What Type of Contract Are You Signing?
Not all physician contracts are the same. Understanding which type you're looking at is the first step to knowing what to focus on — and what questions to bring to your attorney.
Hospital Employment Agreement
The most common physician contract type
Hospital employment agreements are the standard arrangement for the majority of physicians today. You become a W-2 employee of a hospital or health system, which handles billing, staffing, malpractice insurance, and administrative overhead. In exchange, you work under the organization's policies, call schedules, and productivity expectations.
Common Specialties
Key Features
W-2 Employment
You're a salaried employee with benefits, tax withholding, and employer contributions to retirement and insurance.
Productivity-Based Compensation
Most hospital contracts include a base salary plus wRVU-based productivity bonuses above a threshold.
Employer-Provided Malpractice
The hospital typically provides claims-made malpractice insurance. Understand who pays tail coverage if you leave.
Non-Compete Clauses
Hospital contracts frequently include non-competes with geographic radius and duration restrictions.
Typical Terms
| Initial Term | 2–3 years |
| Notice Period | 90–180 days |
| Non-Compete Radius | 10–30 miles |
| Non-Compete Duration | 1–2 years |
| Tail Coverage | Varies — often negotiable |
Watch For
- •Non-compete clauses that trigger even if you're terminated without cause
- •Unilateral amendment clauses allowing the employer to change terms
- •Vague wRVU thresholds with no ramp-up period for new physicians
- •Tail coverage responsibility falling entirely on you
- •Call obligations described as 'as reasonably required' with no cap
Private Practice Partnership
Associate-to-partner track arrangements
Private practice partnerships typically start with an associate period (1–3 years) followed by a buy-in opportunity. You work alongside existing partners with the goal of eventually becoming an equity owner. These contracts are more complex because they involve both employment terms and future ownership provisions.
Common Specialties
Key Features
Partnership Track
An associate period (typically 1–3 years) with defined milestones before you're eligible for partnership buy-in.
Buy-In Structure
The financial terms of becoming a partner — including valuation method, payment schedule, and what assets you're purchasing (goodwill, equipment, real estate).
Profit-Sharing
Partners share in practice profits. Understand the distribution formula and whether it's equal, productivity-based, or seniority-weighted.
Governance Rights
As a partner, you'll have a voice in practice decisions. Understand voting rights, management responsibilities, and exit provisions.
Typical Terms
| Associate Period | 1–3 years |
| Buy-In Cost | $50K–$500K+ |
| Non-Compete | Often more restrictive |
| Profit Distribution | Varies by model |
| Exit/Buy-Out | Defined in partnership agreement |
Watch For
- •Vague or undefined partnership criteria — get specific milestones in writing
- •Buy-in valuation based on 'fair market value at the time' with no methodology defined
- •Restrictive covenants that survive even if partnership is denied
- •No guaranteed timeline for partnership decision
- •Responsibility for practice debts or liabilities upon buy-in
Locum Tenens Contract
Temporary and fill-in physician assignments
Locum tenens contracts are temporary assignments where you fill in at hospitals, clinics, or practices that need coverage. You may work through a staffing agency or directly with a facility. These contracts offer flexibility and higher hourly rates but typically lack the benefits and stability of permanent employment.
Common Specialties
Key Features
Agency vs. Direct Contracts
Most locum work is through staffing agencies that handle credentialing, travel, and malpractice. Direct contracts with facilities may offer better rates but more administrative burden.
Higher Hourly/Daily Rates
Locum rates are typically higher than permanent positions to compensate for lack of benefits, job security, and travel requirements.
Malpractice Provided
Agencies or facilities usually provide occurrence-based malpractice insurance for the assignment, which is more favorable than claims-made.
Flexibility
You choose when and where to work. Assignments can range from a single weekend to 6+ months.
Typical Terms
| Assignment Length | 1 week – 6+ months |
| Notice to Cancel | 7–30 days |
| Malpractice | Usually occurrence-based |
| Conversion Fee | $15K–$50K+ |
| Travel/Housing | Often provided or reimbursed |
Watch For
- •Restrictive clauses preventing you from accepting permanent employment at the facility
- •Conversion fees if the facility hires you directly after a locum assignment
- •Cancellation policies — what happens if the facility cancels your assignment last-minute?
- •Travel and housing reimbursement caps that may not cover actual costs
- •Scope of practice limitations that differ from your usual clinical role
Independent Contractor Arrangement
1099 self-employment structures
Independent contractor (IC) arrangements classify you as self-employed rather than a W-2 employee. You have more control over your schedule and methods but receive no employer-provided benefits, no tax withholding, and must carry your own malpractice insurance. IC arrangements also carry regulatory risk — the IRS and state agencies scrutinize whether the arrangement truly qualifies as independent contracting.
Common Specialties
Key Features
1099 Tax Status
You're responsible for self-employment taxes (~15.3% on top of income tax), quarterly estimated payments, and your own retirement contributions.
No Benefits
No employer-provided health insurance, disability, PTO, CME allowance, or retirement match. You must fund these independently.
Schedule Autonomy
True IC arrangements give you control over when and how you work. If the facility controls your schedule like an employee, the IC classification may be invalid.
Regulatory Risk
Misclassification as an IC when you're functionally an employee can trigger IRS penalties, back taxes, and liability for both parties.
Typical Terms
| Tax Status | 1099 / Self-employed |
| Benefits | None provided |
| Malpractice | Often your responsibility |
| Termination Notice | 15–30 days (often less) |
| Non-Compete | Less common, may signal issues |
Watch For
- •Non-compete clauses — unusual in true IC arrangements and may signal misclassification
- •Facility controlling your schedule, methods, or requiring exclusivity (suggests employee status)
- •No malpractice coverage — you may need your own policy, which can cost $5K–$30K+/year
- •Termination with minimal or no notice period
- •Indemnification clauses shifting excessive liability to you
This guide is for educational purposes only and does not constitute legal advice. Contract terms vary widely by employer, state, and specialty. Speak with a qualified healthcare attorney for guidance specific to your situation.