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Health attorney Dennis Hursh discusses his article “First physician employment agreement mistakes.” Dennis shares his amazement after 30 years in health law at the timidity of new attending physicians during contract negotiations. He explains why the “seller’s market” created by a massive physician shortage means that young doctors have far more leverage than they think. Dennis debunks the myths of the “standard contract” and the fear of “losing the job” by asking for reasonable, median compensation. This episode is a critical guide for any new physician, exploring why the employer is the “motivated buyer” and why the competition is already over once the job offer is made. Learn how to stop being competitive and start negotiating for the reasonable contract you’ve earned.

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Transcript

Kevin Pho: Hi, and welcome to the show. Subscribe at KevinMD.com/podcast. Today we welcome back Dennis Hursh; he’s a health care attorney. Today’s KevinMD article is “First physician employment agreement mistakes.” Dennis, welcome to the show.

Dennis Hursh: Thanks. It’s good to be here.

Kevin Pho: All right, tell us what your latest article is about.

Dennis Hursh: I was just recently talking to some physicians and said, “What do you see as the biggest issue that physicians face in employment agreements?” Lately, I’ve just had a whole spat of starting physicians coming out of training.

The way that I review a contract is I draft a letter on law firm stationery, give it to them to give to the employer, and I’ve had several come back and say, “I don’t know if I want to ask for all of this. Are they going to be mad? I really want this job. I don’t want to lose this job. Maybe we should just sign it as is.” It just got me thinking about the attitude is what sinks most new physicians, I think.

Kevin Pho: All right, well they did come to you for legal advice and review for the contracts, right? So that’s seeking an attorney. To begin with, that in itself is a good first step, right?

Dennis Hursh: Yeah, I think it is. But then the whole idea of paying for an attorney is that you use the advice, and I think that’s where sometimes it falls down. I’ve had people tell me, “I’ve read it. I understand the issues. But I’m just going to sign it.” I mean things where the salary is below median, the signing bonus is below median, there’s just a whole lot of issues. Call coverage is “whenever we tell you to be on call.” Just a whole lot of issues that I felt should be addressed, and they were just concerned that the employer was going to go, “Nope, we’re going to take the next one in line.”

Kevin Pho: Now why do you think they have that mindset to just accept anything that’s presented in front of them?

Dennis Hursh: Well, I think some of it is they’re competing. Let’s face it: You didn’t get through college, then med school, then a residency, and then maybe a fellowship or two without being really hyper-competitive. You just can’t be a physician and be laid back. Very few people said, “Yeah, I partied all night the night before my MCATs and it was great.” You have to be very competitive, very focused.

And I think they take that mindset into the employment and they say, “OK, they’ve offered me a position. Now I really have to compete and make sure that they pick me.” They don’t realize that they have picked you already. Once they made the job offer, they’ve picked you.

Kevin Pho: And a lot of it is because all during that medical school journey and residency journey, they’re conditioned just to do what they’re told, right? And without pushing back, it’s hard to break that mindset.

Dennis Hursh: Yeah, I’m sure it is. And of course, the employers know this. A recruiter will hand an agreement and say, “This is our standard agreement and I can’t change it.” And the recruiter is probably not lying. The recruiter probably can’t change the agreement. It probably is the standard agreement that’s given to every physician.

What the recruiter doesn’t say is, “I would have to take it to the department head and legal to change it, and everybody gets this contract, but not everybody signs it like that.” So, there’s a lot of pressure on them to say, “Hey, just like you say, keep following orders. Do what you’re told. And it’s pointless anyway because we can’t change it.”

And I’ve reviewed about 4,000 of these contracts, and I think I could count at this point, it might be on two hands, the times that an employer has come back and said, “No, that’s our standard agreement. We don’t change it.”

Kevin Pho: So by your estimation, fewer than ten times out of 4,000 contracts that they weren’t able to change a standard contract?

Dennis Hursh: Exactly.

Kevin Pho: You said earlier that some of these early-career physicians are terrified of losing the job. So in your experience, how often does an employer actually rescind an offer because a physician asks for some reasonable changes?

Dennis Hursh: Well, four times in my career. One time was a physician came in and said, “I’ve been around for a while, so they should make me a partner and I shouldn’t pay for partnership.” And they said, “Nope.” One time we had a credentialing issue, and I did have two where they just said, “No, you seem to want too much.” But that’s two out of a thousand.

