Contract Review

The following outline is intended to help physicians better navigate their first employment contract and includes links to a number of websites to consider for additional information. It is not intended to be legal advice, and the information and links below may not be current and are subject to change without notice. Barnabas Health is not responsible for the information included in the sites linked below, and inclusion of those links does not constitute endorsement of any particular positions on these issues, but these are being provided for informational purposes.

Business people negotiating at a table

What are common terms used in a contract?

  1. Salary
    • Physician salaries vary widely across the US based on regional need, specialty and institution
    • Consider visiting the MGMA website for additional information on regional trends in physician salaries.
  2. Productivity Bonus
    1. Often physician salaries include a mix of base salary as well as a productivity bonus. This productivity bonus could be measured by net collections, revenue, or sometimes by Relative Value Units ("RVUs")
    2. Relative Value Units (“RVUs”) – RVUs are part of a comprehensive fee schedule called the Resource Based Relative Value Scale (or “RBRVS”) created by the Centers for Medicare and Medicaid (CMS). When creating this system, CMS considers the work, cost, and malpractice expenses of each service/procedure. In turn, RVRVS provides guidance to practices and hospitals on what to charge for a given service. Often in contracts, employers will consider the first component of the RVRVS system (or the “work RVU” or “wRVU”) in determining a bonus.
    3. wRVUs take into consideration the amount of time, training, skill, and intensity required to provide a given service or procedure. Based on the number of wRVUs that you bill for in a given time period, and often once you exceed a specific wRVU threshold, you may be eligible to receive a bonus. In other cases, your salary may be based exclusively on the number of wRVUs you accrue.
    4. For more information consider visiting the following sites:
  3. Other Types of Bonuses
    With the advent of the Affordable Care Act and the Accountable Care Organization, many institutions are now building additional factors into a physician’s bonus criteria, including metrics for quality and citizenship (i.e. participation within health system governance/committees).
  4. Benefits
    • Paid Time Off (PTO) – When you employer uses PTO, your contract will stipulate the total number of paid days off, which encompass sick days, personal days, vacation days, and holidays. Alternatively, your employer may itemize the number of Sick Days, Vacation Days, and Holidays
    • Healthcare Insurance for you and/or your family
    • Life Insurance
  5. Medical Malpractice Insurance
    It is important when you begin a new job to understand the type of malpractice coverage that you will have – Occurrence or Claims Made.

    To cover any claims made after the coverage period, you would need to purchase what’s called “tail coverage” that would extend the policy. There are a number of factors that affect the cost of tail coverage including (but not limited to) your specialty, whether you work full-time or part-time, where in the country you practice, and any prior claims filed against you. If you know your new employer will provide a claims made policy, you may want to understand who will pay for the tail coverage if you leave that position.
    • Occurrence Policy - An occurrence policy protects you from an incident that “occurs” during the policy period, no matter when a claim is filed. So if you leave a position, and months later a patient files a claim against you, your occurrence policy would still provide coverage.
    • Claims Made Policy – A claims-made policy provides coverage only for a claim that is filed while the policy is active. So if you leave your position or discontinue your claims-made policy, and a patient files a claim after your policy is no longer active, you would not be covered.
  6. Reimbursement for Job-related Expenses
    • State Licensure, Drug Enforcement Administration (DEA), and Board Certification fees
    • Costs for Journals and Periodicals
    • Cost for uniforms/lab coats, professional society memberships, etc.
  7. Continuing Medical Education (CME)
    • Physician contracts may include reimbursement for CME courses, travel, and hotel
    • Employers often have a monetary limit on budget for such fees
    • Employers may also offer designated paid days off for the purpose of CME
  8. Student Loan Repayment
  9. Restrictive Covenant
    1. A Restrictive Covenant (sometimes called a “Non-Compete” clause) – is “a contractual provision between a physician and his or her employer which prevents the physician from practicing in a specified geographic area for a given period of time if the physician's employment terminates”from the American Medical Association (AMA) website
    2. For additional information on Restrictive Covenants, please visit the American College of Physicians website. (There is a section in this resource entitled: “Restrictive Covenants & Non-Solicitation Clauses”)
  10. Partnership
    • In a private practice setting, you may have the option to be considered for partnership or buy-in to participate as a partner. As a partner you may have access to a higher salary, profit-sharing, additional PTO days or other perks. There may also be additional responsibilities required of partners. The benefits and obligations of partnership will vary widely based on each individual practice.
    • Within your contract, a private practice employer “may include stipulations regarding the circumstances under which the physician may be considered for or automatically offered partnership, the timing and method by which the physician may acquire ownership in the practice, how the proposed purchase price will be determined, and the period over which the purchase price will be paid.” Please review the resource from American College of Physicians website for additional information on this topic.
  11. Tenure

What is the common timeline for a contract/offer?

  1. Delivery of Offer Letter
    • In some cases, employers may provide you with an Offer Letter (or “Letter of Intent” or LOI) prior to the delivery of your Employment Contract
    • An offer letter outlines your contract and once you sign, demonstrates your commitment to learning more about the employment opportunity. The LOI may or may not be legally binding.
  2. Delivery of Contract
    • The contract typically includes a “sign by” date, or deadline for action. Your employer will impose a deadline for you to act – either accept or decline the terms of the employment agreement.
    • In some cases, your prospective employer may grant an extension on this deadline. It doesn’t hurt to ask.
  3. Negotiation
    • You may negotiate the terms of your contract directly with your employer, or an attorney may negotiate on your behalf.
    • Some physicians may elect not to use an attorney to negotiate standard contract terms. However, if you are unsure as to whether certain terms are standard, you may want to identify an attorney to assist with your negotiation.

What are the first steps you should take upon receipt of an offer or contract?

  1. Read the contract! Regardless of whether you intend to hire an attorney, be sure to read the agreement in its entirety for your own knowledge.
  2. Consider identifying an attorney to assist with the review of your contract.
  3. Create a list of questions or concerns for further discussion with your attorney or prospective employer.

What are some techniques to find a reputable attorney?

  1. Who should I ask for recommendations? Where should I look?
  2. How much should a consultation cost? Is this fee negotiable?
    • Fees for contract review may vary based upon the firm, experience level of the attorney, or complexity of the contract.
    • You should feel comfortable asking for the consultation fee in advance. If the fee is too expensive, you often have the ability to negotiate this fee. Negotiation may be less feasible with larger firms who use standard fees across their organization.
    • However with larger firms, you could also ask for an internal referral to a newer associate that may have a less expensive hourly rate.
  3. Is it critical to have an attorney from the state where you are being offered a position?
    • It is generally a good idea to find an attorney who practices law in the state where you are being offered a position. Local attorneys can typically provide helpful insights on topics like restrictive covenant, which may vary widely state to state.