GUEST POST: Contracts 101 - Private Practice vs. Corporate Employment


(Editor's comment: this guest post is provided by Jon Appino, the Principal of Contract Diagnostics - a firm specializing in physician contract reviews.  For full disclosure, Contract Diagnostics is a paid advertiser on Future Proof, MD.  Have a great Memorial Day weekend, Thank you to our troops!)

Over the years the employment of physicians by corporate entities has grown dramatically.  Last year, 67% of all graduating residents and fellows chose hospital employment over joining a private practice.  This trend is more pronounced for certain specialties (we recently had a client tell us out of her Family Medicine graduating class of 30, only one is going into private practice).  Let’s talk about the pros and cons of the traditional model of private practice vs. the new trend of corporate employment.

Private Practice – be your own boss.

Many physicians see the benefit of private practice to be more flexible and casual.  This can be a good or bad thing, as expectations or a path to partnership may not be clearly defined.  However, if and when you make partner, you are essentially your own boss.  Nobody can tell you what to do or when to do it, so the satisfaction of total control over your practice and patients (and to some degree, your income) is highest.  Depending on specialty, the income you earn can be dramatically higher as well.  Many have low base salaries with the ability to earn incentive compensation if revenues exceeds a certain threshold (widely variable by specialty, region, and practice).  The private practice model has many benefits but can be challenging in some ways.  Income is usually dramatically lower for a few years and there may be an expensive buy-in.  Contracts typically offer significantly less for signing bonuses or relocation amounts (if any) and rarely cover ‘tail’ malpractice insurance.  There may be an ‘income guarantee’ from a hospital which can cost you well over $1,000,000 if not done right.  These private practice contracts, although seemingly shorter and more simple, can quickly become a nightmare if not closely scrutinized.

Corporate Employment – work for “da Boss”

Many younger physicians ‘just want to work, earn a living, and enjoy it.’  This is why they choose hospital employment.  The contracts are often similar for all physicians and tend to be longer (average 18.9 pages seen at Contract Diagnostics, the record is currently 76 pages!).  They are often filled with ‘legalese’ and can be difficult to review.  Often signing bonuses, relocation stipends, and even student loan assistance are included.  Incentive compensation tends to be based on wRVU production.  While many may appear ‘standard’ with no apparent need for review, they may have different ways of locking a physician into an area, repaying low production years, or complicated termination clauses and intellectual property policies among others.  These agreements can be important as employed physicians are much more likely to leave the employment for another job than someone in private practice. 

Bottom Line

There are “jobs” and then there are “careers”.  You can view the traditional private practice model as a “career” path -  physicians use to finish training, start their own practice or join one, and work until they retired.  Rather the rise in corporate employment can be viewed as a “job” path.  This shift has allowed physicians to be more transient in their employment (56% of physicians leave their first place of employment after the first term).  Within this new reality, employers are modifying their contracting language.  It is more important now than ever to have all documents reviewed by an expert.  There is just too much on the table not to invest in that process.  


Guest author Jon Appino is the Principal at Contract Diagnostics, a nationally recognized leader in physician contract reviews.  They have dedicated their entire practice to helping physicians navigate through the employment/partnership contracting phase.  

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