Physician Contracts 3


This is a follow-up to my prior posts, Choosing Your First Job and Malpractice Insurance. Once you have an offer in hand, they will send you a contract.

For many of you, this will be the first contract you’ve ever looked at, with a lot of legalese that may make your eyes bleed.

I’m going to try to break down contracts in a general sense, to at least give you the context for how to look at and compare them.


First of all, not all contracts are created equally.

Academia versus Hospital versus HMO versus Private Practice contracts are very, very different. This becomes even more different for any contract that talk about partnership, or buying/owning shares. Please note, an independent contractor contract will be different than these as well. However, I don’t have any real experience with those kinds of contracts currently, but may discuss them in a future post.

Please understand my knowledge of contracts are limited to either my own personal experience, contracts I’ve reviewed with my colleagues at their request, and experiences of others. Also, please remember there will be certain areas that are address individually based on your specialty. A radiologist may have different stipulation in his/her contract versus an internist versus an orthopedist, etc. This becomes even more confusing at the partnership level.

This post should only serve as primer regarding physician contracts, so you have a basis for what to look for and certain pitfalls that are present in contracts. However, I advise everyone to please have a dedicated contract lawyer look at their contract, preferably one with knowledge of your specialty and type of practice in your location. It does not matter how much you think you know, a person with expertise is much better equipped than you are to handle it. I’m a neuroradiologist, so I can wax poetic about the types of leukodystrophies and talk about the “Eye of the Tiger” enough to put you to sleep. However, if you gave me a scalpel and said remove this appendix, I would probably run for the hills.

Understand your limitations. 

The most important thing is to respect the people who know things that you do not, and that is the point of this primer.


Academic Contracts

Academic contracts are actually the some of the most straight-forward contracts. I’ve actually heard them been described as “daily contracts” because of their simplicity. From my experience, usually these contracts are only about a page long and usually don’t have much legalese to them. It states your salary, amount of paid time off (PTO), and your basic duties usually with a clinical/administrative split. There are also usually some stipulations regarding having/maintaining malpractice insurance and medical licensure.

However, the usual suspects of “termination without cause” and “termination with cause” are usually absent. Although the contract may be for a year, in essence, since there is no “termination without cause” or “termination with cause” explicitly stated, the interpretation is broad. In that sense, either the employer (the institution) or the employee (you) can choose to end the contract whenever. For example, you could just be told on Thursday night, “Don’t come in Friday” or conversely you can call your employer Thursday night, “This was my last day, I won’t be coming in tomorrow.”

Now, the possibility of either of these two events actually happening is very rare. This is because the lead time to hire and credential your replacement is substantial, at least 3-6 months. This means that for the most part your employer will never exercise this option. As an employee, you will also likely never exercise this option because you would be burning a bridge in academia, which is a small world. If someone was to do something like this without at least a few months notice (if not more), they are taking a significant risk. Any future employer (academic or otherwise) would question whether this person is a “team player” having left their previous colleagues “high and dry”, scrambling to find coverage.

Associate and Assistant Professor positions usually also have a laundry list of accomplishments that must be met prior to being considered for advancement (to Associate or Full Professor). Once again, these are usually somewhat vague, but usually include some form of publishing in a major journal, or publishing in multiple smaller journals. Other necessary accomplishments may include presenting at a major conference, writing a book chapter (or book), and applying for (and receiving) a grant for research. I would imagine the exact needs are different based on the different institutions, but are mostly the same… and usually vague.


Hospital/HMO Contracts

Hospital and HMO contracts are pretty similar to one another so I will talk about them together. I consider this to be one of the more likely contracts a newly-minted attending will be faced with. You will see a significant amount of legalese in these contracts. “Henceforth”, “Hitherto for”, “Parties” and such. The legalese just seeks to confuse you, but after reading the contract a few times you will being to understand the words in context. I will try to hit the highlights on what to look for:

Requirements:

There will be a section dedicated to the requirements for the position and if you fail to satisfy these requirements than your contract will be void. These requirements are usually, maintenance of your medical license and malpractice insurance. Usually there will be some stipulation about becoming (and staying) board certified.

Compensation:

How you are compensated will usually be spelled out in a dollar amount. For example, “$200,000 annual salary.” It will describe “fringe benefits” in different section.

If your compensation is a base + bonus, it will describe that as well. For example, “$150,000 annual base salary” with RVU bonus, equal to X% of the annual collections, but not exceeding Y number (cap). The percentage will vary and the cap will also vary. There are a lot of variations for how to calculate RVU bonuses as well, which can range from very-straight-forward to very complex. For the complex RVU bonus calculations, I would ask for an “example employee”.

For example, if I was to work full time, take my 4 weeks of vacation and do q4 call, what is a reasonable range to aspect for an RVU bonus? Or, if they are willing, they might be able to share the information of a current employee with similar “goals” as you, so you can estimate what your RVU bonus might be.

Benefits:

This will list your health, dental, and vision if applicable. Your options and the % which is covered by the employer should be detailed here. They may also discuss some form of reimbursement if you opt out of the employer’s health insurance (ie, your spouse already has coverage which covers you).

Usually, some form of life insurance and disability insurance will also be present. As I stated before in my prior post, employer-provided life and disability insurance are usually pretty bad and they are only available if you are at that job. Don’t get me wrong, I’m not going to turn down free life insurance and disability insurance. However, I would not rely solely on the employer provided versions, especially the disability insurance as this is usually not occupation specific and just a “general” disability insurance.

