A Physician’s Guide to Employment Contracts

Getting a contract - then evaluating it with confidence - are the important steps in your employment journey.

By Bruce D. Armon | Fall 2012 | Feature Articles

 

“Congratulations!
Today is your day.
You’re off to Great Places!
You’re off and away!”
–From “Oh, The Places You’ll Go!” by Dr. Seuss

Dr. Seuss had it right. The journey relating to a new job can be just as exciting as the job itself. For residents and fellows in their final year of training, the fall is the time of year when there is no shortage of optimism about the wonderful opportunities that await when summer arrives.

For those physicians who have more than a year left before their training is complete, the time between now and when you start that first job will come sooner than you think, and there will likely be lots of twists and turns on the way.

If you are already employed as a practicing physician and considering a change in jobs (hopefully by your own choice and not that of your employer), you have already been through this drill and may have a bit more savvy and a bit more apprehension because of your current experience.

There is no one right job, no one way to get a job, and no one thing that makes any physician the perfect candidate for a particular job. Though being in the right place at the right time is certainly important, there are certain things any physician looking for a job should do to put themselves in the best position to land the ideal job.

It is very important to set your expectations early and to know, in advance, what is most (and least) important to you as it relates to job responsibilities and what is included in your employment contract.

In every negotiation, it is important to understand what the other side is looking for and hopes to achieve. Though not every term is negotiable, you may be surprised by the compromises you can achieve that can help you in both the short and long term.

Understanding certain basic principles can make you a more attractive candidate to a prospective employer when you are preparing for and then going through the interview process.

There are two parties to every job negotiation‹the employer and the employee. Your job is to give the prospective employer the comfort in knowing you are the right candidate for the job. This is not always an easy proposition.

Getting a new job is exciting and exhilarating‹and can be physically and mentally exhausting for both the employer and the prospective hire.
Understanding the motivations and sensitivities of the prospective employer is critical.

There are three typical employers for physicians: private practices, hospitals and private practices in hospital-based settings. There may be different opportunities and challenges in negotiating for employment in each of these settings. Each of these employers has different relationships it needs to nurture, and prospective physician hires need to do their homework to prepare accordingly.

Before you get to the contract stage… Have you completed the fundamentals?

 “You have brains in your head.
You have feet in your shoes.
You can steer yourself
Any direction you choose”

In many respects, getting the proposed employment contract is the last step before you can accept the opportunity.

Before you even step foot in the door of a prospective employer for an interview, you will be screened in multiple ways.

Depending on the size of the prospective employer and the type of health care provider, the mechanisms employers use to screen candidates may be very different.

However, the items a potential employer wants to know about you before bringing you to meet them are likely going to be very similar.

Drea Rosko, Assistant Vice President of Physician Services for St. Luke’s Physician Group, St. Luke’s University Health Network in Bethlehem, Pa., is responsible for screening the qualifications of potential physician hires.

One of the mechanisms Rosko uses to determine if a candidate might be a good match for an opportunity is a Physician Applicant Qualifications Report adopted from a form prepared by the Association of Staff Physician Recruiters (ASPR).

St. Luke’s reviews a prospective hire’s CV with regard to four specific criteria: 1. Is the applicant an M.D. or D.O. from a United States recognized or ACGME accredited medical school? 2. Has the applicant completed both an internship and residency in the United States? 3. Has the applicant completed a residency or fellowship in the specialty for which the candidate is applying? 4. Is the applicant board certified or board eligible?

Rosko studies the candidate’s CV and supporting materials to identify “red flag items.”

Some red flags are gaps in education, multiple moves in a short period of time, a poorly formatted CV or grammatical errors in the cover letter.

If the candidate passes this initial test, she calls the candidate to get answers to questions that may not appear on the CV. Assuming that telephone interview goes well, the hiring process continues.

Just as employers investigate your “red flags” before extending an offer or contract for employment, so should you, too, consider any red flags you encounter regarding the potential employer.

These may include: excessive professional and administrative turnover; inability to grow a practice; and lack of commitment to capital and equipment improvements. Be prepared to ask questions of a potential employer so that you understand their vision for the future and that it is compatible with your expectations.

