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Physician Contract Negotiations: Red Flags To Look for and Avoid in an Employment Agreement

They don’t teach contract negotiations in medical school, residency, or fellowship, but they should. One of the most common contributors to physician burnout and detractors from physician career longevity can be job stress or unhappiness resulting from contractual obligations or clauses that may be unfair or unreasonable. We have an entire series on physician contract negotiations and one on physician compensation data, including dedicated articles on things like noncompete clauses, termination clauses, signing bonuses, letters of intent, RVU based contracts, and more. Here, we’ll do an overview of the most common things we see as red flags in physician contracts that lead to issues down the road based on what we’ve seen on our physician communities. Some of them may not be readily obvious as issues or issues your contract attorney may hone in on, so we want to make sure you look carefully at not just the most commonly discussed aspects of physician contracts, but things that are often excluded from physician contracts that you should ask to be included.  


Disclaimer: Please do your own due diligence before making decisions based on this page. Nothing on this page constitutes formal or personalized legal advice. Laws vary based on location and while this information is accurate to the best of our knowledge, it may not be up to date or apply in your location.  We are not formal financial, legal, or tax professionals, and you should consult these as appropriate. To learn more, visit our disclaimers and disclosures.


15 common contract red flags doctors should look out for in a physician employment agreement


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15 red flags physicians should look for in contracts and during negotiations


Although every physician will have different deal breakers, there are certain things that after past threads on our physician communities, we feel strongly that most physicians should look at within their contracts. 


Some of these things may be things your employer has never put in a contract, and they may be hesitant to commit to something. Pay attention to your spidey senses in terms of how they react to reasonable requests and what effort they make to accommodate your requests or address your concerns. The way that you are treated during a contract negotiation sets the stage for how you will be treated as an employee.


We hope this list of red flags to look out for will help you negotiate the best contract possible. As always, have your contract reviewed by a contract attorney that specializes in physicians.



Unclear hours and no set maximum amount of call


While most physician contracts will specify a minimum amount of hours worked, most will not specify a maximum number of hours worked. Traditionally, doctors just worked as much as they had to to get the job done. However, these days, as administrators push to get more productivity from physicians, it’s more important to set reasonable boundaries. Specifying how long a clinic day is and what days you work can be important to prevent you from a new requirement to staff a Saturday clinic. To the extent possible, define hours and responsibilities within a contract.


Many contracts have vague wording about call requirements that just say things like “call will be distributed evenly amongst the call pool,” or “call will be assigned per our standard procedures.” You want the wording on call to be as specific as possible about what the maximum you can be required to be on call is. While the call pool may consist of 5 people when you join and you assume you will be q5, you may find out that 1 person retires, 1 person leaves, and another elects their option to opt out of call, leaving you at q2 until more people are hired. While most physicians want to and will help out in these situations, you don’t want to get taken advantage of either, or have a situation that leads to you burning out. Ask for a maximum frequency of call to be specified within your call responsibilities. You could also add a line that says something like, “If call needs increase, this frequency could be increased pending a mutually acceptable and agreed upon solution by both parties.” This leaves the door for you to negotiate more pay per call night, more vacation time to reflect the extra work, or another form of compensation for the increased workload. It will also incentivize them to make sure they find you a replacement for the call pool or hire a locums physician as soon as possible.

 

Access our free on call information and negotiation database to see how often doctors go in for on call work and additional information regarding on call, such as whether call is mandatory and if physicians get paid for call.



Unclear delineation of sites you can be asked to work at


Again, as these hospital systems get bigger and add more practices, physicians are being asked to provide more and more coverage. If your hospital system buys another hospital that is two hours away, you don’t want to be responsible for providing call coverage there two weekends a month. You also may not want to have to round at five different hospitals on the weekend when you were only expecting to round at the one that you see patients at. Make sure your contract specifies specifically which locations you will hold privileges and provide services in.



Unclear supervision responsibilities or requirements to supervise non-physicians


These days, more and more physicians are being asked to supervise other non-physician members of the medical team. This has led to a lot of concerns amongst physicians about liability, the extra burden of supervising somebody else’s work and having to sign off on their notes, and otherwise, especially as the time to adequately supervise somebody isn’t always possible with how busy a physician’s own schedule is. If you don’t have a clear clause in your contract about supervising NPs and PAs, you should ask for one that reflects what you are comfortable with. Nobody should ever force you to use your medical license in a way that you are not comfortable with. This section should include how many non-physicians you could be asked to supervise, what your say in who you supervise is and whether you can participate in hiring and firing decisions, and what your compensation will be if asked to take on extra responsibility. And if you know for sure you won’t do it, have your contract say that clearly. At some institutions, this may cost you the job, but you’d rather find that out now than when you’re being pressured to do something you’re not comfortable with.



