How to Approach a Contract Negotiation with a Potential Employer

Provided By Tom Burch, CRPC®, Senior Financial Advisor at Larson Financial Group

Whether you’re starting your career in medicine or transitioning from one position to another, having a solid grasp of the terms of an employment contract before signing is crucial. Physician employment contracts can be lengthy, and many line items will have a substantial impact on both your professional and personal life.

There can be some trepidation, especially among younger physicians receiving their first offer, about objecting or countering the initial offer made by the employer. No contract is carved in stone, and instances of a hospital simply refusing to negotiate are extremely rare. That being said, knowing how and when to approach these matters will give you the confidence needed to stand your ground with conviction.

Receiving the Offer Letter

After the interview process has concluded, a physician may first receive a letter of intent if the employer has decided to move forward. This is an overview of the major terms of the forthcoming employment contract that verifies both parties are on the same page before the contract is drafted.

In many cases, letters of engagement are the only written instruments that are used to memorialize an agreement, so you should really have them looked at by a licensed attorney before signing. If you have any concerns that compensation is not consistent with market standards, you can request additional language be added to the offer that gives you some wiggle room to negotiate. You shouldn’t feel any reluctance to request these revisions, because at this point they’ve invested a lot of time and money to determine you’re the right person to fill the position.1


Physician Employment Contract Review

Once you’ve received the actual contract, it should specifically state how much and how often you will be paid. These figures should not be viewed in a vacuum. You’ll want to verify that the compensation you are offered is comparable to that of physicians with similar experience in your geographical area.

In addition to a base salary, many physicians also receive performance incentives based on productivity. Hospital systems usually base their performance-incentive model on a measurement of productivity calculated by the Center for Medicare and Medicaid known as RVUs (Relative Value Units). Your contract should include a conversion formula to specify the dollar amount of each RVU, and a potential employer can usually provide an estimate of how many RVUs you can anticipate so you can calculate whether these performance thresholds are realistic.

For private practices, performance incentives are typically based on collections instead of RVUs. However, the reimbursements for a procedure vary depending on how the patient will pay for the treatment. Knowing the practice’s current payor mix should help you determine if the incentives for the collections-based model in the contract are feasible. Knowledge of how incoming patients are allocated will also allow you to forecast collections with a greater degree of certainty.


The contract should also list all benefits your employer extends to you; typically including health, disability, life insurance and retirement plans. This is usually an aspect of the contract where there is a lot of room for negotiation, but you need to be vigilant. The employer probably won’t agree to all of your benefits-related requests, but the only way to secure any of the perks on your list is to ask directly.

In addition to sign-on bonuses and reimbursement for moving expenses, many employers provide a stipend for continuing medical education and the costs associated with board certification or recertification. In addition, it’s not uncommon for an employer to cover a physician’s hospital or society dues and offer medical school debt repayment assistance. Make sure your contract states in no uncertain terms the expenses your employer will cover.

Legal Restrictions

Physicians should also seek clarity in regards to what their options and rights are if the decision is made to terminate employment. Restrictive covenants could prohibit you from practicing medicine following contract termination.

If the contract indicates your non-compete is binding within a certain mile radius of any of their sites, this could severely limit your professional options.2 You should know the non-compete rules like the back of your hand, and the non-compete provisions of your spouse if he or she is a physician as well. They can and usually do factor into personal decisions, such as if and when to buy a home.


Regardless of the length of a contract, physicians need to take the time to educate themselves on the underlying details of the agreement before negotiations begin. This typically requires the assistance of a professional that is capable of boiling down complex legal terminology into language that is easy to understand.

In addition to analyzing the legality of the document, you will want to verify that the benefits are reasonable and that the expectations for performance incentives are realistic. The best employment contracts establish principles that encourage shared responsibility and collaboration while creating opportunities for innovation, continuous improvement and shared benefits. Even if this isn’t your first time through the process of negotiating an employment agreement, experience is simply no substitute for the oversight of a competent attorney familiar with your individual circumstances.


  1. Fairway Physician Home Loans, “The Physician Financial Success Podcast”
  2. Hannah Stuart, “Negotiating a Contract You Can Live With” (June 26, 2015).


Advisory Services offered through Larson Financial Group, LLC, a Registered Investment Advisor. Securities offered through Larson Financial Securities, LLC, Member FINRA/SIPC.

Larson Financial Group and its representatives do not provide legal or tax advice. Please consult the appropriate professional regarding your legal or tax planning needs.