Negotiating a Contract You Can Live With

By: Hannah Stuart
Friday, June 26, 2015

For physicians negotiating contracts, knowing what to educate themselves on — and establishing priorities well before negotiations begin — is vital.

Negotiations are a delicate process, and many physicians going through this process are unsure about both the overarching issues to be addressed and the nitty-gritty of contract details. Keeping the big picture in mind is crucial, experts say.

“I always tell them to prioritize the location where they want to see their practice grow,” says Jeffrey Larson, RFC, Managing Partner at Larson Financial and co-author of Doctor’s Eyes Only: Exclusive Financial Strategies for Today’s Doctors and Dentists. “Over 50 percent of physicians will change practices in the first two years, and they generally will end up going to a location that they are from, their spouse is from or they want to raise their family.”

Larson emphasizes putting location first but closely following that with finding a practice that meets what the physician wants from a medical standpoint. Only then does he advise focusing on compensation.

“You could do something you make a lot of money at, but you hate the procedures and [it isn’t your preferred patient population], and you’re going to be miserable,” Larson says. “So I start with the location, then I go with the medical side of things, then I go with compensation.”

Getting Down to Details

At a more granular level, clarity on issues such as non-competition, non-solicitation and non-interference clauses is key, says Bruce D. Armon, Chair of the Health Care Practice and Managing Partner of the Philadelphia office of Saul Ewing LLP. Physicians should understand exactly what they may and may not take with them when they transition from one position to another, Armon says.

Factors such as rural versus metropolitan location, as well as variation in how enforceable certain terms of a contract are in different states, add complexity to questions surrounding non-competition clauses, Larson adds.

“A lot of these practices are multi-site practices,” he says. “If your contract indicates your non-compete is in a certain mile radius of any of their sites, that may be something you want to look at negotiating.”

Larson also encourages physicians to determine whether they will be offered claims-made or occurrence-based malpractice insurance policies.

“With claims-made, there will be an expense, or what we call a tail, if you were ever to leave that practice,” he says. “If it’s a claims-made policy and you leave the practice, the question becomes who covers that tail. That needs to be negotiated — that expectation needs to be clear up front.”

Armon advises physicians to take the necessary time to know what a contract contains, whatever its length.

“It is critically important to understand what is in the contract, as well as what isn’t in the contract,” he says. “If the contract is two pages long, there may be terms that aren’t addressed. If it is 20 pages long, some matters may need renegotiation.”