What to Know Before Signing a Physician Employment Agreement

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You are a new practitioner and are ready to begin your first job, one for which you have been preparing for years. As with many job opportunities, your prospective employer gives you an agreement to sign: It outlines your compensation, scope of work, requirements, and benefits. You are eager to start your new assignment, and you want to sign this document quickly to make your employment official.

However, before you execute this agreement, you must review it in its entirety and understand it fully so you can comply with both the agreement and the law. Here are some of the common and important physician employment agreement provisions you should analyze before you sign the document.

Type of Compensation Model

Before entering into the employment agreement, you’ll want to understand the different compensation models and ensure the agreement language reflects your understanding of how you will be paid. An understanding of the different types of physician compensation models will allow you to decide what type of structure best supports your long-term goals and expectations. Some of the most popular variations of compensation models for physicians are briefly described here:

1. 100% salary model: The physician receives a prenegotiated, fixed salary, which makes this model predictable and easy to administer. However, it may not provide much incentive for physicians to grow a practice because the fixed salary does not fluctuate, even if a practitioner meets goals or benchmarks.
2. Salary plus incentive model: This model guarantees a physician a minimum base salary, which can be supplemented or increased with additional compensation based on merit factors. This model incentivizes certain behavior, and may allow a practice or hospital to promote its mission or values.
3. Capitation/productivity plus capitation model: This model pays a provider a prenegotiated, fixed amount for each patient enrolled in a health plan for a certain period of time, regardless of whether that individual patient seeks care.
4. Equal shares model: This model takes the total amount of money the practice earns and, after expenses are paid, divides it among the practice’s physicians. This can be complicated to implement if the practice’s physician experience or skill levels vary.
5. Pure productivity model: This model gives a physician a designated percentage of what revene they bring to the practice. This type of compensation structure rewards entrepreneurship and can facilitate an individual’s sense of ownership.

Each of these models has its own formula and intricacies. We recommend physicians have a healthcare attorney familiar with the various compensation structures analyze a proposed compensation model to ensure it’s commercially reasonable, does not exceed fair market value, and complies with healthcare laws relating to compensation and fee structures, including fee-splitting laws, the Stark law, and anti-kickback laws.