1. Term

The term of a contract refers to how long it is in force before it expires or has to be renewed. Be sure the start date is realistic and takes into consideration any need to obtain a state medical or dental license or to become credentialed by the hospital(s) and the group’s insurance plans. Most employment contracts have a term of 1 or 2 years, and they often have an “evergreen” provision, stating that the contract is renewed automatically unless terminated by either party. If your contract is automatically renewable, you can renegotiate the terms before it expires. You should start discussions about any such changes before any automatic renewal notice period lapses.

2. Compensation and Benefits

Consider the entire compensation package, not just the base salary. Benefits play a key role in determining the value of an offer and may include, but are not limited to: health, dental, vision, and malpractice insurance; professional membership dues and CME allowance; vacation, sick, and maternity/paternity leave; and retirement and disability plans. You may also be offered one or more of the following enticements:

• Signing bonus. This is more common with hospital contracts than with private practice contracts. It is a function of how difficult it is to recruit someone for this position in this location. Bonuses, which are typically given as a one-time lump sum payment, are treated as additional taxable income.
• Relocation package. This is one you may have to ask for yourself. Relocation assistance packages come in a variety of forms, but the most common is a straight reimbursement of expenses associated with your physical move: packing and moving, short-term lodging in your destination city, meals, transportation costs, and the cost to move your vehicle. If the practice pays for your moving costs, the agreement will likely specify that you must reimburse some or all back to the group if you leave voluntarily before a specified time point.
• Productivity incentives. If you are offered a base salary plus a productivity incentive, the contract should spell out the incentive and how it will be paid. For example, a productivity incentive may be a percentage of the revenue you generate in excess of a set amount, such as two or three times your base salary. Thus, if your base salary is $125,000, the productivity incentive may be a bonus of 20% of the revenue you generate over $250,000 or some other agreed-upon amount. In contracts of more than 1 year, if your base salary increases each year, the threshold for receiving a productivity bonus will generally go up as well. The contract should be very clear about how productivity is defined, such as fees billed, number of patients seen, hours worked, fees collected, or profits of the entire practice. The measures of productivity should cover details such as whether (and how) your productivity will be affected when you provide services to a partner’s patients, and vice-versa.
• Student loan repayment. This is perhaps the least common, but is nonetheless a valuable form of “in-kind” compensation. Among other requirements, the method of the student loan repayment must be commercially reasonable, and the amount of the loan repayment must fit within the fair market value (FMV) of the overall contract. It is important that student loan repayment clauses be structured carefully and that you consult with an accountant.
• Net income. Sometimes the higher guaranteed base salary is not the best deal. When comparing offers from a dollars and cents standpoint, the bottom line of the proposals from an income tax perspective should be looked at critically.

In addition to describing the method of your compensation (salary or salary-plus-productivity, for example), the contract should state how often you will be paid.  If your contract is for more than a year, it is customary for the salary to increase in the second or third year, or for the contract to specify that a salary increase will be negotiated at certain intervals.

3. Clinical Duties

The contract should clearly state whether a doctor is considered a full or part-time employee, whether the doctor will be required to perform administrative or teaching duties, and whether the doctor will be required to share in after-hours call schedules. You should inquire about the length of the workweek (hours) and how many patients are expected to be seen per hour, per day, or per week. It is also important to define call and coverage duties. If your employer has indicated you’ll only have to work one weekend day per month, your contract should say so. The sites where you are expected to practice (main office, satellite office or clinic) should also be specified.

The contract should also clarify how you will be assigned patients and procedures, and how your performance will be evaluated. These areas can be important if you have a productivity incentive based on patients seen or services billed.

4. Termination and Tails

Your contract should include a section describing the conditions under which the employment contract may be terminated before the scheduled end date. Death or permanent disability are conditions that terminate the contract. In the case of disability, typically there is a “qualifying period” ranging from 60 to 180 days before the contract ends. Look for a provision stating that you will receive your salary during the qualifying period. The agreement should also specify provisions for termination, including for cause and without cause. The contract should stipulate what payments you will receive for unused vacation days if you leave the practice. In addition, if your compensation is based on your collections, the contract should state how long after the end of the contract you will continue to receive payments from collections.

Most employers take care of the cost of malpractice insurance, but if its policy is claims-made, your employment contract should specify who will pay for the insurance “tail” if you leave the group. Sometimes, a physician or dentist employment contract calls for you to purchase the tail policy at the end of the contract, whether you leave voluntarily or are terminated. Since this could be a large number, be sure to clearly understand who will pay for the tail and what it might cost. If your employer offers occurrence-based coverage, which is more comprehensive, you won’t need additional tail coverage.

5. Restrictive Covenants

A non compete clause or “restrictive covenant” prohibiting you from practicing in the same area if you leave the hospital or group voluntarily is included in most physician employment contracts. A non compete clause will specify the scope of services, the geographic area, and the period of time that are restricted, such as practicing oncology within a certain radius from the practice for the next 1 or 2 years. You and your attorney should review any non compete language carefully and try to limit the restrictions. Usually the terms can be negotiated to reach a satisfactory compromise that is reasonable and fair for both parties. In considering a non compete clause, you should ask yourself, “Can I find somewhere else to work if this position doesn’t work out, or will I need to relocate?”

These are just a few things to look for in your new employment contract. Every deal is different. Contract language is critically important but can be overwhelming to someone without legal training, thus causing the negotiations to be both exciting and intimidating. We have seen it all and would be happy to assist you in negotiating your next employment contract.

Rachel E. Lusk-Klebanoff, Esq. is an associate in Lamb McErlane’s health law and litigation departments.  She represents physicians, dentists, group practices, and other health care professionals and health-related entities in transactional, regulatory, and compliance matters. 610.701.4416 / rlusk@lambmcerlane.com.