Physician contract negotiation: A comprehensive guide

One of the most important parts of any physician job search comes right at the end — when it’s time to negotiate the physician contract. However, it’s the part that many physicians are the least comfortable with. Once you receive an attractive offer, you may be tempted to just accept it, sign a contract, and get to work. This mistake can lead to lost compensation, unsatisfactory working conditions, and missed opportunity that may have you looking for a new job again in two to three years. On the other hand, a good negotiation and careful review of the contract can make all the difference!

This resource is designed to help you understand how to negotiate, what to look for in a physician contract, and which mistakes to avoid so you can enjoy a successful relationship with your new employer.

Before you negotiate

Before you ever sit down to the table with a potential employer, make sure to determine what’s most important to you. Are you looking for the most money possible? Do you want the right work-life balance? Are you hoping for career advancement? More one-on-one time with patients? When defining your priorities, make sure to include the other stakeholders and decision makers in your life as well.

Of course, not everything can be negotiated. “There are going to be certain sticking points or fixed points that the group is not going to budge on, and you’ll get a pretty rapid feel for what those are, but it doesn’t hurt to ask,” says Dr. Koushik Shaw, a urologist who practices in Austin, Texas. “You’re not going to get everything that you want and, in fact, you’re probably going to need to make a list of what you really need and what your deal-makers and deal-breakers are.”

The White Coat Investor recommends that you define your BATNA or best alternative to negotiated agreement, which is the minimum you are willing to accept. If you can’t get your BATNA after negotiating in good faith, it means it’s probably time to pursue other options.

Ask the right questions

You’ll be a more effective negotiator if you’re well informed before negotiations begin. Take the time to learn as much as you can about your potential employer and the position by asking lots of questions.

You may have to get out of your comfort zone to do it. “A lot of residents are somewhat afraid,” says Dr. Shaw. “They’ve been in the mentor/student role for a long time. Now they’re getting out of that resident mode and going out into the private world of medicine, they may be a little embarrassed to ask the right questions. Residents shouldn’t feel embarrassed. It’s important to ask questions of your future employers.”

Here are the top questions to ask:

• How is compensation structured?

• Is there a base salary with incentive or bonus?

• Is there a non-compete?

• If so, what are the terms? (duration, location, specific facilities/employers)

• What are the schedule expectations?

• Is call coverage required?

• If so, how many hours are included in the salary?

• What benefits are offered?

Jon Appino, principal and founder of Contract Diagnostics, a company that focuses exclusively on reviewing physician contracts, stresses that it’s important to have an honest conversation with the employer. “How do they come up with compensation? Are there differences in the other physicians who are there? Do they have a standard copy-and-paste compensation plan for everybody? How often does it change? What metrics do they look at when it does change?”

It’s also important to ask questions about more than just compensation. Dr. Shaw says that the first interview should help you get an idea of the organization’s culture and how you’ll fit in. “Can I work with these people? Once you kind of bridge that, then you’re going to ask the follow-up questions in subsequent meetings.”

Appino agrees: “It’s not you versus them, and you shouldn’t look at it as somebody wins and somebody loses. Everyone has the same goals, it’s just making sure the expectations are clear as you move forward with an employment agreement. I think as long as expectations are clear then there are no surprises.”

Determine if the offer is competitive

Before deciding whether to accept an offer (or come back with a counter offer), it’s important to determine how competitive the offer is. Attorneys, firms, and staffing agencies like CompHealth that review a large volume of contracts can share insights on the trends they are seeing among physicians they’re staffing in your specialty and geographic area. Some firms may also be able to share comparative compensation data from sources like MGMA.

“We can share trends that we see over time and combine that with localized data,” says Appino. “For example, it’s not just infectious disease in Boise, it’s infectious disease in Boise and they’re building a new group. That’s different than if it’s infectious disease in Boise and they’ve got three people who just quit or are retiring in five years.”

In this video, Appino talks about how physicians can find out their fair market value:

The more information you have up front, the more prepared you’ll be when you return to the table to come to a final agreement.

