Ask most physicians how they approached their current employment contract, and a common answer is that they read it once, asked a friend or a lawyer to glance at the compensation section, and signed. Medical training doesn’t cover contract law, and most doctors enter these negotiations for the first time at exactly the moment they have the least leverage: right out of residency, eager to start working, and facing an offer that reads like a finished document rather than a starting point.
It isn’t one. Sarah Nosal, MD, president of the American Academy of Family Physicians, has been walking through this territory recently for Medical Economics, and her central point is one worth repeating: employment agreements get revised routinely, especially now, in a market where staffing shortages and physician burnout have shifted some leverage back toward candidates. Hospitals and health systems have standard templates, but templates get edited constantly for the physicians they actually want to keep. The question isn’t whether a contract can change. It’s whether the physician knows which parts to push on.
Compensation: The Number that Matters Is Rarely the Headline Number
Base salary is the easiest figure to compare across offers, and it’s often the least informative one. Most hospital-employed physicians are paid on some structure tied to work relative value units — a volume-based measure of productivity — and the terms governing how that structure is set, and how it can change, matter more over a three-year contract than the starting number.
A few things worth pinning down before signing: what wRVU target the compensation model assumes, and whether that target is realistic for the specialty and patient population involved; whether the employer caps compensation at a set percentile of market surveys regardless of actual productivity; and what happens to quality or value-based bonus payments — many contracts route these to the hospital rather than passing them through to the treating physician. It’s also worth asking, explicitly, how the agreement will handle a shift away from fee-for-service-style productivity metrics toward bundled payments or capitation, since three-year contracts increasingly outlast the payment model they were built around.
The harder, more uncomfortable question is what happens if the hospital later decides it can’t sustain the compensation it originally offered. This isn’t a hypothetical concern in a health care market where systems are managing thinner margins from reduced admissions and value-based payment penalties. Physicians with negotiating leverage can sometimes secure a provision allowing them to walk away without triggering a restrictive covenant if the employer proposes a compensation cut beyond a specified threshold. Most physicians never ask for this, and most employers won’t volunteer it.
Termination Clauses Decide Who Has the Power Later
Every contract distinguishes between termination “for cause” and “without cause,” and the fine print in each category shapes how much protection a physician actually has.
For-cause termination usually includes an unambiguous list — loss of license, loss of malpractice coverage, violations of substance policies — where there’s no opportunity to cure the problem before losing the job. That list is rarely negotiable. What’s more often overlooked is the gray area between a physician’s productivity dropping because of personal performance versus dropping because of a shift in patient volume or referral patterns outside the physician’s control. Contract language can and should draw that distinction, rather than leaving “low productivity” as a single undefined trigger for termination.
Notice periods for termination without cause carry a real trade-off. A long notice period, six months for example, gives both sides time to plan, but it also means a physician who wants out is stuck for half a year, and an employer unhappy with a physician gets six more months of service from someone who no longer wants to be there. Short notice periods, 60 or 90 days, offer little job security in either direction. There’s no universally “right” answer here, but a physician should know which version they’re signing and negotiate consciously rather than defaulting to whatever the template says.
One frequently missed detail: many physicians assume they have the right to terminate the contract themselves if the employer breaches it. Many agreements don’t actually grant that right explicitly. And even where a physician terminates for a documented breach, some contracts still leave restrictive covenants technically in force unless the agreement specifically says otherwise.
Restrictive Covenants Are in Flux — and Increasingly Negotiable
Non-compete clauses remain the single most consequential restriction in most physician contracts, and the legal ground under them has shifted substantially over the past two years. The Federal Trade Commission’s attempt at a nationwide ban on non-competes, finalized in 2024, was blocked in federal court and formally abandoned by the agency in September 2025; the rule was removed from the federal code entirely in February 2026. There is no national ban in effect.
What’s replaced it is a patchwork that’s moving fast and unevenly. Roughly twenty states now have some form of ban or meaningful restriction on physician non-competes, ranging from outright prohibitions to income-based thresholds that exempt lower earners, and several more states have legislation pending. Montana expanded its ban to cover all licensed physicians as of the start of this year. Arkansas banned non-competes for physicians and other health care workers in 2025. Other states, including Florida, have moved in the opposite direction, codifying when non-competes are presumptively enforceable. Critically, most of these new laws are not retroactive — a state banning physician non-competes this year typically doesn’t unwind a non-compete a physician already signed, so the date on an existing contract matters as much as the state it was signed in.
