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Physician Employment Contracts: More Than Just Salary and Bonus Thumbnail

Physician Employment Contracts: More Than Just Salary and Bonus

Receiving a new employment contract is an exciting life event. For established physicians, it signifies change and new opportunity, while for young physicians it also marks the culmination of years of schooling and training. Yet an employment contract can also be accompanied by feelings of uncertainty, as you want to ensure you aren’t overlooking anything when it comes to the details of your new opportunity.

While financial compensation receives the most attention, there are many other (often equally important) components of a physician employment contract. And although the amount of flexibility and bargaining power you have varies depending on your employment structure, location, and specialty, there are some key contract items that deserve your attention and understanding.

Job Description and Location

It sounds simplistic, but before signing a contract you should understand exactly what you will do, where you will work, and the hours you will work. Expectations should be clear regarding duties, number of patients and procedures, and work hours. In the current age of industry consolidation and multiple locations for providers, it may be beneficial to include specific addresses for the locations where you will work. A merger or acquisition that results in your organization adding a new location an hour across town can have a material impact on your daily schedule and quality of life. Furthermore, the employer should not have the power to unilaterally change the practice location. Instead, prior mutual agreement of both parties should be required before any practice location changes are implemented.


The value of non-financial benefits is often underappreciated because it is less tangible, but benefits are a key component of the total compensation package. Pay attention to insurance coverage (health, dental, vision, malpractice, and disability), professional membership dues, CME reimbursement, vacation and sick leave, maternity/paternity leave, retirement plans, disability insurance, student loan repayment, signing bonuses, retention bonuses, and relocation expense reimbursement.

Non-Compete Clauses

Many contracts have terms that limit your ability to work in the geographic area, should you leave your employer. The enforcement of non-compete clauses varies by state, but it’s important to understand the details, notably the duration of the clause and its geographic coverage. The more specialized you are, the wider the geographic area will be, but ideally, it’s good to limit non-compete clauses to no more than a few miles from your work site and no more than 1-2 years after you leave.


This is one of those “soft” items, but one that should not be underestimated. The culture of your work environment can be the difference between whether you look forward to, or dread, going to work each day. Joining a group of colleagues who share your values, principles, and view of the profession can elevate your work experience (and vice versa).

Method for Calculating Bonus

There are different ways of measuring productivity and calculating bonus payments (% of billings, % of collections, RVUs) so be aware of the specific methodology. Keep in mind the attractiveness of different bonus structures varies depending on where you are in your career. For younger doctors with production-based contracts, it’s important to understand how patients are assigned within the organization, since low patient volume can negatively impact doctors on this type of bonus model.

Call Hours

Contracts can be ambiguous regarding the details of call expectations. Since your call schedule has a huge impact on your lifestyle, it’s important to understand how hours are split within the organization. Ideally, your employer or group has a straightforward, fair, and well-documented process for divvying up call. If not, you should ask for clarity in your contract.

Outside Activities

Some physicians choose to pursue income-generating activities outside of primary employment. Employment contracts vary regarding what is allowed for such activities and who keeps the income. Before spending time or effort on such pursuits, be sure your employer is giving you the green light.

What Happens if You Leave

Nearly half of physicians leave their job after their first contract is up, so it’s important to understand what obligation, if any, you have when leaving on your own terms. Specifically, know whether you are required to pay back any part of signing bonus, relocation bonus, employer-provided student loan forgiveness, or income guarantees that were included in the contract.

Tail Coverage

Malpractice insurance is a massive cost in the profession. There are two types of coverage:

1) Occurrence – Provides coverage for incidents that happened during the policy year, regardless of when the claim is reported to the carrier.

2) Claims-Made – Provides coverage for incidents that happened during the policy period and were reported as a claim while the policy remained in force. Often, the insurance contract terminates when employment terminates, and claims filed after the policy is no longer effective must be managed through a “tail” policy.

Given the cost of premiums, it’s important to understand what party is obligated to pay for tail coverage. If you leave on your own terms or are terminated for cause, you will probably pay for the coverage yourself. However, assuming it isn’t already included in the contract, it might make sense to negotiate for the employer to pay for tail coverage if you are terminated without cause or if you terminate for cause.


While few people enjoy poring over the details of employment contracts, those details matter. Contracts are much more than just what you will be paid for the work you do. If you plan to negotiate any aspects of the contract, prioritize your key items and aim for “win-win” scenarios that are acceptable for both you and the employer. And if you don’t feel comfortable interpreting your contract on your own, consider hiring a third party (such as a qualified healthcare attorney) to review it. Remember, the words included in the tens of pages of a typical employment contract go a long way in dictating your quality of life and lifestyle during the duration of the contract, and even beyond.


About MD Wealth Management: We are an Ann Arbor financial planner that specializes in providing financial planning for physicians and retirees. We are CERTIFIED FINANCIAL PLANNER™ professionals and fiduciary financial advisors who operate on a fee-only basis, which means we do not sell financial products or collect commissions. As an Ann Arbor financial advisor, we enjoy working with clients both locally and remotely.