Drafting a Physician Contract? 4 Things to Get Right to Close the Deal

The site visits are completed, the verdict is in, and your practice is ready to make a formal offer to an outstanding physician candidate who you believe will be the perfect addition to your team. While the feelings of both parties might make this hire seem like a sure thing, the deal is far from done. At this point, it is up to the employer to sell the prospective candidate on how and  why practicing as part of their team will be beneficial – and the physician contract is one way to show them. “A contract is a sales document” says Roger Bonds of the American Academy of Medical Management. It is in the employer’s best interest to get the following sections right to make sure that they not only seal the deal with a prospective physician candidate, but also increase the likelihood that they will stay on long term.

1. Malpractice Insurance

Does your physician candidate need tail insurance? Depending on your candidate’s employment history and previous malpractice insurance type, your candidate may ask for tail coverage. In fact, most employers offer this coverage without being asked. Offering excellent malpractice insurance is definitely a selling point, and the offer of occurrence malpractice insurance should always be included in the contract.

Not planning to offer tail coverage to a candidate? Many view this as a deal breaker and it will often leave a sour taste in a candidate’s mouth. 

2. Clawback

If you’re considering including a clawback in a candidate’s contract – don’t. Sometimes used by small private and independent practices offering income guarantees as a tool for physician retention, this practice has largely gone out of style among most healthcare employers and with good reason. In some states, a clawback is not even legal.

If your organization insists on including a clawback in a candidate’s contract, it is best to spread the payments out over a number of months or even years (5 years is ideal), depending on the extent of the clawback.

3. Restrictive Covenant

Restrictive covenants, also known as non-compete clauses, are often employed in contracts by employers who want to deter physicians from leaving and choosing to practice at their competitor across the street.  However, some employers have a record of including restrictive covenants that are highly unreasonable, and many states have stringent guidelines or bans on restrictive covenants. If you choose to include a restrictive covenant in a physician candidate’s contract, here are ways to ensure that it is fairly reasonable:

• Length of time should not be more than 1-2 years
• Geographical area should be no further than the area where the practice draws 50% of their patients
• Include a buyout option if they would like to stay in the market

4.  Sign-On Bonuses and Other Pot Sweeteners 

Sign-On bonuses, relocation, and loan forgiveness are great ways to sweeten the pot for candidates, especially if the compensation being offered isn’t quite as competitive. However, many employers are hesitant that a candidate will essentially “take the money and run.” In order to deter physicians from leaving after a short period (or in some cases taking the sign-on bonus and never turning up for work), it is best to structure these incentives as “loans” that are forgiven over time. By doing this, a physician is more likely to stay on for the duration of the “loan” period.

Bringing on the right physician to join—and stay on—your team can have a large impact on  your practice. But getting them to join your organization is contingent on making sure you get the contract phase right. This is why it is crucial to work with a professional that has years of experience working with both healthcare employers and physician candidates to create mutually beneficial employment contracts that lead to a long-lasting professional relationship between the employer and the physician.