Negotiating contracts and compensation for physicians

Here’s what attorneys look for when reviewing physician employment contracts.

YOU’RE AT THE END OF YOUR job search and believe you’ve reached an agreement with an employer you’re really excited about. Now they’ve presented you with a legal document: your proposed employment contract. What’s your next step?

With so much time spent already discussing the details of your employment, it could be tempting to assume the document reflects what you discussed.

Resist that temptation — your employment contract is an important document with significant impact to your career. In fact, there’s a good chance your employment contract will impact not just the contract term, but your full tenure with the employer— and even your career after.

Understanding what you’re committing to is crucial. So if you find yourself staring at a proposed employment contract with eyes glazed over, confounded by legalese, it’s time to hire an experienced health care attorney to help.

To illustrate why, here are a few of the key things lawyers who specialize in physician contracts look for in these documents, which will provide the opportunity to see physician contract reviews through a lawyer’s eyes.

The first step is clarity — and engagement

Attorneys who work with physicians on employment contracts say that ensuring their clients understand the agreement is job one.

“The devil’s in the details, clearly,” says Ezra Reinstein, founder and managing partner of The Reinstein Law Firm in the Boston area. “When I review a contract, I walk the physician through it very thoroughly, to be sure they fully understand what they’re getting into. To do that, we need to go through the whole contract together.”

As with any other field of professional expertise, there are nuances of legalese that non- attorneys can easily miss when reading contracts.

Ericka Adler, shareholder and health care practice group leader at Roetzel & Andress in Chicago, says that physicians too often incorrectly assume they fully understand a contract and don’t need legal help — especially if they believe they’re done negotiating. That’s a mistake that can easily outweigh any savings on legal fees.

“My job is really not to get you as many changes as possible,” Adler says. “It’s to make sure that you know what you’re signing, good or bad. If you come to me later and say, I didn’t know that was in there, then I haven’t done my job.”

David Rosenberg-Wohl, CEO of Hershenson Rosenberg-Wohl, APC in San Francisco, adds that he’s found that some physicians don’t even expect to be able to understand employment contracts, instead wrongly assuming such documents are written only for lawyers.

“The very first thing I do is try to make physicians feel like they have the ability to understand what the document says,” he says. “Then I point out the key terms that might affect them as they practice.”

Actively managing your contract will help you establish a proactive attitude that puts your career on firmer footing for years to come.

“It’s not just that the contract governs your working life,” says Rosenberg-Wohl. “It sets the habit of whether you’re going to expect to be in charge of your career or expect to sign what’s in front of you passively.”

He adds that without an engaged and active attitude toward business dealings, over the course of a career, physicians are apt to forgo countless instances in which they could have negotiated more favorable terms.

“I can’t tell you how many physicians I’ve spoken with who throw their hands up and assume there’s nothing they can do across the board — whether it’s insurance contracts, partnership agreements, or any other business relationship,” he says.

Legal review starts with the everyday

Attorneys say that among the first things they analyze in a contract review are the physician’s schedule, duties and work location. These basics may seem mundane, but they’re critical to job satisfaction.

Reinstein says that a chance encounter with a young cardiologist helped him understand how tied to morale contractual details can be — and led to his decision to build a practice around physicians’ legal needs.

“I met a cardiologist at a holiday party who was a year out of fellowship. He complained to me that this was his first weekend off since he started his job. His practice had a policy of assigning the new guy all the call. He said, ‘I wish I’d had a lawyer look over my contract.’ Immediately, I thought, here’s a need. Six hundred-plus physician clients later, here I am.”

Adler says, “What I’m looking for first is always what the doctor’s life is going to be like. That really comes down to duties, call, location and schedule. I’m looking to see if they match what the physician was told.” If the contract doesn’t exactly reflect the physician’s expectations, she says, the next step is to negotiate a modification to match or “at least give the doctor some control by making it mutually agreed upon.”

Even when the schedule and call burden seem balanced, lack of control over work location can lead to burnout if you’re spending excessive time commuting, Reinstein says. If there are multiple possible work locations, it’s important that the contract provide clear and reasonable guidelines about where you’ll work.

