Contracts with benefits

What’s included in a typical physician employment contract? This helpful guide lays it out.

By Debbie Swanson | Fall 2018 | Feature Articles

 

Ensure you know just what’s expected in return for any financial incentives in your employment contract, recommends Afshin Khaiser, M.D. -photo by Seth Morris

Ensure you know just what’s expected in return for any financial incentives in your employment contract, recommends Afshin Khaiser, M.D. -photo by Seth Morris

After months of filling out paperwork, traveling and dry cleaning your interview suit, you’ve finally landed an attractive job offer. Congratulations! But don’t collapse onto your sofa just yet; there’s still one more matter to deal with. Pour a cup of coffee, grab your favorite color highlighter and settle in to read your employment contract. This document spells out everything about your new position, from the hours you’re expected to be at work, to perks such as travel compensation, to the handling of malpractice claims that may pop up decades after you’ve left the employer.

“What’s offered varies with the type of practice; hospitals and academia might offer more perks, while private practice is more like a small business,” says Afshin Khaiser, M.D., an internal medicine physician based in Illinois.

Though it’s paramount to read the document from start to finish, don’t worry if you feel at least somewhat confused. Deciphering it can be tricky, yet it’s a valuable learning experience. Here are some tips and insight into some of the sections.

Seek a resource

After years in academia, you probably don’t shy away from heavy reading. But this lengthy, legalese-rich document is seldom completely understood by a lay reader. Most physicians—at least early in their careers—consult with a lawyer experienced in physician employment for guidance and reassurance before they sign.

Early in her career, Sylvie Stacy, M.D., a preventive medicine physician in Birmingham, Alabama, sought a lawyer to review her contract before she accepted a position as a medical director, which involved both clinical and administrative work.

“At the time, I had a minimal understanding of all the important factors and the meaning of the various clauses,” she says, adding that the lawyer did suggest some changes “…to protect me if something went wrong, or if I had a disagreement with my employer down the road.”

Stacy went on to have a positive employment experience—but felt that the legal consultation was both reassuring and educational.

“Since then, I’ve done a lot of independent contracting work, with numerous contracts to review. I have felt comfortable doing the review and negotiation myself,” she says.

Some parts are simple

Not every aspect of your employment contract is cryptic or controversial; some just lay out the boundaries of your contract.

Every contract has a defined time period, beginning with a start date and ending with some type of contract termination date. Choosing a start date may seem like a no-brainer, but reflect upon the date before agreeing; once you start working, free time might be at a premium. If you’ll be relocating, remember to build in time to get yourself set up. Or, if you’ve been going full speed ahead since medical school, consider slipping in a few days for some r&r.

Your contract will also state how long it remains valid; it may expire after one year, automatically renew on its anniversary date, or remain effective indefinitely. Make note of this date, as it’s easily forgotten as the years roll by.

Other areas to look for: the type of relationship you are entering into (employee or independent contractor); whether you are full time or part time; and the name and location of your employer. Your primary employment address should be defined, along with any expectations regarding traveling between offices, if applicable.

Ease the burden of moving

It’s great when your new employer offers to assist with your relocation expenses when a move is required. This is more common with larger establishments and hospitals. Covered expenses could range from only the initial expense to transport yourself and your belongings to something more inclusive of the price to get settled: hotels, meals, and public or rental transportation.

“There’s sometimes a maximum dollar amount toward your cost of relocating. Sometimes they’ll help with other things, like a loan to help buy a house,” says Keith J. Chamberlin, M.D., medical director of PeriOperative Services at Marin General Hospital and CEO of Chamberlin Health Care Consulting Group, Inc., in California.

Equally important is making sure your contract spells out anything required of you in return.

“There is a risk involved (for the employer): If you come out and leave soon after, that’s not a good outcome,” Chamberlin says. “A common stipulation is that if you don’t stay six months, you have to pay it back.”

A health care attorney's review on an employment contract gave Sylvie Stacy, M.D., a sense of reassurance. It also helped prepare her for future reviews. -photo by Eric and Jamie Photo

A health care attorney’s review on an employment contract gave Sylvie Stacy, M.D., a sense of reassurance. It also helped prepare her for future reviews. -photo by Eric and Jamie Photo

Upfront cash

A sign-on bonus is a common tactic to entice you to come on board. This is especially appealing to new physicians eager to knock off student loans and set up housing. While money is always attractive, don’t get too carried away, warns Khaiser.

