Contract & Employment

Physician Employment Contracts

When  you  join  a  medical  practice,  you almost certainly will be given an employment contract to sign, maybe more  than  one  contract.  Your employment contract will cover both economic and non-economic issues. The most important economic issue will be your compensation. It was not long ago that most physicians joined an existing practice and applied part of their income to the practice until they earned their way to partnership. This method of compensation and route to partnership is becoming much less prevalent. Straight salary is also less popular because it provides less incentive for physicians to practice efficiently. More common is a compensation package that includes salary plus incentive. Under these types of arrangements, as much as a quarter of a physician’s income can be tied to quality indicators – patient satisfaction scores, utilization reviews, productivity, contributions toward administration of the practice, etc. Typically, a percentage of a physician’s salary is “withheld” or put into a risk pool. The pool is then distributed based on how efficiently a physician manages his or her patients.

Before entering a contract, is important to have the advice of an expert familiar with how physician compensation is typically structured and what will be most beneficial in your particular case.

In addition to the salary or compensation clause, probably the most important clause for physicians to understand is the non-compete clause. Non-compete clauses or “restrictive covenants” are included in most employment contracts. They restrict the physician from engaging in practice within a specific geographic area and for a specific period of time should he or she leave the practice. Non-compete clauses can seriously hamper a physician’s ability to earn a living with the same general community. They should be reviewed carefully by an expert. Non-compete clauses, like most contract clauses, are negotiable, but you may have to accept less compensation in exchange.

Compensation is related to the type of setting you choose as well as the demographics of the market and the region of the country. For instance, compensation typically varies by group size, with solo practitioners earning the least, and those in groups of 3-10 physicians earning the most. Other factors influencing compensation for all primary care physicians include geography, where earnings were highest for those practicing in the Midwest. Suburban and rural doctors also did better than urban and inner city practitioners. It is worth noting that roughly 45% of internists now earn revenue from capitation. At the median, internists with capitation contracts earn about 20% of their revenue from capitation.

Physicians should recognize that anything is potentially negotiable. The amount of paid vacation, continuing medical education, signing bonuses, moving expenses, and the like are all open to discussion. The best time to negotiate any of these issues is before you sign a contract. Once that contract is signed, you have lost any leverage with your potential employer.