Negotiating a Post Residency Contract

negotiate your post-residency employment contract 1

“Engage An Expert To Negotiate Your Post-Residency Contract”

One of the most important parts of any physician job search comes right at the end of residency – when it’s time to negotiate the physician contract. However, this is the part many physicians are most uncomfortable with. Many young physicians mistakenly believe that they should not try to negotiate their contracts. Often they fear that negotiation could jeopardize a job offer. However, it is virtually unheard of for an employer to revoke an offer because a physician asks to negotiate the terms of the contract.

Once you receive an attractive offer, you may be tempted to just accept it, sign the contract and get to work. This mistake can lead to lost compensation, unsatisfactory working conditions, and missed opportunity that may have you looking for a new job in a few years. On the other hand, a good negotiation and careful review of the contract can make all the difference.

Once you understand that it is important to actually review and negotiate the contract terms, the next question is whether you should review and negotiate the contract terms yourself or hire an attorney to represent your interests. There may be a temptation to go it alone. This would be a mistake. What may appear to be straightforward text, most assuredly is not. Physician employment contracts are complex, have hidden landmines, cover detailed and often confusing subjects such as professional liability insurance and “tail” coverage,” have “claw-back” provisions that take back compensation and benefits under certain circumstances, and may or may not cover all of the subjects that need to be covered from the physician’s perspective (e.g., signing bonus, relocation expenses, student loan repayment, etc.). In other words, you cannot just react to what is set forth in the proposed contract, but rather need to be proactive in insuring that your needs and wants are covered in the contract.

What type of attorney should you hire?

Once you decide to hire a lawyer, not all lawyers are created equal. A general business lawyer, such as an attorney who handles real estate transactions for your family, may not be the right attorney to review your physician employment contracts or LOI. Just as there are physicians who specialize in different aspects of the practice of medicine, there are attorneys who specialize in healthcare law and more particularly in reviewing physician employment contracts.

The attorney should take seriously the need to work strategically and collegially with you, and not only review the contract, but start with the terms you and your attorney want to see in the contract. The attorney should then offer verbal and written comments and suggested edits to the proposed contract and should pay particular attention to those contract provisions which have significant potential impact on you (e.g., non-compete provisions, other restrictive covenants, termination clauses, tail insurance, etc.), and not nit-pic minor edits which are meaningless. Finally, the lawyer should stand with  you every step of the way, and either directly or indirectly negotiate the terms of the contract until you are fully satisfied with the contract.

Concierge Healthcare Attorneys, LLC offers flat fee (no hourly billing) contract (and letter of intent) review and negotiation services for graduating medical residents in all 50 U.S. States. This service includes unlimited text, email and telephone communications with my clients. I am the ultimate healthcare law insider, having held general counsel positions with two academic healthcare systems, and a senior counsel position with the American Medical Association, before opening my concierge healthcare law practice. Having held these insider positions, I am well versed in negotiating post residency physician employment contracts on behalf of both hospitals and physicians.

When to Hire a Lawyer

The time for any graduating medical resident to consult an attorney is before he or she has agreed to anything in writing. This includes the letter of intent (i.e., LOI) that you are asked to sign.

Contract Terms – What to Expect

The contract should contain everything discussed in the interview and more. Do not assume verbal statements alone will be remembered or honored. If a specific issue is important to you, make sure it is in writing. It is important to take time to thoroughly review the proposed contract, making sure that all issues that are important to you are covered by the written contract. Don’t be surprised to find contract provisions not squarely discussed in the interview or covered in the “letter of intent.”

The Contract Details

You may be offered a generally favorable employment contract containing most, if not all, of the provisions requested by you, but if your prospective employer can terminate your employment  “at will,” the contract is not worth much. The time to make sure the agreement is worth the paper it’s written on is before you pack up and move to a new city.

Your Obligations

As an employed physician, your contract should include a detailed description of what is expected of you. This includes the type of medicine to be practiced, the amount of hours you are expected to work, your on-call hours, and administrative duties. Understanding the duties upfront will set the tone for a successful employment relationship.

Compensation

A key issue on the mind of graduating residents is starting salary. Before you agree to an employment contract, you should be familiar with the median salary range for a physician in your specialty in your geographic location. A generous starting base salary may be tempting to accept, but base salary is not always straight forward! For instance, academic healthcare centers often make an initial offer of a tempting base salary as part of the “letter of intent,” but then include other terms in the proposed contract which adversely impact the base salary which were not disclosed as part of the letter of intent. For instance, proposed contracts may include provisions which allow the healthcare center to adjust the base salary downwards at any time if the physician breaches any policy and procedure of the healthcare center (e.g., such as the timely completion of medical records). However unlikely it is for such an adjustment to occur, this is not something to overlook in the negotiation of compensation.

In addition to base salary, you should consider other elements of compensation such as: signing bonus, relocation expenses, student loan repayment, professional liability insurance, and other benefits. The signing bonus is often negotiable, and you should get the best bonus possible. However, you need to look out for a contract provision requiring that the bonus be re-paid if you leave  the employer prior to the end of the contract term, or if the employer terminates the contract “for cause.” You do not want to get caught being offered a bonus as part of the letter of intent, only to have the contract make the bonus subject to recoupment! The same is true of the offer of payment of relocation expenses. Beware of a subsequent contract provision requiring re-payment of the relocation expenses paid by the healthcare center if certain events occur. As for professional liability insurance coverage, beware of a contract provision requiring that the physician assume the cost of a reporting period endorsement or “tail” covering incidents occurring during your employment but for which claims are made after you leave the employer. Such a “tail,” which could cost tens of thousands of dollars, should be paid for by the employer, and not passed along to you.

Other Benefits

Benefits can add substantially to base compensation. Examples of benefits include payment of licensing fees and dues to professional societies, time off, continuing medical education, repayment of student loans and disability insurance.

Term of Employment

Graduating medical residents often get into trouble by paying insufficient attention to the term of the employment agreement (i.e., the number of years it will run), the conditions for its renewal, and how and when it can be terminated. You do not want to be locked into a long-term employment contract with no provision for salary increases and/or promotion, and no way to get out of the contract. Nor do you want to be subject to termination pursuant to a provision  that allows the employer to terminate without cause on 30 days notice, when you  thought you had a two-year commitment and were expecting to be at that job for the full two years.

Restrictive Covenants

When newly minted physicians are entering into practice little attention is given to the restrictions that could be imposed on the physician in the future if he or she chooses (or is forced) to leave the practice. Contractual restrictions on your future conduct can include such things as a prohibition against soliciting the employer’s patients, referral sources, or employees; a confidentiality requirement protecting the employer’s trade secrets or other confidential information; or a non-competition provision that limits where you can practice medicine after you leave the employer. These types of provisions are typically called “restrictive covenants.”

Restrictive covenants are strictly construed so as not to violate the public policy in favor of allowing patients an independent right to see physicians of their choice. Non-competition provisions will not be imposed if the employer’s interest in enforcement is outweighed by the hardship to the employee or the likely injury to the public.

The reasonableness of a non-competition provision is based upon three factors: its duration, its geographic scope, and the specific activities (i.e., medical specialty, types of procedures) that are prohibited. If any one of these factors is deemed over-broad and unreasonable, the entire provision will be unenforceable.

You need to be wary of a non-compete provision, since it can prevent you from making a living in the community if your employment ends for any reason. You  would be much better off negotiating a reasonable non-competition provision before the employment agreement is signed.

 

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