“Don’t get too caught up with a number,” Khaiser reminds. “The amount may seem great, but read the fine print—there’s always something attached. For example, if you don’t stay at the company long enough, you may have to pay it back.”

What’s important is understanding your obligation. Be sure to get all the details clarified in your contract.

Know what’s expected of you

Exactly what are you being brought on board to do? This should be clearly spelled out in the areas of responsibility section of your contract. Reject any vague wording or an open-ended definition, such as “will perform duties as assigned.” Look for targeted, specific items, such as: clinical expectations, nonclinical obligations (paperwork, records, phone calls), requirement to serve on boards or committees, expectations of teaching or training others, involvement in research, and more.

Also consider what your employer must provide you to support these efforts: equipment, time, staff, lab access, etc. Get these agreements in writing; this could prove useful in the event of termination.

Another important area is your availability for on-call hours.

“Understand these expectations,” says Khaiser. “For example, are you required to come into the hospital when needed? How many calls do they expect you’ll have in a night? Will you be expected for work the morning after a particularly busy night of call?”

Don’t be afraid to speak up, he adds. “Sleep is important, and you need to take care of yourself.”

Plan for time off

Breaks from your typical workweek are an integral way to avoid burnout, remain compassionate, and focus on what initially drew you into medicine.

Paid time off includes sick time, disability and family leave. Offerings vary greatly based on type of employer and their benefits package. Be sure you understand how these items are calculated and accrue, and how they are treated if unused at year’s end. Also consider how your personal priorities may change within the time span of your contract; what is agreeable today may change over time.

Vacation time and continuing medical education (CME) are two important areas of paid time off. Vacation is time to use as you wish—key to maintaining a healthy outlook. CME is time intended for you to further your medical education by attending conferences, taking a class, or another educational event. CME is typically required both by your employer and to maintain your medical license.

“The contract should stipulate the number of weeks of (paid) vacation time and CME time,” says Chamberlin, adding that each should be broken out specifically. “For example, two weeks CME and four weeks vacation. You usually can’t extend the total, but may be able to negotiate the combination.”

Reimbursement of CME expenses

Whether you fly to a conference, register for an online course or drive to a lecture at a local university, there are always some expenses involved with CME. If your employer has offered to contribute toward CME expense, look for a dollar amount you have available.

Planning the end of your employment

It may seem strange to be thinking ahead to when you terminate this employment, but an unexpected or poorly planned exit could have detrimental consequences on your finances, career and professional standing. Get the details spelled out now so you’ll know what to do if the situation arises.

One area is assignability. It’s common for hospitals and practices to undergo acquisition, consolidation, or mergers, but what’s important is how this would impact you. If your contract is defined as assignable, your employment would continue uninterrupted under the new ownership. If it is non-assignable, your contract is terminated upon the change of ownership—meaning you’re either in need of finding new employment or negotiating a new contract with the new owner.

If you’re signing a non-assignable contract, consider what would ease the turmoil of an unexpected loss of employment. The American College of Physicians suggests negotiating for the inclusion of a cash settlement, or adding language that would release you from any restrictive covenant.

Termination notice defines the amount of time both you and your employer must provide prior to ending the employment relationship. This should be fair and equal for both sides; you shouldn’t be required to provide 120 days of notice while your employer only has to give you 60.

When Stacy had her attorney review her contract, this was one area he adjusted. “[He extended] the time frame for contract termination, and removed wording that would allow immediate termination by the employer in certain circumstances,” she recalls.

Most contracts also specify that an employment can be terminated either “for cause” or “without cause.” A “for cause” termination points to a specific reason for the termination. “Without cause” is much more open-ended; you are free to give notice without a reason, but likewise, the employer is free to let you go for no reason.

“[Avoid agreeing to] a situation where they can fire you at any time—especially important if you relocated or have a family,” advises Chamberlin. “For a brand-new employee, it’s good to have protection in place, such as that they can’t fire without cause for 90 days. After the 90-day mark, get additional protection in place, such as 180 days of notice going forward. That gives both parties adequate time to make new arrangements.”

Post-termination considerations

Issues related to your employment could arise long after you’ve packed up your things and settled into a new situation. Planning for them in your contract is another integral step toward safeguarding yourself.

You’ll probably build up a base of familiar patients who routinely seek your services. Your contract should address the proper means of notification of your departure. In other words, who will tell your patients of your impending departure? Typically, the employer will distribute a letter before you are free to discuss it openly.