Because you think about it, what I have had people say, and the ones that have standard contracts, just say, “No, we’re not changing it.” To say we’re revoking the offer is kind of crazy. Just say, “Nope. It is what it is. Take it or leave it.” And that happens on a few of the major employers. As I said, that was ten; that’s what happened with them.

Kevin Pho: So in terms of rescinding the offer, you would classify it as a rare but non-zero risk.

Dennis Hursh: It’s non-zero, but it approaches zero. I’m not good enough at math to say what two out of 4,000 is, but it’s awfully, awfully low.

Kevin Pho: So what normally happens? Like you said, you normally give these graduating residents a letter with your opinion on a contract. That letter is given to the employer. In normal circumstances, what normally happens after that?

Dennis Hursh: They’ll say, “We’ll give you the first point. We won’t give you the second. The third one, we’re not going to change. The fourth one, we’re not going to give you exactly what you asked for, but we’ll meet you halfway.”

A lot of times the worst case in most of these situations is, “We don’t want to change the contract. How about if we jump up the signing bonus and the salary a little bit? Would you be OK then?” And usually, I think the right answer is no, but a lot of people say, “Yeah, OK, I’ll take more money. I’m happy.”

Kevin Pho: And from your experience, what parts of the contract are typically the most malleable, where the employer comes back with some type of counter-offer versus a straight no?

Dennis Hursh: Oddly enough, compensation. I guess you can’t blame them. If I’m buying your car, I don’t know what you would expect me to come in and say, “Here’s my top dollar. I can’t possibly give a nickel over this.” You’d expect me to come in a little low. So I think they do a first offer and a lot of times I’ll see, “Yeah, we can increase the signing bonus or we can increase the salary, or something like that. We can give you a retention bonus after a year.” Things like that are absolutely the most malleable.

The rest are some of the stuff that, for a small employer, it doesn’t so much matter, but a lot of them say, “We’ll assign you to wherever we want.” So if you’re in a big health system, theoretically they could say, “Hey, tomorrow, you’re across the state. We’ve got a hospital there that needs your specialty. So tomorrow you’re there.” Those are the kinds of things I can often get them to narrow it down and say, “No, it’s these hospitals.”

And of course the employer uniformly says, “Well, we would never send you. We would never do that.” My response is, “Well, if you’d never do it, then you shouldn’t have any problem putting that in the contract.”

Kevin Pho: What about things like call and non-competes? How often do employers negotiate that?

Dennis Hursh: Less often. Call, at least, is something that you can negotiate. I usually try to get some absolute maximum: “This is not going to exceed more than one in five.” And they’ll say, “Well, it’s a business. You don’t understand.” And I’ll say, “No, there are locum tenens out there. You are not going to do more than one in five.” I mean, I’ve seen as bad as one in three, but at least there’s a limit. If you’re in a four-physician department and one gets pregnant, one retires, and one takes another job, you don’t want to be 24/7, 365 call.

So sometimes they’ll be reasonable. A lot of times they’ll be reasonable about saying it’s equitable call coverage. Because I’ve seen that. I don’t know why it is, perhaps just a coincidence, but everybody seems to get Christmas day the first year. It’s probably just a coincidence. But they say it’s going to be “equal call.” Well if you think about it, if I get call every Tuesday, there are seven of us. I get call every Tuesday. You get call every Saturday. That’s equal. I got a day. You’ve got a day. It’s just not equitable.

Kevin Pho: And how about non-competes? Do you find that gets negotiated out?

Dennis Hursh: Less so, but sometimes you can refine it a little better. With private practices, weirdly, I have had that experience. I used to represent practices, though I don’t anymore, but years ago I represented one practice that had something like seven physicians, and they all had different non-competes. OK. And I kept telling the owner, “They’re going to talk to each other. This is going to be bad.” So they are concerned about physicians talking to each other and saying, “What do you mean? You have a shorter one, smaller one than I do?”

But a lot of times you can get it refined. The covenant ought to be based on your new office, not your new employer, every location it has. And it should be based on where you are working now, not every location your current employer has.

So a lot of times they will be willing. They’ll always say, “Well, nobody will enforce it anyway.” But the thing is, the market will enforce it. So again, if you don’t care and you’d never enforce it, then you shouldn’t have any problem clarifying it.

