Are you considering a position as an employee of a hospital, health system, or physician group? Know the basics before you negotiate an employment agreement.
These five elements are just the starting point. There are a number of other important contract-related considerations to take into account. A health care transactional attorney can help you review a specific employment agreement in detail to be sure it is fair and appropriate and represents your best interests.
When you’re negotiating an employment agreement, ensure that the following are true:
If an employer offers a base salary plus incentive compensation, look closely at how you would qualify for incentive payments and how they’re calculated. Many incentive models are still based on collections or work relative value units (wRVUs). However, these models are evolving to support high-quality, cost-efficient care (e.g., value-based payment models).
In general, hospitals and health system employers offer a better range of benefits and more retirement options than private practices.
Employers typically provide the following:
Some employers may also offer the following:
For employed physicians, it’s preferable to have occurrence-based malpractice insurance coverage. This covers incidents that happen during the coverage year, regardless of when a claim is filed.
If you have claims-made coverage (for claims filed during the coverage year), you will need a reporting endorsement ("tail coverage") when your employment ends. This covers incidents that happen during employment but aren’t litigated until after employment ends. If the employer offers a claims-made policy, your employment agreement should specify whether the employer will pay for part or all of your tail coverage upon termination of employment.
More employers are combining vacation, CME time, and sick leave into a “paid time off” concept. Be sure that your employment agreement specifies the amount of paid time off to which you’re entitled. If not, changes to your employer’s leave policy could reduce your benefits without your consent.
If your compensation is based in part on productivity, analyze how your income may be affected when you take paid time off.
From the outset of negotiations, be clear and open about your schedule expectations to ensure that they align with the employer’s requirements.
Employers often leave scheduling provisions loose so that employed physicians have flexibility to deal with the needs of their patients and the practice. However, the following should be stipulated in your employment agreement:
Termination provisions set the term of the employment agreement, regardless of the stated term. If you or the employer can terminate the agreement without cause, the actual term of the agreement is the length of the notice period (e.g., 30 to 90 days).
The following termination provisions are often included in physician employment agreements:
Some hospitals and health systems will guarantee a minimum one-year term for an employment agreement. Be aware that if you agree to this, you’re contractually obligated to stay for the full term.
Many states enforce restrictive covenants to reasonably protect the employer’s interest against competition, although state law may impose limits on enforcement. These states generally require that restrictive covenants must be limited in the following:
When you’re negotiating an employment agreement, ask if the employer will agree to limit the instances in which the restrictive covenant would be enforced. For example, the agreement could specify that the restrictive covenant will not be enforced if you terminate your employment for cause.
Some states do not permit restrictive covenants. However, these states often allow non-solicitation provisions. These provisions prevent you from soliciting former patients, employees, and referral sources after your employment ends. Read the AAFP's opposition to restrictive covenants.