Top 10 Mistakes Physicians Make When Negotiating Their Contract
Have you ever bought something off of Craigslist or eBay based on the description of the item, only to find out after the purchase that the item sold to you was nothing like the advertisement? If you think of the sale as a contract, this experience can be maddening!
But, as the saying goes, “Buyer beware!”
This applies to your physician contract negotiations as well. You need to know what you’re getting.
Most contract issues arise from misaligned expectations and vague descriptions in the contract that lead to conflict over work expectations, compensation packages, and work-life balance.
Most of those issues are avoidable.
Top ten items for physicians to consider when negotiating their contract.
This will help you get the job you want and avoid future disasters.
1. Accepting vague or unclear language
The purpose of a contract is to spell out very clearly what the expectations should be for your work. This is to benefit the employee as well as the employer.
It’s not meant to be restrictive, it’s meant to be protective.
I can’t tell you how many times in the last few years I’ve had to deal with issues of employee contracts because a hospital or employee wanted to change their job description. If the employer/employee contract is vague or unclear, or if there are “lots of ways to interpret certain clauses,” then you’re just asking for trouble down the line.
Here’s a common scenario I’ve encountered: an employee is hired for a particular job, but they are a team member of a big unit (like a department of surgery or labor & delivery). The team member understands from the people hiring them that their job is, let’s say, working clinic hours doing pre-operative assessments for surgical patients. Three years later, the employer says, “My team needs coverage in the labor & delivery ward, so we’re moving you up there. You’ll have night shifts and weekend calls regularly.” The employee says, “I was hired for a daytime clinic position in the pre-op office. I don’t want to do nights and weekends.” What matters is what’s in the contract.
Do NOT make the mistake of accepting vague language in your contract!
Be specific, clear, and unambiguous.
By the way, this goes both ways. If you’re hiring team members, it’s incumbent on you to make sure that the language in their contract is very clear. If you hire someone to work 40 hours a week, and they decide they want to work only 35 hours per week, you’ll have problems if the contract doesn’t specify the number of hours to be worked.
2. Failing to prepare for the negotiation
Typically in a negotiation, the person with the most information wins. Who gets the better deal on buying a used car? Is it the guy who wanders in and says, “I like blue cars,” or is it the guy who comes in armed with 10 years of reports from Kelley Blue Book on the prices of cars they’re interested in, plus heavy research on the types of available features on the car they want to buy?
Take time to do some research on the job you want. Look up typical salary/compensation packages. Talk to current employees at that job and related jobs. What are the call expectations? How long does it take to become a partner? What level of productivity is required?
You are negotiating for a job that may last 30 years or more. Mistakes made during contract negotiation could cost hundreds of thousands of dollars over the long haul.
3. Not understanding compensation structures
There are lots of ways to structure your compensation. Here are some of the issues that you need to make sure the contract addresses, again in very specific terms.
- 1099 vs W-2
- Minimum salary guarantee
- Is compensation based on collections or billing?
- Term of contract (may be only 1-2 years if you are coming straight out of training)
- Bonuses (how much, when/how are they paid, what does it take to get them?)
- Malpractice insurance coverage (including tail or nose coverage)
- Vacation time (how many days/weeks? paid or unpaid?)
- Path to partnership (number of years, requirements to get there, how are you selected?)
- Expectations in partnership (profit sharing, buy-in, ownership of ancillary services, etc.)
- Retirement plans
- License fees (e.g., state license, DEA license)
- Continuing medical education
- Maternity/paternity leave
- Health insurance and dental insurance
- Disability insurance
- Dues for professional societies
- Subscriptions to medical journals
- Student loan forgiveness
- Moving expenses
- Car allowance or commuting expenses (uncommon)
4. Failing to address restrictive covenants
You may hope that your position in the new job will last for decades, and maybe it will. However, things change, and you need to make sure the contract is clear on what happens if you leave the practice.
A “restrictive covenant” or a “non-compete clause” typically sets limitations on where/when/how you can practice if you leave your current job. The non-compete clause should specifically address:
- Time: How many years the non-compete will be enforced.
- Geographic location: How far from the current practice are you required to relocate to your new job? This is typically done as a radius, e.g. “You are prohibited from establishing a practice within a five-mile radius of the current practice.” Be clear on this. If you’re in a major metropolitan area, this kind of restriction could encompass half the city.
- Exceptions: You may not be able to practice within a certain radius from the current practice, but there may be allowable exceptions for teaching, pharmaceutical representation, and other non-clinical activities.
