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Required and Recommended Elements of Physician Employment Agreements

Adaptive Medical Partners | Healthcare Administrators, Physician Recruiting

For the physician, choice of employment heavily impacts future opportunities, job satisfaction levels, compensation and more for at least a few years. For the group practice, clinic or hospital, choice of contracted provider heavily impacts revenue and patient care, as well as staff workload and satisfaction. For both parties the physician employment agreement is a critical document. Understanding of all elements of the physician employment agreement is essential before beginning negotiation of terms favorable to both parties.

Before You Begin Negotiating

Before the parties engage in negotiations:

  • Consider having a health law attorney review before signing, especially if you do not fully understand all terms.
  • Understand how compensation is set. There are two types of compensation models typically used: either fixed or variable. In fixed models compensation is a set salary and is not dependent upon performance. Variable compensation uses formulas that factor in a physician’s performance when determining salary.
  • Understand the practice’s economics. Payer mix, financial conditions and stability, market conditions and growth rate are important factors when evaluating the long-term viability of the practice as well as when projecting potential compensation.
  • Both parties should thoroughly vet the other and honestly assess how well they fit. The employment agreement locks in the physician for the near future; an unsatisfied hire benefits no one.

Core Elements of Employment Agreements

Though the specific details will vary from practice to practice due to the range of circumstances, administrative differences and variations in state laws, the following elements should be found in all physician employment contracts:

Term and Termination:

This section will state the start date, which should be realistically set a couple months in the future to allow adequate time for insurance plan enrollment and credentialing processes to complete. The duration of the employment will be indicated, as well the reasons permitted for terminating the agreement and required notices in case of termination.


The physician’s responsibilities will be detailed. Workload expectations might be included and should be reviewed for reasonableness. Expectations regarding any teaching activities, administrative duties and requirements to provide on-call coverage should be noted.


How much and how often the physician will be paid should be clearly stated. If compensation is based on a formula computation, then the basis for the calculation should be specified.

Common Contract Components


The contract should include all of the benefits extended to employees. Important benefits to discuss include:

  • Health insurance
  • Retirement plan
  • Disability insurance
  • Licensure fee reimbursement
  • Payment of medical society dues
  • Student loan repayments
  • Vacation and leave

Continuing Medical Education:

Continuing medical education (CME) is a requirement for continued medical licensure. Most physician agreements allow for at least a week of additional time away from work in addition to vacation in order to complete CME. Employers typically reimburse at least some of the costs related to CME; CME expenses include registration, travel and lodging.

Professional Liability Insurance:

The employer typically provides malpractice insurance coverage. The policy details should be noted. Also of importance to negotiate is responsibility for purchasing “tail insurance” coverage if the provider leaves the practice.

Non-Compete Clause:

This restrictive clause intends to keep the physician who leaves the hospital or other employer from practicing medicine for a period of time in a specific geographical area. The employer includes this clause as protection from future unfair competition. To be legally enforceable, covenants not to compete must be reasonable in their geographic scope, duration and restricted activity. For urban areas, the geographic range should be less than five miles in radius. One or two years is generally accepted as a reasonable time frame.

Let Adaptive Medical Partners help find your perfect fit. Contact us to discuss how we can work together to meet your physician recruiting needs.