On the plus side, Rosenberg-Wohl says that a physician’s schedule and hours may be among the more negotiable elements of an employment agreement.

“Schedules and hours often have greater flexibility than you might imagine, almost more than any other part of the contract,” he says. While how much flexibility may depend on the employment setting, “in the medical field, people practice in non-uniform ways and hours. Not all physicians work five days a week. Not all physicians work eight- or 10-hour days.”

He adds: “I’ve not seen a situation where there’s much leverage to increase a physician’s initial rate of pay… But I have seen a lot of discussion about adjusting schedules, which can be as valuable as compensation.”

Compensation tops an attorney’s review list, too

When you started your job search, compensation was probably one of your primary concerns. Unsurprisingly, it’s also one of the first things attorneys looks at when reviewing your employment contract.

If you’ve already agreed on compensation (such as by signing a term sheet or offer letter), the contract stage is likely too late to ask for a higher salary. It’s still essential to confirm, though, that the terms match what was previously discussed. Beyond defining your salary, contracts also include compensation-related terms—such as how variable pay and bonuses are calculated—and details of employee benefits that have a big impact on pay, both today and in the future.

Adler says that, for example, it’s common for a contract to specify an income guarantee for a fixed period, after which pay will be based on productivity. In cases like this, she’ll be interested in how likely—or even possible—it will be for the physician to maintain or grow their compensation once the guarantee ends.

“I ask the physician if they’ll be replacing someone or if there’s excess existing demand,” she says. “Employers sometimes hire even if they don’t really have a need, and then the doctor suffers financially.”

She adds that while salary guarantees are usually clear and many productivity pay programs are straightforward, she sometimes sees more complicated compensation schemes that even she can’t understand based on the contract alone. In those cases, she encourages her physician clients to politely ask the employer for help.

“A lot of times, it’s just words, not numbers,” Adler says. “Or it says ‘as determined by the department’ or some other description we can’t figure out in reality. In that case, I ask the physician to request a pro forma model or projections to illustrate how it will work.”

Getting that little bit of example data is important so that both the attorney and the physician understand how the compensation system will work in practice. Once they have that math in hand, Adler says, she can also provide some feedback on whether the income potential seems in line with the market.

Reinstein adds that with productivity pay, it’s not just critical that the contract explain how it will be calculated, but that you understand what factors beyond your control could affect it.

For example, if your productivity pay is based on collections, will billing lags affect when you’ll receive your compensation? And what happens if you’re no longer employed when the bonus was scheduled to be paid? “Productivity bonuses are usually either RVU- or collections-based, and there are pitfalls to both,” Reinstein says. “One is the timing of the payment. If the bonus is paid out once a year, but you’re let go through no fault of your own 11 months in, do you get nothing? Should there be a prorated bonus calculated at termination? And if your bonus is collections-based, will you be paid later for revenue that comes in after you leave?”

Your attorney will also want to determine if you might have to pay back any of your compensation.

In some cases, the contract may state that you must repay part of your compensation if your productivity falls short of benchmarks. It’s also not unusual to find that if you decide to leave your job before the end of a period specified in the contract, you’ll be obligated to repay any relocation allowance or signing bonus you’ve received.

What’s more, if the contract permits your employer to terminate you without cause, Reinstein says, that can have an impact beyond just job insecurity.

“You’ll see termination without cause clauses in virtually every contract. They’re important not just because they reduce job security, but because they also allow the employer to force a renegotiation. We saw this a lot early in the COVID pandemic, when doctors were being asked to take a ‘voluntary’ pay cut, but also told that if they didn’t volunteer, they’d be fired without cause.”

Rosenberg-Wohl notes that another common contract provision, automatic renewals (so-called “evergreen” language) should be considered carefully. Typically, an automatic renewal will kick in if neither you nor the employer take any steps to renegotiate during a specified time period (e.g., 60 or 90 days before the end of the term).

“An evergreen clause means the contract will simply repeat without anyone taking any affirmative steps,” he says. “All the terms will be repeated. You’re not going to get a raise necessarily. Or a better schedule. Or better responsibilities.”

Perhaps worse than locking in your current compensation and work structure, Rosenberg-Wohl says, is the psychological effect of simply going along with automatic renewals.

