Mastering Physician Contracts: Key Salary Clauses You Must Know

Understanding Salary Clauses in Physician Contracts: A Strategic Guide for New Attendings

Physician Contracts are more than just paperwork you sign before starting a new job—they are legally binding agreements that shape your income, schedule, autonomy, and long-term Medical Career trajectory. For residents and fellows entering the job market, the salary sections of these agreements can feel especially confusing and high-stakes.

Salary Clauses are not just about a single number. They interact with productivity expectations, call schedules, malpractice coverage, and even where you can practice in the future. Having a clear grasp of the key financial terms in your contract is critical for effective Healthcare Negotiation and long-term financial stability.

Below is a detailed breakdown of the top 10 salary-related clauses in physician contracts, how they work in practice, and what you should look for before signing. While this article focuses on salary and compensation, remember that these clauses exist within the broader framework of Contract Law and employment regulations, so consulting a healthcare attorney is always wise.

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1. Base Salary: The Foundation of Your Compensation Package

Your base salary is the anchor around which most other compensation components are structured. It’s the guaranteed amount you receive for fulfilling the agreed-upon duties in your position.

Key Elements of Base Salary

A typical contract will specify:

• Annual salary amount (e.g., $230,000 per year)
• Payment schedule (biweekly, monthly, etc.)
• Whether the salary is guaranteed or subject to adjustment
• Relationship to productivity (e.g., a pure salary vs. salary plus incentive model)
• Duration of guarantee for new graduates (e.g., a 1–2 year income guarantee before moving to RVU-based compensation)

Example:
A hospital-employed internist is offered:

• Base salary: $260,000 per year
• Payment: Monthly
• Term: Guaranteed for two years, after which compensation transitions to RVU-based with a lower base and higher productivity upside.

What to Watch For

• Fixed vs. variable:
  Is the salary truly fixed, or can it be reduced based on production, quality metrics, or “financial performance” of the organization?

• Salary vs. total compensation:
  Confirm whether the listed figure is just base salary or includes:

  • Expected productivity bonuses
  • Call pay
  • Stipends or leadership supplements

• Benchmarking:
  Ask how the number was determined:

  • Are they using MGMA, AMGA, or specialty society benchmarks?
  • Is your offer at the 25th, 50th, or 75th percentile for your specialty and region?

• Future adjustments:
  Does the contract address annual raises, cost-of-living adjustments, or periodic reviews?

Action Step:
Before negotiating, pull compensation data from sources like MGMA, Doximity, specialty societies, and talk with senior residents or recent grads in your field. You’ll negotiate from a stronger position if you know market ranges.

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2. Bonus Structure: How and When You Earn Extra Pay

Bonuses are one of the most variable parts of Physician Contracts. They can meaningfully increase your total income—but only if they are realistic and clearly defined.

Types of Bonuses

Common bonus types include:

• Sign-on bonus: Paid once when you start; sometimes tied to a required service period.
• Retention bonus: Paid after staying for a set number of years.
• Performance bonus: Based on metrics like patient satisfaction, quality scores, or panel size.
• Practice profitability bonus: Often tied to group or department financial results.

Example:
Your contract may state:

• Sign-on bonus: $25,000, paid within 30 days of start date
• Annual performance bonus: Up to $20,000 for meeting:
  • Patient satisfaction scores above a set threshold
  • Quality metrics (e.g., diabetes control, screening adherence)

What to Watch For

• Timing and payout rules:

  • When is the bonus calculated (quarterly vs annually)?
  • When is it actually paid (e.g., 60–90 days after the performance period)?

• Clawback provisions:

  • If you receive a sign-on bonus but leave before a specified time (commonly 1–3 years), do you have to repay all or part of it?
  • Is repayment prorated (more favorable) or all-or-nothing?

• Clarity of metrics:

  • How exactly are performance targets measured?
  • Are the benchmarks historically achievable in that practice?

Action Step:
Ask for historical data: “What percentage of physicians in this group received the full performance bonus in each of the last three years?” This transforms a vague promise into concrete expectations.

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3. Incentive Compensation: RVUs, Collections, and Productivity Models

Incentive compensation connects your pay to your productivity and, increasingly, quality metrics. This is where understanding the contract’s fine print can make the difference between a fair deal and chronic underpayment.

