How to Read an Employment Contract: A Physician's Guide

The physician employment contract is one of the most financially consequential documents you will ever sign. A 40-60 page contract negotiated in two weeks can shape the next decade of your career and potentially restrict where you can practice for years after leaving. Yet many physicians — particularly first-time attendings coming out of residency — sign their first contract without a careful read or attorney review. This guide walks through the most important clauses in a typical physician employment contract, what to look for, and where to negotiate.

Section 1: Compensation Structure

Compensation is rarely as simple as the quoted base salary. Most contracts include several components:

• Base salary: Guaranteed annual compensation regardless of production, typically for the first 1-2 years.
• Production / RVU bonus: Compensation above a threshold of clinical volume, measured in wRVUs (work relative value units) or collections.
• Quality / value-based incentives: Tied to patient satisfaction, quality metrics, or other measures (usually 5-15% of total comp).
• Signing bonus: One-time payment at start; often subject to pro-rata repayment if you leave early.
• Relocation allowance: Taxable payment for moving expenses ($5,000-$25,000 typical).
• Loan repayment: Ongoing annual payments toward student debt; often requires 2-5 year commitment.

What to Scrutinize

1. RVU threshold: Is the wRVU bonus threshold realistic? New practices often set it high to minimize bonus payouts. Ask for the trailing 12-month production of the physician you're replacing or the partner group.
2. RVU conversion factor: What dollars per wRVU above threshold? $45-$75 per wRVU is typical for most specialties; surgery and procedural specialties are higher.
3. Quality metrics: Are the metrics truly achievable? Some contracts tie "incentives" to metrics that are structurally unreachable.
4. Repayment terms on signing bonus: If you leave in year 2 of a 3-year signing bonus vest, what do you owe back?

Section 2: Non-Compete / Restrictive Covenants

The non-compete clause is often the single most important provision in the contract. It restricts where and when you can practice after leaving the employer. Standard physician non-competes include:

• Geographic radius: Typically 5-25 miles from practice locations.
• Duration: Typically 1-3 years post-employment.
• Scope: What activities are restricted (practicing medicine in same specialty, owning a competing practice, etc.)

What to Scrutinize

1. Enforceability in your state: Some states (California, North Dakota, Oklahoma, Montana) void physician non-competes entirely. Others (New York, Massachusetts) are hostile to overly broad non-competes. Confirm state law.
2. Radius measurement: Is it measured from your primary office, all employer facilities, or as-the-crow-flies vs. driving distance?
3. Buyout option: Can you pay a lump sum to void the non-compete if you leave? Typical buyouts are 1x-2x annual compensation.
4. Carve-outs for termination without cause: Does the non-compete still apply if the employer terminates you? If so, you can be left unemployable in your area through no fault of your own.

Section 3: Malpractice and Tail Coverage

Malpractice insurance coverage has two components:

• Occurrence coverage: Covers all incidents that occurred during employment, regardless of when the claim is filed. Best for physicians.
• Claims-made coverage: Only covers claims filed while the policy is active. Requires "tail coverage" when leaving to protect against claims filed after employment ends.

Tail coverage can cost $20,000-$75,000+ depending on specialty and the tail duration. Who pays for it is heavily negotiable.

What to Scrutinize

1. Is coverage occurrence-based or claims-made? If claims-made, tail coverage becomes important.
2. Who pays for tail? Best outcome: employer pays for tail regardless of who terminates employment. Worst: you pay for tail if you resign.
3. Policy limits: Typical physician coverage is $1M/$3M or $2M/$6M. Is it adequate for your specialty?

Section 4: Termination and Notice

Termination provisions dictate how either party can end the relationship:

• Termination without cause: Either party can terminate with notice (typically 90-180 days).
• Termination with cause: Employer can terminate immediately for specific breaches (loss of license, conviction, patient abandonment).
• Cure periods: Opportunity to fix an alleged breach before termination takes effect.

What to Scrutinize

1. Notice period: 90 days is typical; 180 days is tilted against the physician (hard to accept a new job with 6 months notice).
2. Definition of "cause": Overly broad cause definitions let employers terminate without owing tail coverage, bonuses, or other post-termination obligations.
3. Cure periods: Do you get 30-60 days to cure a breach before termination becomes effective?
4. Pay through notice period: Are you paid during the notice period or can you be put on administrative leave with pay cut?

Section 5: Call Schedule and Hours

Many contracts are silent or vague on call expectations, leading to disputes later. Look for:

• Specific call frequency (1-in-4, 1-in-8, etc.)
• Call coverage for holidays and weekends
• Compensation for additional call beyond contracted share
• Home call vs. in-house call

Section 6: Benefits Specifics

Contracts often describe benefits in general terms ("standard physician benefits") without detail. Request a benefits summary document and verify:

• Health insurance premium contribution (employee vs. family)
• Retirement match percentage and vesting schedule
• CME allowance and time off for CME
• Paid time off: separate vacation, sick, holiday allocations?
• Disability and life insurance

The 10 Clauses Most Worth Scrutinizing

1. Non-compete geographic radius and duration
2. Non-compete carve-out for termination without cause
3. Tail coverage payment responsibility
4. RVU production bonus threshold and conversion factor
5. "Cause" definition for termination
6. Notice period for termination without cause
7. Signing bonus vesting and repayment terms
8. Partnership / ownership track (if applicable)
9. Assignment clause (can the employer transfer the contract?)
10. Compensation review and adjustment provisions

Is Attorney Review Worth the Cost?

Physician contract review attorneys typically charge $500-$1,500 for a thorough review. Given that a single negotiated clause (non-compete buyout, increased wRVU conversion factor, tail coverage shift to employer) can easily be worth $25,000-$100,000+ over the contract term, attorney review is one of the best ROI investments a physician can make. Specialty-specific contract attorneys (those who review physician contracts daily) generally add more value than general business attorneys.

Common Negotiation Points That Are Often Accepted

Many contracts arrive as "take it or leave it" drafts, but most employers will negotiate on:

• Tail coverage payment responsibility
• Signing bonus amount and vesting
• Relocation allowance
• CME allowance increase
• Vacation days (within reason)
• Non-compete radius or duration reduction
• Bonus threshold reduction

Negotiable but harder: base salary for new graduates, partnership track timelines, quality bonus structure.

Finding the Right Opportunity

Ava Health connects providers with healthcare organizations across the country. Search openings by specialty, state, and employment model at providers.avahealth.co.

Related reading: How to Negotiate Physician Compensation Packages, Physician Contract Negotiation Tips, Internal Medicine providers.