The art of the deal: How to negotiate employment contracts

February 25, 2016

When husband and wife Mark Christensen, MD, andHeidi Christensen, MD, decided to leave their practices in Redlands, California, for a smaller practice out of state, they knew it was going to get complicated.

When husband and wife Mark Christensen, MD, and Heidi Christensen, MD, decided to leave their practices in Redlands, California, for a smaller practice out of state, they knew it was going to get complicated.

Mark, a family physician with Kaiser Permanente, and Heidi, an emergency department doctor, were looking for a specific situation. They wanted to work for the same employer. Heidi wanted to go part-time in the ED while Mark continued working full time. However, both wanted to be able to spend some hours practicing sports medicine, a specialty they hope becomes full time someday.
Castle Rock Adventist Hospital in Castle Rock, Colorado, south of Denver, was interested in hiring the Christensens, but the mid-30s couple knew they needed help negotiating contracts.
“It was much different than my Kaiser contract,” Mark says. “In medicine, half of [your work] is knowing the language. It’s the same thing with contracts. There are a lot of words in the paperwork - what do they all mean?”
So the couple hired Resolve Physician Agency of Columbia, Missouri, to negotiate the contracts with Centura Health, owner of Castle Rock Adventist. Resolve vice president Kyle Claussen, JD, was invaluable in clarifying the language and terms of the eventual three-year contracts the couple signed, says Mark Christensen.
With Claussen’s prompting, Christensen even asked for a signing bonus. “I got a big chunk of money I wasn’t getting before,” Mark says...

 



1/ Why and when you need a lawyer
Physicians are used to calling the shots in patient treatment and diagnosis, but that doesn’t mean they’re prepared to negotiate employment contracts. At minimum, physicians should hire an attorney to review a contract before signing anything. And not just any attorney, but one experienced in healthcare employment contracts.
When attorney Claussen addresses residency programs he asks for a show of hands from those who are confident in their ability to understand and, if necessary, negotiate an employment contract. Few hands are raised. “An overwhelming number of residents get zero training on this. They’re not being taught,” he says.
And the stakes are high. A typical contract lasts from two to three years and dictates a great deal of a physician’s life, including compensation, benefits, vacation, location, on-call hours etc. And the typical contract can be renewed automatically, meaning bad terms can be hard to get out from under.
Still, that doesn’t mean physicians always need a lawyer at the table as primary negotiator, says Roderick Holloman, JD, of The Holloman Law Group in Washington, D.C.. He says it’s simpler and less expensive to have an attorney in the background, reviewing language and offering advice, but once a physician gets a legal assistance, the employer will likely do the same.
In particular, physicians joining a small practice also should be careful about negotiating through an attorney because it can cause distrust and hard feelings, Holloman says.
But that doesn’t mean settling for handshake deals and agreements in principle, he says: “It all boils down to what’s in the contract. If it’s not in writing, it’s not real.”

 



2/ Who’s got leverage?
The amount of wiggle room physicians have to negotiate contracts depends on a number of factors, including location, specialty,  practice size and whether the employer is a hospital, healthcare system, academic institution or other, he says.
It all boils down to supply-level economics,” says Holloman, who has been working with physicians since 2005, when he helped his interventional cardiologist wife negotiate a contract.


However, larger healthcare systems prefer to use standardized contracts for primary care physicians and hospitalists. That’s even more so with prestigious hospitals such as the Mayo Clinic or Cleveland Clinic, which don’t have to make concessions to attract physicians.
Health care systems know Medicare and Medicaid reimbursement formulas and how much they can expect to earn from a physician and are not going to put themselves at a financial disadvantage.
However, specialists and subspecialists can have an edge, as do those willing to stay in or relocate to an underserved area. For example, a family practitioner willing to work in rural Nebraska is in a stronger negotiating position than his counterpart in suburban Boston.
Negotiating with more than one employer can also help. “The general rule is the doctor has the leverage if they still have plans B and C,” Claussen says.
While there might not be much room to negotiate pay and benefits, there is sometimes more leeway with scheduling, hours on call, number of days, office locations, etc. Sometimes, employers are even willing to pay signing bonuses, cover relocation costs, or repay medical school loans.

 



3/ Negotiating the end
It’s only natural when signing a new contract to focus solely on the (hopefully) happy relationship ahead, but that can be a mistake, Holloman says, adding, “New employment is a lot like marriage. When entering into marriage, you rarely think about divorce.”
Yet physicians, particularly younger ones should never lose sight of the fact that they probably will leave the new job eventually. Holloman likes to remind clients that the standard contract contains a 90-day termination without cause clause, meaning physicians actually are working under rotating three-month contracts.
Among the end-of-employment items to consider in the contract are malpractice insurance tail coverage, non-compete clauses, repayment of signing bonuses or relocation costs, and how collections will be distributed after a physician’s departure.

 



4/ Renewals and consolidations
Renegotiating contracts, whether mid-term or at time of renewal, is tricky. Most contracts renew automatically at the end of their two or three-year terms. Many employers refuse to negotiate mid-term and are reluctant to change much during renewals. However, employers also know repeatedly refusing to renegotiate usually means losing the physician.
Bringing an attorney in to negotiate mid-term or upon renewal can sometimes bring about the end of the relationship, according to the attorneys.
Physicians also should consult an attorney if their practice is acquired or merges with another. While contracts generally are honored after the transition, new employers typically want to get their new employees on their own contracts as soon as possible and can use the 90-day termination clause.
While there always will be physicians who go it alone on employment contracts, a growing number realize the value of having an attorney involved, Claussen says.
“They know what they don’t know and want help,” he says.  

Editor’s note: This is the first part of a three part series on negotiating contracts. Stay tuned for the next installment in March.