This article is part of our complete legal guide to selling a medical practice.
Why does post-closing compensation change?
Buyers often value a practice on earnings after resetting physician pay to a new level. The reduction becomes part of the profit the buyer is paying for. That can be a fair trade, but only if you understand how much your pay will change, for how long, and what you receive in exchange through the price and any rollover equity.
Federal law also shapes the pay model. Under the Stark Law's employment exception, post-closing compensation must be consistent with fair market value for the services you actually provide and cannot take into account the volume or value of your referrals, although productivity bonuses based on services you personally perform are permitted.
What should the employment agreement cover?
| Term | What to look for |
|---|---|
| Compensation model | Base salary, wRVU rates, collections, or a hybrid, and whether the formula can change |
| Productivity targets | Whether targets are realistic given staffing, scheduling, and payer mix you no longer control |
| Term and renewal | How long you are committed, and what happens at the end of the initial term |
| Termination | Without-cause notice periods, definitions of cause, and good reason for the physician |
| Duties and schedule | Call, locations, supervision of advanced practice providers, and administrative duties |
| Malpractice and tail | Who buys tail coverage for pre-closing and post-closing claims |
| Restrictive covenants | Non-compete and non-solicitation terms and how they interact with the sale covenant |
Our related guides go deeper on wRVU compensation, termination without cause, and who pays tail coverage.
How does employment interact with the rest of the deal?
The employment agreement rarely stands alone. A termination can trigger repurchase of your equity, accelerate or forfeit earnout payments, and start the clock on a non-compete in the purchase agreement. Definitions such as cause, good reason, and disability should be consistent across the purchase agreement, employment agreement, and equity documents, so that one event does not trigger different consequences in each.
If you practice in Virginia, note that for agreements entered into or renewed on or after July 1, 2026, Va. Code § 40.1-28.7:8 generally prohibits employers from entering into or enforcing non-competes with health care professionals, including physicians. Its sale-of-business exception covers the covenant you give as a seller, not a separate non-compete in your employment agreement. See our guide to non-competes after selling a medical practice.
Can I negotiate the employment agreement separately?
It is usually negotiated alongside the purchase agreement and should be addressed at the letter of intent stage. Once the purchase price is fixed, buyers have less reason to improve compensation terms. See our guide to letters of intent when selling a medical practice.
Related guides
- Selling a Medical Practice: The Complete Legal Guide (start here)
- 7 Common Mistakes Physicians Make When Selling a Practice
- Selling Your Practice to Private Equity
- What Is an MSO?
- How to Value a Medical Practice
- The Corporate Practice of Medicine in a Practice Sale
- Stark Law and the Anti-Kickback Statute in a Practice Sale
- Letters of Intent When Selling a Medical Practice
- Rollover Equity: What Physicians Should Know
- Non-Competes After Selling a Medical Practice
- F Reorganizations in a Medical Practice Sale
- Due Diligence When Selling a Medical Practice
- Selling to a Hospital, Private Equity, or Another Physician
About Med Contract Law. Med Contract Law is a focused practice group of McCormick Law & Consulting dedicated to physicians. We represent physicians and physician-owned practices in practice sales, private equity and MSO transactions, and hospital acquisitions. In these matters, we represent the physician side, not hospitals or health systems, so our focus is always on the physician's side of the deal.
If you are selling your practice and will continue practicing for the buyer, have your employment terms reviewed with the rest of the deal. Schedule a confidential consultation to talk through your situation.
Unfamiliar with a term? See our physician contract and practice sale glossary.
Frequently asked questions
Will my pay go down after I sell my practice? Often, yes. Many buyers reset physician compensation after closing, and that reset supports the purchase price. The size and duration of the change should be clear before you sign.
Can I leave after selling my practice? Usually, but the employment agreement, equity documents, and restrictive covenants may impose consequences, such as notice periods, repurchase of equity, and non-compete restrictions.
Who pays tail coverage after a sale? It depends on the deal. The purchase agreement and employment agreement should state who covers claims arising before and after closing.
Is the employment agreement negotiable? Yes, and it is best negotiated alongside the price, before exclusivity reduces your leverage.