Common Productivity Models

• wRVU-based models:

  • You’re paid a certain dollar amount per work RVU after reaching a threshold.
  • Example: $50 per wRVU above 5,000 wRVUs per year.

• Collections-based models:

  • You receive a percentage of net collections (money actually collected from payers and patients).
  • Example: 40% of collections after expenses.

• Hybrid models:

  • A base salary plus a bonus tied to wRVUs, collections, or panel size.

Example:
You are offered:

• Base salary: $230,000
• wRVU target: 4,800 annually
• Bonus: $45 per RVU above 4,800

If you produce 5,400 wRVUs, you earn an additional 600 × $45 = $27,000.

What to Watch For

• Realistic thresholds:

  • Are the targets achievable for your specialty, patient mix, and support staff?
  • Ask: “What is the average wRVU production for physicians in my role here?”

• Control over your schedule:

  • If your salary depends on productivity, do you have enough clinic time, support staff, and OR time to meet targets?

• Transparency of calculations:

  • How often are reports generated (monthly, quarterly)?
  • Will you receive regular summaries of:
    • Your wRVUs or collections
    • How your bonus is calculated

• Payer mix and billing practices:

  • In collections-based models, payer mix (Medicaid/Medicare/Commercial) and billing efficiency significantly affect your income—often outside your control.

Action Step:
Request example compensation reports (with identifiers removed) to see how the incentive formula has worked for current physicians over the past 1–2 years.

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4. Profit-Sharing Arrangements: Participating in the Practice’s Success

Profit-sharing allows physicians—especially partners or senior associates—to share in the net profits of a group or department. This can substantially boost earnings but often comes with conditions.

How Profit-Sharing Typically Works

• Eligibility:
  • Often available only after a partnership track period (e.g., 2–3 years).
• Formula:
  • A defined percentage of net profits distributed:
    • Equally among partners, or
    • Based on productivity or ownership share.
• Components:
  • May include ancillary revenue (imaging, labs, ASC fees) in some practices.

Example:
A 10-physician group designates:

• 30% of net annual profit to be equally divided among partners.
• If net profit is $2,000,000, the profit pool is $600,000, or $60,000 per partner.

What to Watch For

• Definition of “net profit”:

  • What expenses are deducted before profit is calculated?
  • Are there any management fees or owner distributions taken off the top?

• Partnership track details:

  • How long before you’re eligible?
  • What is the buy-in cost and how is it determined?

• Transparency and governance:

  • Do you get access to financial statements?
  • How are decisions about profit distribution made?

Action Step:
If profit-sharing is a major selling point, request a written explanation of the formula and the average profit-sharing payout per physician over the last 3–5 years.

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5. Call Pay: Compensation for Overnight and Weekend Responsibilities

For many specialties, call obligations significantly affect workload, lifestyle, and compensation. Call pay is often negotiable and can vary widely—even within the same region.

Types of Call Pay

• Stipend per call shift:

  • Fixed amount for covering call (e.g., $1,200 per 24-hour in-house call).

• Per encounter or per consult pay:

  • Additional payment for each case seen while on call.

• Differential for intensity:

  • Higher pay for in-house vs. beeper call, or for trauma/ICU-heavy services.

Example:
A hospital offers:

• $1,500 per 24-hour in-house weekend call
• $800 per weekday call
• Additional $100 per procedure performed overnight

What to Watch For

• Definition of “on call”:

  • Are you expected to be in-house or within a certain distance?
  • Does “backup call” count, and is it compensated?

• Volume and fairness:

  • How often will you take call compared to other physicians?
  • Is there a cap on how many call shifts you can be required to take?

• Call expectations vs. compensation:

  • Are you required to take call without pay as a “condition of employment”?
  • Is this clearly stated in the contract?

Action Step:
Clarify call frequency (“Average number of call shifts per month?”) and ask whether call schedules are shared in writing. Negotiate call pay if call demands are high or inequitable.

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6. Malpractice Insurance Coverage: Claims-Made vs. Occurrence

Malpractice insurance is a core part of your compensation package and a major area where hidden costs can appear—especially when changing jobs.

Key Malpractice Concepts

• Occurrence coverage:

  • Covers any incident that occurred during the policy period, regardless of when the claim is filed.
  • Typically more expensive for the employer but simpler for you.

