By Bonnie Darves, a freelance health care writer

When physicians interview for a new practice opportunity and both the prospective employer and the physician are interested in continuing discussions, it’s not uncommon for the physician to receive a letter of intent. That letter, also called a “terms sheet,” is akin to an offer letter and typically covers the primary components of employment: start date and contract duration, compensation, physician job duties, and benefits. In other words, it’s a brief snapshot (one to two pages) of what the employment contract will look like — ideally minus the dense legal jargon.

The main purpose of the letter of intent is to set expectations, according to Dennis Hursh, managing partner of Physician Agreements Health Law in Middletown, Pennsylvania. “The letter isn’t necessary, but it helps to ensure that the employer and the physician are on the same page,” he said, before the parties move toward an employment contract. For example, if the employer puts the starting compensation at $275,000 and the physician is expecting to earn closer to $325,000 based on market data for the specialty, that’s a pretty big difference to close. Mr. Hursh noted that terms sheets are commonly used in all medical specialties.

“As a physician, you really want to make sure that you agree with all the terms in the letter of intent, in both a monetary and legal context.”

— Scott Weavil, Weavil Law PC

“If there are any make-or-break items, it’s best to get them out of the way at the letter-of-intent stage.” If the employer proves inflexible on key terms outlined in the letter, that might be a sign that it’s not prudent, or worthwhile, to continue discussions.

Understanding the letter’s legal status          

The letter of intent is not a legally binding document, but — and this is an important but — it is a clear indication of what the employer would include in a final contract. For that reason, it should be taken very seriously, according to Lauren Kaufman, an attorney with the MorganTheeler LLP health law practice in Mitchell, South Dakota. “The employer may simply say, ‘we need you to sign this to get the contract started,’ but physicians should understand that it’s usually difficult to make material changes to the terms once the letter has been signed,” she said. It’s easier, and advisable, to negotiate basic terms before the letter of intent is signed. Ms. Kaufman added.

“Physicians should have what they need in place, in the letter, so that the document reflects the joint goals of the physician and the employer,” Ms. Kaufman said, which helps to ensure that ensuing discussions are collaborative in nature. For example, she added, if the physician feels strongly that she or he doesn’t want to take call more than five times/days a month and the letter of intent states that call “may be up to 40 weeks a year” (something Ms. Kaufman has encountered in documents), or the language infers that the physician could be on 24-hour call for several days running, it’s best to pull back and negotiate before the letter moves forward.

“The employer might say, ‘Don’t worry, that’s not what usually happens with call schedules,’” Ms. Kaufman said, but that’s not sufficient assurance that call amount won’t be unreasonable. “It’s best to get call specifics in place at the letter stage,” she said, noting that this is the ideal juncture to invoke legal review by an attorney experienced in physician employment contracts.

As for what the letter includes, there’s a pretty wide range in the marketplace, according to employment contract lawyers. If the letter is skimpy on the details, physicians should ensure that components that are important to them get added. For example, the physician might request that call duties, schedule basics, and vacation time be included, and perhaps at least a basic rundown on benefits. Following is a suggested list of elements that should be addressed in a terms sheet:

• Compensation, start date, and contract duration; and any non-compete clause.
• Clinical and administrative duties (if applicable) and details on call responsibilities.
• Productivity and/or performance expectations on a monthly or annual basis, along with a brief description of what might occur if those benchmarks aren’t met.
• Vacation and benefits, to include annual time off, health and disability coverage, retirement plan participation basics, malpractice coverage, and continuing medical education (CME) benefits.
• Sign-on bonus and other employment enticements if those have been verbally discussed.

The American Medical Association, in its “Physician Contracting” guide, advises physicians to be on the lookout for provisions in the letter that, even if not binding, may prove problematic. For example, many terms sheets will include this type of statement: “During the time that we’re talking with you about possible working for us, you agree not to negotiate with anyone else.” Besides being heavy-handed, that provision, if agreed to, could come back to haunt the physician later, should the physician receive another, more attractive letter of intent after signing the initial one.

On a related note, it’s important to note that a mishandled letter of intent could “follow” the physician if the word gets out, for example, that the physician was essentially stringing along multiple prospective employers in the same market.