Contracts matter. While the cinematic version of a napkin-negotiated salary ends in a handshake, the reality is that a signature on a legally binding document offers a happier finale. As we transition out of shelter-in-place and prepare to resume our pre-pandemic lives, we explore here the basic principles for a physician employment agreement. The purpose of a contract is to establish an agreement between two or more parties and detail their rights and duties in accordance with said agreement. Fundamentally, a contract can help prevent misunderstandings, which often lead to lawsuits. As presented in this webinar a few years ago, a properly developed contract will not only help protect both employer and employee but will also help ensure alignment of expectations prior to employment. But before entering in to a contract, both employee and employer should do their due diligence and forecast for the future.
The Do’s of Due Diligence
Understand the market and recruiting trends and gauge reputations.
First, it’s important to understand what’s trending in the physician market. Hospital employment, private practice, and academia each offer different benefits. From malpractice insurance input to help with student loans and licensure fees, different compensation structures will provide certain pros and cons. While hospital employment may offer more stability, private practice can promise more growth potential and partnership equity. When looking at the different employment models, factors to consider include the looming ‘health care bubble’ and administrative costs of medicine. Understand also that the recruiting process in medicine has become much more competitive, meaning physicians may expect more on their contracts, and employers should be ready to offer such. As part of your due diligence, check the reputation of either the employee, employer, or institution with whom you seek to work. Ask around, do social media research, and talk to other professionals. Your reputation hinges on those around you.
Reflection and Projection
Reflect on who you are and project where you want to be.
Next, outline what you seek out of the relationship. This inquiry goes beyond the task of the job itself, and requires a look to the future, both long- and short-term. We tell clients, both corporate and individuals, to identify your Plan A. Plan A is basically your desired trajectory, with a prioritized list of your career and corporate goals. Considerations to weigh include stability v. incentive-based salaries, work-life balance, and employment v. ownership. Plan A provides a yardstick, measuring an employment relationship against those goals. For example, maybe a physician knows they want to eventually end up in private practice in their hometown, but first needs experience and board certification. Contractual provisions would need not focus ownership, but instead on the experience they will gain and physicians with whom they will work. Plan B, on the other hand, identifies a backup plan if the relationship for some reason ends. Identifying Plan A and Plan B prior to contract negotiation, informs whether the relationship will ultimately make sense and the contract is aligned with your goals.
High-Five the Big Five
You’ve Received a Contract, Now What? Look for the Big 5: Written Contract, Compensation, Social Media, Restrictive Covenants, and Patients.
Understandably most physicians focus on compensation when they first receive their contract. Compensation is indeed important, but so are the other four in what we deem “the Big 5.” There is an old legal maxim: the oral contract is not worth the paper it is written on. While oral contracts are enforceable in most states, we always recommend a written contract. Contracts also should not be developed based on loose terms and conditions, or through a chain of emails. Legally referred to as the four corners test, it is important to understand that if it’s not in the agreement, it doesn’t exist. Make sure all the terms and conditions you desire are within the four corners of the agreement in order to avoid future misunderstandings.
Your pre-contract due diligence comes in to play when you review compensation. Make sure you know your earning potential in the current market. Look at the compensation structure: does it include base salary, and/or bonus/incentive compensation? Know that hospital employment affects the private practice market and while a few publications exist and provide a decent gauge on the market, they must be taken with a grain of salt. There are several different types of compensation structures. Each offers varying benefits, some of which may include continuing education reimbursement, licensing fees, societal dues/subscriptions, malpractice insurance, and other benefits such as health care, 401k, holidays, paid vacation, etc.
Additional considerations, especially in the field of aesthetics and other elective medicine fields, are social media rights and ownership of before and after pictures. Contracts generally do not allow a provider access to patient files upon departure, and photos can be considered part of the medical record. Be sure ownership of photos and social media accounts are addressed in the contract.
The fourth of the Big Five that require attention in any physician contract are restrictive covenants. These include non-compete agreements, designed to prohibit an individual from working for a competing practice for a set period of time, in a designated geographic area. Physicians with non-compete clauses would theoretically be subject to legal action if they went to work for another practice within the agreed-upon time span and geographic area. This seems fairly straightforward. However, in reality, non-compete agreements can be difficult to enforce, as courts are often reluctant to obstruct people’s personal employment choices. Courts will also look to several aspects of a restriction, such as whether they are reasonable in time, geographic scope, and activity. Options for a non-compete buyout in some states, like Texas, should also be covered under the scope of this agreement.
Finally, without patients there would be no doctors. Remember, it is the patient that will keep you or your practice busy and productive. They are the ultimate indicator of whether or not the employment relationship will be a success. While most contracts do not delve into how the employed physician will develop patients, these are critical conversations for both the employer and the employee.
Do the work before getting to work
Before entering into an employment agreement, remember that the ball is in your court. Whether you are the employee or employer, the work you do on the front end — outlining your expectations, goals, and personal and professional trajectory — and then getting it in writing will help prevent misunderstandings. For more information on physician employment agreements and contracts, please schedule a consult or contact ByrdAdatto at info@byrdadatto.com.
