Physician employment contracts are among the most important documents you’ll encounter in your medical career. Whether you’re signing your first contract as a resident or renegotiating terms as an experienced physician, understanding the basics of a physician employment contract is essential to protect your career, financial interests, and professional satisfaction.

These contracts go beyond just salary; they define your responsibilities, benefits, and even potential restrictions on future employment. Misunderstanding or overlooking key elements can have long-term consequences, making it crucial to thoroughly review and negotiate your agreement.

In this comprehensive guide, we’ll break down the key elements of a physician employment contract, including compensation models, termination clauses, non-compete agreements, and more. By the end of this post, you’ll be well-equipped to navigate your next contract with confidence.

What is a Physician Employment Contract? 

A physician employment contract is a legally binding agreement between a physician and an employer that outlines the terms and conditions of employment. It covers critical areas such as compensation, benefits, work responsibilities, and termination terms.

Physician contracts can vary widely depending on the type of employer—whether it’s a hospital, private practice, or locum tenens agency. While these contracts are designed to protect both parties, they often include language that can put physicians at a disadvantage if not properly negotiated.

For example, some contracts include restrictive covenants, unclear productivity benchmarks, or vague language regarding termination. Understanding the common components of a physician employment contract is the first step toward ensuring you’re making an informed decision about your career.

Key Elements of a Physician Employment Contract 

1. Compensation and Productivity Models

• Base Salary: Most contracts include a guaranteed base salary for an initial period. Afterward, compensation may shift to a productivity-based model.
• Productivity Metrics: Common productivity measures include work RVUs (Relative Value Units) or collections. Be sure you understand how these metrics are calculated and how they impact your income.
• Bonuses: Look for signing bonuses, performance bonuses, and retention incentives. Ensure bonus structures are clearly defined in the contract.

2. Benefits Package

• Health and Retirement Benefits: Most contracts include health insurance, malpractice insurance, and retirement contributions. Verify coverage details and employer contributions.
• Continuing Medical Education (CME): Many employers provide CME allowances for professional development. Make sure the allowance covers travel, lodging, and registration fees.
• Relocation Assistance: If applicable, confirm the amount and terms of reimbursement for moving expenses.

3. Termination Clauses

• Without Cause Termination: This allows either party to end the agreement without providing a specific reason. Ensure the notice period is reasonable (e.g., 60-90 days).
• For Cause Termination: This includes specific circumstances under which the employer can terminate the agreement immediately. Examples include loss of licensure or failure to meet performance benchmarks.
• Severance: If the contract is terminated, does it include severance pay? Clarify these terms to avoid surprises.

4. Non-Compete Clauses (Restrictive Covenants)

• Scope: These clauses restrict where you can work after leaving your employer. Understand the geographic radius and duration of the restriction.
• Reasonableness: Courts often evaluate whether the restrictions are reasonable. Overly broad non-competes may be unenforceable, depending on your state.
• Negotiation: If the terms seem overly restrictive, negotiate for reduced scope or duration.

5. Work Schedule and Call Coverage

• Work Hours: Ensure the contract specifies expected patient contact hours and administrative duties. A “full-time” designation can vary widely.
• Call Requirements: If on-call duties are included, clarify how frequently you’ll be on call, what support will be provided, and whether on-call hours are compensated separately.

6. Malpractice Insurance

• Types of Coverage: Most employers provide malpractice insurance, either occurrence-based or claims-made policies. Understand the differences and ensure adequate coverage.
• Tail Coverage: For claims-made policies, you may need to purchase tail coverage upon leaving. Confirm whether the employer covers this cost.

7. Relocation and Loan Repayment

• Relocation Assistance: Many employers offer relocation packages. Ensure the terms are clearly defined, including repayment obligations if you leave early.
• Loan Repayment: Some contracts include student loan repayment assistance. Verify the amounts, repayment terms, and any strings attached.

8. Performance Expectations

• Benchmarks: Productivity expectations should be clearly outlined, whether they’re based on RVUs, patient volumes, or other metrics.
• Evaluations: Determine how your performance will be reviewed and whether raises or bonuses are tied to these evaluations.

9. Path to Partnership or Advancement

• Private Practice: If joining a private practice, ensure the contract outlines the criteria for partnership, including buy-in amounts and timelines.
• Career Growth: For hospital-based positions, inquire about leadership opportunities or pathways to specialized roles.

10. Legal Review

• Before signing, have your contract reviewed by a healthcare attorney. They can identify red flags, suggest modifications, and ensure the terms align with industry standards.

Red Flags to Watch Out For 

When reviewing a physician employment contract, be aware of these common red flags:

• Unclear Compensation Terms: Ambiguity around productivity metrics or bonus structures can lead to disputes.
• Overly Restrictive Non-Competes: Broad geographic or time restrictions can limit future opportunities.
• Vague Termination Clauses: Ensure the terms for both for-cause and without-cause termination are explicitly defined.
• Insufficient Malpractice Coverage: Confirm that coverage levels meet state and specialty requirements.
• Unreasonable Workload Expectations: If the contract doesn’t specify work hours or call frequency, you may end up overburdened.

Tips for Negotiating a Physician Employment Contract

Negotiation is a critical step in the contract process. Here are some tips to help you advocate for yourself:

1. Do Your Research: Use resources like the Medical Group Management Association (MGMA) to understand salary benchmarks for your specialty and location.
2. Prioritize Your Needs: Identify the terms that matter most to you, such as compensation, work-life balance, or location.
3. Seek Professional Help: A healthcare attorney can provide valuable guidance and negotiate on your behalf.
4. Don’t Rush: Take your time to review and understand the contract. Employers expect you to do your due diligence.
5. Ask Questions: Clarify any unclear language or terms before signing.

Understanding the key elements of a physician employment contract is crucial for protecting your career and achieving your professional goals. From compensation and benefits to non-compete clauses and termination terms, every aspect of the agreement plays a role in your overall job satisfaction and long-term success.

By thoroughly reviewing your contract, watching for red flags, and negotiating effectively, you can ensure that your employment terms align with your personal and professional priorities. When in doubt, consult a healthcare attorney to help you navigate this critical process.

Your physician employment contract is more than just a document—it’s the foundation of your career. Take the time to understand it fully and make informed decisions that set you up for success.