A Quick and Simple Guide to Professional Physician Contract Negotiation

Have you ever felt like the odds were stacked against you when it came to negotiating a physician contract? If so, then you’re in the right place! This blog will provide you with a quick and simple guide to ensure that you have the upper hand when it comes to professional physician contract negotiation.

It is important for physicians to have an understanding of the complexities of professional physician contract negotiation and to be aware of their rights and responsibilities under such contracts. Professional physician contract negotiation involves negotiating terms, conditions, and financial arrangements between physicians, medical providers, patients, health insurance companies and other parties.

Leveraging other physicians to grow your private practice is an excellent avenue to earn more income. However, it’s important to structure your contracts in a way that protects your bottom line. Consider the following tips from to help you draw up a profit-friendly contract.

Involve experts

Negotiation experts advise that it’s crucial to draft airtight contracts to ensure all rights and responsibilities are enforceable by law.

To avoid issues arising in the future, involve legal personnel when drawing up all contracts with physicians. It’s usually easier to have a verbal arrangement or draft a simple agreement between colleagues. However, if you have a falling out, a crystal-clear contract is the best way to protect your interests.

Decide on the payment structure


You can work with either a fixed or variable payment system for full-time physicians.

A flat payment strategy allows you to make more money if the physician brings in more income since you will pay a set amount. However, having a flat payment introduces a fixed cost that increases your financial risk because even if the doctor doesn’t work, you will still have to pay the full amount.

A variable payment system allows you to share some risks with your hired physicians.

For instance, you can settle an arrangement that will enable you to take a certain percentage of collections, say 35 to 40%, to cover your overhead costs and an extra smaller percentage, say 5%, which would be your profit. The rest goes to the physician, meaning you would only pay them based on the income that they helped bring in.

However, a variable payment system leaves you to shoulder all fixed costs if the doctor doesn’t stick to their end of the bargain. For instance, if the hired physician opts to look for locum work elsewhere under the pretense of personal days, you will still be left to cover overheads such as:

  • malpractice insurance
  • medical assistants
  • billing platform
  • phone bill
  • dictation software
  • health insurance
  • dental costs
  • share of rental costs

Train yourself to negotiate for a combination of a flat and variable payment system—for instance, a flat payment (excluding when the doctor is on leave). You can also add variable incentives as pot sweeteners to attract the physician without adding excess overhead-related financial risks.

You may also consider adding a clause that increases the doctor’s share of overheads if they take more time off than initially agreed.

Review the contract periodically

Set regular time intervals where you sit down and review the terms of the contracts. Relooking at the terms of the arrangements helps to ensure that the agreement continues to serve both sides well—it can help you retain physicians and continue making profits.

For instance, if the doctor works fewer weekly hours than initially anticipated, you can negotiate to lower or remove the fixed payment portion and rely on the variable part, so you don’t end up paying through the nose for fewer hours worked.

Include safeguards for “canceled from insurance network” costs


If the physician employee provides locum services in other establishments, insurance providers may remove the doctor from your insurance network when they get credentialed with another doctor’s practice.

Each time the doctor is removed from your network, you will incur additional costs to get the doctor re-listed. In addition, you will experience delays in payments which may affect your cash flow.

If cash inflows are slower than outflows, you won’t be able to meet your liabilities on time, and your books of accounts are less attractive when applying for loans.

Consider adding safeguards to shield your business from insurance network disruptions. For instance, you can add a clause to the contract that obligates the doctor to cover the costs of following up with insurance companies.

Also, consider adding a clause in the contract that requires the physician to receive your okay before taking on locum positions. When the doctor seeks approval, you can contact insurance companies beforehand, thereby reducing the costs associated with being removed from the network.

Include a restrictive covenant


Restrictive or non-compete clauses are typically added to contracts for trained professionals to deter them from leaving and practicing with competitors in the same area.

The restrictions are beneficial because if your hired physician leaves for a local competitor, they are highly likely to take your patients with them.

Consider negotiating for a clause in the contract that restricts the physician from setting up a similar business or working with your competitors when they leave your organization.

However, it’s important to ensure that the restrictions are not excessive. A length of time exceeding 1 to 2 years may render the contract unappealing, which makes it harder to engage top talent.

Consider limiting the geographical radius of the restrictions only to areas where your practice gets more than 50% of your patients.

It also helps to include a buyout option to increase the contract’s flexibility making it more attractive to the doctor.

All in all, to attract and retain skilled doctors while protecting your profits, consider negotiating for a fixed and variable payment combo and non-compete clause. In addition, remember to include safeguards against insurer network challenges and, most importantly, consult with trained experts to draft iron-clad contracts.

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