This Q&A section is from a webinar done with Matt Wiggins and Roderick Holloman. A shortened version of these questions has been edited for your convenience.
Roderick Holloman, Founder and Principal of The Holloman Law Group
Matt Wiggins, Partner and Founder, Pattern Financial Consultancy
Who is the best person to negotiate contracts with?
Roderick: Whomever the employer designates is the best person to start with, because that allows the employer to be as comfortable as possible in the negotiation.
You very well could wind up negotiating with someone who doesn’t have the authority to bind the employer to the terms. This is common with recruiters, where they really just want the deal to close so that they can receive whatever commission is tied to the deal closing!
So they may promise the physician "well yeah, we can do this, we can do that" but then when it actually comes down to it they don't have authority to bind the employer.
Do you always recommend having a lawyer review your contract, or is an experienced mentor sufficient?
Roderick: When you get into a physician contract, because of the amount of compensation we're talking about and the size of practices in hospitals, missing even the smallest detail can add up to thousands to hundreds of thousands of dollars in lost compensation or benefits.
So it's those little things that can be missed by someone who's not an attorney, who doesn't review contracts every day, that can be a big deal.
I would make sure that, as best as possible, not a single detail slips through the cracks. Mistakes early in your career can exponentiate or exacerbate the problems that you have right now.
Because if you have debt without a lot of savings built up and add to that a financial mistake on your contract that you're penalized for, it just can really set you back in a big way early on. So I would absolutely recommend having an experienced physician contract attorney look at your contract.
What are the differences between academic and private practice contracts?
Roderick: Academic contracts are usually somewhat abbreviated, in that a physician will receive a, say, five-page or less contract that will reference the standard terms and conditions applicable to employees of the medical center or university system-wide.
So for those considering academic positions, there are fewer items that are actually negotiable, because the hospital system utilizes a standard contract for all of their faculty, like their medical faculty. Those things that should still be negotiated would include the compensation and more importantly the schedule.
Particularly if a physician has certain research objectives or clinical objectives, those need to be addressed in the contract with some specificity because with the academic contracts usually the physician schedule is determined by the chair of the department.
But if it's left there the physician is walking in without the assurances in writing that they may need, especially if the chair when they sign the contract is not the chair when actual employment commences. That could be a problem.
Should I expect to have a contract with no options with a J1 waiver?
Roderick: With the J1 contracts, it's not stripped down. It's actually beefed up. Because for the J1 contract to pass, the contract has to specify practice location and that the compensation always has to be a fair market value so as to safeguard against abuse.
It also has to specify that the physician will practice in an underserved area and, depending upon the state, it would also stipulate that the contract cannot be terminated without cause during the first three years.
So with those J1 contracts, if it's a contract that cannot be terminated without cause during that three-year period then the physician certainly needs there to be some specificity with the schedule and the duties, because once you sign it you're locked in.
What is a good resource to determine the average pay per location and specialty?
Roderick: Utilize MGMA's data dive. They're your most comprehensive offering.
Where are they the most strict and the most relaxed when enforcing non-competes?
Roderick: In California, Massachusetts, Connecticut, and Oklahoma they’re not enforceable. Illinois second district i.ee Chicago they're not enforceable if the employment ends within the first two years. In Louisiana, they have to be specified by a parish in order to be enforceable. In Texas, in order to be enforceable, they have to contain a buyout clause. If the physician is not offered the opportunity to buy out the non-compete it's unenforceable.
Are we able to negotiate max hours and overtime pay?
Roderick: Well, it would depend on if the question was coming from a hospitalist or ER doctor, then they would be working shifts, so naturally if they are working more shifts then the additional shift rate should apply.
However, if you're a specialist or a sub-specialist in a clinical setting situation you want to place parameters on what your anticipated schedule will be. For example, Monday through Friday, starting at approximately 8:00 a.m. and ending at approximately 5:00 p.m. or 6:00 p.m., or something like that on average.
And even if there's one late day like a Thursday where the clinic is open late, specify that in the contract but you can have it say that there are no weekend hours unless mutually agreed-upon.
If there's additional call that's required, placing a cap on call is something that's very popular with specialties where the call can be onerous like OBGYNs where they want to say, look we're not going to do more than a Q5 frequency or something like that, unless we receive the additional call compensation rate or whatever that rate may be, but it's usually supposed to be specified in the contract.
Does tort law mean the same as tail coverage?
Roderick: No. So tail coverage is a form of insurance and so actually it's a colloquialism. Tail coverage is technically considered an extended reporting endorsement on a malpractice insurance policy.
A tort is a civil wrong, as opposed to a criminal wrong, or a crime. So tort would be something like a breach of contract where it's not where someone committed a crime but they fail to comply with a legal obligation.
It's good to know the difference. Tort reform gets thrown out a lot when you're talking about malpractice and limits and things like that, so I can understand where there'd be a little bit of wondering how they play into each other.
Should I get disability insurance now?
Roderick: The answer is some of you should, some of you could wait, but the main point is you should look into it now. Some of you are in positions where, as the calendar year turns over, there might be changes to discounts.
