Nov 28, 2022
2 min read

A Dozen Provisions to Include in Physician Employment Contracts

When it's time to negotiate or renegotiate a physician's employment contract, there are critical issues that must be understood and settled. The fulfillment and career potential of the physician and the success of the practice depend on it.

A written physician employment agreement is a binding contract that supersedes all prior oral assurances. The goal is to make sure each physician understands and is comfortable with the contract provisions.

Here are a dozen common provisions to consider including in your practice's contracts and information on what to expect from each one:

1. Term. A contract should extend for a fixed period of years, typically two or three. At the end of the period, the contract either automatically renews or expires, which may require renegotiation.

2. Conditions of termination. A balanced contract allows either party to terminate it "without cause" upon advance notice (typically one or two months). In addition, the practice will want to be able to terminate "for cause" in cases such as a physician's loss of medical license, failure to obtain hospital privileges or debarment from Medicare.

3. Description of responsibilities. The physician's professional and administrative duties should be described in reasonable, specialty-specific detail. Avoid phrases such as "perform usual duties of a physician." Include the physician's typical schedule, the locations where he or she will work and call expectations.

4. Compensation. How will the physician be compensated? It could be:

  • By a guaranteed salary;
  • On the basis of productivity (or other criteria);
  • Or a combination of both.

Your CPA can help you develop a formula for the productivity calculation.

5. Employee benefits. The contract should describe any benefits offered by the practice, such as health care coverage, retirement plans, profit sharing, vacation, long-term care, disability income and personal leave.

6. Reimbursement of practice expenses. Practices generally pay for a physician's practice expenses, such as license fees, professional dues, and CME and related travel costs. Spell these out in the contract.

7. Malpractice insurance. Discuss malpractice insurance coverage for the physician's actions while he or she is with the practice (which normally pays the premiums). The contract also should indicate who will pay for malpractice "prior acts" or "tail" coverage after the physician leaves.

8. Potential practice buy-in. If the physician is likely to become a practice partner, summarize the terms of the "buy-in" transaction. This might include how soon the buy-in might occur, prerequisites for exercising the option and the price.

9. Relocation costs. The practice may choose to pay or loan the physician funds to cover relocation expenses. Make sure the contract outlines the purpose of the loan, its terms and interest and repayment/forgiveness conditions.

10. Restrictive covenants. It's common to restrict the physician's ability to compete with the practice after he or she leaves. Restrictions typically include the geographic area, time period and range of activities. The physician's negotiating goal is to keep the area, period and range of activities for non-competition as minimal as possible.

11. Ownership of patient records. Laws generally hold that patient records remain the property of the practice. The physician should negotiate reasonable access to the records in the event of a malpractice action or a credentials committee investigation.

12. Employee handbooks, policy books, codes of conduct/ethics, standards of care. When evaluating the contract, the physician should have access to documents detailing policies and procedures.

Depending on the physician's prominence in the local market, it may be possible to negotiate and adjust the language of the provisions of an employment contract. Consult with a qualified health care law attorney.