Requiring permission for or restricting side gig work


As you know, we are big fans of physician side gigs. If you are too or think you might become one, make sure that your contract doesn’t restrict you from engaging in them. While many jobs will (rightfully) exclude you from engaging in other work during work hours, many physicians feel that their time outside of work is theirs and they should be able to do what they like. Academic contracts can be particularly restrictive in this vein, laying rights to your earnings or requiring that you ask permission for any activity. Make sure that your intellectual property outside of work is your own. Other jobs may outright forbid other work as a physician. Read this clause carefully and ask for any restrictions you’re not okay with to be taken out. Side gigs can give you the leverage to walk away from a bad situation as well as expedite your pathway to financial independence, so you don’t want others telling you you can’t engage in them if you have the time, energy, and desire to do so.


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Unclear/unreasonable productivity or RVU requirements


Compensation is a very difficult topic for many physicians, who have been taught to be great clinicians, but very little about the business of medicine. As such, when told that they have to produce a certain amount of RVUs or bring in a certain amount of collections, they have no context for what is reasonable. Many contracts these days will penalize you for not hitting certain RVU thresholds, whether or not they are reasonable to begin with. Ask to see how many RVUs others in your position generated during their first year on the job and how many the current physicians average to get a sense for how reasonable your thresholds are before agreeing to them. Also make sure you check our physician salary and negotiation databases for information on what others in your field are expected to do.




Lack of clarity about pay, bonuses, PTO, and benefits


Your contract should also be very clear about how your compensation and/or bonuses are calculated, and when you will be paid. If there are reasons why they can withhold payments, they should be spelled out clearly. Be careful for example about things that allow withholding for incomplete documentation - we have heard of someone where the employer just kept finding ‘incomplete’ charts that needed to be reviewed. 


The employer should commit to providing you with a transparent means of tracking your RVUs or productivity. If bonuses or other compensation is contingent on performance measures or other subjective measures, you should make sure those are also spelled out as clearly as possible.


The contract should specify what happens with unused PTO, under what conditions the employer can decline your PTO requests, and how the PTO accumulates and carries over from year to year. 


While you may hear vague comments about the benefits package, make sure you read the fine print in the contract. When are you eligible for retirement accounts? Is there employer matching and is it required? How soon after you start are you eligible for health insurance? Who pays premiums on things like employer sponsored disability and life insurance? These are all big parts of a compensation package, so you want to make sure you understand exactly what you’re owed.



Clauses for unilateral change to compensation


Not infrequently, we see posts on our physician communities from physicians who’ve been told that they are going to get paid less per RVU or that their compensation structure is otherwise changing to the detriment of their earning potential. While there are certainly cases in which compensation calculations can need to be reconsidered, this should not be able to be made unilaterally. Ask that any changes to compensation structure or values require mutual agreement and an addendum to the contract.



Items negotiated but not included in the written contract


There is a lot that is said during the negotiations process, and that doctors accordingly make plans based on. However, sometimes these things don’t make it to the contract, either intentionally or unintentionally. 


It is prudent in these situations to ask about the employer to put these things in writing in your contract. Remember that if it’s not in the contract, it will be difficult to enforce. While somebody may verbally promise something, you need proof, and if for some reason they change jobs, a new person may not honor it.


So whether you asked to be able to end some days early, to have a budget to decorate your office, or for a monthly parking pass - make sure it’s in writing.




One-sided or vague termination clause


Employers are quick to include all the ways that they can get out of a contract if they’re unhappy, but often won’t offer you the same consideration. They may say that they can terminate you at any time for any reason, whereas you have to give 6 months notice, pay back your signing bonus, and pay for your tail insurance. You’re going to want to make sure that whatever you sign is fair and protects you from being terminated without reason, as well as covers your expenses for tail insurance or disputes. Talk about this one with your physician contract attorney, as they’ve likely seen lots of situations where physicians had no rights because they signed a contract with an unfair termination clause.


At minimum, the clause should include how much notice each side should give when terminating without cause, who is allowed to terminate the contract for cause and with what specific reasons, who pays for tail insurance, and whether the noncompete clause will apply depending on the circumstances. Please do not sign anything that says that you can be terminated without cause for any reason without substantial notice, or that you can be terminated with cause for vague reasons. Being able to terminate you because of concerns about conduct or reputation without a fair hearing makes you very vulnerable.


A special consideration here is a nondisparagement clause. We’ve seen several physicians terminated with cause for saying something negative about their employer. Be careful about signing a contract that includes one of these, as it can significantly limit your ability to speak up about issues in your workplace without fear of retaliation.