Some explanation of a 401k/403b or 457 is also likely present in this section. Look for an employer match here. An employer match is FREE MONEY. You will need to request the detailed information of the 401k/403b or 457 as this is unlikely to be present in your contract. By detailed information, I mean the manager of the fund and the different fund options that are available. Hopefully in those options you can approximate your portfolio of choice.

Vacation and Personal Leave:

This is divided into: Vacation, Sick Leave, and CME. Sometimes employers will allow you to carry-over vacation and sick days into the following year, up to a certain cap. For example:

You get 3 weeks of vacation a year, but only took 2 weeks this year. The week you didn’t take carries over to the following year, so you have 4 weeks to use this year instead of 3.

Another way jobs will describe vacation and personal leave is that you “earn” vacation days for time worked. For example:

For a full-time employee you will receive 4 weeks of vacation for the year. So you will accrue 1 week of vacation every 13 weeks worked, or the fractional day equivalent for every day worked. Dividing it like this prevents an employee from taking 4 weeks of vacation in their first month of the year, and then leaving, or some variation of that. You can think about this as preventing you from taking vacation that “you haven’t earned yet”.

Reimbursements:

As a physician, you have a lot of “other” expenses related to your profession, such as membership fees to various organizations, maintenance of licensure, and maintenance of certification. Some employers will pay for all or part of these expenses, which they will outline here. CME allowance is also usually outlined here.

For example, “5 days of CME and total of $2000 reimbursement.”

They can also specify this cost to only be valid for the course and not cover travel expenses, to covering anything and everything related to the CME (including food).

*Note that the above expenses are usually tax-deductible if you were to pay them yourself. However, the amount of money you would need to spend in order to qualify for the deduction is very, very high (2% floor).

For example, if you make $200,000 a year, and your Adjusted Gross Income is something like $175,000 you have to spend 2% of that, $3500, and only then can you begin deducting every dollar after that. Now, unless you are going to multiple CME courses and paying for it yourself, then it may be difficult for you to hit that limit in the first place. And only after the $3500 can you begin to deduct.

In general, having these expenses paid for by your employer is better.

Professional Liability:

As an employed physician, you must have liability insurance (malpractice insurance). This will detail who pays the insurance and what kind of insurance it is. Usually, it will even specify that the employee is responsible for their own “tail coverage”.

This area is important, please review my malpractice insurance post to understand claims-made, occurrence, tail and nose coverage. Depending on your specialty, (like OB for example), you may need to set aside money to cover your own tail in case you need to leave that practice. This fact may change how you allocate your salary, and your emergency fund may need to be larger in order to pay for tail coverage, should the need arise. You don’t want to be stuck at a job because you can’t afford your own tail coverage.

Employee Responsibilities:

This section will outline everything that you as the employee are responsible for. It will also outline the expectations for practice hours (ie. “full-time employment” described as a minimum of at least 30 hours a week). It is delineated like this because call requirements which usually make physician hours vary. This will also describe any call requirements. Unfortunately, this area is usually purposely somewhat vague. They will usually describe something like the call is “rotated equally” between the physicians, of which there are currently 6. However, by stating it like this, they have recourse in case they lose 2 physicians, and call changed from q6 to q4.

Just be careful of the wording here. If it says call is “rotated equally” among the associates (or something similar) then the call pool may not include some of the more senior physicians, Even though there might be 6 physicians, only 4 of them may take call, making call effectively q4 instead of q6.

Also, it is important to understand that larger hospital systems and HMOs may have multiple sites for which you could possibly work for. I would advise that you look for something in your contract that states “The primary location of work for this position will be 123 Mulberry Lane, a branch of ABC Hospital System.” Ideally, it would even specifically state that you will be doing 100% of your work at the location that was discussed.

The reason for this is because in the event coverage is needed, such as a physician leaving from a different part of the hospital system and then your employer asks you to cover indefinitely, you want to be able to point at your contract. You can then show them that your contract states your primary location is at 123 Mulberry Lane and not 789 Yellow Brick Road and although maybe you are willing to help cover, that 789 Brick Road is not your primary location. Now, in the event you actually do want to work at 789 Yellow Brick Road instead, then they can simply renegotiate the contract with you.

I had planned to talk about all of the contract stuff in one post, but once again I underestimated how much there is to write about.

One more thing before I forget: Please remember, everything is negotiable. There is no “standard contract”. The closest thing to a “standard contract” would be an academic contract, but there is still room for some negotiation there.


Next week I will talk about Termination without cause, Termination with cause, Non-compete clauses, and Evergreen clauses.

Also, I will try to give a little background on Private Practice contracts, Shares, Buy-In, and Partnership. However, this subject is extremely complex, and whatever I say will be very basic.

TL;DR

Honestly, most of the above is just to help you direct your attention to different areas of your contract to navigate various pitfalls.

The take home point of this post is to have a contract lawyer look at it, preferably one with expertise in your specialty, location, and type of practice.

Another take home point is, everything is negotiable. There is no “standard contract”. The closest thing to a “standard contract” would be an academic contract, but there is still room for negotiation there.

Next week I will talk about Termination without cause, Termination with cause, Non-compete clauses, and Evergreen clauses.

Also, I will try to give a little background on Private Practice contracts, Shares, Buy-In, and Partnership. However, this subject is extremely complex, and whatever I say will be very basic.

 

-Sensei

Agree? Disagree? Questions, Comments and Suggestions are welcome.

You don’t need to fill out your email address, just write your name or nickname.

Share this:


Leave a comment

Your email address will not be published.

3 thoughts on “Physician Contracts