Employment Agreement negotiations from the Practice Perspective

In any game, there is always a great advantage to getting inside the head of your opponent.  Although employment agreement negotiations should never be approached from an adversarial standpoint, we think you will benefit greatly from an appreciation for what motivates an employer during the recruitment and job offer negotiation process.

Whether you are considering joining a large integrated healthcare corporation or a small practice with a handful of partners, the more you understand about the party on the other side of the negotiating table the better.

In this CareerPhysician article we offer an overview of the physician recruitment process from the employer’s perspective, focusing on three critical areas —

  • using an executive search agency or consultant
  • developing a solid employment agreement
  • negotiation tips and strategies

Executive Search Consultants
More than likely your potential employer will be relying on the services of a candidate search consultancy to assist them with recruitment process,  probably an agency specializing in the healthcare sector.

Often these consultancies are small, boutique agencies, sometimes with only one or two senior consultants   Some agencies specialize in just physician search.  Others offer a range of practice management services.  If you land your job, your new employer will typically pay up to 30% of your first year total compensation as their fee.   Given the price-tag, when a practice selects a recruiting agency they will —

  • make sure they come personally recommended by a colleague they trust who has used their services before
  • check ensure they are ‘buyer agents’ only, and don’t also work for candidates
  • chose an agency that specializes in the healthcare sector

Although recruitment agency engagements will vary, the types of services provided will typically include –-

  • assisting the employer team with the development of a detailed position requirement document
  • sourcing and recruiting top-flight candidates based upon their detailed position profile and job description
  • pre-screening candidates in telephone and sometimes face-to-face interviews
  • preparing candidate interview summary reports for employer review and assessment along with the selected candidate resumes
  • coordinating candidate interviews with you and your management team, partners or selection committee
  • verifying candidate references
  • assisting you (assist the practice right?) with coordinating job offers and acceptance

Employment Agreements
A healthcare practice may employ hundreds of physicians over a period of years and so they are heavily incentivized to develop and maintain  a standardized written employment agreement governing all physician employment engagements.

They will likely have hired an attorney (specializing in employment law) to assist  with drafting their standard agreement and will review and update it periodically to reflect changes in their business, the marketplace and employment law.

For a sampling of a generic physician employment agreements online link to the Findlaw web-site —  http://contracts.corporate.findlaw.com/agreements/aetna/cardillo.emp.1996.03.30.html.

For a fee you can also access standard agreements at — http://www.healthlawyers.org/Ecommerce/ProductDisplay.cfm?ProductID=33405

A practice will easily justify this investment in legal services by adhering to guidelines similar to those that follow as they seek to protect their business’s interest when entering into an employment agreement:

  • Their draft employment agreement is an essential part of the job offer negotiation process, so it will be crafted in such a way that any eventual points conceded to the physician do not dilute the basic advantages to the business.
  • It will likely include language stating that the employment agreement constitutes a  “work for hire” relationship.  This protects the employer in instances where the employee participates in creating any intellectual property – it belongs solely to the employer.
  • Unless negotiated away, employers want to retain “at will” status with their employees. By law, most employees are hired on an “at will” basis but they will often explicitly detail this in their contract since it sets the terms for acceptable termination causes.  Employers don’t like to give up this right unless it is used as a bargaining chip in negotiations.  Be sure you  get something considerable in return should you agree to strike this from the deal.
  • Well-crafted employment contracts will include a detailed definition of the business of the employer since this definition will ultimately be used to enforce any non-compete or non-solicitation agreements (“restrictive covenants”) with the physician if/when they leave the practice.
  • Be mindful of the limiting confidentiality terms employers will insert to protect their company’s trade secrets and other confidential information.
  • Verify the specific and detailed definition of the agreed upon duties and work to be performed by your under the terms of the agreement.
  • Employers are eager to establish their unrestricted ability to assign their rights as defined in the contract to any other third party.  This allows the  practice to be sold with the existing physician contracts “transferring” to the new owner if so desired.  In some cases, employers who need to concede a point during negotiations, will save this as a chit — removing the ‘assignability’ clause to give you, the physician, more perceived control over your destiny.
  • You should carefully analyze and agree with the definition of employee actions that would constitute cause for termination and what the consequences of that might be regarding possible loss of benefits or other compensation.
  • All financial compensation terms should be explicitly spelled out, including any target thresholds that will determine performance-based compensation such as bonuses, profit sharing or stock options.   The basic terms of financial compensation include base salary, bonuses, signing bonus, stock options, and other perquisites such as company car, 401(k), health insurance, professional fees, etc.

Negotiation Strategies
Once a practice decides that you are a great fit for their business and are prepared to make an initial offer, you can expect a rigorous negotiation process.

Below we offer some insight into how to use your new-found knowledge about the practice negotiator’s mind-set to get what you want out of the negotiation process.

  • When they’re ready to make a formal offer of employment, they might decide to prepare a letter of intent (“LOI”) spelling out the general proposed terms of the employment agreement, as you’ve agreed verbally.  This could mean an intermediary step in negotiations, but also identifies the possible deal-killer points early on.
  • Make sure to have sufficient bargaining chips either in your initial requirements or in your arsenal of counters offers to be able to concede on some points that are less than important to you during negotiations.     Bargain chips might include practice start-up (lump sum or list of activities), income guarantees, forgiven loans, sign-on bonuses, incentive to close, moving expenses, professional educational stipend, company car etc
  • Remember – the party that wants the deal worse usually gets the lesser end of the deal.  Position yourself from strength and resolve, and don’t tip or overplay your hand.
  • Remember to aim for a true win-win agreement, where both parties feel like they’ve gotten the important things they set out to “win”.  Never narrow down the negotiation to only one issue since then someone will have to “lose” to reach agreement.
  • Realize that people don’t want the same thing.  We all have a unique perspective.  Always help the other party get what they want, after you determine what that is.
  • If you reach what feels like a negotiating impasse, don’t let it stop you from continued talking.  Try building momentum on other items, and deal with the difficult issues last.
  • No matter how good their first offer sounds, don’t jump too fast.  You want the practice representative to feel he/she has negotiated a great contract in their favor.
  • Whoever drafts the first version of an agreement usually holds more ultimate power over its final shape and content.  As discussed above, the majority of employers will try to command this ground by putting forth a draft of their standard agreement.  Hire an attorney to review their draft and don’t be shy about making any and all amendments you see fit to meet your requirements.
  • When an employer feels you are both close to a deal and are ready to push for a closing, they might send the modified contract along with any agreed sign-on bonus check.  They are banking on your long-term planning being influenced by the attraction of ready cash in hand.   Make sure you sign for the right reasons if confronted by such negotiation techniques.

About the Author:

Wesley D. Millican, MBA, CEO and Physician Talent Officer of CareerPhysician Advisors, LP, and CareerPhysician, LLC, provides comprehensive talent solutions for academic children’s hospitals, colleges of medicine and academic medical centers across the nation. He possesses a longstanding passion for career development of all young physicians and serves as a go to career resource for training program directors and their residents and fellows. In continuing his commitment to the “future of medicine”, Mr. Millican speaks nationally at residency and fellowship programs. His Launch Your Career® Series is a proven resource for today’s residents and fellows and has served as a go to resource for program directors over the last 15 years.