Congratulations On Your New Job: Contract Terms to Look Out For

The day I have been waiting for is finally here. Employment contract in hand, more money on the table that I dream possible. After many years of education, medical school, scutwork and residency, the dream is, but a wisp away. 20K sign on bonus, 12K relocation bonus, 350K first year salary guarantee – show me the dotted line and I’m all yours!

Whoops! Hold it right there. Let’s find out more about the terms in the contract. Some are more general things to look out for and applies to all employment contracts, other terms are more specific to physician jobs and different specialties.

Compensation: While 200K, 300K, 400K first year salary guarantee seems amazing, be sure that your compensation is similar to other jobs in the same geographical location. You can find general salary information online or in print. Medscape salary report, Merritt Hawkins and MGMA salary report are the bigger ones that come to mind. For more specific information, do ask your friends and share compensation information. Almost all salary surveys show a disparity in compensation between males and females. An April 2017 article on CNN states that female physicians earn 74 cents for every dollar a male physician makes. Experts feel that females across the board are generally worse negotiators and tend to accept what they are offered. If you are apprehensive about negotiations, there are firms that specialize in physician employment negotiations. Consider contacting Contract Diagnostics and they can provide a no-obligation quote.

So, consider the following when discussing a new employment contract.

First year salary guarantee: While many places offer a first year guarantee, it is very important to understand what that entails, and what is offered in year two. Also, I know of some candidates who are confident enough to ask for a ‘production bonus’ beyond their first year salary guarantee. This is, of course, only in cases that their production is higher than expected by the employer.

work Relative Value Units (wRVU): This is a term you may heard from other physicians. “Working more” to generate more “RVUs”. wRVUs are units in medical payment terms that govern how much a physician is paid for certain work: Intellectual work is paid less, procedure-based work is more. Many employers pay physicians on a wRVU term after their initial salary guarantee, exception being a fix-salaried job. This is also how employers are paid by insurance companies for work done by the physician.

Production Bonus: Some employers offer a production bonus, so if you are a hard worker and hit certain wRVU within the year, you may get a production bonus. Be sure that you review the benchmark you are measured on and understand it before signing the contract. For example, your production bonus stipulates that you will need to exceed 4000 wRVU in order to hit the production bonus, ask to see how many wRVU current employees achieved. If all of the current employees only hit 3500 wRVU or less, then 4000 wRVU would be an unrealistic target. Likewise, if 5-10% of the employees obtain 4000 wRVU or more within the past year, then this is an achievable target. It would be a wise idea to ask for period reviews of how many wRVU you hit at the 6 and 9 month intervals as well.

Sign-On Bonus: While the large bonus is often enticing, remember to save at least 40 per cent of the bonus for taxes. Check out my other post here Beware: High Tax on Relocation Packages and Sign-On Bonus – to get more details on trying to minimize taxes on sign-on, relocation bonus and moving expenses. Remember that all ‘sign-on’ benefits – including help with mortgage, loan repayment, etc are subjected to income taxes. Reimbursement for expenses are not subjected to taxes.

Benefits: This is a broad category that normally includes health insurance, licensing fees (state medical license, DEA license, ACLS, etc) that is normally paid for by the employer for full time positions. Many will offer a certain amount of paid continuing medical education (CME) allowance. Remember to ask (and have it written if possible), on what is covered by the CME allowance. A physician had purchased an expensive Smart Phone, thinking that could be claimed as a CME expense (as it is used for electronic order entry, paging system, etc), but the employer disagreed, quoting only medical conferences and travel to such conferences as well as education material as being covered expenses. This is can sometimes be discussed separately ahead of time. Disability insurance, 401K contributions by employees and life insurance may be other benefits offered.

Vacation Time: Ensure that vacation is spelt out clearly. Also, what happens to the vacation time if you do not use it up at the end of the year? Can you carry forward a certain number of days to the next year? Will you be paid for the days that are not used?

