Negotiating Physician Employment Contracts: Attitude Is Everything

I had a very unpleasant phone call this morning with a lawyer representing a young resident taking his first job in Chicago. This lawyer was a litigator and cousin of the physician. He had no prior experience with a physician contract.

While I represent many physician practices, I also work with residents and fellows from across the country to review their employment agreements. As such, I have been on both sides of the employment contract equation numerous times.

Although I could offer valuable advice on the terms of an employment agreement, what is equally valuable (but not often discussed) is the appropriate conduct of physicians and medical practices (as well as their representatives) when negotiating employment contracts.

The following are some items to consider:

1. Find a lawyer familiar with physician contracts. It’s worth the time and expense to get proper advice and a quality contract. Your real estate lawyer may not be the right person for the job, no matter how great his rates may be. Whether you are the employer or the employee, you need a representative who will ask the right questions and seek out the most protective language so as to avoid future misunderstanding and litigation.

2. Decide how you want the lawyer, consultant, or practice manager to handle negotiations and express your wishes. Negotiations go more easily and quickly when parties seek an efficient and fair resolution to issues. An overly aggressive or hostile lawyer, for example, who demands what they want at all costs, is not well suited to negotiations and is a poor representative of your interests. Contract negotiations should not be personal. Sometimes you get everything you want and sometimes you do not. In my opinion, a lawyer or consultant has done his or her job when they help their client to understand the contract terms, focus on the real issues, communicate the need (or denial) for the requested changes in a professional manner to the other side, and help the parties reach as amicable a conclusion as possible.

3. Sometimes it’s easier to fight over deal points than it is to compromise. For example there are certain parts of a contract that are going to seem unfair to a physician joining a practice, but no matter what your hear, in most states restrictive covenants are enforceable when properly drafted, tail coverage is typically paid for by a terminated physician, and partnership is often not mentioned in the contract at all. Arguing over the legitimacy of these basic physician contract provisions distracts from the negotiating that can be done: What if the covenant applies only if the physician quits or is terminated with cause? What if the tail is paid by the practice if the associate stays for a certain length of time? What if the parties agree to discuss partnership by a certain date? Many significant issues can be compromised in some cordial manner.

4. Practices should pay attention to criticisms of their contract. Your agreement may have served you well for many years, but is it outdated? Inaccurate? A contract should be updated regularly to remain competitive and to minimize liability. Make sure your advisors share all comments from opposing counsel with you and consider them carefully before refusing changes. A fantastic surgeon you want to recruit for your group is not going to sign a contract her lawyer reports is poorly drafted and uncompetitive unless changes are made.

Remember that tough negotiations can leave a bad taste for all parties long after the contracts are signed. I have had groups retract an offer and physicians look for another position as a result of negotiation tactics, even when the personalities were otherwise a great fit. The manner in which a contract is handled can set the tone for the parties’ entire relationship.

Physician practices are like marriages. You join a practice hoping to have a long-term connection and to spend a career working together. Like any marriage, however, it’s important to enter into the relationship thoughtfully, with flexibility and some humility. Contract negotiations can tell you a lot about whether there’s a divorce or a golden anniversary in your future.

For more from Ericka L. Adler and our other Practice Notes bloggers, click here.