As more and more physicians, both young and experienced, choose to merge with larger practices or join multispecialty groups, I am getting numerous questions about the contracts they are being asked to sign. Obviously, every circumstance will be unique; but some common issues and avoidable mistakes are worth mentioning.
The most common error I see is failing to retain an attorney in a timely manner. Incredibly, many physicians try to do their own negotiating, and call a lawyer only when unpleasant discoveries are made after the contract has been signed. You will need counsel from the very beginning – and not your brother-in-law, or a family friend. Get referrals from colleagues who have gone through the process and are happy with their contracts.
An experienced contract negotiator will alert you to potential problems, suggest strategies and tactics that you would never consider on your own, and help you avoid vague or unclear provisions that may seem reasonable, but could get you into trouble later. For example, is the contract’s length clearly spelled out? Is it renewable? By whom, and on what terms? Are there provisions for early termination, and at what cost to you? I have read contracts with no escape clause and no mention of renewal. Others have a vague “self-renewal” clause, with no provisions for renegotiating anything at renewal time.
Ambiguous provisions that could later become the subjects of dispute should be kept to a minimum. One example I have seen more than once is, “physician shall share call duties.” Don’t rely on the employer to be fair and reasonable with the call schedule. Get specific language that does not hinge on factors outside your control, such as the health or diligence of other physicians in the practice.
The conditions of your employment may also be inadequately defined. Office hours, administrative duties, medical record responsibilities, and access to specialized equipment and support staff are all negotiable, and should be clearly delineated, preferably prior to any discussion of compensation.
Other provisions may be defined, but not the way you might define them. When a contract puts a specific definition on a specific term, it will highlight the term in italics or boldface, then define it in the “Definitions” section. Read that section carefully! In court, the term will mean what the contract says it means, not what you may think it means. For example, if you can be terminated for “professional misconduct,” make sure you know how the agreement defines that transgression. Look carefully at any other termination provisions as well; make sure they are fair, reasonable, and well defined. Vague conditions such as “conduct detrimental to the practice” should be clarified.
When you discuss compensation, pay close attention to fringe benefits, such as vacation and sick leave, dues, allowances, profit sharing and retirement plans, and various insurances. Most are open to negotiation, even if the employers do not volunteer that they are. An experienced contract lawyer may also propose additional benefits that aren’t listed, and that you may not have thought of.
Incentive provisions require particularly close scrutiny. Beware of bonus triggers that an unscrupulous employer could manipulate against your interests. I’ve seen contracts that award a percentage of net income as a bonus; net income is subjective, and easy to manipulate. Owners can pay themselves a higher salary and drive down the practice’s net income. Such bonuses should be based on gross income numbers, which are more objective and easier to pin down. Incentive plans should protect you as well as your employer.
Be sure to include specific language protecting your rights to outside or additional income, such as lecture honoraria, writing royalties, expert witness testimony, and patent royalties. And carefully consider all of the implications of signing a noncompetition clause. Negotiate the clause cautiously; you won’t want to spend time and money litigating this issue if you leave.
Finally, don’t neglect researching your prospective employer, and colleagues already employed there. A friend of 30 years recently told me that merging his practice with a large conglomerate was “the worst mistake I’ve ever made,” largely because of important promises that were not kept. Due diligence, he now admits, would have revealed that the organization has a long history of promising the world, but failing to deliver. He also discovered – too late – a series of pending government sanctions, malpractice claims, and other litigation that diminish his own previously impeccable reputation, and may well affect his compensation and profit sharing for years.
Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J. He is the author of numerous articles and textbook chapters, and is a longtime monthly columnist for Dermatology News. Write to him at dermnews@frontlinemedcom.com .