“It puts you in passive mode. And as you can probably tell, I don’t think physicians should be in a passive mode,” he says.

To be clear, Rosenberg-Wohl says that even under automatic renewal, “nothing can stop you from renegotiating or compel you to work under the same terms. But you can’t count on your employer to come back and renegotiate. Because that is unlikely to happen.”

Responding to an evergreen clause in a contract doesn’t necessarily mean negotiating it away, he adds. Becoming a more active manager of your career can start with marking your calendar to remind yourself to initiate a renegotiation during the prescribed window.

Thinking ahead— even far ahead

The effect on your compensation is just one reason it’s important to consider what your contract says will happen when you and your employer part ways.

One of these factors could be a noncompete provision in your contract. If you have your heart set on working in a particular part of the country, a noncompete could make that difficult when you decide to move on to a new job or start your own practice. And though you may hear that these restrictions are going away or are unenforceable, much will depend on how the terms are written, where you are located and the current law, as legality around non-compete provisions are in flux. Any terms related to ownership of patient records also should be analyzed carefully. These can make it difficult for patients to follow you if you leave to join another local practice.

Another important consideration related to exiting the job: malpractice tail insurance to cover claims related to this place of employment when you move on to another.

“You want to be sure when you change jobs that you’re still covered for any claims that come up with your previous employer,” says Rosenberg-Wohl. “It’ll either be by the insurer at your prior employer or your new one, but you need to make sure there’s no gap.”

Your attorney will also want to be sure it’s clear who’s paying for the tail coverage. The cost could be high, so you may want to negotiate language that states your current employer will cover the cost if you’re terminated without cause or for reasons outside your control. Sharing the cost with your employer may also be possible.

Another term related to your eventual exit that Adler watches for: an acceleration provision.

“Let’s say the contract allows both the employee and the employer to give 90 days’ notice at any time. But if there’s an acceleration provision, the employer has the right to accelerate the termination date, so that it will be effective immediately,” she says.

If the contract specifies that the employer would continue paying you through your notice period, Adler says, that’s less problematic. The trouble starts when the acceleration allows the employer to end your compensation immediately.

“There should be language stating you’ll be paid during the entire notice period. And if your compensation is something other than a base salary, there should be language explaining that you’ll be paid based on average compensation — for example, based on your prior 90 days’ pay.”

Diagnosing mismatched terms

A key part of the process of legal review is confirming that the contract reflects what you believe you were promised in negotiations.

A discrepancy between the contents of the employment agreement and physician expectations isn’t generally the result of deliberate deception, says Rosenberg-Wohl. Mismatched assumptions are more likely to blame. Conversations with your attorney can help you work through unexpected issues.

“I haven’t come across a situation where someone was promised, say, schedule A and got schedule B or was promised salary A and got salary B. When there’s a mismatch, it’s much more likely to be a situation where something wasn’t discussed, and the doctor assumed it would be a certain way, and the employer assumed it would be a different way,” says Rosenberg-Wohl.

For example, he says, a physician might assume all along that the employer will pay for continuing medical education, unaware that the employer was assuming the opposite. If the physician never thought to discuss these details during negotiations, the contract won’t reflect their expectations.

“Sometimes, there are different expectations between the physician and the employer because of lack of context in a term sheet or offer letter,” says Reinstein. “For example, let’s say that in the term sheet, there’s a generous signing bonus. You sign off on it immediately. But then when you receive the contract, it turns out there’s a five-year repayment obligation attached to the bonus.”

Reinstein says he suggests his physician clients ask for their full employment contract, or at least a copy of the employer’s standard contract language, earlier in the process, before signing a term sheet or offer letter.

“I’ve worked with hundreds of physicians on their employment contracts, and I’ve only seen offers withdrawn four or five times,” he says. “All of those were times when the client tried to renegotiate something that they’d agreed to in the offer letter.”

Understanding negotiation

In most cases you’re not going to be able to negotiate for every single thing you want, especially when you’re considering your first job. That means prioritizing is key.