Related: What questions should you ask? ow.ly/dOhvG

Your employment contract may be influenced by the practice’s location. “We make sure candidates realize that we actually get busier during the summer and peak vacation time because of the influx of visitors and urgent urological needs that cannot wait until the individual returns home,” says Frank Wren, M.D., president of Jersey Urology Group, which has offices near Atlantic City.

Frank Wren, M.D., president of Jersey Urology Group, a large urology practice based in New Jersey with several offices near Atlantic City, says his group tends to rely on referrals when screening candidates.

Because urology is a fairly small specialty, a person’s reputation–good or bad–can travel far and wide. “Knowing where the candidate trained and who trained the candidate is critical to our analysis,” he says. “We believe we know who has a good reputation and that helps us effectively winnow candidates.”

 Location’s role in your contract

“You’ll look up and down streets.
Look ’em over with care.
About some you will say,
‘I don’t choose to go there.'”

Once you pass the initial screen, the prospective employer will likely bring you to the community.

If the opportunity is in a community that’s a temporary stop en route to your ultimate desired living situation, you may not be concerned with a contract’s post-employment restrictions such as restrictive covenant and non-solicitation provisions.

If location is your main priority, understand how broadly the prospective employer defines the “community” and what options will remain if you are no longer employed by that organization.

If your spouse is also a physician, you’ll also want to make sure that a non-compete restriction that one of you has does not mean both of you will be forced to switch jobs if one of you changes employment.

Employers, too, try to ensure that their location matches a candidate’s goals before the contract stage.
“We know we are not the ideal location for every candidate” says Teresa Mitchell, executive director for Lafayette Radiology, a hospital-based medical practice in Lafayette, Ind. “It is very important to us in a buyer’s market that we only make an offer to a candidate who we think wants to be in our community for the long term for the right reasons.”

Your contract may include provisions relating to special geographic circumstances.

Wren’s practice is located minutes from the New Jersey beaches.

“We enjoy being a part of a great community and do not take for granted our proximity to the beach,” he says. “At the same time, we make sure candidates realize that we actually get busier during the summer and peak vacation time because of the influx of visitors and urgent urological needs that cannot wait until the individual returns home.”

Taking extended vacation in the summer may not be a realistic option in a beach community. Similarly, an employer may place restrictions on you taking extended vacation in a skiing community in the middle of winter.

Assuming the prospective employer believes you want to be a part of the community for the right reasons and they find you acceptable professionally, personally and socially, the next logical step will be offering you employment.

 What should be in your employment contract?

“I’m sorry to say so
But, sadly, it’s true
that Bang-ups
and Hang-ups
can happen to you.”

First, make sure you get an employment contract. A handshake is not sufficient. A properly drafted contract will protect both you and your employer. The contract delineates your respective rights and responsibilities.
“We have given a lot of thought to what we include and do not include in our employment contract,” says Wren. “As we have grown over time, we have made modifications to fulfill expectations and protect our practice.” There are certain key elements that you should look for in any contract you receive:

√ Term and termination
√ Salary and benefits
√ Work schedule
√ Post-employment restrictions

“Our contracts are carefully drafted. Every section is included for a specific reason,” says Robert Wax, senior vice president and general counsel for the St. Luke’s University Health Network.

Term and termination

Term and termination is important to you and the employer. Though a job could theoretically last “forever,” the reality is often different. From your perspective, you should understand the length of the initial term and any renewal terms. Understanding how and when you can leave an employment situation is important.

Assuming you do intend to stay, and your employer wants the same for you, the term and termination provisions may help clarify opportunities for advancement by job title and/or by compensation.

For instance, an initial contract with a term of three years may delineate whether you become an “owner” of the practice at the end of the initial term, or promotional opportunity if you are in an academic medical center
environment.

From the employer’s perspective, they want to ensure a timely separation if the agreement is not working as expected. It can be awkward for everyone if it is clear you are no longer welcome and your continued presence affects office dynamics, patient relationships or referral patterns.

Salary and benefits

Do your homework to ensure your salary is competitive for your specialty and the geography. Supply and demand becomes an important consideration with respect to salary.

