Assessing the Contract
Patricia LePore, JD
Managed Care Resource Center
For many of you, preparing to enter the job market is the culmination of long hours of study and work. Take your time and make sure the opportunity facing you is one that you can live with. To make sure your first foray into the work world is successful, experts recommend the following:
Consult a Professional. Consider hiring an attorney to review the provisions of the employment contract. You will be bound by the agreement you make now for the next year (or more). Make sure the agreement is one you can live with, and that you can fulfill the requirements of the job. A contract is a legal document containing many terms that require a professional to interpret.
Check with your local medical society for the names of attorneys who work with physicians and specialize in employment agreements. Employment contracts are legal documents that can be quite complicated. And don't make the mistake of assuming the contract is not negotiable. An attorney skilled in employment agreements can both interpret the contract language for you and make suggestions for changes beneficial to you. He or she can also negotiate any changes on your behalf with the practice or hospital you are considering joining.
And most importantly, take the time right in the beginning to make sure everything you need is covered in the contract. Once you sign, you will have lost any leverage to make changes to the agreement, at least or until it is time to re-negotiate.
Contractual Issues. Your employment contract will cover both economic and non-economic issues. The most important economic issue will be your compensation. Again, it is important here to have the advice of an expert familiar with how physician compensation is typically structured and what will be most beneficial in your particular case. It was not long ago that most physicians joined an existing practice and applied part of their income to the practice until they earned their way to partnership. This method of compensation and route to partnership is becoming much less prevalent. Straight salary is also less popular because it provides less incentive for physicians to practice efficiently. More common is a compensation package that includes salary plus incentive. Under these types of arrangements, as much as a quarter of a physician's income can be tied to quality indicators - patient satisfaction scores, utilization reviews, productivity, contributions toward administration of the practice, etc. Typically, a percentage of a physician's salary is "withheld" or put into a risk pool. The pool is then distributed based on how efficiently a physician manages his or her patients.
In addition to the salary or compensation clause, probably the most important clause for physicians to understand is the non-compete clause. Non-compete clauses or "restrictive covenants" are included in most employment contracts. They restrict the physician from engaging in practice within a specific geographic area and for a specific period of time should he or she leave the practice. Non-compete clauses can seriously hamper a physician's ability to earn a living with the same general community. They should be reviewed carefully by an expert. Non-compete clauses, like most contract clauses, are negotiable, but you may have to accept less compensation in exchange.
More Specifics About Physician Compensation. Compensation is related to the type of setting you choose as well as the demographics of the market and the region of the country. A survey by Medical Economics published November 16, 2007 showed that the total median compensation for internists in 2006 was $170,000. However, compensation varied by group size, with solo practitioners earning the least, at $152,000, and those in groups of 3-10 physicians earning the most, at $174,000. Other factors influencing compensation for all primary care physicians include geography, where earnings were highest for those practicing in the Midwest. Suburban and rural doctors also did better than urban and inner city practitioners. For more information, look at the Medical Economics article.
Another article reporting data from this survey and published in Medical Economics December 7, 2007 issue showed that 45% of internists earn revenue from capitation. At the median, internists with capitation contracts earn about 20% of their revenue from capitation.
Other Negotiable Issues. Physicians should recognize that anything is potentially negotiable. The amount of paid vacation, continuing medical education, signing bonuses, moving expenses, and the like are all open to discussion. The best time to negotiate any of these issues is before you sign a contract. Once that contract is signed, you have lost any leverage with your potential employer.
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