How to Negotiate a Physician Contract: 7 Key Considerations
Mark Smith, president of Merritt Hawkins & Associates, a leading physician staffing firm and, like Staff Care, a company of AMN Healthcare, shares his insights into how to negotiate a physician contract with these seven key considerations.
7 Considerations for Physician Contract Negotiation
1. How can you tell if a physician contract is a good deal, in financial terms?
There are now a variety of surveys available that track physician compensation by specialty. It is not too difficult to get a range for what is competitive by referring to these and by talking to recruiters and peers. This is an important step for new physicians. Some have an accurate idea of what is competitive in their specialties, but others are way off. Usually, they are too low.
In addition, physicians must be clear on how the compensation is to be achieved. Contracts that are heavily production- or collections-based are not always a good idea for new physicians, because it can take time to build up a practice. It's important to ensure that adequate compensation will be in place through a salary or guarantee during the start-up period.
2. What are some common mistakes when it comes to evaluating physician contracts?
The main mistake is not asking questions. Many new physicians are uncomfortable asking questions because they may not have much knowledge of contracts or the business of medicine. Generally, this isn't taught in medical school or residency. But new physicians should feel no compunction about asking for definitions of terms or probing for specifics. Of course, it helps to know what to ask.
3. Should physicians act on a letter of intent?
No. The letter sets the framework of discussions, but the physician should not move based solely on a letter of intent. They must have the contract in hand.
4. When negotiating a physician contract, how can you be sure you won't be doing all the dirty work while the partners reap the benefits?
It's important to ask about workload expectations and hours. These can be specified in the contract. But it is also important to ask about who your patients will be. How will patients be assigned? They should not be assigned based on payer type, with new physicians handling all the uninsured or underinsured patients, particularly if physicians will be paid based on collections. So, are you being brought in so the practice can dump the Medicaid patients on you? This is something you have to ask about but also observe as you interview.
5. What about non-compete clauses?
Most new physicians don't give a lot of consideration to them because at the time they really have no intention of competing with their employers. That can change, however. For a family physician to be prohibited from practicing within a 50- or 100-mile radius for a period of one to two years simply is not reasonable, though it might be for a spine surgeon. New physicians have to protect their long-term interests by minimizing the scope of non-competes as much as possible. If you think more than 10 miles is unreasonable, you need to say so.
6. To what extent should new physicians negotiate various points in a contract?
There is no particular reason to accept a boilerplate contract that doesn't reflect the terms of the practice at issue. If a contract is not specific about details such as hours and call, a new physician is certainly within bounds to ask that these details be inserted. The general rule is to ask for what you want and what you believe to be fair. If a vacation is important to you, you may ask for more vacation time, though the total financial package may be altered downward.
Physician contracts today are not "take it or leave it" propositions. There is room to negotiate on things like salary, educational loan forgiveness, and call. Again, physicians in demand are more likely to get favorable terms, which is one of the advantages of locating in a region where they may need doctors, such as a medium-sized or rural community. Remember, there is give and take. A rural area may be able to provide complete educational loan forgiveness and a high salary, but they may not be able to offer extensive call.
7. Many new physicians leave their initial sites of employment after just a year or two. How do contracts play into this high rate of turnover?
Quite a bit. We hear many complaints from new physicians. They may find that after working for years and carrying the load the partner was "not ready" to make them a partner yet. Some sense they are not being told what the practice is truly generating and that they are being short-changed. Others are told they have to work an unreasonable number of hours and have no choice in the matter.
Clarity in the contract can avoid these misunderstandings. If the employer is unwilling to be clear about these and other points addressed above, it is a strong signal to walk away from the offer.
Consultation is a key component. You should have senior physicians you know to examine the contract or advise an attorney. A well-trained, conscientious recruiter also can be an important asset. You don't have to go it alone.