RELATED: Watch CompHealth's webinar on how to effectively negotiate your physician contract

What to negotiate

What to negotiate will depend on your individual priorities. If you’re planning to stay in the area for only a few years, a non-complete might not be important to you. You may be more interested in how a signing bonus is repaid, how you can terminate, and how malpractice is covered. For a physician who wants to settle down, build a home, and raise a family, the non-compete terms may be more important to you.

A good advisor can help you determine what you should focus on in your negotiation. “Make sure you have somebody who can give you guidance based on your specific, individual situation,” says Appino.

“It’s important that you look at it as a holistic process, not here’s the contract and tell me what I’ve got to know,” Appino says. “Our first questions when we talk to a physician are: ‘Why are you interested?’, ‘Why are they needing a doctor?’, ‘How long do you want to work here?’ We capture that information before we even talk about what the contract says.”

What is negotiable and what is not

Compensation, schedule, and contract duration are typically negotiable.

Roderick J. Holloman, a healthcare attorney who specializes in physician contracts, feels everything is negotiable until proven otherwise. “I never assume anything is not negotiable. One never knows what’s non-negotiable until one tries to negotiate.”

However, it may be a mistake to assume that an employer — especially a large employer — will be willing to change everything.

“I think a happy medium is somewhere in between,” Appino says. “It’s important to ask the right questions at the right time to the right person and then make sure you have reasonable expectations on what they can and are willing to change.”

For example, non-compete clauses are often non-negotiable. However, it’s important to understand how a non-compete can affect you personally should you decide to terminate a contract.

As hospitalist Dr. John Thieszen says, “People don’t understand sometimes that what this can mean is a physician can resign from a group or be fired from a group and not be able to practice in the same town anymore. It can mean moving your whole family or practicing somewhere else. Some of these clauses may be unavoidable, but I’d have an attorney involved.”

How to negotiate

Negotiating may take you out of your comfort zone but it’s well worth the effort. “As physicians and as young graduates, I think we feel awkward about negotiating our terms. But this is where some of the easiest money in the world is to be made,” Dr. Thieszen says. “I felt very awkward asking for any more money but in the 30 seconds it took, the hospital agreed to $20,000 dollars as a sign-on bonus. That was the best 30 seconds of awkwardness I ever spent!”

Negotiation “Dos” and “Don’ts”

DO: Make it as comfortable as possible for the employer

Roderick Holloman says it’s important to make the negotiation as comfortable as possible for the employer. “Does the employer prefer to communicate via email or phone? Does the employer strike the physician as being rather straight-to-the-point or does the employer like to be a little less direct in the negotiations? Whatever the case is, you should mirror that employer’s style of communicating.”

DO: Have all of your questions ready up front

Courtney Saenz, manager of CompHealth’s permanent placement pediatrics team, recommends you come to the table prepared with all of your questions. “Go back to the employer as few times as possible with a list of all of your desired changes, requests for clarification, and anything else you want to discuss,” she says. “This reduces the amount of back-and-forth time for a negotiation.”

DO: Have a justification for what you are asking for

If you’re asking for more money, added benefits, or special consideration, you should be able to explain why you’re asking for it. “Always have a justification for what the physician is asking for. It has to be more than, ‘Well, because that’s what I want,’” Holloman says. “If a physician is asking for another $30,000 in compensation, the physician has to justify why it makes sense for the employer to grant that request. If the physician can’t answer that question, the physician shouldn’t ask for that $30,000.”

Saenz agrees. “We see providers have better luck getting what they are asking for if they explain the why behind it.”

DO: Go in with a positive attitude

A positive attitude and a willingness to compromise is critical to successful negotiation. “It’s not ‘I win, you lose or you win, I lose,’” Appino says. “It’s ‘Let’s work together to make sure we understand each other, and let’s get there to help patients.’”

