Getting in Shape for Your Contract Negotiations

A Primer to Navigate Your Employment Contract/Personal Service Agreement

You’ve made it through years of education and training – leading to confidence that you are a “real” medical doctor. However, reading the legalese of a contract can make one’s head spin and increase anxiety. All you know is you are ready to practice medicine and be recognized as a physician. However, signing an employment contract without understanding the details can sabotage the outcome, leaving money and opportunity on the table.

Often physicians feel too intimidated to negotiate a better deal than an initial offer, even if the deal is not meeting their expectations. The reality is that very few contracts are signed as presented. Negotiation is not only common and expected but is crucial to vetting a proposed agreement before signature. Therefore, all employment contracts should be reviewed by a healthcare attorney whose practice is concentrated in physician representation with extensive experience in contract review and negotiation.

The purpose of this article is to help you manage common anxieties about contract negotiation by offering you information and practical suggestions to help you succeed. Getting in shape for these negotiations will help lead to your success.

Remember That You Are a Brand – Setting The Stage For Negotiation

As you begin the process of negotiating, realize that you are a “brand” and the employer is hiring you for a reason.  Identify what makes you unique and frame your value as a positive to use in the negotiations. You may have a skill or interest that makes you marketable to a particular type of patient base that the hospital wants to grow, a specific demographic, ethnic background, or a treatment specialty.  For example, personal experience as an athlete may be attractive to a sports medicine practice. Think about how you can use your personal background when you speak with potential employers, enhancing your value for their business.

Your Contract Is Your Asset. Contract Smart!

Your negotiated contract is your valuable asset and should be negotiated as such. The contract represents how you will be paid, your job responsibilities, and how secure your position may be from a legal standpoint. In order to best protect your asset, the following are suggestions to help you succeed:

• Language and expectations should be specific and clear. A contract provides something for you and your employer to legally enforce. Therefore, it should not be ambiguous or silent on important points.
• Bring in legal expertise. Have your contract reviewed by a healthcare attorney with experience in physician representation and physician employment/personal contracts and service agreements. Look for a flat rate. The cost will be small compared to the value of your total compensation and employment security that you might leave on the table.
• Know what you are negotiating. Understand the difference between an employment and independent contractor agreement. Both employment and independent contractor agreements have advantages and disadvantages.
• Some key advantages of employment agreements are predictable salaries and benefits, relative job security, and possible future ownership; whereas, some disadvantages of employment agreements include loss of control of your time.
• The advantages of independent contractor agreements are the ability to control your time, work in more than one place, and own your own business; whereas, the disadvantages may include paying your own taxes, not having any benefits, and providing your own malpractice insurance.

You should weigh the advantages and disadvantages when deciding whether to become an employee or an independent contractor. Your accountant and attorney can help you evaluate.

• Don’t be afraid to ask questions to clarify verbiage. Read the contract carefully and note what you think is incorrect or unclear according to your expectation or understanding. Remember be confident. This is your life and your career.
• Discuss the contract with your attorney to understand and identify the issues that need to be discussed with the other party. An experienced attorney will have market intelligence on what current trends are for your specialty. Understand the legalese and impact for you.
• Understand the length of the contract or the “term” provisions. Term provisions are important because they state how long the contract will last and may include automatic renewal as well as early termination provisions. For example, if your agreement has a termination without cause provision that allows either party to terminate the agreement at any time and for any reason upon 30 days written notice, this essentially makes your agreement the equivalent of a 30-day contract. That may not be what you need from a business or career perspective.
• Understand malpractice and tail coverage. Tail coverage is crucial if the insurance is “claims made” because it provides protection for medical malpractice claims that are reported after the policy is expired or cancelled. It is preferable that the employer provide tail coverage when you leave their practice. If the employer does not provide tail insurance post-termination of the contract, then this must be carefully reviewed to understand the cost and other possible options.
• Understand restrictive covenants. Almost all employment agreements contain covenants, which protect the business interests of the employer. While the laws surrounding the enforceability of non-compete provisions vary from state to state, the non-compete provisions must generally be reasonable in scope and duration. You must also ensure the provisions are predictable. For instance, stating that a physician shall not practice medicine within a 20-mile radius of all the employer’s locations is not predictable because at the time of signing, you do not know the exact restricted territory.

Some Common Pitfalls

While there are many things you can do to help ensure your success, there are also certain things you can do to hinder your success. Some common pitfalls to avoid include:

• Devaluing your worth, being overly anxious to secure a position and taking whatever is offered without asking for what you want.
• Not obtaining professional legal advice before signing.
• Not reading a contract thoroughly and asking for clarification.
• Agreeing to a restrictive covenant that is overly burdensome and then regretting it later.
• Not vetting insurance coverage options.
• Thinking that a contract is only a formality and will never really need to be challenged.
• Relying on verbal promises made by the employer that are not in the contract.
• Thinking that you might not get caught and risking the violation of a covenant.

Make your contract a success, financially, and professionally. Coping with your anxiety by reading the contract, asking the questions, finding the right lawyer and understanding the details will lead you to a great start to your career as a physician.

For further information contact us.