Medical employment contracts are not the same as they used to be. With the rise of private equity and the increase in hospital positions and recruitment, contracts are becoming more standardized and less negotiable. It’s important for all physicians — especially dermatologists — to be aware of what to include in a contract. Signing a bad one (though good for the employer) could have serious implications.
As an attorney who has counseled thousands of physicians and the practices who hire them in my career, here are my top 10 tips for considering an employment contract:
Tip #1: Always negotiate.
Always try to negotiate something in the contract as it lets you see the kind of people you are dealing with. It shows you if they are willing to respond to your unique desires and concerns. If they deny 5 out of your 10 requests, that’s fine. Then you pick your battles. But if they deny everything? Then you decide if that’s a deal breaker. Remember, if you don’t ask, you don’t get.
Tip #2: Pick your battles.
A lot of the private equity contracts are written by lawyers who didn’t necessarily have a background on what is common for dermatologists, or no healthcare background before their clients entered the market. That means their contracts are extremely unilateral and very aggressive, so you should hone in on what really matters. What is worth walking for? What is so unfair it should never be agreed to?
Tip #3: Make sure everything the practice has promised is in writing.
If they are not willing to put it in writing, then you can’t enforce it later. Your only option would be to leave and in that case you have spent years of your life at the opportunity cost, and may have to “start over” in building a patient following if you are subject to a bad restrictive covenant. Whether it’s when and where you will work or when you’ll receive a salary increase, get it in writing. If you don’t, what assurance can you have for the future? Remember, the person making the promises may not be employed at the practice next year and a different decision maker may be in charge.
Tip #4: You can negotiate partnership before your start.
If you intend to grow your income and make a profit on other people’s work, or participate in a sale to private equity if it happens, it very important that you get partnership in writing. Partnership, if on the table (and you may learn it is never on the table), usually occurs after 3 years or 5 years, so if your contract specifies a longer term than that, know that it’s not typical. Basic terms might be able to be included, especially if they have done it before. In addition, you may want to include that after a certain point they can’t fire you without cause. Otherwise they could pull the rug out from under you right before making partner.
Tip #5: Include credit for accounts receivable after you leave.
If you’re only getting paid for collections during the term of the agreement, or if collections go toward a bonus, that means you are working for free on one end or another. Make sure you get credit for accounts receivable attributable to your services, but which are collected for months after you leave. Most contracts start out by offering you none.
Tip #6: Include access to the book of books and records, including following termination.
Access to the practice’s financial records will verify your compensation entitlement, and that’s especially important for your accountant to see when you leave. Getting this in writing now prevents having to make a request through your lawyer. Practices can miscalculate costs and if you don’t look you won’t be certain you received all that you are entitled to.
Tip #7: Are you supervising?
If you will be designated as supervising a PA or nurse, or an esthetician, specify your level of compensation credit for their services up front. Their work reduces your collections. If you do not want to supervise, require consent.
Tip #8: Get the employer to pay for a “tail” if you ever need it or for an occurrence malpractice policy.
Occurrence is a more expensive form of malpractice insurance, but it will cover you forever. That means as long as the policy was in effect when the claim happened, you will be covered, even if you leave the practice. If the employer only wants to pay for a claims-made coverage, then ask them to contractually agree to pay for tail coverage. If you retire from the practice of medicine before a certain age, if you leave the state or go to an employer who requires that you switch from claims-made to occurrence, you will need a tail to be purchased to cover prior acts.
Tip #9: Remember, restrictive covenants are still enforceable.
In most states they are enforceable as long as they are reasonably related to the employer’s legitimate business interest. Check to see if the employer gets patients from a certain area as that defines whether or not the covenants are reasonable. Litigation of restrictive covenants is expensive and those costs will have to come out of your pocket, so address issues with covenants up front. Perhaps that means asking for a lower radius or, if it’s a multisite practice, limited to the area around where you worked the most. Other exceptions can be asked for as well, such as a “honeymoon” period so that if you leave the practice within a short period of time, there would be no covenant.
Tip #10: Get permission for your additional activities.
If you’re interested in outside research, pharmaceutical consulting, writing, speaking or creating your own product line, get permission to do this now! Make sure the income and intellectual property belong to you. Anything you do outside of their office and without using their patients, supplies and staff should be yours.
This can seem overwhelming, I know. But with a trusted and experienced attorney at your side, you can come to terms with your new employer in a fair and equitable manner. Learning how things will work by asking questions about the contract and seeing how they respond is a great way to take some fear out of this big decision.
