Red Flags in Physician Contracts

In recent years, we’ve seen physician contracts increase in length, complexity and burdens on employed physicians. There are lots of red flags that physicians need to be aware of when reviewing their potential contracts.

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Physician contracts contain a wide variety of terms and obligations and can be highly specific. It is essential that physicians review their proposed employment contracts with a specialized attorney so they fully understand the potential consequences and duties.

While all contracts are different, it is essential to know what all of the terms mean before agreeing to sign the contract.

Some red flags to watch out for include:

  1. Non-compete clauses – Many of our clients initially are given contracts with non-compete clauses. It is important to understand the potential ramifications of a non-compete clause as it can impact the rest of your career. We recommend attempting to negotiate the removal of the non-compete.
  2. Productivity-based compensation – Depending on the physician’s specialty and place of employment, compensation may be based on productivity. Sometimes the compensation is guaranteed for a short time and then will switch to a wRVU-based model. It is essential to know that this can greatly shift compensation over the years and can be very problematic for physicians.
  3. Automatic renewals – Many physician employment contracts have automatic renewal provisions, so that upon expiration, the contract automatically renews for a year. This can be problematic as the physician then might lose leverage and their renegotiation opportunity.
  4. Broad termination clauses – Many employment agreements have incredibly broad termination clauses. It is important to understand how and why you can be terminated, and what the implications of termination include. Many contracts also have termination without cause provisions. Make sure to understand the termination provision prior to agreeing to a contract.
  5. Obligations to pay – We have seen a large increase in repayment obligations in physician contracts. Sometimes, physicians are provided with signing bonuses, student loan payments, moving costs, or other bonuses. Physician contracts now often include provisions that physicians need to repay these bonuses or partially repay the amount to the employer if they leave before the term of the contract. This can be very problematic for many physicians, especially if the repayments are owed even in the event of termination without cause.

This is just a short list of potential red flags. Many physician contracts have many more terms that can cause issues for the physician down the line.

Many physicians agree to employment contracts with boilerplate language, and end up regretting it when they go to leave, have issues with their employer, or end up needing to pay substantial costs to their employer.

At the beginning of negotiations is when you have the most leverage to change your contract. Work with your attorney to help you achieve the best results possible.

We work with our physician clients to make sure their interests are protected in their employment contracts.

If you need help with your employment contract or other contracting needs, contact Rickard & Associates today.

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