DON’T: Sign an letter of intent prior to negotiation and then try to renegotiate it

A common mistake physicians make is signing a letter of intent (LOI) when they receive an initial offer and then trying to negotiate salary or other conditions before signing the contract. Holloman cautions against this action. “An LOI is not legally binding, but it’s the equivalent to a handshake. I always say that if you signed on the letter of intent with a salary of $300,000 and then the employer issues a contract with $270,000, it would rub you the wrong way. The opposite is also true. If you signed an LOI at $300,000, you can’t then come to the employer to say, ‘Now I want $330,000.’” It’s best to not sign an agreement — either binding or non-binding — prior to concluding negotiations.

DON’T: Fail to tell your attorney the whole story

If negotiations take place prior to bringing in your attorney or negotiator, make sure they know everything that has already been discussed. This will prevent embarrassing and time-wasting exchanges. “It makes it a lot more difficult for me to arrive at the terms a physician wants if the physician has already started down the process,” Holloman says. “It’s like you’re starting to bake a cake. You mix it up, bake it, take it out of the oven, and then give it to a chef and say, ‘Ok, fix it.’ If it’s already proceeded down the wrong path, I can’t make a wonderful cake from this.”

DON’T: Demand changes to things that are determined by policy

Asking for a hospital to make changes to benefits or conditions that are determined by policy can lead to a breakdown in negotiations. “For example, if they offer PTO and it’s determined by policy, they can’t change the policy,” Appino says. “They can’t make an exception for one particular physician. Some physicians feel there should be more flexibility for them individually, but sometimes a hospital just can’t change certain things.” It’s best to understand what is and isn’t negotiable as early as possible in the process.

RELATED: 11 things every doctor should know about physician employment contracts

Reviewing the contract

Once you’ve completed negotiations, take the time necessary to carefully review the details. Hospitalist Dr. Ariana Peters recommends seeking legal assistance. “Do not sign anything until you have an attorney look at it, because there’s so much legal wording,” she says. I’ve gone over a contract with an attorney and he picked up on things that I would never have caught in a million years.”

Dr. Catherine Francis, a child and adolescent psychiatrist, also relies on legal help: “At this point, I wouldn’t even consider signing a contract without a contract attorney who absolutely knows how to keep my best interests as a physician in mind. I want to be able to make good decisions with the contracts because I’ve heard too many people come and say, ‘I wish I had known.’”

What to look for in a contract

Here are the top five things to keep in mind when reviewing the physician contract.

1. If it’s not in the contract, it doesn't exist

Dr. Shaw points out that promises made during negotiations aren’t enough. “A lot of residents may be promised a variety of things only to find down the road that those things may not bear fruit or they may have been misled,” he cautions. “I hate to be skeptical about this, but if it doesn’t exist in the contract, it doesn’t exist. You can’t just take their word for it.”

Holloman agrees. “Do not rely on any understanding or agreement that you reached to color your interpretation of the contract,” he advises. “If it is not included in the contract, you can’t assume that it still stands once that contract is signed.”

2. You are bound by the contract, whether you understand it or not

“Physicians are often surprised to learn what they actually agreed to when they executed the contract,” Holloman says. “This may be because they did not read the entire contract as thoroughly as they should have, or they relied on their interpretation of what the contract meant and signed.”

Holloman recommends having the contract reviewed by someone experienced in reviewing physician employment contracts and not just employment contracts. “Contracts to employ healthcare providers are a lot different than contracts to employ most any other profession,” he says.

It’s also valuable to hire an advisor who works with a large volume of physician contracts. “If you have someone who’s reviewing a bunch of contracts daily, odds are that attorney may have actually worked with the employer you’re considering,” Holloman says. “They may have a little bit of inside knowledge on the problems or benefits of working with that employer which you wouldn’t find if you’re working with someone who doesn’t do it on a daily basis.”

3. Beware of evergreen contracts

Holloman also cautions physicians to beware of evergreen contracts with fixed compensation. “This can create a situation where, theoretically, the physician will have the same compensation into perpetuity.”  It’s important to have a clear perspective of the long-term compensation and have it defined in the contract.