• Claims-made coverage:

  • Covers claims filed while the policy is active.
  • When you leave, you usually need tail coverage to protect against later-filed claims.

Example:
Your contract might provide:

• Claims-made malpractice insurance with limits of $1 million per claim / $3 million aggregate.
• Employer pays premiums during employment but does not pay for tail coverage if you leave.

What to Watch For

• Who pays for tail coverage?

  • Tail coverage can cost 1–2 times the annual premium—often tens of thousands of dollars.
  • Ideal: Employer pays for tail or shares the cost on a prorated basis.

• Coverage limits and scope:

  • Standard limits vary by state and specialty.
  • Confirm your policy covers all aspects of your work:
    • Clinic
    • Hospital
    • Telemedicine
    • Teaching/supervision

• Moonlighting and side work:

  • If you plan to moonlight, verify whether it’s covered by your primary policy or requires a separate policy.

Action Step:
Ask directly: “If I leave the position, who is responsible for purchasing tail coverage, and what is the typical cost in this specialty?” Make sure the answer is reflected in the contract.

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7. Relocation Expenses: Moving Support and Payback Obligations

Relocation support is common in post-residency offers and can meaningfully reduce your initial financial burden. However, it often comes with strings attached.

Typical Relocation Benefits

• Reimbursement of moving costs:
  • Moving company fees, packing, storage.
• Travel and housing support:
  • Temporary housing for 1–3 months.
  • Travel for house-hunting visits.
• Lump-sum relocation stipend:
  • A single payment for you to manage the move.

Example:
A large health system offers:

• Up to $12,000 reimbursement for documented relocation expenses.
• 60 days of temporary housing.
• Payback clause if you leave within two years.

What to Watch For

• Cap and eligible expenses:

  • Is the benefit a flat amount or reimbursement up to a maximum?
  • Which expenses are eligible (storage, car shipping, temporary housing)?

• Repayment obligations:

  • If you leave early, do you have to repay all relocation expenses?
  • Is the payback prorated based on time served?

• Tax implications:

  • Many relocation benefits are taxable income under current IRS rules.
  • Clarify whether taxes are grossed up or your responsibility.

Action Step:
Negotiate for prorated repayment obligations whenever possible, especially if you are moving long-distance or uprooting a family.

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8. Benefits and Retirement Plans: Hidden but Powerful Compensation

Benefits can easily add the equivalent of 20–30% or more to your base salary, making them a critical part of any Healthcare Negotiation. Evaluating benefits carefully helps you compare offers accurately.

Core Benefit Areas

• Health, dental, and vision insurance:

  • Employer vs. employee premium contributions.
  • Dependents’ coverage and out-of-pocket costs.

• Retirement plans:

  • 401(k), 403(b), 457(b), or defined benefit pension plans.
  • Employer match or discretionary contributions (e.g., 4–10% of your salary).

• Paid time off (PTO):

  • Vacation, sick leave, CME days, and holidays.
  • Are they combined or separate buckets?

• Professional expenses:

  • CME allowance, licensing fees, DEA registration, board certification fees, professional society dues.

Example:
A contract might state:

• Employer contributes 5% of your salary to a 401(k) after 1 year of service.
• CME allowance: $3,000 per year plus 5 paid CME days.
• PTO: 20 days vacation + 6 holidays + 5 CME days.

What to Watch For

• Retirement vesting:

  • When do employer contributions become fully yours?
  • Are there multi-year vesting schedules that affect your ability to leave?

• CME and licensing support:

  • Are key professional costs covered, or do you pay them out of pocket?

• Benefits start date:

  • Do health insurance and retirement benefits begin on day 1, or is there a waiting period?

Action Step:
Request a benefits summary document and compare total cost of benefits—including premiums and out-of-pocket expenses—across offers, not just base salaries.

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9. Employment Duration and Termination Clauses: Protecting Your Stability

Even though these clauses are not “salary” on their face, they directly affect your financial security and your ability to leave a bad job without undue penalty.

Key Contract Duration Terms

• Initial contract term:
  • Often 2–3 years, sometimes with automatic renewal.
• Notice requirements:
  • The amount of written notice required to terminate “without cause” (commonly 60–180 days).
• For-cause vs. without-cause termination:
  • For-cause: Misconduct, license revocation, etc.
  • Without-cause: Either party may end the contract for any reason, with proper notice.