“As a large employer, our employee benefits are worth thousands of dollars a year,” says Rosko.

You should understand the scope and effective date of each benefit. Is family health insurance provided, or is it only for the individual employee? Is short-term and long-term disability insurance available? What sort of retirement benefits are provided?

Will the employer reimburse you for your moving expenses or provide a signing bonus? What is the annual vacation and continuing medical education allotment?

There are no guaranteed benefits that you should expect to receive. Keep in mind that the cash equivalent value of the benefits offered combined with a “mediocre” salary can make for a very generous job offer.

An important (and expensive) benefit is professional liability coverage. Depending upon whether the insurance is occurrence-based or claims-made, you will have different considerations regarding professional liability coverage if this employment ends. In addition, many states require a physician to have certain levels of professional liability coverage and coverage during the period of time covered by the state’s statute of limitation in which a suit can be brought. Your contract should specify the type of coverage offered.

Work schedule

Understanding your expected work schedule and call coverage is an important part of your contract.

“We pride ourselves that each physician‹no matter how senior or junior‹has the same work schedule and call obligations,” notes Wren. “It shows that we are all in it together.” You should know the locations where you are expected to work and the “regular” office hours and rounding responsibilities.

Post-employment restrictions

No one should knowingly start a job expecting to leave that employer and then stay in the community as a competitor.

An employer has a legitimate right to protect its business interests. You should understand the length of restrictive covenant and the scope (e.g., miles, zip codes, counties) and the impact that it will have on whether you need to move your residence if you leave that employment.

If your spouse or significant other is also a physician, you may have two sets of noncompete provisions that you need to consider.

Getting help on the employment contract

Wax, Rosko, Mitchell and Wren agree that it is important to have an attorney involved in the contract process for you and the employer.

“We use our attorney to draft our employment contracts because we want to make sure we draft the document correctly and are acting fairly,” says Wren.

Each of the employers also expects that the prospective hire may contact an attorney to review the employment contract.

“We have no problem dealing with a physician’s attorney,” says Wax. “We do find it preferable if the attorney has real health care experience and is genuinely interested in looking for opportunities to make the deal work as opposed to finding reasons to nix the deal. That works to the benefit of the prospective hire in the short term and long run.”

Related: How to negotiate like a 5-year-old ow.ly/dgiIB

A physician looking to hire an attorney should ensure the attorney understands health care legal issues and physician dynamics. In addition to appreciating the details of the contract, your attorney should serve as your advisor to help guide you in making the correct decisions.

“If someone is completely distrustful and skeptical of every provision in a contract, we question whether that individual really wants to be a part of our health care family,” says Rosko. “Establishing trust is a two-way street, and the attorney can be helpful in that regard.”

As you consider hiring an attorney, talk to colleagues for recommendations. Hire someone who you want in your corner to explain the contract terms and who can negotiate on your behalf if you choose.

You should feel comfortable asking the attorney how he or she charges for their services and an expected price range for the engagement. Dealing with an attorney whose specialty is health care law and who has negotiated physician contracts is essential. An attorney who does not understand health care fraud and abuse laws, appropriate scope of a noncompete and licensure and bonus provisions will not serve you well.

The attorney you hire should not be someone looking to kill the deal, but should be comfortable telling you if something is a less-than-ideal opportunity. There may be situations where it is better for you to walk away from the offer and bide your time until a better opportunity presents.

Your attorney should be able to put you in the most competitive position and prioritize the contract issues that are most important to you and your family.

 Taking the journey

“And will you succeed?
Yes! You will, indeed!
(98 and 3/4 percent guaranteed.)”

Depending on when you are actually offered employment, the process may only take days or a few weeks.

Ideally, you are considering multiple opportunities at the same time so you can weigh the advantages and disadvantages of each offer. The earlier you get the opportunities in the job cycle, the more latitude you may have in negotiating terms that are important to you. Though nothing has to be forever, you ideally do not want to be switching employment multiple times in a rather short period of time.

Despite Dr. Seuss’ good wishes and unbridled optimism, you may not reach the level of success in Oh, The Places You’ll Go. You will increase your opportunity for success, however, by understanding the goals and objectives of your prospective employer in looking to hire you, applying for jobs that truly interest you, and making a great first and lasting impression with everyone with whom you interact during the interview process.

