Background of letters of intent for physicians
You had a great interview at an employer that you really liked, and the employer has sent you a letter of intent outlining the terms of a potential job. The employer is asking you to sign the letter and return it. You know that the document isn’t legally binding, so shouldn’t you just go ahead and sign?
That all depends on what the letter says. Make sure the terms seem reasonable, whether it’s the amount you’ll be paid or the number of patient contact hours. If something seems wrong, don’t just sign because the document isn’t legally binding.
About 10% of our physician clients receive a letter of intent from prospective employers before they get their physician employment agreement, and the content of those letters is all over the map.
Because no two letters of intent are the same, they require a careful reading. And while it’s true that signing such a letter doesn’t legally obligate you to take a job with that employer, there can be consequences to signing too soon. Physicians must take letters of intent concerning their physician employment contracts seriously.
What is the purpose of letters of intent for physicians?
The purpose is to make sure that everyone is on the same page. If I’m an administrator and I’m thinking about hiring a physician at a salary of $220,000, but the physician thinks he or she should make $350,000, there’s probably no reason for me to produce a 30-page employment agreement because we’re not on the same page. If we are miles apart on the salary, it makes no sense to move to the stage where we produce and review a contract. So the purpose of letters of intent in physician contracts is to make sure that we’re not wasting anyone’s time.
The good news is that if an employer gives you a letter of intent, it has decided you’re the best person for the job, and they intend to make a physician employment agreement offer. Employers aren’t giving letters of intent for one job to five physicians and waiting to see who replies first. They’ve pretty much decided they want you.
Should a lawyer review a physician's letter of intent?
Sometimes you may not need a physician’s attorney to review a letter of intent. The times the letter of intent should be reviewed is when the employer is using very specific numbers. If they are offering you $220,000 and you think you’re worth $350,000, I would suggest using language that says you’ll be paid fair market value based on reasonable benchmarks.
If possible, postpone the discussion about compensation until you have time to review MGMA benchmarks and present those to the employer. When letters of intent get into specifics that the physician isn’t comfortable with, it’s time to get a lawyer involved.
How specific are most letters of intent for physicians?
There is great variability in letters of intent for physicians. As I have noted in my book on physician employment agreements, I have seen some that say only we’re going to pay you this much money to work in this specialty, while other physician letters of intent offer a lot of detail. Many will provide not only compensation, but will also address call coverage requirements and may also discuss physician benefits and perhaps even the physician covenant not to compete.
What are the downsides of signing a physician letter of intent?
You need to assume that anything mentioned in the letter of intent is off the table in physician contract negotiations once you move to the contract stage. If you sign a letter of intent saying you are going to work for $220,000 a year and then you obtain a physician contract review and discover that you should be paid $260,000 a year, it can leave a bad taste in the employer’s mouth.
The fact that letters of intent aren’t legally binding trips up many physicians. There’s nothing legally wrong with signing a letter of intent and then trying to negotiate the items in it, but it makes you look like you’re not negotiating in good faith. As far as the employer is concerned, you have already agreed to what’s stated in the letter—so if you do want to renegotiate any of those terms, you’re in a weaker position if you’ve signed a letter of intent that had a specific provision addressing that item.
During physician contract negotiations I’ve explained that my client didn’t have access to compensation data when she signed the letter of intent and that I thought the numbers were low, and I’ve been able to renegotiate compensation numbers in that situation. But it’s not ideal. In many such physician contract negotiations I have been told that “the physician agreed to that.”
Is it legal to sign more than one physician letter of intent?
Legally it’s not a problem to sign multiple letters of intent for physicians, but if you look at a letter of intent as a sign of good faith, it’s not a good idea to lead multiple employers to believe that you are only interested in them. If you end up signing a letter of intent and then not taking a job with that employer, it could come back to haunt you a few years later if you look for a new job with that group or hospital. In today’s health care marketplace, the group you join today could be bought by the hospital you misled with the letter of intent, so you could find yourself working for someone who has had a bad experience with you.
Summary - 5 things to watch
Remember these five points when looking at a letter of intent or term sheet for a physician employment agreement:
- Realize that, even though it isn’t legally binding, the employer will assume you agreed to everything in the term sheet
- Accordingly, don’t agree to specific salary or wRVU numbers unless you are aware of the relevant benchmarks.
- Don’t expect the letter of intent to contain lots of details – these will be fleshed out in the physician employment agreement.
- Don’t sign letters of intent with more than one employer. Treat the letter of intent as a sign that you are negotiating with this employer in good faith, and expect to sign a contract if all the details can be worked out.
- If you intend to get a physician contract review of the final agreement, have your attorney involved in the letter of intent.
Our firm includes review of a letter of intent or term sheet as part of the cost of a physician contract review or negotiation. If you have a letter of intent you would like us to review, you can start your physician contract review here. We can also provide a free consultation to explore how we can help.