Until I co-founded and started running my own company, Neighborhood Psychiatry, I hadn’t worked in a conventional job setting since residency. So I never had to think about employment agreements or contracts, employee handbooks, policies and procedures, or addenda like “limited powers of attorney” and “employment modification.” I couldn’t tell a non-compete from a non-disparagement clause –  and I was almost sure that a “restrictive covenant” was something from the Lord of the Rings.

Now that I’m in the weeds, so to speak, of hiring and contracting, I have been thinking back to my early years as a psychiatrist and what I wish I’d known. Herein are some lessons learned – including crucial terminology – for early career psychiatrists and psychologists seeking their first position, or even a career change. The following list is not meant to be exhaustive, nor does it offer legal advice, but rather, the initial thinking about how to approach evaluating positions. When work deals are made, contracts always come into play, and the following tips will enable you to be an engaged player at the hiring table.

Psychiatry Practice: Know the Field

For starters, take solace knowing that few clinicians are well-versed when it comes to employment contracts. If I’ve learned anything in my years of hiring, setting up businesses, and working with attorneys, it’s that the majority of clinicians are not very familiar with how employment works, that we are easily confused by business thinking and terminology and, most important, we’re focused on taking care of our patients, sometimes even when it means we don’t fully pay attention to our own needs.

The fact that our field is evolving, almost daily, doesn’t help. As reported by the American Medical Association, fewer doctors are going into private practice, or even small group practice, while more are working in companies with 50 or more clinical staff. At the same time, medical companies that are physician-owned are becoming a thing of the past. On the whole, clinicians are less involved in the business side of healthcare, putting us at a disadvantage.

(More on the evolving mental health landscape of digital health and private practice.)

While my co-led group strives to be transparent and collaborative, crafting employee agreements that meet the needs of all job applicants and the company – valuing a healthy work environment as we do – is a welcome challenge. Many clinicians I’ve spoken with or stories I’ve read on private discussion groups describe hospital contracts with markedly favorable terms – for the employer. It’s no secret that parties to a contract want the contract to be in their favor.

Much like a math problem or a chemistry equation, most people understand legal arrangements for only a fleeting moment after they are explained. After that magic interval, confusion sets back in. I have to revisit contracts time and time again, giving me enduring familiarity.

Employment Contracts: Negotiate and Collaborate with Your Hirer

A good employment contract will balance competing needs and define areas of alignment, thus kicking off a solid working relationship. While negotiating employment terms is at best a collaborative process, it can become adversarial, especially when there is a perceived power imbalance. How the negotiation is conducted tells the applicant a lot about the management and tells the company a lot about who they are hiring. It’s important to play your role and to ask the right questions.

Signing an Employment Contract: Questions to Ask & Terms to Know

Scope of Services

Regardless of the type of employment, the Scope of Services section in a contract should be clearly spelled out in advance. Be sure to ask:

  • Are you treating patients only? If so, what in what capacity?
  • Are you going to be supervising, and if so, for how many people and in what capacity?
  • How many hours are expected?
  • Is administrative time included?
  • What degree of administrative support will you have?
  • Are you compensated if patients don’t show up for appointments?
  • How much control will you have over your schedule, and your work assignments?

Ensure that all responsibilities are listed in the hire contract. Bear in mind that it is common and appropriate for a work agreement to leave room open for expected changes which happen in the normal course of employment.

Change Procedures

Find out what your prospective employer’s policies are regarding changes in employment.

  • Are you expected to go along with changes or will changes be approached collaboratively?
  • Under what circumstances would you need to renegotiate?

I often hear of positions where duties are piled on without warning, additional compensation, or reduction in other responsibilities. Make sure you find out how additional tasks may be handled, and how likely they are to occur (and how frequently). If your employer addresses this upfront during hiring, that transparency is a good predictor of how future changes will be managed.

Employee or Contractor?

There are different ways of working with a company. On a basic level, clinicians can be W-2 employees or 1099 independent contractors. The difference is in how many hours are worked and in how much direction is given. Labor laws are strict and vary from state to state, so it is important to understand that companies are bound by regulations.