Understand each element of your proposed employment contract and use an outside advisor to help guide you through the process.

With each of these tips in mind, you will find plenty of opportunities for the places you can go.

Bruce D. Armon, Esquire (barmon@saul.com) has helped negotiate and draft hundreds of employment contracts for physicians and employers. He is co-chair of Saul Ewing LLP’s health law practice and managing partner of its Philadelphia office.

Personality matters

No one wants to hire a horror story waiting to happen.

“We do not want to have belligerent or unprofessional physicians employed by our organization,” notes Robert Wax, Esquire, senior vice president and general counsel for the St. Luke’s University Health Network. “Respect for one another and for yourself are hallmarks of our organization.”

“We need to make sure the prospective hire’s clinical skills are at the level we expect. However, the evaluation does not end there. It is very important that we understand their personality, their extracurricular interests and their sense of stability,” says Teresa Mitchell, executive director for Lafayette Radiology in Indiana.

Mitchell generally meets with a candidate first. Then the candidate meets with each partner in the group and key hospital administrators, and tours the hospital space. “Everyone’s impression counts when we interview a candidate,” she says.

Since the practice is intrinsically connected to its hospital through a services agreement, the practice cannot risk having a physician as one of its employees who would or could do anything that would jeopardize that relationship.

“I remember one candidate who I took to lunch and I could not find anything which we could discuss, regardless of whether we even agreed upon the subject. The lunch was socially awkward, and I recommended to my physicians that we not extend an offer,” Mitchell recalls.

You have to sell yourself and realize your clinical skills alone do not make you an ideal candidate. There may be multiple candidates interviewing for the same position. Personality matters.

 

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Negotiation tips

By Kyle Claussen, JD, LLM

Negotiating an employment agreement can be a nervous and stressful time for many physicians. These agreements are worth hundreds of thousands of dollars and will define when and where you practice medicine. Here are a few tips that will reduce your anxiety.
Negotiations start immediately.

The moment you begin speaking to a recruiter, you are negotiating your position. It is important to be open and honest with an employer. You should not commit to any specifics regarding salary requirements or work schedule until you have evaluated the offer as a whole. It is best to discuss compensation only after an official offer has been made and after you have evaluated the facilities, support staff and benefits package.
Remember that even “standard” contracts that “every physician has signed” can be changed.
Prioritize your needs.

Every physician has unique needs in their employment. A four-day workweek may be the most important factor for a new mother. A resident with large amounts of student loan debt may need to maximize compensation. Only you know what your needs are, and you should communicate to the employer which terms of the proposed agreement are truly “deal breakers” during your first round of negotiations. Contract terms to consider include:

€ Compensation
€ Call schedule
€ Malpractice tail coverage
€ Equipment
€ Non-competes

Know your value.

Underestimating your value can substantially reduce your compensation. It is rare that the first offer made is the best you can receive. Conversely, overestimating your value can lead to an offer being pulled and a relationship with the organization destroyed. To determine your value, consider geographic specific salary data, competing offers, length of time the position has been open, total revenue you will generate, and the number of candidates being considered for the position.
Keep “Plan B” alive.

As Yogi Berra said, “It’s not over til it’s over.” You should never turn down an offer until you have determined with 100% certainty that you will not be accepting the position. Negotiations can take many weeks and occasionally will turn sour. If this happens, you will need to have another option or two for consideration.
Get professional guidance.

Any contract (employment or otherwise) that is worth a significant amount of money should be analyzed by a professional. Attorneys specialize in practice areas just like physicians. You would not go to an orthopedic surgeon for a colonoscopy, and you should not go to your cousin (or brother, aunt, etc.) who practices family law to review your employment contract.

Find a health care attorney with experience reviewing physician employment agreements. As Benjamin Franklin stated, “an ounce of prevention is worth a pound of cure.”

It”s absolutely critical that you find out what the practice expects of you in terms of minimum productivity levels. What do you have to do to earn the base salary? At what level does the productivity bonus kick in?

 

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