“If I’m working with a physician straight out of residency or fellowship, we’ll need to focus our efforts on a short list of items because there may not be that much tolerance for argument,” says Reinstein, noting that part of his job is to help his physician clients figure out what matters to them most. “For example, are they really worried about job security? Do they care more about lifestyle and schedule or maximizing compensation? Prioritizing is crucial, but where the priorities are is up to the doctor to decide. I help them flesh those things out, to discover how they feel. I help them analyze the trade-offs. And I then help them figure out ways to implement their priorities.”

Certain less-common contract terms may be much more important to some physicians than others, Rosenberg-Wohl adds. For example, some contracts include intellectual property language that claims all of an employee’s work product for the employer—even, potentially, ideas you come up with during non-work hours.

“Generally speaking, all employers expect that ideas you generate during your workday belong to them, even though that’s not instinctively true. Most of these things won’t ever matter, but if you develop something that becomes quite valuable, it will,” he says. “At that point, attorneys for your employer will revisit your contract and see whether it says that this valuable thing you’ve developed is actually theirs.”

If you decide to negotiate any aspect of your contract, Adler offers a few words of advice. First, even though you have an attorney on your side, it’s usually better for you to talk to the employer yourself, especially at the early stages.

“Once a lawyer’s involved, then the doctor’s out of the discussion. Their lawyer talks to me, I talk to my client—it can become like a game of broken telephone,” she says. “Besides, when the physician talks with the employer directly, it’s a good test of how the employer will interact in the future. Do they listen? Do they blow off the doctor’s concerns? Are they too stern? These things can help the physician know if they’ll be happy working there.”

She adds that when you’re trying to negotiate with your prospective employer, how you handle your side of the interaction will be noticed as well.

“My number-one piece of advice in negotiating contracts is: Now’s the time to ask questions. Don’t be afraid to ask questions,” she says. “What turns employers off is demands. So you’re not saying, ‘I want a bonus.’ You’re saying, ‘Is there any room for a signing bonus?’ ‘Is there any room to increase the salary to X amount, which is more in line with what I was expecting?’ People don’t get offended when you ask it like that. They may simply say, ‘We’re sorry. We’re on a strict budget’ or ‘We don’t do bonuses.’ But when you make a demand, that leaves a bad taste in people’s mouths.”

Reinstein adds that even when you’ll be leading the negotiating process yourself, you can often shield your relationship with your future employer by explaining that your attorney is the reason you’re asking more detailed or probing questions.

“If there’s anything that becomes uncomfortable to ask, I tell my clients all the time just to blame it on me. Just say, ‘I don’t know about this, but my lawyer was really upset because it looks like the contract says XYZ.”

Through a specialist’s eyes

It’s most useful to work with an attorney who specializes in physicians’ employment needs — not an attorney in a different field, not a generalist attorney, not even an attorney who works in another corner of the vast realm of health care law. Start your relationship with that attorney before you sign anything— contract, offer letter, even a “non-binding” letter of intent or term sheet.

“You don’t want to go to your real estate attorney, just like I wouldn’t go to a brain surgeon if I had a stomach ailment,” Adler says. “We lawyers all have our specialties.”

She adds that while hiring an attorney can seem expensive, “that’s really just not the case. You can’t afford not to have a lawyer look at your contract. And many health care attorneys offer special rates for residents and fellows to make sure they can obtain the review they need.”

Adler adds that one of the worst situations she encounters is when a resident or fellow tried to do without an attorney, signed a document they didn’t fully understand, and are now dealing with unhappy consequences.

“We can’t undo what you’ve already agreed to,” she says. “That’s why it’s worth it to talk to a lawyer even before you sign a letter of intent. Because although it may not be binding, it reflects what you’ve agreed to and is the basis for the employment agreement. The employer is not looking to renegotiate those terms once the letter of intent is signed.”

Renistein also recommends thinking long term.

“Especially if it’s your first job, it’s a good idea to get connected with an attorney who can help you through the phases of your career. When you’re thinking about your next job, or you have issues with this one, or if you decide to start your own practice or do some consulting work…there are a lot of different reasons you’ll need an attorney,” Reinstein says. “Rather than starting from scratch when you have an urgent need, it’s helpful to have someone who knows your history and who you’re comfortable with.”