Kevin Pho: You wrote in your article that employers often like seeing that a candidate has retained an attorney. How do you know that and why do you think that is?

Dennis Hursh: Well, again, it’s because I used to represent private practices and the same owner that had all the different covenants not to compete, he would tell me, “Hey, this is great. He’s serious about this.” If you think about it, you could apply to eight places and just be playing them off against each other, but the odds are not good that you hired eight attorneys or one attorney eight times to look at eight contracts. So you’ve signaled, “I’m really serious about this position.” Once you’ve retained an attorney, it signals that this is the one I’m mostly looking at.

Kevin Pho: It’s like a mentality shift, right? So I think that the idea that physicians are competing after they’ve won is definitely powerful. As you said, a lot of these newly graduated physicians are in that competition mindset. So how can they mentally shift from being a competitor to being the proverbial prize?

Dennis Hursh: Well, I think you just have to tell them, “Look, think about it. They offered it to you. They didn’t throw it in a pool and say, ‘The first one to sign gets it.’ They didn’t say, ‘Hey, I need this back tomorrow, or we’re taking it to the second person.'” They’ve indicated that they want you.

And the thing is, it’s not a cheap process for them. They may have had three physicians looking through CVs, interviewing, maybe taking you around town and telling you what a wonderful place and “every day’s a holiday here at Mega Health” and all that. And they were doing that instead of seeing patients and billing for the employer. So the employer has invested a lot getting you here.

If there’s a recruiter, I’ve seen some recruitment agreements for as much as a third of a year’s salary. So the employer isn’t just playing around. The employer has invested a lot of time and money into getting it, and they’ve decided they want you. You just have to keep that in mind.

Kevin Pho: In this scenario that you mentioned earlier, where some of these physicians are scared to give the letter you give them to their employer, how do you reassure them? And how often are they actually convinced that it’s a good idea to bring some of these requests to their employer?

Dennis Hursh: Almost always. It’s very, very rare that I can’t convince them to just give it. Part of the thing I do is say, “Look, it’s on law firm letterhead. It’s signed by this guy Dennis, who’s not in the room. Nothing in it is unreasonable. But if they were to come back and say, ‘Hey, this is outrageous,’ you can shrug and say, ‘Eh, attorneys.’ They’re not really asking for it.”

A lot of times I think that gives them some comfort that it’s not me asking for it. I’m just handing this letter, and this guy who’s not in the room has asked for it.

Kevin Pho: How often does it progress to where you would talk directly to the potential employer’s attorney and negotiate directly on behalf of the physician?

Dennis Hursh: Maybe one in ten. Most physicians are comfortable doing it themselves. Once they understand the risks, because it’s all in the letter, they know what they should be talking about. They can talk to me and say, “Look, how important is this?” And a lot of times we’ll come down and say, “Look, this, this, this, and this are what I really think is important. That’s what you should really stand on.” Maybe one in ten just like me to do everything.

Kevin Pho: Now, if a new attending is listening to us today, and they can only do one thing, what’s the most important step they should take after receiving an offer but before signing it?

Dennis Hursh: Well, I’m a little biased, but I’d say have an attorney look at it. And I should clarify, if you’ve got a letter of intent or term sheet and you’re going to have somebody look at it, now is the time to do it.

I have so many physicians sign a letter of intent and then come to me and say, “Well, it said it wasn’t legally binding.” But as far as the employer’s concerned, you’ve agreed to that salary; you’ve agreed to everything that’s in the letter of intent. So I would say, have it looked at. You don’t know what you don’t know.

Kevin Pho: We’re talking to Dennis Hursh, health care attorney. Today’s KevinMD article is “First physician employment agreement mistakes.” Dennis, let’s end with some take-home messages you want to leave with the KevinMD audience.

Dennis Hursh: Just remember how valuable you are when you’re coming out of school. You are in a profession. You’ve worked very hard. You’ve probably taken on a lot of debt. You are enormously talented. They have picked you, and there’s a massive physician shortage. So don’t feel like you need to jump on the offer and don’t feel that they’re doing you a favor by offering you this position.

Kevin Pho: Dennis, thank you again for sharing your perspective and insight. Thanks again for coming back on the show.

Dennis Hursh: My pleasure.