Why Your Physician Contract Matters More Than Your Salary
by Malik
Why Your Physician Contract Matters More Than Your Salary
You're negotiating your first attending job. The recruiter throws out a number. $350,000.
That's a real number. You trained for over a decade to get here. Your medical school classmates are congratulating you. Your family is proud.
And you should be. But here's the thing nobody talks about in those negotiations. That $350K offer might actually be worth $280K. Or it might be worth $420K. It all depends on what's in the contract.
The salary number is the least important thing in that contract. I know that sounds backwards. Let me explain.
The Base Salary Is Just the Starting Point
When physicians look at job offers, most fixate on the base. It's easy to compare. Group A offers $320K. Group B offers $350K. Group B wins.
But a contract has five or six different components that affect your real compensation. And the base is often the least impactful one once you understand the others.
Here's what actually matters.
Production Bonuses Can Work For or Against You
Most employed physician contracts include a production bonus. Usually it's tied to RVUs, which stands for Relative Value Units. It's basically a measure of how much work you do.
The structure sounds reasonable. You generate a certain number of RVUs, you get a bonus. Hit more RVUs, bigger bonus.
The problem is the thresholds. I've seen contracts where the bonus threshold is set at the 90th percentile of productivity for that specialty. Which means you have to work significantly harder than average to hit it. And "average" in this context means physicians who have been in that practice for years and know the system.
New attending shows up, doesn't know the EHR yet, still building patient panel, trying to be efficient. You're going to hit that threshold in year one? Maybe not.
Or the opposite problem. The threshold is reasonable but the bonus rate per RVU is so low that the math barely works out to anything meaningful.
When you're reviewing a production bonus structure, ask two questions. What percentage of physicians at this practice actually hit the bonus threshold? And what does the payout curve look like? If you can't get clear answers, that's information too.
The Non-Compete Problem
This is the one that surprises physicians most when they finally want to leave.
Non-compete clauses in physician contracts are real. Enforceable in most states. And they can effectively trap you in a geographic area for years if the language is broad enough.
I've seen situations where a physician wanted to move 30 minutes away to be closer to family and couldn't because their non-compete prohibited them from working in the same metropolitan area. For another two years.
Before you sign anything, read the non-compete carefully. What geographic area does it cover? What timeframe? Does it restrict you from working in the same specialty or just the same employer? Some non-competes are narrow enough that they only restrict you from going to a direct competitor. Others are so broad they effectively limit your entire career in that region.
And ask about buyout provisions. Some contracts allow you to pay a fee to exit the non-compete early. Others don't.
Tail Insurance Is Not Optional
This one trips up physicians more than any other contract issue I see.
When you leave an employer, your claims-made malpractice coverage doesn't follow you. Any claims filed after you leave for incidents that occurred while you were employed? Those fall under your former employer's policy, not yours.
Unless you have tail insurance.
Tail insurance extends your coverage for incidents that occurred during your employment but are reported after you leave. And it is not automatically included in most claims-made policies.
Who pays for it? Depends on the contract. Some employers provide it automatically at no cost to you when you leave. Some require you to buy it yourself. And tail coverage for a physician can run $15,000 to $30,000 or more depending on your specialty.
Before you sign, understand what happens to your malpractice coverage when you leave. Is it occurrence or claims-made? If it's claims-made, who pays for the tail? If it's you, factor that into your compensation calculation.
Benefits Packages Are Part of the Compensation
Health insurance, retirement contributions, CME allowance, licensing fees, disability insurance. These aren't add-ons. They're part of what you're worth.
One employer might offer $340K with a 5% retirement match, $3,000 CME allowance, and employer-paid disability insurance. Another offers $355K with nothing extra. The first package is actually worth more.
And disability insurance specifically. I tell every physician I work with the same thing. Lock in your disability coverage before you sign that contract if you can. Once you're employed and underwritten, you have to disclose any health changes. If something comes up during your first year, it could affect your ability to get coverage or the terms.
Get it before you start if possible. It's that important.
The Real Negotiation Point
Here's what most physicians miss. The base salary is the hardest thing to negotiate because employers have a range they're willing to pay and they know what the market rate is.
But signing bonuses, tail insurance provisions, non-compete modifications, CME allowances, PTO structure, and call schedules? Those are all negotiable. And most employers have much more flexibility there than they let on initially.
If you're early in your career and you don't feel comfortable negotiating the big stuff, bring someone with you who does. A physician-focused financial advisor or attorney who understands these contracts can identify issues you'd miss and help you understand what you're actually agreeing to.
The salary gets the attention. The contract determines whether that salary works out.
The Question to Ask Before You Sign
Before you commit to any physician employment contract, ask yourself one question. If I stay here for three years and then want to leave, what does that look like?
If the answer involves a restrictive non-compete, paying for your own tail insurance, and a bonus structure that only rewards superhuman productivity, the $350K might be costing you more than you think.
Get the contract reviewed. Ask the hard questions. Then decide.
FAQ
How do physicians build wealth differently than other high earners? Physicians face unique challenges including delayed earnings, significant student debt, complex tax situations with private practice vs employed structures, and insurance needs that must be locked in early. The window for catching up is compressed because of training years.
What taxes affect doctors most? The biggest tax issues for physicians are self-employment taxes if in private practice, the jump to higher marginal brackets as attendings, and timing of income deferral strategies like 403(b) and 457(b) contributions. Physicians in high-tax states also feel state income taxes more acutely.
Why do many doctors go broke despite high incomes? Lifestyle inflation, student loan debt servicing, poor tax planning, and delay in building savings all contribute. But contract issues like inadequate disability insurance, non-compete restrictions, and unfunded tail insurance also create financial traps that catch physicians who don't understand what they've signed.
When should physicians invest in real estate? Only after the financial foundation is set: emergency fund, maxing retirement accounts, adequate disability insurance, and understanding your employment stability. Real estate is a good long-term investment but shouldn't come before protecting your income and building basic savings.
How much should a resident doctor save? At minimum, enough to capture any employer 401(k) or 403(b) match. Beyond that, focus on building an emergency fund of three to six months expenses before investing heavily. Once attending, the savings rate should increase significantly to make up for lost compound growth during training years.