Physician Employment Contract: A Financial Review Checklist

You spend 10 years in training. You get an offer. You have 30 days to accept. The contract is 40 pages long and was drafted by the employer's legal team. This is the moment most physicians feel the most financial pressure and have the least time to think clearly.

Contract mistakes compound. A below-market wRVU rate costs you $30,000–$80,000 per year, every year. A clawback clause you didn't read fully can mean repaying $50,000 after taxes cost you even more. A non-compete you agreed to can determine whether you have to leave the city when you switch jobs. These aren't hypotheticals — they're standard provisions that vary dramatically between offers and matter enormously over a career.

Here is what to evaluate before you sign.

1. Compensation model: understand your wRVU math

Most physician employment contracts now use a wRVU (work relative value unit) production model — either as the sole comp mechanism or as a threshold above which bonuses are paid. The number that matters isn't the base salary; it's the wRVU rate.

How it works: the Centers for Medicare & Medicaid Services (CMS) assigns every CPT code a work RVU value. At the end of the year, your total wRVUs × your contracted rate = your production comp. If your contract pays $42/wRVU and you generate 5,000 wRVUs annually, that's $210,000 in compensation. The same 5,000 wRVUs at $52/wRVU is $260,000 — a $50,000 difference for the exact same work.

The wRVU threshold in hybrid contracts is equally important. If your contract guarantees $350,000 but you only earn production bonuses above 6,000 wRVUs, and typical production in your specialty is 5,200 wRVUs, you will likely never see a bonus — and the base salary is all you will earn. Know what the threshold represents relative to your expected workload before you sign.

2. Signing bonus: the clawback trap

Signing bonuses of $20,000–$100,000 are standard in physician recruiting. They are nearly always subject to a clawback clause: if you leave before the end of a specified period (typically 2–3 years), you repay a prorated portion.

What most physicians don't model: the tax asymmetry. When you receive a $100,000 signing bonus, you pay ordinary income tax on it immediately — at your top marginal rate, that's roughly $37,000–$42,000 to the IRS and state. If you leave at the 18-month mark and owe back 50%, you repay $50,000 in gross dollars — but the money you have left after tax is less than $50,000. You're repaying pre-tax principal with post-tax dollars.

IRC § 1341 (the "claim of right" doctrine) allows you to deduct the repayment in the year you make it, potentially at your current marginal rate. If the rate at repayment matches the rate at receipt, the net tax impact is washed out. But if tax rates change or your income bracket changes between receipt and repayment, the math may not be symmetric. Model this before you accept a contract with a large signing bonus and an unclear exit picture.

Negotiating the clawback: a 2-year clawback is more common than 3 in competitive markets. For residents leaving geographic constraints, shorter clawbacks are sometimes negotiable. Know what you're agreeing to.

3. Non-compete clauses: what they actually cost

Most physician contracts contain a non-compete restricting you from practicing within a specified geographic radius (typically 10–25 miles) for 1–2 years after departure. In a dense metro, a 15-mile radius may cover your entire patient base.

The financial cost of a non-compete is relocation or career disruption. If you want to leave a poorly-managed practice but your non-compete covers the entire metro area, your options are: litigate the clause, sit out the restricted period, or move. All three are expensive.

Enforceability depends entirely on state law. California, North Dakota, and Oklahoma do not enforce physician non-competes. Minnesota passed a ban effective 2023. In most other states, non-competes are enforced if they are reasonable in scope and duration — courts generally uphold clauses of 10–15 miles for 1–2 years for physicians. The FTC's 2024 rule attempting to ban non-competes nationally was struck down in federal court, leaving enforcement to state law.

Before signing, ask: if this employment doesn't work out after 18 months, where could you actually practice? If the answer is "nowhere in this metro without litigation or a year off," that's a meaningful cost to factor into the offer's total value.

4. Malpractice insurance: who pays the tail?

Claims-made malpractice policies — by far the most common in hospital employment — only cover claims filed while the policy is active. When you leave, any claim filed afterward for care delivered during your employment falls through the gap unless tail coverage (an extended reporting endorsement) is purchased.

Tail coverage typically costs 1.5–2× the annual claims-made premium. For surgical specialties where annual premiums run $15,000–$40,000, tail coverage can be $25,000–$70,000 or more, paid as a lump sum at departure.

An alternative structure: an occurrence policy covers any care delivered during the policy period, regardless of when the claim is filed. No tail required. These are less common in hospital employment but more common in private practice. If you're evaluating a private practice offer with an occurrence policy, a comparable claims-made contract with a tail obligation is meaningfully more expensive to exit — include that cost when comparing offers.

5. Benefits: retirement plan math

A 5% employer 401(k) match on a $350,000 salary is $17,500/year in free compensation. Over a 20-year career, that's $350,000 before any investment return. It belongs in the offer comparison, not a footnote.

Key questions for the benefits package:

• Employer retirement contribution: Is this a match (requires your contribution) or a profit-sharing contribution (added regardless)? What's the vesting schedule? A 3-year cliff vesting means leaving at year 2.5 forfeits all employer contributions.
• Is the employer a 501(c)(3)? If so, this position counts toward PSLF. If you have federal loans, a hospital system's PSLF eligibility can be worth $100,000–$200,000 in present value compared to a private practice offer. See our PSLF guide for the qualification criteria.
• Disability coverage: Most employer group policies use a modified own-occupation definition and cap benefits at $10,000–$15,000/month — under your actual income. What you need to know about individual policies on top of group coverage.
• CME and professional expenses: A $5,000/year CME stipend plus CME leave is standard at competitive hospital systems. Missing this is a $5,000/year income difference.

6. Partnership track: what you're actually buying

If the offer is a pre-partnership employed position, the partnership track details matter as much as the initial salary.

What to verify: the timeline (2–4 years is typical; longer is a yellow flag), the buy-in structure (asset purchase vs. stock purchase has different tax treatment), and what the entity actually owns. A common trap: the practice owns no real estate (it's leased), minimal equipment, and the goodwill valuation reflects earnings you will personally generate. You're buying your own book of business at a multiple.

Ask for a copy of the most recent buy-in valuation (performed by an independent third party, not the partners). If one doesn't exist, that's a material negotiating point. A fee-only financial advisor can review the partnership agreement and buy-in structure against MGMA benchmarks before you commit.

What a financial advisor does at contract review

An attorney can tell you whether a clause is legal and what it means. A physician-specialist financial advisor tells you what it costs — in dollars, over your career, against competing offers.

Specifically: modeling the wRVU rate against specialty benchmarks, projecting total comp at multiple productivity levels, quantifying the signing bonus after-tax math, estimating the tail cost at departure, comparing PSLF value to refinancing for any federal loan balance you carry into the position, and reviewing the retirement plan contribution structure.

Most physicians sign their first contract without this analysis. Most of them later discover they left money on the table or took on an exit obligation they didn't fully understand. Contract review is one of the most asymmetric uses of an advisor's time — an hour of structured analysis before signing is worth far more than a course correction 3 years later.