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Contract Negotiations: Letter of Intend

  • The letter of intent is an important step within the offer process, occurring after interviewing and before contracts are extended.

While a letter of intent is not legally binding, it is a promise to bargain in good faith based on principles outlined in the letter. If a practice is serious about employing a physician, they should have no problem providing a letter of intent. The letter of intent is an important step within the offer process, occurring after interviewing and before contracts are extended, and is used by employers to find out if you are serious about the opportunity or if they should move on to other candidates.

They are also used as a technique to start the negotiation on more favorable terms for them because you essentially end up having to agree to terms, in writing, before you get to see the entirety of the contract. The bare minimum of what a letter of intent should outline are as follows: income expected, expenses covered, planned buy-in agreements and bonus structures, compensation range, length of employment, start date, duties and responsibilities, and benefits. In the event that the letter details items that raise concern, it may be best to consult an attorney before signing, especially if the letter comes across as anything other than non-binding. There are multiple ways to approach this stage of the relationship, so it is recommended that you seek out counsel for the best approach based on your situation.

A candidate may get a letter of intent from a practice describing conditions for partnership. It is important that the path to partnership and terms surrounding it are clearly defined in an employment contract, but they should at least be outlined in the letter of intent. Additionally, buy-in procedures will establish a framework for sharing income and expenses in the event that the physician becomes an owner. It is advisable that physicians get as much information in writing as possible, as letters of intent can be legally binding.

Bonus numbers will vary by specialty, but it is a safe bet to insist that it be tied into production. The bonus structure should not be tied into arbitrary reviews or group profitability, as those are out of the physician's control and don't ever amount to the degree expected. While there is no formula for how this is structured, the current owners will have spelled out how income and expenses are shared. Ideally, the physician should receive a similar arrangement, which should be written up and included in the contract later.

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