Here are some tips from Jon Appino about how to ask for a raise in your contract negotiations:

4. Get specific

Fuzzy, unclear language can lead to confusion and disagreement on when and how an agreement will be honored. “Contracts that omit key details, such as the expectations of the physician with respect to the physician’s schedule, are among the chief reasons that physicians are disgruntled with their employment,” Holloman says. “A contract provision such as, ‘A physician will work at such times and consistent with such schedule as the employer from time to time determines,’ grants the employer an incredible amount of liberty and autonomy with respect to scheduling the physician.”

Ask to have key details included such as:

• Frequency of call

• Number of patient contract hours expected

• How patients are assigned

If there is a bonus promised, get specifics on how the bonus works. “If the contract reads something like, ‘The employer may provide bonuses depending upon practice performance,’ it’s important to define what metrics will used,” Holloman advises.

5. Make sure you understand the termination provisions

“When you’re joining a group it is very exciting, you’re interviewing, the hospitals want you to come. It’s nice to feel wanted and there is a tendency for people to think the contract is just a formality. People like to think that they are going to be working here for 20 or 30 years and then I’ll retire and nothing will ever go wrong. That typically is not the case,” Dr. Thieszen says. “More often, you might work somewhere for a year or two years or five years and the contract will come into play at some point, so you need to be careful about what you sign.”

Two termination provisions to be careful of are accelerated termination dates and extended separation periods.

Accelerated termination date: “If a contract allows the employer to accelerate the termination date of the contract and states the physician will only be paid compensation up to the termination date, that means the employer can effectively terminate the contract at any point without cause,” Holloman says. “The employer can say, ‘We received your 90-day notice and we’re going to accelerate the termination date. Today is your last day and your last paycheck will arrive in two weeks.’ This means the physician won’t get the 90 days they thought they were going to get.”

An extended separation period means you may have to stay at a hospital much longer than you want to. “A lot of hospitals want you to sign something saying that once you resign or the hospital lets you go you will continue to work for them for up to six months,” Thieszen says. “I can tell you from personal experience that when it happens that six months is really awkward. It’s a long time and everyone is wanting to go to the next step. I would say three months or less is more reasonable, because the hospital needs to have time to find someone to replace you, but six months is a really long time.” Consider negotiating for a shorter clause.

Holloman recommends these contract must-haves for the termination clause:

• How the contract can be terminated, including a without-cause provision in the contract

• A definition of how much notice is required for a without-cause termination to be effective

• What, if any, repayment the physician must assume should the contract be terminated

• What, if anything, the physician will be responsible for after termination of the contract, including who pays for tail insurance

After signing a contract

Hopefully, both you and your new employer will be satisfied with the conditions of the contract and enjoy a long and mutually beneficial relationship. But what do you do if your employment conditions aren’t what you expected?

If they’re not what you expected but are consistent with what’s in the contract, the best strategy is to approach your employer about your concerns. If you are unable to resolve them, you can always exercise your right to terminate without cause.

Here are some tips from Jon Appino on how to deal with contract inconsistencies:

If the organization is breaching the contract or not living up to its conditions, you can still try to resolve the issue. In this case the physician is in a much stronger position, Holloman says. “He or she can say, ‘You want me to adhere to the contract, and I want you to adhere to the contract. These are the departures from the contract and these things need to be resolved.’ If the employer does not resolve them, then the physician can issue notice of termination of the contract due to the employer’s breach.”

6 key tips for successful physician contract negotiation

Additional resources

Successful contract negotiation is key to a successful start to your employment and can play a large role in your ongoing happiness in your new position. Here are even more resources to help you through the process.

The Student Doctor Network: Negotiating Your First Contract as a Physician

The Student Doctor Network: Physician Employment Contracts: The Good, The Bad and The Ugly

White Coat Investor: Contract Negotiation – Ten Tips from the Trenches

CompHealth has been helping physicians find the perfect job for more than 40 years. For one-on-one help in your job search, give us a call at 800.453.3030 or view today’s physician job openings.