Your contract may seek to limit your interactions with patients through a non-solicitation clause. This prevents you from recruiting patients to join you at your new location. If such a clause exists, ask for a clear definition of solicitation. Getting this in writing will help you know what you can and cannot say to your patients, as well as the guidelines to follow.

A non-solicitation clause may also try to prohibit you from treating patients who choose to follow you to your new location. Most experts agree that enforcement of this is questionable; courts often support the patient’s right to seek any doctor of their choosing. Check with your local legal expert if such language is included.

Another post-termination issue might be a non-disparagement clause, which prevents you from making negative or defamatory comments about your employer both during employment and post termination. This clause should be equally in effect for both parties, also preventing the employer from making disparaging remarks about you.

Understand any restrictions

Sometimes referred to as a non-compete clause, the restrictive covenant is another area to read carefully. This defines limits on where you can work after leaving your employer. For example, it might prohibit you from working for a similar type of practice, within a range of 12 miles, for five years post-employment.

This clause protects the employer by preventing you from going to a direct competitor, sharing confidential information, or drawing patients away from the practice. Though it’s a common part of most employment contracts, make sure the language is not overly prohibitive.

“If you live in an area you like and want to remain there long term, try to negotiate, ” says Khaiser.

You are legally bound to uphold anything you sign your name to, but be aware that not all states equally enforce restrictive covenants. It’s best to run the language past a health care attorney to understand your obligation, your state’s stance, and to make sure that the language is not overly prohibitive.

Protect your other income

Even if you don’t have an additional stream of income today, opportunities could present themselves down the road, so be sure your contract addresses work performed outside of the practice both related and unrelated to medicine.

For anything related to medicine, compensation may become an issue. According to the ACP, “the contract should state explicitly whether money earned from outside sources is to be considered private compensation, paid directly to the individual physician, or more typically as part of the group’s overall income.”

The contract should also identify any restrictions on non-medical activities—for example, if you play in a band or own a coffee shop. Though it is usually clear that such compensation is your own, there may be restrictions on time or type of work allowed. According to the ACP, “groups usually preclude physicians from performing outside services that will interfere with their ability to fully satisfy their practice obligations.”

Protect your future

One of the most critical sections of your employment contract is the handling of malpractice insurance. This protects you against liabilities that may arise while you are acting on behalf of the hospital, practice group or academic institution.

Coverage varies depending on the type of situation. A hospital or large practice may pay some or all of your malpractice insurance premiums, while a smaller group or practice may expect you cover your own. Your contract should define any limits or maximums on the policy, who is responsible for premiums, and any breakdown of coverage.

The type of policy is an important distinction; it will be either “occurrence based” or “claims made.” In an occurrence-based policy, any incident that arose during the boundaries of your employment period is covered, regardless of when it is raised. In a claims-made policy, only incidents that are raised while you are an active employee are covered; anything raised after your termination date are not, even if they originate from service provided while you were an active employee.

It’s not uncommon that a patient raises a claim years—even decades—after you treated them, so with a claims-made policy, look for the inclusion of an extended reporting endorsement, more commonly known as tail insurance. This is offered by the malpractice insurance carrier as a way to extend a claims-made policy to include anything raised against you post-termination.

“Be cognizant of what is covered in your contract; having tail insurance is non-negotiable,” Khaiser says. “The number-one thing is to protect yourself and your license.”

Tail insurance is costly; employers may split the cost with you, usually by deducting your contribution directly from your paycheck. Sometimes the employer will offer an incentive plan, in which the cost to you decreases each year you remain with the practice. The ACP points out that sometimes a provision states that the employer will pay tail premiums if the employer terminates the physician without cause, but if the physician is terminated for cause, the burden of cost falls to the physician.

Carefully read the details and don’t hesitate to negotiate for the best arrangement.

Moving up the ladder

You may be thrilled with your new job exactly as it is, but it’s never too early to think of the future. Your contract should address issues important to your career advancement, such as the frequency of your employee review, criteria for promotions or advancement, or the possibility of partnership.

Each time you receive an employment contract, you’ll become more adept at what to watch for. But regardless of how familiar you become, it’s always important to read it thoroughly and then consult with a lawyer or seasoned colleague. Changes or adjustments made before you sign can have lasting benefits for you and your family, improve your finances and protect your professional future.

One of the most critical sections of your employment contract is the handling of malpractice insurance.

Changes or adjustments made before you sign can have lasting benefits for you and your family, improve your finances, and protect your professional future.

 

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