Contemporary employment contracts are structured to balance the interests of the employer and the employed physician while remaining compliant with evolving legal standards. These set the stage for a future relationship shift from employer- employee to partner-partner.
An employment contract that only favors the employer is likely to be rejected by the candidate or resented later. Either way, there is an indirect cost to that approach, causing either a delay in hiring or higher-than-normal physician turnover. If this employee is potentially a future partner, that is all the more reason to set the initial stage equitably.
Here are key terms to consider when you hire a new associate or renew an existing physician employment agreement for your practice. All the comments below are looking through a practical business lens—you should consult your attorney closely whenever you draft any employment agreement.
Compensation and Benefits
No perfect compensation model has ever been developed. If 2 doctors are using the same resources and generating the same revenue, then any compensation model is fair. In all other cases, the feelings and the math can get complicated.
Typically, there is a market-based, competitive base salary related to experience and sub-specialty. Base wages for general ophthalmologists have climbed steadily in the last decade, from $200k-$325k to a present range of $250k-$450k, depending on the market.
Added to this is a productivity bonus, typically tied to net collections. We find that a common construction is +/-30% of collections exceeding 2.5x to 3.5x base salary. A +/-5% optical bonus is typical; contact lens sales are rarely bonused.
A typical benefits package includes family health insurance, professional liability insurance, a retirement plan (401k with employer match), a continuing education allowance, and other benefits your practice may offer. It is increasingly common to offer a sign-on bonus and/or relocation bonus of $10-25k or more.
Schedule and Call Duties
It’s important to spell out your specific expectations. This approach makes the requirements clear from the start. State the number of workdays, expected patient load, anticipated OR time and case volumes, call schedule, and time for business meetings and outreach.
Term and Termination
Physician employment contracts are commonly for 1 year or longer with renewal options. Keep in mind that no contract is really any longer than the termination provisions allow. Discuss with your attorney the advantage of having a so-called “evergreen” contract that automatically renews. This can avoid gaps in contract coverage for both parties if renewal and revision negotiations are prolonged.
A termination clause and notice requirements stipulate various grounds for immediate termination with cause. “Without cause” termination is also covered. For an employed physician, typical terms are 60 to 90 days’ notice without cause and immediate termination with cause.
Restrictive Covenants
Non-compete recitals, still present in the majority of associate-MD contracts, are terms that restrict employees from working for competitors of their former employer or starting a competing practice within a specific geographic range of their former employer during a designated timeframe. Their purpose is to protect the interests of the employing practice.
Practices invest heavily in building their reputation, marketing their services, developing professional networks for patient referrals, and acquiring patients. A non-compete clause prevents departing doctors from immediately setting up a competing practice nearby and taking patients and employees with them. This protection helps ensure the financial stability of the original practice and allows it to continue serving its patient base effectively by limiting staff and physician turnover.
Without a non-compete clause, a departing doctor could exploit inside knowledge of the practice, including patient lists, pricing strategies, and business plans. This could give that physician an unfair advantage when opening a new practice.
The use of non-compete clauses has generated considerable debate, particularly regarding their impact on doctors and patient care. The concern is that these clauses lead to restricted health care options.
In April 2024, the Federal Trade Commission issued a final rule aiming to ban most non-compete agreements nationwide. As of this writing, that proposed regulation remains blocked. Employers should continue to adhere to existing state laws and regulations regarding non-compete agreements.
State laws differ on non-compete clauses. For example, in California, non-compete clauses are unenforceable for physician employees, but enforceable for practice partners. In states where case law supports imposition of a non-compete agreement, the geographic and time boundaries must meet the standard of being “reasonable.”
Typical terms are for a 10- to 30-mile radius and a 2-year exclusion. These terms are wide-ranging, and typically less restrictive (ie, a smaller radius) in urban centers than in rural areas.
Until the present administration in Washington, the trend was to loosen or eliminate non-competes—which is favorable to associate doctors but poses challenges for employers. With the new administration, the mood is changing; it’s advisable for practices to stay informed and consult counsel to navigate this complex landscape.
Partnership Track
If the new associate is on a partnership track, the employment contract itself (subject to your attorney’s preferences) typically includes prospective (but not guaranteed) partnership terms. The timeline for partnership consideration is commonly 2 years, but this is often extended if the associate’s productivity lags.
Although any prospective partnership terms shared in the original employment agreement or any side letter is non-binding, it’s an effective, good-faith approach to help assure that the parties are on the same page. With competition high for candidates, successful recruitment includes being transparent about how practice finances and governance work from the start of the working relationship.
Performance Expectations
During the interview process, you should discuss and agree on future patient visit and surgical case volume expectations. The employment agree-ment should spell out a reasonable range of expectations—for example, “…35+ patient visits per day and 400+ visits per month by the end of the first year…and 30+ cataract surgeries per month…”
Be sure to lay out your expectations regarding outreach and other patient development efforts, and how much time will be spent outside of regular office hours with calls, business meetings, community engagement and the like.
Including this in the employment contract will help prevent misunderstanding and reinforce your work standards. It’s especially important to do so in entrepreneurial practices, where the existing providers have established more aggressive growth goals. In such settings, the practice may have to coax young associates along. Even the best surgeons don’t necessarily have the experience or confidence to build their personal practices.
By including these contemporary terms, an ophthalmology practice can create a clear and fair employment contract that attracts top talent while protecting the business’s long-term interests. OM
