You worked hard for your degree. Whether you’re landing your first job or looking to make a career move, understanding the nuances of physician contract negotiation can be a mentally taxing process. Your potential employer is looking out for their best interest. So it’s important that you look out for yours in securing the best possible terms for your career.
Thoroughly reading the proposed contract terms is vital. One aspect that can be particularly sticky is the pesky “forgiveness clause.” A key part of physician contract negotiation is knowing where employers may include terms that can cost you in the long run. Keep reading to learn more about how to get the best physician contract negotiation.
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Forgiveness Periods
During physician contract negotiation, it’s common to see clauses tied to tuition reimbursement or bonuses.
Picture this: you’re an early-career physician and your potential employer is offering you tuition reimbursement as a benefit. It may seem tempting to take the lump-sum amount up front – say $100,000. However, keep in mind that money will be taxed as income. For reference, the IRS guidelines on taxable income outline how bonuses and reimbursements are generally treated.
Additionally, if you decide to leave the position before the forgiveness period of your contract term, you could end up owing money. If you don’t absolutely need the money up-front, the better decision is to take a payout. For example $20,000 at the end of every 12 months of service. That way you’re not taxed on a big lump sum. And if your life circumstances change, you won’t be expected to pay back what they’ve given you.
Sign-on bonuses are another popular contract benefit. However, the same “forgiveness period” pitfall can happen, depending on the language in the contract. If you need the lump-sum amount up front, make sure the forgiveness period is no more than two years. If you take the sign-on bonus it turns into a retention bonus. You’ll then owe this back if you don’t stay longer than the forgiveness period. When handling your physician contract negotiation, always request clarification on how long you’re bound by forgiveness terms.
The other place this issue frequently occurs is in moving expenses. If your potential employer is covering moving expenses – which is common – make sure there isn’t a forgiveness period. This is one clause you can often have removed through careful physician contract negotiation.
Related Reading: How financial advisors benefit physicians during contract negotiation
Weigh Your Options
Make sure you know if any up-front money you receive will be expensed against your employment to the practice. Often times bonuses and benefits are constructed as short-term loans. So make sure you do the math. Because of the forgiveness clauses, doctors can sometimes be on the hook for a loan for more time than their contract is drawn to accommodate. (Example, they would owe four years, at a 1% interest loan for $100,000 tuition reimbursement, when their employment contract was only for three years). These details are often overlooked in physician contract negotiation, but they can make or break your financial outcome.
Negotiating Beyond the Forgiveness Clause
While forgiveness clauses are important, they’re just one piece of the larger picture when it comes to physician contract negotiation. You will also need to consider non-compete clauses, call schedules, and pay structures. These things can also affect how flexible you are at work and how much money you can make in the long term. A non-compete clause, for example, could limit where you can work after your contract ends, sometimes for years or covering a large regional area.
It’s also important to look at how RVU-based pay or productivity bonuses match with what you can reasonably expect in terms of the patient volume. Employers sometimes create targets that are hard to hit, which could prevent you from making as much money as you anticipated. During physician contract neogtiation, ask for data on average physician performance and how bonuses are figured.
Remember that negotiating isn’t about arguing; it’s about being clear and looking out for your own interests. When you fully understand each and every component of the contract, you can then make wise choices, choices that will help you realize your career goals and keep your money safe in the long run.
Ultimately, the employer’s goal is to hire you and retain you. You’re easier to retain if you owe them money. So watch out for the forgiveness period. It’s one potential pitfall of contract negotiation you can avoid. For more information on contract review savvy, visit our contract review services page.
