Young doctors should be aware of contractual loopholes

Reading the fine print is an integral part of long-term career satisfaction.

Issue: December 2003

For young surgeons searching for their first jobs, six-figure annual salaries and equally sizeable signing bonuses might seem like the fruits earned by the labor of medical school, residencies and fellowships. Contract details, however, can easily turn a financial windfall into disaster.

“A lot of young doctors leaving residencies and fellowships are being offered financial incentives, some really big, but they need to look at the strings that are attached to them,” said Mark Flaherty, JD.

Flaherty is general counsel for Physicians for Responsible Negotiations (PRN), a labor organization established by the American Medical Association in 1999 to help doctors avoid contract pitfalls that turn seemingly good deals into career traps.

While PRN represents groups of residents, fellows and physicians in negotiations with management companies, hospitals and universities, the same issues apply to individual doctors looking to join an established organization, Flaherty said.

Contract law foreign to MDs

While physicians immerse themselves in the minute detail of human anatomy and its vast complexities, contract law is not part of that curriculum.

“It’s the sort of thing that you never hear about until you start to do it,” Steve Copeland, a fifth-year resident at the University of Chicago, said of signing an employment agreement.

Copeland is headed for a one-year sports medicine residency at Baylor College of Medicine and thoughts of negotiating his first contract are not foremost on his mind.

“Pay is certainly a consideration but I haven’t given it much thought yet. Education on those issues is virtually nonexistent,” Copeland said.

Copeland hopes to gain employment with an established group that has an academic affiliation and would allow him to teach as well as practice a mix of general orthopedics and sports medicine. His ideal salary structure would provide a secure base while offering additional monetary opportunities.

“Probably when I’m starting out it would be nice to have a guaranteed salary, but I would like some sort of financial incentives,” Copeland said. “In the ideal job, your reimbursement would be based on how much work you do. To me, that just seems reasonable.”

One of the most frequent and relatively recent contract landmines is a noncompete clause, which limits a physician’s ability to leave a group yet stay in the same town.

“Often doctors are asked to sign unconscionable noncompetition agreements, and that means that if they are unhappy with their employment situation, they basically have to pick up stakes and move to another community,” Flaherty said.

Even if a doctor is able to leave town, “recapture” clauses can force a physician to repay substantial signing bonuses, some as high as $300,000, or other forms of financial compensation.

“If things don’t work out, new doctors can suddenly find themselves under a mountain of debt,” Flaherty said.

Flaherty said the emergence of strict noncompete clauses has been spawned by communities in search of hard-to-find specialists and subspecialists, using money to draw them in and fine print to keep them there.

Also, if a potential employer is linked to a for-profit practice management company, that should be a danger signal for a young physician, Flaherty said.

“Almost universally, doctors become unhappy. They think they’re going to work for other doctors when really they’re working for a company interested in profits,” Flaherty said.