Presumably, you will want to work for an ethical company, one which does not bend the rules –  this ultimately will be in your best interest because such companies will be more likely to be compliant across the boards, protecting yourself, as well as the company.

Typically, to be a 1099 contractor, you have to work less than 20 hours per week (a 15-hour formal cut-off leaves room if you end up working a few more hours). W-2 hires are for more than 20 hours per week, or fewer if care is closely supervised as to constitute direction, and they tend to come with a benefits package (more on this below).

Independent contractors may have administrative services and basic quality assurance but are working on their own and expected to give standard and customary care. In many cases, clinicians may prefer to work 1099 for tax reasons, but this is not always possible. It also varies from state to state, and in some cases you may have to pay taxes in more than one state, depending on the location of the company and where you reside. Often, if there is taxation in multiple states, it is broken up state by state so you don’t overpay – but it is more complicated on the accounting side.

At-Will and Binding Clauses

In some states, employment is “at-will.” Either party can end the relationship at any time, giving sufficient notice to ensure patient care is not jeopardized. Typically, an employment agreement or contract will stipulate the amount of time required for either party to give notice, as well as the circumstances under which employment may end. Termination of employment may be with or without cause. With at-will employment, there is no obligation to give a reason for notice.

The employee agreement should spell out the reasons for termination with cause, typically related to failure to practice according to competent standards or related to failure to follow the company’s policies and procedures, which could be related to staying current with paperwork, licensure or other compliance issues related to professional standing or workplace behavior. Termination for cause is typically preceded by warnings and a formal improvement plan. Future employers may ask whether you have been terminated for cause in a prior position, along with other questions about professional standing and ability to work as promised without impairment.

Some contracts will have a minimum term of employment (eg, 1 year), during which barring glaring issues, you are legally obligated under contract to complete the agreed-upon term. Other contracts do not have such a binding obligation and may simply automatically renew annually unless notice is given by either party of non-intention to continue employment.

Compensation: Fee-for-Service, Salary, and Bonuses

Some jobs promise astronomical salaries, but it may be hard to hit the required performance marks (eg, very high patient volumes, completing chartwork with inhuman efficiency) to earn them. For example, I recently spoke with a recruiter for a large company who told me there was “no cap” to income, promising compensation upwards of $325,000.00 per annum. Payment was “fee-for-service,” meaning that the group pays a proportion of the total revenue generated by the individual, for example, 50-50 or 60-40. In this position, however, clinicians would have to see many patients per day, for very short visits, to reach the high salary mark. The average collected salary was closer to $250,000.

Compensation was based solely on the number of patients seen, essentially a commission or a profit-share, without any base salary. So, when considering a position, be sure to look at the base compensation and how higher amounts of money may be earned. Ask yourself what compensation model will work best for you. Are you comfortable without a guaranteed salary with primarily performance-based pay, or would you prefer a reasonable base salary with an incentive program that allows you to earn more while offering the security of guaranteed income as long as you do the work competently?

Beware of groups that make high compensation promises but don’t deliver. Do your research, speak with current employees, and again – make sure you understand exactly how compensation and bonuses are structured and earned.

Similarly, many companies offer a variety of bonuses. In addition to signing bonuses, which typically require passing a minimum initial period successfully, practices also offer retention bonuses, earned after staying on successfully for a minimum period, typically 1 year, among other additional monies such as relocation expenses. Companies may also offer performance bonuses, based on various systems ranging from “profit share” models in which total company growth is distributed to all staff as a portion of the bonus with a smaller fraction coming from individual performance, to relative value unit (RVU) models in which individual performance is the main driver of the bonus amount. Regardless of the system, make sure you understand how bonuses are calculated, as they reflect the culture of where you are considering working.

Productivity & Flexibility

Are you looking to work in an environment where productivity is heavily weighted, incentivizing short patient visits with less time to do a conscientious job and little concern about patient outcomes or staff wellness? This may be a better choice if you are used to working hard and seeing a lot of patients per day, can document efficiently, and have a lot of debt to pay off.

