Automatic Renewal Contracts: What are My Options?

If you are like most busy physicians today, chances are that your employment contract is up for automatic renewal.

In fact, most of your life may seem to be on auto-renewal, including everything from your TV streaming services to your utility bills. The concept of something being automatic does not mean that it can’t change.

Physicians get caught in the endless loop of their automatic contract renewal but often neglect to ask for or don’t know how to ask for changes such as a raise.

Dr. Kathryn Sarnoski with Contract Diagnostics, a longtime site sponsor, says it doesn’t have to be this way.

 

 

The Psychology of Automatic

 

There is a good reason why everything, including your physician employment contract, has become automatic. The rationale for something being automatic is obviously so you don’t have to think about it, supposedly giving you peace of mind.

On its face, being automatic reduces worry, but it also takes away control. That is a calculated strategy so that you won’t say anything.

Contract Diagnostics finds that around 87% of physicians work under “evergreen” contracts, meaning the employers count on not having to find the physician to sign the new contract but hope to avoid any new negotiation.

The best example in history of the psychology of automatic began during World War II. Congress introduced payroll withholding and quarterly tax payments with the vote of the Current Tax Payment Act of 1943.

The concept of automatic tax payments came from the famous economist Milton Friedman who at that time worked for the Tax Research Division of the Treasury.

Milton Friedman’s economic principle was based on the psychology of automatic. It ensured that employees comfortably pay as they go. The government decided what was comfortable, and it fought tax evasion so that taxpayers were not faced with an insurmountable tax bill at year-end. All taxpayers today have no choice. 

 

The psychology of automatic tax withholding was both powerful and effective. None of us think twice about it today. That was Milton Friedman’s goal, and he succeeded. It was truly genius.

That is why the psychology of automatic is now applied to just about everything today. Businesses would much rather have an automatic renewal client than one who pays upfront.

When you signed your automatic renewal for your physician contract, you entered the realm of the psychology of automatic. You felt comfortable, but that comfort level was designed to be in your employer’s favor, not yours.

Physician employment contracts have an important difference from paying withholding taxes: You have a choice! Automatic doesn’t have to be the same as nonnegotiable taxes.

Contract Diagnostics is well aware of the psychology of automatic and is here to guide you outside that comfort zone so you can negotiate more salary and benefits when your contract renews.

Physicians with evergreen contracts don’t have to sign the automatic renewal, so the contract may renew without them realizing it unless they pay close attention.

 

Automatic Renewal Clauses

 

Automatic renewal clauses are designed to be two important things: automatic, of course, and created so you won’t pay attention to them.

Most physicians accept and ignore them because they are happy in their job and many don’t want to rock the boat. But it is important for physicians to learn and understand what the automatic renewal clause means, and most importantly, what their options are.

Automatic renewal clauses are universal today. Business contracts, leases, vendor agreements, and employment contracts use them frequently.

Our Netflix subscription is a good example. Yes, your physician employment contract has been relegated to the concept of a Netflix subscription. But Netflix can at any time raise its price. They can raise their prices without having to wait until a long contract ends. Why can’t a physician do the same when their contract term ends in a year or more?

The automatic renewal clause in your physician contract usually has a one-year term instead of a monthly term like Netflix.

It is important to understand that you still have an underlying employee agreement and contract that renews every 1-3 years.

Modifications are allowed at the end of each contract, contrary to the mindset instilled by the psychology of automatic. Again, Milton Friedman strikes again!

 

What can I do about my automatic renewal clause?

 

First, don’t just accept it. Yes, you may be happy in your job, you love the hospital, and you don’t want a change. But you need to keep up with the times. Your employer is, why shouldn’t you?

Normally, if you want to opt out of a contract, you will need to give notice as per the terms of the contract. The letter or email needs to be clearly defined and over what time period. Is it 30, 60, or 90 days?

This may be drastic and not what you want to do, but it does give you significant leverage. If you have a typical 90-day no-cause termination provision, we feel 120-150 days before it auto-renews is a perfect time to raise your hand for negotiation.

If you want to stay, let your contract renew, and renegotiate your terms. You have every right to do so.

Don’t fall for the psychology of automatic thinking that you don’t have any options. You can raise your hand and ask for more. Make sure you ask for what you want and be on the record. Negotiate for yourself.

 

 

Before your contract renews, Contract Diagnostics suggests contacting your supervisor or employer’s point of contact and requesting a meeting regarding the terms of your contract renewal.

Be prepared with facts, data, and a good sales pitch. Use reliable compensation data sources and your best production numbers or patient encounters. Always, highlight your particular strengths, and if there are any procedures or patients that only you see, announce that too. Tell your story to lend context to the data.

Let Contract Diagnostics help navigate this process with you. Don’t forget the exact date of your contract renewal so you don’t have to be locked in for another year without saying something.

Sending the right notice at the right time to the right person strengthens your position. Knowing the right physician marketplace data at the right time gives you the power to raise your hand and be heard.

Having a good strategic argument guided by experts is vital to your success in negotiating a fair contract and keeping your earnings off auto-pilot.

Contract Diagnostics has vast experience with physician automatic renewal clauses. Renewing or terminating contracts properly may help you avoid unnecessary contract and legal fees and get the best salary and benefits for the next year of your contract. Set up a free 15-minute conversation with us today at www.contractdiagnostics.com. 

 

 

Is your contract automatically renewed? Have you renegotiated your contract? What has your experience been like?