Best Practices for Reviewing and Negotiating a Dermatology Contract

Best Practices When reviewing a professional contract, it’s crucial to thoroughly analyze key components to ensure clarity, fairness, and alignment with both short- and long-term goals. Below is a detailed breakdown of the most important contract points to consider:

Most of the dollar value items and terms within a contract can be negotiated. If working with a recruiter, they should be transparent about what is and is not appropriate to try to negotiate. You should also feel comfortable asking about when negotiation is appropriate. If working directly with a practice owner or group assume the time for negotiation is after receiving an offer. At any point during your interview process, if the practice brings up aspects of compensation, that is an invitation to ask questions.

1. Income Structure: Guaranteed vs. Variable Compensation

Understanding the income structure is essential, as it determines financial stability. Guaranteed income offers a fixed salary, providing predictability, whereas variable income is tied to performance metrics such as Relative Value Units (RVUs) or a percentage of collections. RVU-based compensation can be a subjective measure. Make sure to ask for details on their calculation. We recommend negotiating for a percentage-of-collections structure as it is the most straight forward way to be compensated. The percentage of collections model is influenced by payor rates and billing efficiency. Be sure to ask about a practice’s performance in those areas. Clarify whether there are minimum guarantees during the initial period and if income reviews or adjustments are scheduled periodically.

2. Bonuses: Signing, Starting, Relocation, and Retention

Bonuses can significantly enhance the value of a contract. Signing bonuses provide an upfront incentive to join, while starting bonuses may be disbursed after beginning work. Relocation bonuses can cover moving expenses, ensuring a smooth transition, and retention bonuses incentivize long-term commitment by providing rewards for staying with the organization for a specific duration. Ensure that any bonus payments are clearly stated, including repayment obligations if the contract is terminated early.

3. Benefits: Time Off, Health Insurance, 401(k) Plans, and More

Comprehensive benefits are critical to overall job satisfaction. Evaluate the amount of paid time off (PTO) offered, including vacation, sick leave, and parental leave. Review the health insurance plan options, including premiums, deductibles, and coverage for dependents. Assess retirement benefits like 401(k) plans, noting whether the employer offers matching contributions and the vesting schedule. Additional benefits to look for include disability insurance, continuing education allowances, professional dues, and licensure reimbursements.

4. Malpractice Coverage: Tail Coverage

Malpractice insurance is a vital component. Verify whether the employer provides malpractice insurance and, importantly, whether tail coverage is included. Tail coverage extends protection after the contract ends, safeguarding against claims that may arise from services rendered during employment. If tail coverage is not included, understand the cost and whether you’ll be responsible for purchasing it independently.

5. Termination Terms: Notice Period and Non-Compete Clauses

Termination terms outline how the contract can be ended by either party. Ensure the notice period is reasonable, typically ranging from 90 to 120 days, allowing adequate time to transition. Non-compete clauses should be reviewed carefully, as they may restrict where and how you can work after leaving. Pay attention to the duration, geographic scope, and specific restrictions to ensure they are not overly prohibitive. Recent legislation was passed to ban non-competes, they are being contested in court.

6. Path to Partnership

For those pursuing partnership opportunities, understanding the path to partnership is critical. Clarify the timeline—whether it’s based on years of service, performance metrics, or a combination of both. Determine the financial requirements, such as buy-in amounts, and what equity or profit-sharing arrangements are available. Also, understand the expectations for clinical, administrative, or business development contributions and any mentorship or support provided to facilitate the transition.

These should be clearly spelled out in an agreement to avoid not meeting one party’s expectations. Often you will work with a practice before either party decides to become a partner. It should be expected to detail when and how those conversations will take place in an initial agreement.

Conclusion

Reviewing and negotiating these key contract points ensures a well-rounded understanding of the offer and can significantly impact professional satisfaction, financial and long-term success. Seeking legal or financial advice during contract negotiations is also advisable to ensure that all terms are equitable and clearly defined.

Reviewing and negotiating these key contract points ensures a well-rounded understanding of the offer and can significantly impact professional satisfaction, financial and long-term success. Seeking legal or financial advice during contract negotiations is also advisable to ensure that all terms are equitable and clearly defined.