Before You Sign: Three Hidden Pitfalls in Your Physician Employment Contract

By: Christopher Williams and Elizabeth Schlissel

You spent over a decade training to practice medicine. You should not sign away your career in an afternoon.

Yet that happens every day. Many physicians sign employment agreements without fully understanding them. The contract often arrives after you have given notice, relocated your family, or committed to the role. The pressure to sign is enormous, and the language is dense. The result? Terms that limit your income, restrict your professional freedom, and create liability you never saw coming.

This alert covers three provisions that routinely catch physicians off guard, drawn from real hospital system and physician practice agreements. Read them, then call a lawyer before you pick up the pen.

1. Conflict of Interest and Outside Activity Disclosures

The Trap: Your Side Hustle May Already Be a Breach

Many physicians have professional activities outside their primary job: speaking and teaching engagements, consulting, advisory boards, expert witness work, or moonlighting. These are common and legitimate. Your new contract may still treat every one of them as a problem.

Physician employment agreements typically define “External Activities” in sweeping terms. Here is a representative definition drawn from a standard hospital employment agreement:

“External Activities are any professional activities outside the scope of this Agreement in any field of medicine or surgery, academic lecturing, including consulting, promotion, marketing, or speaking engagements, or teaching, research, writing, or the provision of testimony as an expert witness.”

That covers nearly everything you might do outside your clinical duties. And the contract requires prior written approval before you engage in any of it:

“The Physician will not engage in consulting, advisory board, or speaker program agreements with medical device companies, pharmaceutical companies, or other health care related entities without the prior written consent of Company.”

Even with approval, the activity must be “consistent with the interests of the Company... and may not pose any potential for bias and influence on the physician’s medical judgment.” The employer, not you, decides whether that standard is met.

Why This Matters

If you already consult, speak, or advise when you sign, you may be in breach on day one. The contract may not grandfather existing arrangements.

How do you protect yourself?

• Audit your outside activities before you sign. Make a complete list of every engagement, consulting arrangement, advisory role, and speaking commitment you currently hold and ones that you may want in the future.
• Disclose everything up front. Submit the full list to the employer and request written approval as part of the hiring process, not after.
• Negotiate carve-outs. If specific activities are important to your career or income, negotiate express exceptions written into the agreement or an attached schedule of pre-approved activities.
• Clarify the approval process. Understand who approves requests, how long the process takes, and whether approval can be revoked.

2. RVU-Based Compensation Structures

The Trap: Your Bonus May Be a Mirage

Many agreements tie bonuses to Work Relative Value Units (wRVUs). Exceed a threshold, and you earn a set dollar amount for each wRVU above it. Typical language reads:

“[B]onus compensation [is based on] the Physician’s generation of more than [NUMBER] Work Relative Value Units (‘wRVUs’) during the employment year (the ‘Bonus Base’). The Company will determine the amount, if any, of bonus compensation at the conclusion of the employment year, by multiplying $[NUMBER] by the number of wRVUs in excess of the Bonus Base.”

Sounds fair. But first, the employer controls the inputs that determine whether you hit your target:

“The Company shall have complete and exclusive authority to assign patients to the Physician, and to establish fee schedules and otherwise set fees for all Professional Medical Services.”

You do not control your patient volume, patient mix, or fee schedule. Yet your bonus depends on all three.

Second, the employer reserves the right to change the rules at any time:

“[T]he Company has the right to continuously review and revise the compensation structure annually as necessary based on the physician’s performance and the Company’s goals and any relevant market influences.”

Translation: the wRVU threshold, the per-unit dollar amount, or the entire bonus formula can be revised annually at the employer’s discretion.

The Post-Pandemic Problem

This is especially dangerous today. Many wRVU benchmarks were set or adjusted during the COVID-19 pandemic, when patient volumes were wildly abnormal. The pandemic also accelerated telehealth and reduced in-person visits, yet many benchmarks were built around in-person encounters, and virtual visits may earn fewer wRVUs or none at all. The result can be targets that are simply unworkable given current patient volumes, the mix of in-person and virtual care, staffing levels, or payer mix. Before signing, ask how telehealth visits are credited toward your wRVU targets.

What to Do

• Negotiate a ramp-up period. New physicians (or physicians joining a new practice) should not be held to full wRVU targets in the first year. Push for a guaranteed base salary during the initial 12 to 18 months.
• Require benchmark recalibration. Insist that wRVU thresholds be recalibrated annually using objective market data, such as MGMA (Medical Group Management Association) survey benchmarks, rather than set unilaterally by the employer.
• Establish a guaranteed minimum. Negotiate a compensation floor so that your income does not collapse if patient volume drops for reasons beyond your control (staffing shortages, facility closures, payer mix shifts).
• Get clarity on what counts. Confirm which activities earn wRVU credit. Administrative duties, committee work, teaching, and call coverage often do not count but consume significant time.

3. Non-Compete Clauses

The Trap: You May Not Be Able to Practice in Your Own Community

Almost every physician employment agreement includes a non-compete clause. In a hospital system agreement, the restricted area is typically defined as an entire geographic region:

“The Physician agrees that for a period of [NUMBER] years following the termination of this Agreement, they shall not, individually or jointly, whether as an employer, physician, operator, agent, independent contractor, owner, shareholder, investor, joint venture participant, or otherwise, engage in the practice of medicine: [SPECIALTY] in the [GEOGRAPHIC REGION].”

Practice agreements often use a mileage radius from the practice or any of its offices instead.

On top of the geographic restriction, non-solicitation provisions prohibit you from soliciting employees, patients, or referral sources of the employer after departure.

The Modern Danger: Hospital Consolidation

Non-compete clauses are not new, but their impact has changed. Large hospital systems now dominate regional networks, often operating dozens of facilities across an entire metro area or region.

If your restricted area is the employer’s “geographic region,” it may cover every facility in the system. If the relationship ends for any reason, you could be locked out of practicing your specialty in your own community for years.

And these agreements are typically at will. The employer can terminate you without cause, but the non-compete survives. You lose your job and the ability to work in your own backyard.

What to Do

• Narrow the geography. Push for restrictions tied to the specific facility or office where you practice, not the employer’s entire service area. Radius-based restrictions should be as small as possible.
• Shorten the duration. Every year counts. A one-year restriction is far less damaging than a three-year restriction.
• Negotiate carve-outs. Seek exceptions for specific practice settings (academic medicine, telehealth, locum tenens) that do not directly compete with the employer.
• Add a buyout provision. If you cannot eliminate the non-compete, negotiate a defined buyout amount that allows you to purchase release from the restriction.
• Check your state’s law. Some states have enacted or are considering legislation limiting non-compete enforcement against physicians. Know your rights before you negotiate.

The Bottom Line: Get a Lawyer Before You Sign

You would not perform surgery without reviewing the imaging first. Do not sign an employment contract without having it reviewed by an attorney who specializes in physician employment agreements.

These provisions are not unusual. They are negotiable, but only if you spot them and raise them before you sign.

A contract review typically costs a few thousand dollars. A bad contract can cost years of restricted mobility and hundreds of thousands of dollars in lost compensation.

Do not wait until there is a problem. The best time to fix a bad contract is before you sign it.

DISCLAIMER: This summary is not legal advice and does not create any attorney-client relationship. This summary does not provide a definitive legal opinion for any factual situation. Before the firm can provide legal advice or opinion to any person or entity, the specific facts at issue must be reviewed by the firm. Before an attorney-client relationship is formed, the firm must have a signed engagement letter with a client setting forth the Firm’s scope and terms of representation. The information contained herein is based upon the law at the time of publication.