Physician employment agreements can contain important terms that are easy to overlook, particularly when a physician is focused on a new position or practice opportunity. One common mistake is failing to carefully review the compensation provisions. Physicians should understand not only their base salary, but also how bonuses, productivity incentives, call pay, benefits, and expense reimbursements are calculated and paid. Compensation formulas that rely on productivity metrics, such as relative value units (RVUs), should be clearly defined, including the applicable measurement period and any adjustments or deductions.
Another frequent mistake is overlooking restrictive covenants, including non-compete provisions, as well as termination provisions. Non-compete, non-solicitation, confidentiality, and intellectual property clauses can significantly affect a physician’s options after leaving a practice, while termination provisions determine how and when the employment relationship can end. Physicians should pay close attention to notice requirements, termination without cause, termination for cause, repayment or “clawback” obligations for retention bonuses previously paid, and what happens to bonuses or other compensation after termination.
The agreement should also clearly address malpractice insurance, including whether coverage is claims-made or occurrence-based and who is responsible for any required tail coverage. An occurrence-based malpractice insurance policy provides coverage for acts that occur during the policy period, regardless of when the claim is filed. In contrast, a claims-made policy generally provides coverage only for claims made while the policy remains active. To address potential coverage gaps when a physician is no longer employed, insurers offer supplemental insurance, commonly referred to as tail coverage.
Finally, physicians sometimes assume that verbal promises or recruiting discussions will automatically become part of the employment relationship. That is not necessarily the case. Important representations about partnership opportunities, future compensation increases, ownership interests, clinical responsibilities, administrative duties, or schedule expectations should be reflected in the written agreement or an incorporated document.
Physicians should also review provisions concerning benefits, paid time off, credentialing, licensure, professional expenses, and dispute resolution. Often, these provisions are contained in the employer’s general employee handbook or other policies, which should be reviewed along with the summary of benefits. Because employment agreements can have significant financial and professional consequences, physicians should consider having the agreement reviewed by an attorney experienced in physician employment matters before signing.
