Physicians entering new employment agreements tend to focus on the "big ticket items," such as compensation, hours to be worked, partnership opportunity and signing bonus. My advice, is that physicians also need to immediately focus on their exit strategy. Here are some things to consider.
How can the agreement be terminated?
Most physician contracts can be terminated without cause on 90-120 days' notice. I typically object to contracts that require less (without cause) notice as it can take a significant amount of time for a physician to interview, become credentialed, and potentially apply for a license in another state. Physicians should consider their geography, specialty and how long they can afford to live without income in evaluating a notice provision.
Many contracts also lock physicians in for a certain amount of time, sometimes two or three years. This may be because the physician was difficult to recruit and will take years to replace, or the commitment is linked to earning forgiveness related to a signing bonus or other amounts.
Physicians are often attracted to such contracts for job security and financial benefits offered, but do not think through the termination issues. Leaving a job where you have become unhappy, are poorly treated, or due to a change in family situation may become impossible under such provisions. Physicians who do leave will be in breach of the agreement and potentially liable for repayment of significant amounts. These types of long term commitments should be carefully considered.
Evaluate Your Compensation
When evaluating compensation, it is important to focus on termination provisions. A contract where a physician is paid purely on productivity should contain a "run-out" provision where the physician continues to be paid for some period of time following termination. Where a physician receives a base salary with a bonus based on productivity, RVUs or some other incentive formula, physicians must watch the termination language for requirements to be present on a certain date to earn such bonus. When a physician's bonus/incentive compensation represents a large portion of their compensation package, such language can be problematic.
I like to insist the bonus be pro-rated through the date of termination regardless of the reason for termination. At a minimum, the bonus should not be lost unless the physician has been terminated for cause by the employer. Physicians should also pay close attention to language that allows an employer to prevent a physician from working during a notice period. The language of the employment agreement should address how productivity and/or bonus compensation will be computed under such circumstances.