Example:
Your contract may specify:

• Term: Three years, automatically renewing for one-year periods.
• Either party may terminate without cause with 90 days written notice.

What to Watch For

• Short notice periods:

  • Very short notice from the employer (e.g., 30 days) can be financially destabilizing.
  • Ideally, notice periods are similar or balanced for both sides.

• Financial consequences of early termination:

  • Repayment of sign-on bonus or relocation expenses.
  • Penalties tied to training costs or loan repayment incentives.

• Tied compensation elements:

  • If you leave, what happens to:
    • Unpaid bonuses?
    • Pending incentive compensation?
    • PTO payouts?

Action Step:
Negotiate for fair notice periods (90–120 days is common) and clear, reasonable repayment arrangements for any front-loaded financial benefits.

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10. Non-Compete and Non-Solicitation Clauses: Impact on Future Earning Power

Non-compete and non-solicitation provisions can restrict where and with whom you can work after leaving a job, potentially limiting your future income and career options.

Non-Compete Clauses

These limit your ability to practice within a certain geographic radius for a specified time period after leaving.

Example:
A non-compete might state:

• You may not practice within a 30-mile radius of any clinic location of the employer for 12–24 months after termination.

Non-Solicitation Clauses

These prevent you from:

• Recruiting staff or physicians from your former employer.
• Actively soliciting patients to follow you to a new practice.

What to Watch For

• Scope and geography:

  • How large is the restricted area?
  • Does it apply to all locations of the system, even those you never worked in?

• Duration:

  • Restrictions longer than 1–2 years are often excessive and may be harder to enforce.

• Enforceability and local law:

  • Non-compete enforceability varies by state and is evolving.
  • Some states significantly limit or ban physician non-competes.

Action Step:
Discuss the non-compete with an attorney knowledgeable in Contract Law and local employment statutes. Ask if the employer is willing to narrow the radius, reduce the duration, or limit the restriction to specific practice sites or specialties.

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FAQs: Navigating Salary Clauses in Physician Contracts

1. How can I tell if my compensation package is competitive for my specialty?

Compare your total compensation (base salary + bonuses + benefits + call pay) to:

• Regional and national benchmarks (MGMA, AMGA, specialty society surveys).
• Online physician compensation reports (e.g., Doximity Physician Compensation Report).
• Feedback from recent graduates in your specialty.

Remember to adjust for cost of living, call burden, and benefits. A lower salary in a low-cost area with great benefits might be more valuable than a higher salary with poor support and higher expenses.

2. Which salary clauses are usually negotiable in physician contracts?

Most of the following can often be negotiated:

• Base salary and duration of guaranteed salary
• Sign-on bonus and relocation support
• Call pay structure and frequency
• CME allowance and PTO
• Tail coverage responsibility (sometimes shared or prorated)
• Non-compete radius and duration

Approach negotiation with data and a collaborative tone—emphasize that you want a sustainable, long-term relationship that works for both sides.

3. Should I hire a lawyer to review my physician contract?

Yes, it is strongly recommended. A lawyer specializing in healthcare contracts and Contract Law can:

• Explain complex salary and bonus formulas
• Identify risky termination, repayment, or non-compete terms
• Suggest reasonable edits and negotiation strategies

The cost is usually modest compared to the potential long-term impact on your compensation and career flexibility.

4. What should I prioritize if I can’t negotiate every clause?

Focus on:

1. Total compensation (base + realistic bonuses + call pay)
2. Malpractice coverage and tail responsibility
3. Non-compete scope and future practice limitations
4. Termination terms and repayment obligations (sign-on, relocation, loans)

If necessary, trade less critical perks (e.g., small CME increase) for improvements in these high-impact areas.

5. How early in the job search should I start learning about physician contracts?

Start during your final year of residency or fellowship, before you sign any offers. Understanding Physician Contracts and salary structures early:

• Helps you compare offers apples-to-apples
• Makes you more confident in Healthcare Negotiation
• Reduces the chance of surprises when you start your first attending role

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Mastering Salary Clauses in your physician contract is essential to building a stable, rewarding Medical Career. Take your time, ask questions, seek expert review, and remember: almost everything is negotiable before you sign—and very difficult to change afterward.