Understanding Your Employment Contract: Advice from a Physician Recruiter
If you’re ever tempted to sign an employment contract without reading it carefully or receiving competent advice, think about these situations:
A headache specialist joined a rural practice with a guaranteed salary, only to find her income decreased $70,000 when the guarantee was removed and patient volume did not make up the difference.
A physician’s non-compete clause prohibited work within 25 miles of the former employer’s locations—which meant the entire state was off limits, given the number of sites encompassed by this organization.
A candidate’s prospective employer expected him to drive up to six hours a day to cover remote locations—although this duty wasn’t stipulated in the contract.
A fellow lost an offer when she “negotiated” by forwarding to the practice manager a contract marked up by her attorney— including comments the attorney had meant for only the candidate to see.
These stories and more come from Andy Fadenholz of the neurology physician search firm Rosman Search, Inc. In his role as a neurology recruitment consultant, Fadenholz says he has spoken with a variety of physicians who “got burned” by not having a clear understanding of what their employment contract did or did not include. That’s a situation he tries to remedy by providing advice to candidates whenever possible. “My team and I do a lot of residency and fellowship education,” he says. “We give talks to go over different employment models, things to look for in a contract, how to interview—that first position out of training is important because it establishes your career. If you leave in a year or two, that’s always going to be on your CV and you’re always going to have to explain it.”
For the most part, Fadenholz believes difficult situations can be avoided by paying closer attention to the contract, conducting at least minimal research, and negotiating the most important issues before signing on. This is necessary, he says, even in today’s market, where neurologists are in high demand. “There are a lot of different aspects that determine how negotiable a contract is,” he notes. “In a geographic area that’s pretty saturated, or in a big academic center with renowned researchers, the salaries can be quite a bit lower.” While that figure won’t necessarily improve with negotiation, Fadenholz says an informed candidate can conduct a self-survey before committing, to ensure that being part of the research is a good trade-off with the compensation.
That self-survey can pay off in other ways as well—particularly when it’s paired with transparency. Fadenholz recalled the story of a candidate who had chosen a specific location because of the research they were conducting but was dismayed by the $148,000 salary. With children to support, student loans to repay, and a husband whose work was quite low-paying, she knew that she was not in a position to accept the salary as offered. “We advised her to explain her situation,” Fadenholz says, “and they ended up bumping the salary and offering a housing stipend.”
The type of organization can play a role in the offer as well. Fadenholz has been seeing that academic positions offer the lowest salaries, community hospitals offer the most, and private practices fall somewhere in the middle. That said, the initial salary tells only part of the story. Sometimes an offer is tied to a guarantee for the first year or two, before reverting to a production model that pays according to RVUs, or relative value units, which are used to measure a physician’s productivity. This might work well in a very busy setting but could create a decline in income in another situation. Talking with other physicians in the group and asking more questions of the employer are two steps a candidate can take to avoid an unpleasant surprise. Fadenholz recommends learning more about the organization as well, to understand things like patient wait time and whether it would be difficult to build up the volume needed to achieve one’s RVUs.
As important as it is, compensation is hardly the only thing to worry about in the employment contract. In addition to stipulating the duties, pay, and benefits, a contract may also contain a noncompete clause and other information relating to what happens if (and how) you leave the position. For example, the employer may demand more notice from the physician than the organization is required to give. “If you have to give a program notice of 60 or 90 days, which is common,” he says, “in turn, the program should have the same requirement for termination without cause. Because if they can terminate you with only 15-days’ notice, for example, then that three-year contract isn’t a three-year contract. It’s a 15-day contract.”
According to Fadenholz, what’s not written in the contract—what’s “silent”—is also a concern for physicians. “What have they not addressed that you need to be aware of?” he asks. “Are you going to have to travel to one of their locations if one of their neurologists leaves? One of our candidates was expected to drive two to six hours a day to cover practices in two states. There was nothing in the contract, but he was just expected to do it.”
If you’re starting to feel overwhelmed, that’s probably a good sign that you’re taking this seriously. After a decade or more of training and preparation to become a neurologist, now is hardly the time to lose focus. Even so, it doesn’t have to be daunting to get through the contract stage of the employment process. In addition to conducting the research noted earlier, Fadenholz recommends candidates follow a few basic steps. First and foremost, he wants physicians to “get very clear in their minds” about what’s non-negotiable to them, and to create a second list of things that aren’t deal-breakers, but which they’d like to change if possible. Then he wants candidates to pick up the phone rather than emailing their concerns, as he believes the process goes more smoothly in conversation. As a final step, he recommends the candidate use a contract attorney to review the agreement and clarify what each section means. Since so many contracts are created as part of an extensive internal process, Fadenholz cautions that the organization may resist making changes to the document itself—which means redlining and wordsmithing are less critical for the candidate to do. But adding amendments to the contract is a reasonable expectation that will have the same results when signed by both parties.