However, if you are seeking a focus on patient care, with good work-life balance and possibly greater professional satisfaction, it may be harder to hit that super-high salary but the average compensation may be the same, or better. It’s important for potential employees to understand that the financial health of any company – regardless of what our clinical values may be – is critical for staff satisfaction, company growth and ultimately, patient care.

Benefits

Benefits are an important and valuable element of employment. Benefits have a dollar value associated with them and should be taken into consideration as part of the total compensation (eg, if there are fewer benefits, the financial base may be higher and vice versa). Benefits are generally part of W-2 employment, and not typically available to contractors.

Depending on the company’s level of development, benefits may be more or less robust. In some cases, if you do not use offered benefits, you may be able to negotiate an increase in base compensation. Basic benefits include health, vision, and dental insurance, HSA/FSA, retirement plans, additional medical “bridge” insurance, commuter benefits, and an array of other services (including mental or behavioral health coverage) depending on the company. The degree of coverage varies, from full coverage for employees and all family members, to coverage for individuals with opt-ins for higher coverage. Some companies also offer concierge benefits, such as support for insurance company communication, which can be valuable in time saved when staff do not have to get on the telephone for personal health issues.

Equity and Partnership Options

Traditional medical groups may have a partner track, where eligible clinicians can qualify to get equity or options for equity, usually after several years of employment to prove both value and match for the group. This arrangement can be favorable with profit share and valuable equity in the company but is limited generally by the size of the group and possibly restrictions on investors if there is a requirement that owners only be members of the same professional class eg only physicians. There is potential for significant realized gains if the practice is acquired by a healthcare system or larger entity, but this gain is limited by the total possible valuation of the group.

Entrepreneurial companies ­– following a “start-up” model rather than a traditional medical practice – may have equity options for a management company that oversees the operations of associated clinician entities. This type of equity option is higher risk but potentially a much higher reward, if the parent company grows significantly, as shares in the company may accrue high future value. There is more room for growth as the management company can be owned by investors who are not constrained by profession.

Restrictive Covenants: Non-Compete and Non-Solicitation Clauses

Contracts and agreements often have “Restrictive Covenants” which are standard and necessary for safeguarding the employer. One important component is the “non-compete”, which stipulates that when people leave employment, they may not create competing practices within a set distance and time period, for example restricting a clinician from opening up a similar company within a 10-mile radius of any practice location for 1 year. This radius will be larger for telemedicine. The exact terms vary from market to market-based on geography and competitiveness.

Another common component is non-solicitation, which means that departing clinicians are not allowed to ask or otherwise suggest to patients that they leave the current practice to follow them elsewhere. Patients are allowed to ask, however, where their clinician is going to be. Non-disparagement clauses stipulate that former employees are restricted from. In addition, employment terms will typically protect the intellectual property and operational know-how of the company from being used by former staff.

Professional Takeaways

Ensure the Company’s Mission Matches Your Passion

The key factor here, beyond knowing your financial needs, is to understand the culture of the company you are evaluating. Does the company value staff wellness? It may be in their mission statement, but how do they back that up? Is their care model aligned with how you want to practice? If you want to work in a group that services patients with health insurance, their financial model is likely to be very different from one which does not take insurance. Understanding the vibe of the company, and how that plays out in the work environment, is essential.

Clinicians may be skeptical of company profit motives, with good reason. At the same time, a financially healthy company guided by strong clinical values with be able to balance patient care, staff wellness, and company health. If the company is not in good shape financially, patient care and staff well-being cannot be support. If the company does not invest in patient care and staff development, the work environment will suffer.

Have an Attorney Review the Documents

Overall, these are some of the key elements to understand when evaluating a hiring contract or agreement. It’s essential to have agreements reviewed by an attorney familiar with contracts and labor laws to ensure that you know what is on the table. It’s equally important to read and comprehend key legal documents yourself and feel comfortable enough to address any questions or concerns with potential employers.

More complicated negotiations, for example, those which involve significant intellectual property or equity options, likely require the engagement of legal counsel on your behalf. There’s much more to say about evaluating a new position, let alone reading and understanding the contract, with this brief overview as a point of departure.

Questions? Email the editor and we’ll try to address it in a future column.

Last Updated: Jul 9, 2021