Separately from state law, the FTC hasn’t fully stepped back. Even without a blanket rule, the agency has signaled it will pursue case-by-case enforcement against non-competes it considers overly broad, evaluating factors like the employee’s wage and skill level, the geographic and time scope of the restriction, and the employer’s market power. That gives physicians in still-permissive states another angle to raise in negotiation, even short of outright refusal to sign.
Practically, this means the question to ask isn’t just “does my state ban non-competes for physicians” but “what does my state’s law say today, does it apply to contracts signed before or after its effective date, and does the specific restriction in front of me — its geographic radius, its duration, whether it survives a without-cause termination — look like something a court in this state would actually enforce.” Health systems in the current environment are frequently willing to narrow a non-compete’s geographic scope, shorten its duration, or waive it entirely if the physician is terminated without cause, particularly for candidates in short supply. None of that happens if the physician doesn’t ask.
Non-solicitation provisions deserve separate attention from non-competes, since they’re treated differently under most state laws and are less likely to be swept up in the current wave of physician-specific bans. These typically restrict a departing physician from actively recruiting former colleagues or soliciting patients to follow them to a new practice. The distinction between active solicitation and a patient or colleague choosing on their own to follow a physician is one worth clarifying in the contract language itself, since ambiguity here tends to get resolved in litigation rather than in the physician’s favor.
The Parts of the Contract that Don’t Feel Urgent Until They Are
A handful of provisions rarely get much attention during negotiation because they only matter if things go wrong — which is exactly why they’re worth addressing while everyone is still negotiating in good faith.
Medical records access. Most hospital systems fold a physician’s patient records into the institutional EHR on hire. If the physician leaves, the practical questions — what format records will be provided in, who bears the cost of extracting them, how quickly the hospital must respond to a request — are worth specifying up front rather than discovering the answer during a contentious departure.
Billing and audit exposure. Because the hospital typically controls claims submission on the physician’s behalf, it’s worth confirming who bears financial responsibility if that documentation later triggers an audit, an investigation, or a payer settlement — including after the physician has left. Some employers will indemnify the physician for their own claims-submission errors; others push that risk onto the physician instead. If an employer won’t agree to indemnification, an alternative is to have the contract specify that the hospital will submit claims according to industry standards, with the physician agreeing to document according to legal and payer requirements — a lower bar than full indemnification, but still worth having in writing.
Post-termination patient notice. State law sometimes dictates how patients must be informed when a treating physician leaves a practice, but where it doesn’t, the contract can specify it directly, reducing the odds of a dispute over whether the hospital or the departing physician “owns” that communication.
The Negotiation Itself
None of this works as a checklist handed to an employer unread. Nosal’s broader point, and one echoed across coverage of this topic for over a decade, is that leverage in these conversations depends heavily on context: how badly the employer wants this particular physician, how tight the local labor market is for the specialty, and how willing the physician is to walk away from a term that doesn’t work. Physicians negotiating their first contract out of residency generally have less leverage than those with a track record and an existing patient panel, but the current combination of physician shortages and burnout-driven turnover has shifted more of these conversations in physicians’ favor than at almost any point in the past decade.
The practical takeaway is less about memorizing specific contract language and more about treating the document as negotiable in the first place — reading every clause with the assumption that it can be discussed, and bringing in employment counsel before signing rather than after a dispute has already started.
Sources:
- Medical Economics, “How doctors can negotiate a better employment contract,” July 13, 2026
- Medical Economics, “Negotiating hospital contracts: What physicians need to know before signing”
- Medical Economics, “Noncompetes for physicians: Necessary contracts or a nuisance to careers?”
- UB Greensfelder, “FTC Enforcement and State-Level Reforms Signal a New Era for Non-Compete Agreements,” January 2026
- Maynard Nexsen, “Recent Developments in Physician Non-Compete Agreements: A State and Federal Landscape in Flux,” 2026
- National Law Review, “Noncompete Agreements in 2026: A Federal and State Overview”
- American Staffing Association, “Beyond the Ban: The FTC’s New Path on Noncompetes,” January 2026
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