The contractual issues addressed here are an important subset of a large litany of issues physicians may encounter. It’s important for physicians to know that all contracts aren’t equal, and that some components merit more attention than others.
Aren’t all physician employment contracts the same?
The employer type often determines the type of contract a physician is offered. For example, a physician may have an employee contract with a hospital and also with a medical/surgical group. The latter is a “triangular relationship” that creates duties and obligations to the medical/surgical group and the hospital. The hospital must be certain the relationships do not conflict.
Several components of an employee-employer relationship merit extra attention because they have the greatest impact on the physician’s medical/surgical practice life. These issues require due diligence:
Terms of the contract. Does the contract expire or renew automatically? If the contract renews automatically, are mechanisms in place to define employee duties, responsibilities, and reimbursement methodology? Is part-time work allowed? Is outside work allowed?
Compensation. How much and how often will the physician be paid? If the payment method is work relative value units (wRVU), how are they calculated? What are the potential bonus structures? Are the bonus structures clearly defined? What triggers a bonus? Are there metric expectations that trigger a reduction in reimbursement if not achieved? Is paid time off clearly defined? What are continuing medical education (CME) allowances? Can the employer eliminate CME unilaterally?
Benefits. What are the benefits? Employee benefits are perks or compensation beyond base salaries and wages. A complete employee benefits package may include a health insurance plan, life insurance, paid time off, profit sharing, and retirement benefits. The contract often does not include details about benefits because the benefits package can change year to year without notice.
Credentialing, licensing, job expectations, duties, and responsibilities. Is the credentialing process outlined? Is there a timeline for completion? What are the licensing expectations? Are licensing fees paid? Is there support staff to help with licensing? Are there clearly defined expectations of what you are to do and what you are not allowed to do? Moonlighting? Consulting? Industry? What are the expectations for remaining credentialed? What are the board certifications expectations?
Malpractice: How much malpractice coverage does the employer provide? Is the coverage comparable to market coverage for the specialty? Does the employer provide tail coverage — insurance that covers claims reported after the insurance policy expires or is canceled.
Severability clauses: What are the grounds for termination? For cause? At will? At will means that an employer can terminate an employee at any time for any reason, except an illegal reason such as discrimination, or for no reason without incurring legal liability. What is the notice period? The range can vary from 30 to 210 days.
What is an injunction in a contract?
An injunction is a mechanism whereby the employer can go to court to stop a physician from practicing medicine/surgery while the court determines whether the physician violated a rule. An injunction is a court order requiring a physician to cease doing a specific action. The injunction clauses simply mean the employer has the right to pause a physician’s work while the court determines whether the physician is guilty of the alleged violation of a tenet of the practice.
Does the non-compete clause of an employer-employee contract affect a physician’s ability to practice medicine/surgery in the future?
Most physician employment contracts include a non-compete clause, depending on state law. California does not allow non-compete clauses. The Federal Trade Commission (FTC) is considering eliminating non-compete clauses.
Physicians should review and understand the nature of their contract’s non-compete clause. This clause is especially important when a physician decides to take a new job a few years down the road. Non-compete agreements prohibit physicians for a certain period of time from joining a competing practice or setting up their own practice within a particular geographic distance from their previous practice.
Are sign-on bonuses taxable?
Bonuses are considered salary and are taxable. Because a sign-on bonus is considered supplement income, it is subject to federal taxes and may also be subject to state and local taxes, depending on the physician’s geographical location.
What if there is a contract dispute?
Not all contracts describe the policy for handling a contract dispute, but many require giving the employer written notice of the issue and then allowing 30 days for resolution. Human resources policy manuals may list information such as arbitration or mediation if an issues surfaces.
Arbitration agreements are written agreements between physicians and employers that state that any dispute that arises will be handled through arbitration. In arbitration, the parties agree to use an arbitrator or arbitration panel, as opposed to a judge or jury, to decide the outcome of their dispute. Arbitration is an alternative process for reaching a verdict in a dispute that is determined on its facts and merits and that controls costs and limits exposure to liability.
Mediation is a more informal process where the parties agree upon a neutral third party, the mediator, who works between the parties to seek common ground. Mediation is a voluntary process, which allows all parties to retain a substantial level of influence and control. The parties and their attorneys may present ideas and alternative suggestions for resolution. Mediation may resolve all or part of the matter at hand. Neither party is required to accept the recommendations of the mediator.
In Summary
I have only briefly touched the surface of the potential issues with physician contracts. Before negotiating a contract or signing on the dotted line, physicians should seek the counsel of a savvy healthcare attorney who can help them negotiate the slippery slopes of a physician contract.