Connections for Success

 

11.13.14

Ten Tips for Negotiating Physician Employment Agreements
D’Ann R. Meisenheimer

Until they become partner-owners, most physicians have an employment relationship with their physician group. When it is time to negotiate or renegotiate an employment contract, there are critical issues that must be understood and settled. A physician’s contentment and career success will depend on it.

A written physician employment agreement is a binding contract that supersedes all prior oral assurances. The goal is to make sure each physician understands and is comfortable with every contract provision. Here are ten common provisions that should be included in your practice’s contracts and some tips on what to expect from each one:

  1. Contract Term — Contracts should extend for a fixed period of years, typically two or three. At the end of that period, the contract will either automatically renew or expire, which will require renegotiation.
  2. Conditions of Termination — A balanced contract allows either party to terminate it “without cause” upon advance notice, typically one or two months. In addition, the practice will want to be able to terminate “for cause” in cases such as a physician’s loss of medical license, failure to obtain hospital privileges or debarment from Medicare.
  3. Description of Responsibilities — The physician’s professional and administrative duties should be described in reasonable, specialty-specific detail, avoiding phrases such as “perform usual duties of a physician.” Include the physician’s typical schedule, where he or she will work, and call expectations.
  4. Compensation — This provision explains whether the physician will be compensated by a guaranteed salary, on the basis of productivity (or other criteria), or a combination of both. Your CPA can help you develop a formula for the productivity calculation.
  5. Employee Benefits — Along with providing details on compensation, the contract should describe any benefits offered by the practice, such as health care coverage, retirement plans, profit sharing, vacation, long-term care, disability income and personal leave.
  6. Reimbursement of Practice Expenses — Practices generally pay for a physician’s practice expenses, such as license fees, professional dues, and CME and travel costs.
  7. Malpractice Insurance — The contract should discuss malpractice insurance coverage for the physician’s acts while with the practice (which normally pays the premiums). It also should indicate who will pay for malpractice “prior acts” or “tail” coverage after the physician leaves.
  8. Potential Practice Buy-In — If the physician is likely to become a practice partner, make sure you summarize the terms of this “buy-in” transaction, such as how soon it might occur, prerequisites for exercising the option and the buy-in price.
  9. Restrictive Covenants — It is common to restrict the physician’s ability to compete with the practice after he or she leaves. Restrictions typically include the geographic area, time period and range of activities. The physician’s negotiating goal is to keep the area, period and range of activities for noncompetition as minimal as possible.
  10. Employee Handbooks, Policy Books, Codes of Conduct/Ethics and Standards of Care — When evaluating the contract, the physician should have access to documents detailing policies and procedures.

Depending on the physician’s prominence in the local market, it may be possible to negotiate and adjust the language of many of these provisions. The help of a qualified health care law attorney will make the process much easier. For additional questions, contact D’Ann Meisenheimer at dmeisenheimer@orba.com or call her at 312.670.7444. You can also visit ORBA.com to read more about our Health Care Group.

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