If you're coming up on a birthday, health concerns... I mean there are all sorts of reasons why knowing what's there and then giving yourself time to get it over the next, you know, month or two or even six or seven or eight months, it's a good idea to go ahead and get an idea of what's going on.
How long do contracts usually last?
Roderick: So usually a contract will have an initial term of one or two years... but then it will automatically renew for an additional one-year period so it's really an evergreen contract or a contract that does not expire.
Keep in mind, if the contract has a termination without cause provision, the term of the contract is somewhat irrelevant because either party can get out of the contract by giving the requisite notice. So if there's— let's say there's a 10-year contract, but if it has a 90-day without-cause provision it's really just a 90-day contract that renews every day during that ten-year period.
Can you comment on liquidated damages clauses?
Roderick: So liquidated damages clauses are usually in the context of a violation of a non-compete or terminating a contract prior to its expiration. And liquidated damages is where the employer will say, hey if this thing happens you will pay us this amount of money in the context of a non-compete.
Liquidated damages would say if the physician violates the non-compete the physician has to pay the equivalent of one year salary in liquidated damages.
The purpose is to stipulate a dollar amount so that the employer doesn't have to actually prove the harm suffered because the physician has already agreed that if this thing happens they'll pay this amount. I'm usually not a fan of liquidated damages because not all breaches of a contract have the same effect, so they should not all have the same penalty, the same financial responsibility, attached to them.
Can I negotiate a payer mix i.e. little to no fault or IMEs?
Roderick: No, because what you can probably negotiate is an equitable assignment of patients so that you're not saddled with low-pay, no-pay patients, but I don't think that you can walk into a practice establishing or kind of dictating to the employer the type of payors that you're willing to see.
Can employees negotiate non-compete clauses to be taken out of a contract?
Roderick: It depends. It's unusual that an employer that presents with the non-compete would agree to remove it entirely, because that's like, you know, such a big shift.
But you may be successful in negotiating with the employer to only apply the non-compete in limited instances, as well as reducing the geographic scope and duration of the non-compete.
What if you get a good job offer, not a dream job but it's a good job, but the employer doesn't budge in altering the contract?
Roderick: If the employer is not willing to modify the contract based on, say, maintaining internal equity then that shouldn't necessarily be a reason to not move forward as long as you understand very clearly what you're moving into by signing the contract.
Also, what I find is the manner in which an employer conveys their position matters, because it is indicative of how things will work in practice if a physician or prospective physician employee turns into a real physician The two aren't necessarily dating anymore but they're kind of in a relationship, how would the physician be treated then?
For example, if a physician presents like, hey, you know, these are some things that I'd like to discuss or modify in the contract and the employer says yeah, no, we don't change anything, take it or leave it?
Well, that's very different than an employer that says well, we appreciate your concerns and some of them are very valid, however, as a matter of equity if we make these concessions for you then we have to change everyone else's contract because we maintain the same terms in everyone's contract out of fairness. That's an entirely different answer but with the same net effect
What should your answer be when asked about expected compensation?
Roderick: Fair market value and you should be very interested to see what the employer proposes, but don't negotiate against yourself.
How much time is usually available for the contract to be reviewed and returned to the employer?
Roderick: Usually at a minimum, it's two weeks. Sometimes I see physicians that have months to decide.
Is there a specific qualification that an attorney should have whom we hire? Should we hire an attorney in the state where the contract is executed versus someone who's more nationally based?
Roderick: First, credentials of the attorney. You definitely want an attorney that has a good amount of experience with physician employment contracts, not just like a labor and employment attorney but one that deals with physicians, because obviously there are nuances with physician employment.
With respect to being physically located in the state where the contract is out of, knowledge is not necessarily contained within the parameters of a state, right? But what you do want is someone that is familiar with the laws of the state as they apply to your contract.
Whether or not that attorney is located in the state that doesn't necessarily factor into the knowledge, which is really what you're paying for.
When's the best time to negotiate salary?
Roderick: Usually it's at the offer letter stage... but if there is no offer letter then when you receive the employment contract. But what you don't want to do is sign an offer letter with a salary or compensation listed, then once the contract comes to try to negotiate salary or compensation because from the employer's perspective it's already considered resolved by virtue of the execution of the offer letter.
Do you recommend that you enter into contracts for shorter or longer terms?
Roderick: Usually, if there's no ability to determine to terminate without cause, then it probably should be a one-year commitment as opposed to longer than that if the physician is not compelled to do so because of a J1.
Because despite whatever's on paper in the contract, the reality of the experience may be very different, and if you can't get out you're locked in to that experience, unfavorable or favorable as it may be.
Matt: Great answers. Well, Roderick, I want to thank you again for being here with us tonight, for sharing your expertise. I know a lot of those answers got much better answers from you then that would have from me and I really appreciate your legal expertise.
We're thankful all of you came tonight, we trust that it was helpful, that you're more competent to even look at your own contracts and you feel empowered to be able to understand them better.
And if anything, from my perspective, I hope it also encouraged you to use someone like Roderick to make sure that, if this is your first employment contract for your first attending position, you nail it and that you get into a situation that's as good as possible and you can really get your career started off on the right foot.
So thanks again for being here with us!