Negotiating a Hospital/Physician Employment Agreement

As every young physician reads the dollar figure in their first employment agreement, he or she inevitably thinks the same thing—“this is low.”  This thought is immediately followed by the belief that the employer is unlikely to negotiate. But this isn’t entirely true.  It is simply a matter of which issues to negotiate. Rather than asking for additional compensation, which is unlikely to be agreed to by the employer, a more pragmatic approach is to instead negotiate several key non-compensatory terms. Negotiate the restrictive covenant, but conceding is sometimes a win too Arguably the most important non-compensatory provision of an employment agreement is the restrictive covenant—for example, the period of time that an employee is prohibited from competing against the employer after the employment relationship ends.  Restrictive covenants vary in time and geographic scope, but they usually fall within the range of 1-3 years, and 5-15 miles (with shorter distances for larger metropolitan areas).  The restrictions customarily also extend to the non-solicitation of the employer’s patients and employees. Negotiating a restrictive covenant is critical because it prohibits a physician, post-employment, from treating patients in the very community where he or she has been developing a reputation.  The longer the employment relationship lasts, the more valuable becomes the goodwill that a physician has nurtured.  Being able to take one’s patients when an employment relationship ends immeasurably advances a physician’s professional career. If an employer is unwilling to eliminate a restrictive covenant from the agreement, another option is to request that the restrictive covenant not apply in the event that the physician is terminated by the employer without cause.  Otherwise, with...
Avoiding Pitfalls in Physician Employment Contracts

Avoiding Pitfalls in Physician Employment Contracts

Faced with declining reimbursement, added expenses from implementing new technologies, and countless other factors (Figure), research has shown that many physicians are fleeing private practice to pursue employment in hospital systems. Most hospital employment contracts offer a guaranteed salary for 1 to 3 years that is equal to a physician’s salary the previous year in private practice. For many, the decision appears to be a no-brainer. However, these employment contracts can be wrought with ambiguous clauses that can leave physicians wishing they had taken a closer look before signing on the dotted line. Becoming Vigilant of Ambiguity in Contracts Employment contracts usually have guaranteed compensation for some period, according to Dennis Hursh, Esq. “Once that period ends, compensation is often based purely on productivity,” he says. “Physicians then have all the disadvantages of private practice—including declining reimbursement—but they’re not their own boss and don’t have the flexibility in schedule that comes with private practice. Productivity formulas can be so nebulous that they’re almost impossible to quantify. In addition, many agreements allow for periodic unilateral changes in the compensation formula.” One of the biggest issues with physician employment contracts occurs at termination, explains Hursh. “It’s important for physicians to know if their contract includes a covenant not to compete once the contract expires, meaning they won’t be allowed to practice anywhere within a given area or at specific facilities. The ramifications of such clauses are profound. In some cases, physicians who leave their job may need to pull their children out of school and start a new practice in a different location.” As the financial strings continue to tighten, many...