5 Contract Red Flags Every Physician Should Know

Ericka L. Adler, JD, LL.M


September 07, 2022

Recruiting healthcare workers is a challenge these days for both private practice and hospital employers, and competition can be fierce. In order to be competitive, employers need to review the package they are offering potential candidates and understand that it's more than just compensation and benefits that matter.

When all else is equal, contract language can end up being the difference between capturing or losing a candidate.

As someone who reviews physician contracts extensively, there are some common examples of language that may cause a candidate to choose a different position.

Probationary Period

Although every employer wants to find out if they like the physician or midlevel employee that they have just hired before fully committing, the inclusion of a probationary period (usually 90 days) is offensive to a candidate, especially one with a choice of contracts.

Essentially, the employer is asking the employee to (potentially) relocate, go through the credentialing process, and turn down other potential offers, all for the possibility that they could easily be terminated. Probationary periods typically allow an employee to be immediately terminated without notice or cause, which can then leave them stranded without a paycheck (and with a new home and/or other recent commitments).

Moreover, contracts with probationary periods tend to terminate the employee without covering any tail costs or clarifying that the employer will not enforce restrictive provisions (even if unlikely to be legally enforceable based on the short relationship).

It is important to understand that the process of a person finding a new position, which includes interviewing, contract negotiation, and credentialing, can take up to 6 months. For this reason, probationary provisions create real job insecurity for a candidate.

Entering into a new affiliation is a leap of faith both for the employer and the employee. If the circumstances do not work out, the employer should fairly compensate the employee for the notice period and ask them not to return to work, or otherwise allow them to keep working the notice period while they search for a new position.

Acceleration of Notice

Another objectionable provision that employers like to include in their contracts is one which allows the employer to accelerate and immediately terminate an employee who has given proper notice.

The contract will contain a standard notice provision, but when the healthcare professional submits notice, their last date is suddenly accelerated, and they are released without further compensation, notice, or benefits. This type of provision is particularly offensive to healthcare employees who take the step of giving proper contractual notice and, similar to the probationary language, can create real job insecurity for an employee who suddenly loses their paycheck and has no new job to start.

Medical workers should be paid for the entire notice period whether or not they are allowed to work. Unfortunately, this type of provision is sometimes hidden in contracts and not noticed by employees, who tend to focus on the notice provision itself. I consider this provision to be a red flag about the employer when I review clients' contracts.

Malpractice Tail

Although many employers will claim it is not unusual for an employee to pay for their own malpractice tail, in the current marketplace, the payment of tail can be a deciding factor in whether a candidate accepts a contract.

At a minimum, employers should consider paying for the tail under circumstances where they non-renew a contract, terminate without cause, or the contract is terminated for the employer's breach. Similarly, I like to seek out payment of the tail by the employer where the contract is terminated owing to a change in the law, use of a force majeure provision, loss of the employer's hospital contract, or similar provisions where termination is outside the control of the employee.

Employers should also consider a provision where they share the cost of a tail or cover the entire cost on the basis of years of service in order to stand out to a potential candidate.

Noncompete Provisions

I do not find noncompete provisions to be generally unacceptable when properly written; however, employers should reevaluate the reasonableness of their noncompete language frequently because such language can make the difference in whether a candidate accepts a contract.

A reasonable noncompete that only protects the employer as necessary and does not restrict the reasonable practice of medicine is always preferable and can be the deciding factor for a candidate. Tying enforcement of a noncompete to reasons for termination (similar to the tail) can also make a positive difference in a candidate's review of a contract.

Egregious noncompetes, where the candidate is simply informed that the language is "not negotiable," is unlikely to be compelling to a candidate with other options.

Specifics on Location, Call, Schedule

One item potential employees find extremely frustrating about contracts is when it fails to include promises made regarding location, call, and schedule.

These particular items affect a physician's expectations about a job, including commute time, family life, and lifestyle. An employer or recruiter that makes a lot of promises on these points but won't commit to the details in writing (or at least offer mutual agreement on these issues) can cause an uncertain candidate to choose the job that offers greater certainty.

There are many provisions of a contract that can make a difference to a particular job applicant. A savvy employer seeking to capture a particular healthcare professional should find out what the specific goals and needs of the candidate might be and consider adjusting the contract to best satisfy the candidate.

At the end of the day, however, at least for those physicians and others reviewing contracts that are fairly equivalent, it may be the fairness of the contract provisions that end up being the deciding factor.

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About Ericka Adler
Ericka L. Adler, JD, LL.M, is a shareholder and health law practice group manager for Chicago-based law firm Roetzel. She has nearly 25 years representing individual providers, physician groups, and other healthcare entities, focusing on regulatory and transactional healthcare law. Adler is also skilled in compliance counseling, handling mergers, sales and acquisitions of healthcare entities, and has deep experience with Stark, Anti-Kickback Statute, and other challenges facing healthcare professionals.

She also works with providers in HIPAA, fraud and abuse, billing audits, government investigations, and contract disputes.

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