The background and interests of a client are critical in reviewing contracts for physicians at all stages of their careers. I always start with a review my client’s C.V., and discussion with them about their background, experience, special skills and accomplishments. I then talk with them about their goals, work/life balance and life-cycle expectations, financial needs/goals. Next, we discuss the job opportunity they are considering. I always encourage my clients to have more than one opportunity in hand, so as to ensure flexibility and not to get boxed into a bad offer. It does not serve a contract client well to simply take and review the text of a contract without doing the appropriate background work. However well a physician may believe he/she understands his/her contract situation, I have always found that doing our homework has led to better financial terms, better business terms, and better work/life balance. Physicians should keep this in mind selecting the right attorney to review a contract and represent them in contract negotiations.

Case Study:

A bright young dermatologist in practice for three years asked me to review his contract with a new dermatology practice in a suburb of a major metropolitan midwestern community. He would be relocating from another community thousands of miles away. He has some previous ties to the community of the new practice, and was leaving a thriving practice to move closer to his family.

My client chose to negotiate with one potential practice rather than keeping all options open. This necessarily limited the contract parameters.

  • Establishment of Employment: (i) the contract provided for the sharing of “on-call” time on an equal basis with other physicians. This sounds OK, but my client had no idea how many hours/days of call would be expected of him per month. So, I recommended that he pin down the Practice as to the expected on-call time per month. (ii) the contract provided that employment would be exclusive through the Practice. This would have prevented moonlighting, or the provision of telemedical services which would not interfere with the provision of employment services for the Practice. I recommended that my client seek a provision affording him some flexibility in the provision of professional services when not employed by the Practice.
  • Term of Employment. The term of the contract purported to be for 3 years, automatically renewable thereafter. However, the contract provided that the Practice could terminate my client’s employment for any reason, or no reason, upon 60 days-notice. The effect of this provision was to shorten the contract term from 3 years to 60-days! While the Practice assured my client that it had never executed the 60-day termination provision, that is little reassurance that it won’t be used. Such a provision is particularly onerous for a physician moving half-way across the country to create a new life for himself. The best approach here was to either reject the 60-day termination provision outright (i.e., if the Practice really wants you, it should not have to protect itself in such a noxious manner), or only allow 60-day termination after year 2 of a multi-year agreement, plus a release from any non-compete requirement.
  • Malpractice Insurance. The contract stated that the Practice pays for the insurance, but would charge it back against my client’s total compensation. It further required my client to purchase “tail coverage.” I advised my client that he should not be charged-back for malpractice insurance or forced to purchase “tail coverage” while an employee, rather than a partner, of the Practice. These expenses can be considerable, and would substantially eat into his total compensation.
  • Covenant Not-to-Compete. The contract provided a non-compete of a 3-mile radius for 2 years if my client was terminated within the first 6 months of hire. This would in essence mean the Practice could, at any time within the first 6 months of employment, give my client 60 days-notice, and then prevent my client from going to work for a competing Practice for 2 years. That provision needed to be deleted unless my client was comfortable in knowing that he would not be fired.
  • Additional Compensation. (i) we proposed that my client should earn an additional $25K per year provided that his net collections exceeded $1M at year end. (ii) we proposed that my client would receive a quarterly bonus based on Practice revenues for ancillary services provided by other care providers. (iii) we requested moving expenses equal to actual cost of relocation. (iv) we proposed a $25K sign-on bonus.

In the end, my client got most of what he was requesting, and signed a revised contract acceptable to both him and the Practice. This story identifies some of the many issues open for negotiation between a physician and a Practice. Don’t let anyone tell you that contracts are “non-negotiable.” Keeping your options open is the best way to ensure that you get the best possible deal from the Practice that has stated that it wants you by offering you a contract.

Physicians must make difficult choices – they must take care of themselves at least as much as they take care of their patients. Otherwise, they can expect hospitals and private practices to place their wellbeing secondary to the hospitals or practices own bottom line. Be proactive and retain sound legal counsel to help negotiate contracts that serve your needs. Consider Barney Cohen at Concierge Healthcare Attorneys, LLC. He can be reached for a free consultation at (312) 804-1739.