Another special consideration is asking them to waive their right to terminate you once you give notice that you are going to leave. Some contracts include a clause that says that you can be terminated without cause and without pay after giving notice. This is extremely unfair.




Unreasonable noncompete clause


One of the biggest ways physicians hurt themselves in contract negotiations is by signing an unreasonable noncompete clause that makes it extremely difficult to leave a bad job or take a job that’s a better fit if you are geographically restricted to a certain area. While most physicians hopefully take jobs that they can see themselves staying in, the truth is that especially with rapid changes in the healthcare macroenvironment, many physicians find that a job that may have seemed ideal when they first took it is not always the right fit for their whole career, which can significantly contribute to physician burnout and detract from career longevity. It also dramatically decreases the leverage you have at the negotiating table in the future, because the employer knows how hard it will be for you to leave.


While the recommendation is always to get rid of the noncompete clause if you can, not all employers will give in on this. If they don’t and you still want the job, make sure you negotiate it down to something that is reasonable.


Along these lines, make sure that the noncompete clause has the smallest radius possible, ideally just from the location that you primarily work at. If it’s a large hospital system with 200 different locations throughout the state, saying that you can’t work 15 miles from any of them could pose a large problem and significantly limit your ability to work elsewhere without having to move very far away.



By the way, it’s important to note that while you may hear that the FTC banned noncompetes in a ruling in early 2024, it was subsequently blocked. While they may appeal it, for the time being, you should assume that noncompetes are fully enforceable. Read more about the FTC ban on noncompetes and updates.



Lack of tail insurance or unclear about how malpractice insurance is covered


For those with claims made malpractice insurance policies at work, when you leave, you will require tail insurance, which can be very expensive. In residency or fellowship, you likely had an occurrence based policy and never learned about the importance of tail insurance, and may not even notice this line in the contract. However, tail insurance can be several tens of thousands of dollars, and the last thing you want is to have to pay for it if you’re terminated by your employer without cause or if you find another job that’s a better fit after a few years. Ask for them to pay for your tail insurance. Some employers may say you are responsible for it under certain circumstances to limit their own risk, but make sure those circumstances are reasonable. This will often be in your termination clause as well.


Similarly, while we see this less often, some contracts will not specify who pays for the malpractice insurance, particularly in more independent contractor type arrangements. Make sure you verify that malpractice insurance is included if you are an employee, and understand who’s paying or getting reimbursed if not. You don’t want to realize you’re not covered.




Overly broad non-solicitation clauses


While most practices and employers won’t let you take your patients or employees with you when you leave a job, some contracts will specify that you can’t even treat patients that you had seen at their practice in the past, regardless of whether you reached out to them or not. Work with your physician employment attorney to make sure that this clause is reasonable.



Assignment clauses


As consolidation and mergers and acquisitions in the healthcare space increase, this is a clause that is showing up in more and more contracts, and can be very problematic for employed physicians. These clauses say that the employer can assign the contract to another entity - but you may not want to work for that other entity. For example, if a private equity group buys your private practice or your small group is acquired by a large corporate entity or hospital system, you may not want to stay there. Since the job itself will be fundamentally changed, you will want to be able to get out of the contract without being held to your noncompete or having to pay for your tail insurance.




Subjective start dates that can be delayed


These days, licensing and credentialing can be a total nightmare. While you have your responsibility in getting these taken care of expeditiously, if you are not able to see patients on the date that you are supposed to start due to delays on the employer’s side, you should not be held responsible for that. While you want to be reasonable and understanding about delays, you have also made a move and have bills to pay. Therefore, do not allow a clause that says that delays in credentialing with insurance companies or hospital systems can delay your start date, provided that you submitted all your materials in on time according to the timeline they specify. This will incentivize them to move quickly on their side as well. 



No mention of what happens to accounts receivable or bonuses upon termination 


We often see posts from physicians who feel they have money owed to them after they leave, but whose contracts say otherwise. It’s important to specify in the contract what happens with accounts receivable and bonuses after you leave, especially if a large part of your compensation is paid out in the form of bonuses. Similarly, if you happen to be a partner, you’re going to want to make sure that the buyout process is specified in detail.



Conclusion


As you can see, there’s a lot of room for subjectivity in physician contracts, and many of the grey zones can fall in the favor of the employer. Take note of the things physicians have found unfair in their contracts and remember them when you are signing a new contract. Always have an experienced set of legal eyes look at the contract, and specifically use a contract review attorney that is used to dealing with physician contracts. They will have experience to know what pitfalls physician contracts often have and which employers tend to have more problematic causes in your area. Even identifying and changing one thing is likely to pay off the cost of the contract review with dividends in regards to money, stress, burnout, or otherwise.  



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