Malpractice: In the medical world, this is a biggie. Physician malpractice coverage is generally covers physician liability in the event of an adverse patient outcome. Especially in the litigious medical malpractice climate here, it is essential to know what is covered and what is not. There are generally two big categories of malpractice insurance: Claims-made or Occurrence. A claims-made insurance will only provide coverage if the policy is active at the time of the incident and at the time the claim is filed. For example, a physician performed surgery on a patient in 2016, and then left the practice and joined another group, in December 2016. In May 2017, the patient filed a lawsuit against the physician: this is not necessarily a covered claim unless a tail coverage is purchased. Tail coverage normally extends the original insurance for a set amount of time: 3 years, 5 years, 10 years. Please ensure your employment contract specifies who pays for tail coverage: I have heard of a tail coverage for a high-liability specialty costing over 200K! Sometimes, you can negotiate with your new practice to pay a ‘nose’ coverage, which works similarly as a tail (protects you for a set number of years beyond the initial incident). Occurrence based insurance is superior in that it pays for the event regardless of when the claim is filed. Occurrence insurance is many times more pricey compared to claims-made insurance, so this is rarely offered.

Call Schedule: As physicians, being on-call is part and parcel of our profession. Have it in writing on your schedule and call obligations. If you are verbally told you will work one weekend every four weeks, make sure that is in writing. Also, ensure that you contract spells out any extra compensation you are due for taking extra calls. One of my friends ended up taking call without extra compensation for 2 months as one of her 3 colleagues fell ill. While it did not affect her other co-workers financially, as they are compensated per wRVU, she was paid a flat salary and did not benefit from any extra pay despite taking extra call.

Non-compete clause: Some employers have this in their contract to prevent an employee from working for a competitor and to poach patients. This is not enforceable in some states. Generally, it would be a good idea to agree to a contract without any non-compete restrictions, or limited non-complete (in terms of timeframe and distance).

Termination: In at-will states, employer may terminate ‘without cause’, which means they do not have to give a reason to fire you. In other states, termination has to be ‘with cause’. Ensure that it is written in the contract that you must be given notice of termination, and how many ‘warnings’ (to correct the deficiency) before you can be terminated.

Rights to ‘other sources of income’: Some employment contracts specify that your ‘outside income’ belongs to your employer. While these were originally included to protect academic centers from academic physicians benefiting from working with drug companies, there are still employers who include such clauses in the contract. If your sources of outside income are generated outside of regular work hours, you should have the right to keep such income. These can include locum tenens work, inventions, consulting work or medical surveys you choose to partake in.

Medical Records:  Most of the time, such records belong to the facility or employer. Try and specify limited access to such records if needed to complete your professional responsibilities at the end of your employment.

Indemnification Clause: Certain physician contracts now state that the employee agree to “indemnify, hold harmless, and defend the hospital from any and all loss, damage, cost, and expense the hospital may suffer that is in any way related to the physician’s performance”. According to some employment lawyers, having the above terms could mean that the employee can be forced to reimburse their employers if the employer is named in a lawsuit due to negligence of the employee. Such clauses can cause regular malpractice insurance to be void and can result in personal financial losses for physicians.

Consider hiring an attorney to review your contract. There is also a company that specializes in Physician Contract Negotiations. Contract Diagnostics offer numerous packages (starting at $200 for a basic review – up to more detailed legal, a benefit, and a compensation review. They also offer direct negotiation with your employers. They offer an all-in-one human resources, legal team that will help you negotiate the best compensation possible.

I hope this post has been helpful. Are there any other employment terms to be aware of, especially as it relates to physician employment? Comment below!


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2 thoughts on “Congratulations On Your New Job: Contract Terms to Look Out For

  1. That’s a pretty comprehensive list and all new hires should know what they are signing. As long as you are not being taken advantage of in an egregious fashion, don’t nitpick or try to negotiate every detail that you don’t like. Most contracts in mid to large practices are boiler plate and every associate goes through it. You don’t want to be labeled the entitled troublemaker even before you start your first day. Keep the eye on the long game.

    1. Thank you for your input. I agree with your advice. From what I have seen, it is important to know what new hires are signing and to be prepared for the consequences. I do know of many international medical graduates, who are desperate for green card sponsorship, who get taken advantage of. Also, in some cases, it is a matter of not-asking so not-getting what matters to the job applicant (i.e. time off for board exams, reimbursement for travel expenses to find a rental/purchase a home, partial student loan reimbursement if the employer offers green card sponsorship and you don’t need one).
      It is great advice to not be too nit-picky with every single detail. In fact, I paid for my expedited work visa H1b (which cost an extra $1200) using my sign-on bonus reimbursement for my own peace of mind when I started my current job.

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