Well-Designed Physician Employment Contracts:Save Time, Money, and Frustration

By Martin H. Osinski and Michael J. Kirschner

One of the last stages in the physician recruitment process is presenting the contract to the qualified candidate. This step should be a formality and many organizations have mastered this stage. However, for some organizations it becomes a major obstacle. If a top quality candidate is lost at this period of the process, it becomes demoralizing. A well-designed contract can save significant time, money and avoid massive frustrations.

This article provides suggestions in designing a successful physician employment contract.

Time Period of Contract/Employment
Typically, the contract will be for one or two years. If there is a partnership option, it would be offered after the end of the contract. Long term or multi-year contracts (of five years or more) could be attractive if there is no partnership option.

Financial Compensation and Benefit Package
Make sure your compensation is competitive. Review current studies published by national organizations or search firms to ensure that you are offering a competitive compensation package for your region. Packages normally include malpractice coverage, healthcare for family, vacation, continuing medical education, office rent, incentives and bonuses. Explain how the bonuses or incentives would work in general terms or by an equation. If you are working with a professional consultant/recruiter, get their advice. An inappropriate compensation package will only cause frustration and waste everyone's time. Remember, in order to attract a quality physician, it must be competitive.

Contract
Although the restrictive covenant clause is a standard item in the contract for a private practice, determine your purpose for the restrictive covenant. It should be a "reasonable" way for a practice to be protected for a specific period of time. The practice should decide if a physician leaves the practice and wants to practice elsewhere, what geographic region would the physician impact their practice. This radius may range from three to twenty five miles, depending upon the demographics of the area. It also can be acceptable to allow the new physician to practice in the immediate area with a specific financial payment. The practice should evaluate the financial impact if the new physician practiced in the area. Financial payments range from $25,000 and up. Although, it has been said this clause may not be supported in some states within their legal system. A reasonable clause stands a better chance of being supported in any location.

Termination
The termination clause tends to be a debatable issue since there are few right or wrong answers. Many of the decisions are preferences of the practice. The key areas that surface are termination with cause and without cause. Legal advisor typically recommend to be vague and not too specific since it may box you in and could make it difficult to terminate a physician who is truly hurting the practice. However, the problem with this approach, from the candidate's perspective is that it could be used as an excuse to not offer partnership. Some candidates feel that this could be a tactic by some practices to never offer partnership and perhaps they never had intentions. An approach to solve this concern is to not enforce the restrictive covenant if termination is without cause. This would show the practice's true support. It would be suggested to allow 90 days notice for both the employee and employment regarding termination.

General Verbiage
Vague verbiage in a contract could be just as damaging toward losing a candidate as any dispute with a clause. Terms such as sole discretion, may not be an option, could fluctuate, or have option to change cause concern for most quality candidates. These terms decrease the credibility of the contract.

Conclusion
When you finish designing the contract, ask yourself if you would sign that contract, if you were that candidate. A poorly designed contract with unrealistic terms will cause you to lose the candidate, waste money, and increase frustrations. Designing a fair contract builds credibility, trust and sincerity. This process should be the foundation of a long-term successful professional relationship.