Contracts from the Organization’s Point of View
David A. Evans, MBA, is CEO of Texas Neurology and has overseen the development of dozens of employment contracts for the comprehensive neurology center. As the former chair of the AAN Practice Management and Technology Subcommittee, he also has guided the Academy’s outreach and information on the topic of contracts. Texas Neurology is a private practice that is 100-percent owned by physicians, employing a staff of 100, including 20 neurologists and APPs, working in three locations.
Because of the physician-ownership model, Evans says their employment contracts for neurologists are explicit about the group’s two-year path to become a partner or shareholder, including the duties and privileges that conveys, and what will be measured to determine progress to this goal. He advises candidates for private practice positions to ensure this information is made clear in their contracts. Talking to others who have recently achieved partnership and requiring the contract to include a timeline for when the candidate would be considered for partnership are additional recommendations. “We always have it at 12 months when you’d be told whether you’re being considered for partnership,” he explains. “We’ve found that it helps attract top-tier candidates when they know from the beginning what the partnership path looks like. We also put them in communication with the most recent partners so they can understand the process.”
Another condition Evans says his group makes explicit in its agreements is the pre-employment clause. “If you don’t have your state license because you’re relocating or you’re not credentialed with a majority of payers or Medicaid, we can’t use you on the day you start. It could be completely null and void. These things are essential to our practice so you can bill on day one, or see a patient in the hospital on day one.” By making this point clear in the contract, Evans says Texas Neurology has seen higher engagement with candidates in the months leading up to their first day of work, another bonus for creating a good start. In other situations where RVUs or a threshold to bonus may depend on maximizing each day’s work, Evans recommends candidates pay close attention to assure their starting date of employment is as closely aligned with their credentialing as possible, even if the contract allows 30 days to complete the process after coming on board.
In terms of the duties and call coverage, Evans advises candidates to request as many details as possible in order to understand the expectations. For example, is there a clear formula to determine call coverage? Will your call duty be based on others who are “similarly situated?” That is if you’re one of four headache specialists, but one of nine employed, non-partner neurologists, being counted as similarly situated would mean you share call with the nine, not the four—a big difference in terms of how many calls you end up taking. Close attention should be paid to the duties and obligations section of the agreement, Evans says, to clarify things like your ability to perform your subspecialty in the proportion you desire, your obligations for supporting general neurology or ancillary services, and related considerations.
As a strong advocate for transparency in the agreement stage, Evans also advises candidates to request what’s called a “pro forma process” in which they can sit down with someone from the organization to put sample numbers into a spreadsheet to help them understand what it will take on their part to reach the RVUs, bonuses, patient numbers, or other thresholds noted in the contract. This is especially important if incentive compensation is going to be offset with expenses—particularly if the expenses are uncapped. “If I was negotiating,” Evans says, “I would want to know those numbers and have them contractually controlled because I am not a partner, I am not in control of those costs. This lets the doctor focus on their productivity and things they absolutely can control. We want them to see how they can impact their numbers and ours, and we tell them, we need you to be whole by the end of the first year.”
Details, Details—Keeping It All Straight
There are many more clauses and points both Evans and Fadenholz can reel off that candidates should be aware of in their contracts— everything from contract renewals to patient assignment to professional liability and outside work could, and probably should, be covered in the initial employment agreement. And what about a pre-employment agreement? In cases where an employer is paying a fellow a stipend during training or is sponsoring the training itself, Fadenholz cautions candidates to understand what must be repaid if employment conditions aren’t met.
Although it would be cumbersome to include every detail in a contract, Evans recommends knowing your needs and goals well enough that you can keep your focus during the agreement process. “All of these things require a dialogue with the employer,” he says. “If it would be important enough that you would leave over it, then it needs to be in the agreement. If you feel comfortable with a handshake on some points, then look at how they’ve done it historically and make your decision. How important it is to you ethically, professionally, financially—these are the guides for whether you request it goes into the contract.”
Educating yourself is important but no amount of research is likely to prepare you to understand this document on your own. Instead, Evans and Fadenholz strongly advise you seek outside counsel in the form of an attorney who specializes in medical contracts. When coupled with your own research and self-survey of needs and goals, the attorney’s assistance will prepare you well for navigating the contract process.
And if you want to understand salaries in the field of neurology, you’re in luck: the AAN offers a free salary calculator tool exclusively for member residents and fellows. Based on recent information gathered from members who complete the Neurology Compensation and Productivity Survey, this tool can be accessed at https://www.aan.com/Account/Login?ReturnUrl=https://www.aan.com/salarycalculator.
Taking these steps will not only give you confidence, but it will help you establish good habits that benefit you throughout your career. As Fadenholz notes, “For the residents and fellows coming out of training, this is a very exciting time. But you have to do your due diligence. This is a relationship you want to go into with trust, and one that you want to last.”