Fellow-in-Training Perspective
Navigating Your First Contract: Tips from a Contract Lawyer
By Abraham Abdulhak, MD, ACMS Fellow-in-Training Board Observer
As a new Mohs surgeon, evaluating contracts can be a daunting task. There are many clauses and legal terms that may be unfamiliar to you. It's important to seek the advice of an experienced attorney to guide you through the process and ensure that your interests are protected. To gain some insight into what to look out for when evaluating contracts, I interviewed attorney and managing partner of Kelso Health Law Firm, Jim Kelso, JD, LLM.
One of the first things that Jim recommends looking out for in a contract is the termination clause. There is a common saying that the agreement is the divorce and not the marriage. Jim stated that the termination clause is important because if you are barred from leaving on a reasonable timetable, you have no power in the relationship. You should never execute a strict fixed-term agreement. He also stated you need to make sure there are no liquidated damages. Liquidated damages are predetermined damages that the parties agree will be paid in the event of a breach of contract. Jim explains: "If the contract includes a liquidated damages clause, make sure you understand the amount that you may be liable for in the event of a breach. Sometimes these damages can be excessive, and some employers with high turnover rates attempt to use liquidated damages as a means to prevent people from leaving.”
Non-compete clauses are another important consideration in contracts for Mohs surgeons. Non-compete clauses prohibit you from practicing within a certain geographic area for a specified period of time after leaving your current position. Jim advises, "Make sure you understand the scope and duration of the non-compete clause. It's important to negotiate these terms if they are too restrictive, as they can limit your career opportunities in the future.” These clauses can be detrimental to you. At present, the Federal Trade Commission is promulgating rules to prohibit non-compete clauses across country. This will impact the future economy of medicine as a whole. As these clauses come under legislative scrutiny, Jim encourages every resident and fellow to write the FTC with support and write their representatives urging them to consider banning these clauses altogether. States such as California, Massachusetts, and Oklahoma have already done so!
Negotiating the terms of a contract is a common practice, and Jim recommends that new Mohs surgeons take advantage of this opportunity. He says: "Don't be afraid to negotiate the terms of the contract. Your employer may be willing to make changes to the contract if they are reasonable. Another added benefit is that this will allow you to see how your employer responds to compromise or challenges. A bad response can be indicative of a difficult work environment. It's always a good idea to have an experienced attorney review the contract and provide guidance on what terms are reasonable to negotiate."
Many of us will consider working in academic medicine at the start of our careers. Compensation here is notoriously lower but important to understand. Academic work RVU averages are a key consideration for Mohs surgeons. Academic work RVUs are a measure of productivity used by many healthcare organizations to determine compensation. Jim explains: "Make sure you understand what the academic work RVU averages are for your specialty in your geographic area. This will help you negotiate a fair compensation package. For most Mohs surgeons, the average work RVU target tends to be in the mid-fifties.”
In addition to the previously discussed topics, attorney Jim Kelso also emphasizes the importance of being aware of inappropriate cost shifting, fixed-term employment clauses, and understanding how to calculate net collections when evaluating contracts as a new Mohs surgeon.
Inappropriate cost shifting occurs when the employer attempts to shift costs onto the employee that are typically the responsibility of the employer. Jim explains: "Cost shifting can take many forms, such as requiring the employee to pay for their own malpractice insurance, benefits or requiring them to purchase their own equipment. It's important to carefully review the contract to ensure that the employer is not unfairly shifting costs onto you. This could mean that your 45% of collections could be significantly reduced.”
Calculating net collections is another important consideration for Mohs surgeons. Net collections should be defined as gross cash less refunds, chargebacks, and adjustments and less the cost of cosmetic consumables for those who do not have 100% Mohs workloads. Not all adjustments are created equal. Some adjustments, such as contractual adjustments, are legitimate and expected. Jim explains: "Understanding how to calculate net collections is critical to understanding your compensation. Make sure you understand the formula used to calculate net collections and how it impacts your compensation. If the formula is very confusing, that is a red flag and you should ask to a see a spreadsheet depicting the calculations." Jim notes a 1% deviation is equal to $10,000 at $1 million and $30,000 at $3 million. If you are 100% Mohs and have a 4% deviation, that can be as high as $120,000 in lost compensation if your collections are at the $3 million mark.
In conclusion, evaluating contracts as a new Mohs surgeon requires careful attention to detail and an understanding of the potential pitfalls. Navigating this with an experienced attorney is a smart investment for any new graduate.