New employees often feel that restrictive covenants are unfair, but actually they’re quite fair and reasonable. A business should have the expectation that a new employee won’t build up their practice for three years and then move across the street and take all of their business with them. Just be sure you’re clear on the terms and that the terms are not unreasonable. A good contract lawyer can be very helpful here.
5. Failing to address employment conditions
Next to compensation, this is probably the most important aspect of a contract. This is the area where many physicians fail to apply due diligence in reviewing the contract. The terms and expectations need to be very clear.
If there is a clause that says something like, “You will share call duties with the other physicians,” you need to get that to be more specific. Otherwise, you run the risk of having the hospital come along and declare that you’ll be doing every other night call. If the contract is vague, you don’t have a lot of wiggle room to contest them. Here are some specific items that need to be addressed in your contract:
- Call expectations: number of weekday/night/weekend shifts per month
- Hospital coverage (if different from call coverage)
- Clinic output: number of procedures, new patients, and follow up patients per day
- Time to respond to patient requests
- Ancillary duties: building the schedule, supervising the office, obtaining supplies, etc.
- Clinic hours
- Paid holidays (Christmas, Thanksgiving, Independence Day, etc.)
- Nursing/support staff availability
- Work space, office space, clinic exam room space
- Research activities (if applicable): support staff, lab space, funding, time for writing
- Code of conduct
- Professional dress code
6. Being afraid of actually negotiating
Many physicians believe that if they negotiate with their future employer, their employer will not like them, or won’t trust them. This is simply not the case.
I’ve negotiated several contracts, and it’s always a professional business relationship. A certain amount of negotiation is expected. It’s rare to find a case where the physician and the employer have identical expectations for their job.
Consider these tips when going into a negotiation:
- Put yourself in the other person’s shoes. If you were hiring someone, how would you expect to be treated? Be fair, be prepared to compromise, and look for opportunities to create a contract that is beneficial to all concerned parties.
- Be prepared to defend your worth. You’re asking for a certain level of compensation, and you should be able to show why it’s worth it to the employer to pay you that much.
- Have an idea of what’s typical for your position. If you go in expecting to be paid $750,000/year, work 25 hours a week and have one call night per month, you’ll get nowhere. Do some research so you know what range is reasonable to expect, and then negotiate from there.
7. Not understanding terms for termination of the contract
Again, not all business relationships last forever. Your contract should very clearly spell out the terms of terminating the contract, both from the employer and employee side. Both parties need protection when it comes to this issue.
The contract should, at a minimum, address conditions for termination in case of:
- Professional misconduct
- Sexual harassment
- Drug use
- Default or bankruptcy
- Voluntary termination by the employee
You should also know under what terms you are allowed to terminate the contract, such as unfair treatment, sexual harassment, or business malfeasance. If you choose to terminate the contract yourself, what guarantees do you have? Do you still have tail insurance coverage? Is the non-compete still enforceable? Do you have any compensation guarantees?
8. Not including clauses about keeping outside income
It is becoming increasingly common for physicians to have a “side hustle,” such as medical malpractice case review, utilization management, or speaking and writing engagements. The contract should have language that ensures you get to keep your outside income. It is reasonable to also have clauses stating that the employee will not use company time or resources to engage in their outside income activities. Your work is your own, so be sure you protect it!
9. Not having a minimum expectation and being afraid to walk away
This might be the biggest mistake a physician can make. You are incredibly valuable, so you shouldn’t just take the first job you get without regard for horrible conditions or poor compensation.
You (and your spouse, if married) should agree on some minimum expectations in terms of workload and compensation. If your negotiations can’t at least reach that level, you should walk away!
There are thousands of physician jobs out there. In the coming decades, there will be a massive physician shortage, so you are in a position to negotiate for a job that you actually want! Have reasonable expectations, fight for what you’re worth, and then go somewhere else if you can’t secure it during the negotiation.
10. Not having a lawyer look over the contract
You need to look over your contract in painstaking detail, but it’s wise to have a lawyer look over the contract with you. It’s helpful to have a dispassionate assessment from someone trained in contract negotiation. Take the time to protect yourself. It’s definitely worth the investment.
Also, don’t just go to your aunt or friend or neighbor who happens to be a lawyer and ask them about the contract. Take the time and money to actually hire someone to look over it in a professional way.
You wouldn’t generally feel bad about negotiating for a deal on a house or a car, so don’t feel bad about negotiating for your job! Think of this as a multi-million dollar negotiation and approach it that way. Do the research, get some good advice, then execute the negotiation and don’t be afraid to walk away if you can’t get a good deal. The future is yours, so go for it!
Do you have questions about negotiating contracts? Please leave a comment below!
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