Contract NegotiationsContract Negotiations

OverviewOverview

PartiesParties TermTerm Physician’s DutiesPhysician’s Duties Employer’s DutiesEmployer’s Duties CompensationCompensation BenefitsBenefits Restrictive Restrictive

CovenantsCovenants TerminationTermination Other ProvisionsOther Provisions

Parties: First Things FirstParties: First Things First

Get to Know Your Potential EmployerGet to Know Your Potential Employer What is the employer’s reputation?What is the employer’s reputation? Is employer legally able to “practice medicine”?Is employer legally able to “practice medicine”? Who are the other physicians in the practice?Who are the other physicians in the practice?

Employee v. Independent ContractorEmployee v. Independent Contractor Important legal ramificationsImportant legal ramifications Courts and governmental agencies are not Courts and governmental agencies are not

bound by the label given by the parties and will bound by the label given by the parties and will instead look to the substance of the relationship.instead look to the substance of the relationship.

Key: the degree of the employer’s control over Key: the degree of the employer’s control over the physician’s practicethe physician’s practice

IRS Employment Relationship IRS Employment Relationship FactorsFactors

The IRS has identified twenty general factors it will use to The IRS has identified twenty general factors it will use to consider whether a worker is an independent contractor or consider whether a worker is an independent contractor or employee. These include:employee. These include: Instructions; Instructions; Services Personally Rendered;Services Personally Rendered; Hiring, Supervising, and Paying Assistants; Hiring, Supervising, and Paying Assistants; Continuing Relationship; Continuing Relationship; Set Hours of Work;Set Hours of Work; Full Time Required; Full Time Required; Doing Work on Employer’s Premises; Doing Work on Employer’s Premises; Payment by Hour, Week, Month; Payment by Hour, Week, Month; Furnishing of Tools and Material; Furnishing of Tools and Material; Right to Discharge;Right to Discharge; Right to Terminate. Right to Terminate. IRS Revenue Ruling 87-141. 1987-1 C.B. 296. IRS Revenue Ruling 87-141. 1987-1 C.B. 296.

Contract TermContract Term

At WillAt WillIf not otherwise specified, employment If not otherwise specified, employment

terminable at any time and usually for any terminable at any time and usually for any reasonreason

Specified TermSpecified Term Provides stabilityProvides stability May include provisions regarding extension of May include provisions regarding extension of

the termthe term May want to mark your calendar to re-negotiate May want to mark your calendar to re-negotiate

contract well in advance of its end datecontract well in advance of its end date Effective Date v. Start DateEffective Date v. Start Date

Physician’s DutiesPhysician’s Duties

Scope of WorkScope of Work Basic expectationsBasic expectations Estimated number of patients expected to Estimated number of patients expected to

see see Practice or Work HoursPractice or Work Hours

How allocated between practitionersHow allocated between practitioners Coverage by other practitioners Coverage by other practitioners

On Call Policy & ProceduresOn Call Policy & Procedures RequirementsRequirements How allocated between practitionersHow allocated between practitioners

Physician’s Duties Cont.Physician’s Duties Cont.

Referral PracticesReferral Practices Travel RequirementsTravel Requirements Additional Non-Medical Duties Additional Non-Medical Duties

What might they be?What might they be? Clearly outline scope of dutiesClearly outline scope of duties At a minimum, likely will include oversight of At a minimum, likely will include oversight of

assistants, nurses, and other personnelassistants, nurses, and other personnel How much time would they require? How much time would they require? Is the time required in addition to work hours?Is the time required in addition to work hours? Is there additional compensation?Is there additional compensation?

Physician’s Duties Cont.Physician’s Duties Cont. Billing and ComplianceBilling and Compliance

Physicians are responsible for the accuracy of Physicians are responsible for the accuracy of their own billings their own billings

Due to increased fraud and abuse enforcement, Due to increased fraud and abuse enforcement, the AMA recommends physicians and medical the AMA recommends physicians and medical practices carefully ensure billings are accurate.practices carefully ensure billings are accurate.

Policies & ProceduresPolicies & Procedures Employment agreement should specify rules and Employment agreement should specify rules and

regulations physician is required to followregulations physician is required to follow What types of policies? Utilization review, quality What types of policies? Utilization review, quality

assurance, peer review, etc.assurance, peer review, etc. Important to understand who determines Important to understand who determines

violations and to whom those violations are violations and to whom those violations are appealableappealable

Physician’s Duties Cont.Physician’s Duties Cont. Professional Standards Professional Standards

Physician should be held to standard no higher than that Physician should be held to standard no higher than that required by law: physician must provide the quality of required by law: physician must provide the quality of care provided by a reasonable physician in his/her care provided by a reasonable physician in his/her specialty under similar circumstances. specialty under similar circumstances.

Do not sign a contract that imposes standard higher than Do not sign a contract that imposes standard higher than that of malpractice; could create additional liability for that of malpractice; could create additional liability for physician. Examples include: “provide services physician. Examples include: “provide services according to the highest standards of competence” or according to the highest standards of competence” or “of optimum quality”“of optimum quality”

An acceptable standard: “Physician shall perform his/her An acceptable standard: “Physician shall perform his/her duties under this Agreement in accordance with the rules duties under this Agreement in accordance with the rules of the ethics of the medical profession. Physician shall of the ethics of the medical profession. Physician shall also perform his/her duties under this Agreement in also perform his/her duties under this Agreement in accordance with the appropriate standard of care for accordance with the appropriate standard of care for his/her medical profession and specialty.”his/her medical profession and specialty.”

Employer’s DutiesEmployer’s Duties

Agreement should specify who is Agreement should specify who is providing the equipment, facilities providing the equipment, facilities and personnel and whether the and personnel and whether the physician has any input on hiring, physician has any input on hiring, firing, and disciplining non-physician firing, and disciplining non-physician personnel.personnel.

Compensation: Fee StructureCompensation: Fee Structure Is it clear and understandable?Is it clear and understandable? What control does the Employer have to What control does the Employer have to

adjust or change compensation structure?adjust or change compensation structure? Types:Types:

Guaranteed Annual SalaryGuaranteed Annual Salary amount and frequency of payments should be specifiedamount and frequency of payments should be specified deductions should be made clear in advancedeductions should be made clear in advance base salary should not be subject to deductions other than base salary should not be subject to deductions other than

ordinary payroll deductions (such as professional liability ordinary payroll deductions (such as professional liability insurance, employer payroll taxes, benefits, etc.)insurance, employer payroll taxes, benefits, etc.)

market surveys are available that list salaries by specialty market surveys are available that list salaries by specialty and geographic marketand geographic market

if a salary cannot be agreed upon, alternative may be to if a salary cannot be agreed upon, alternative may be to write in a provision requiring a review in 6 months or alter write in a provision requiring a review in 6 months or alter the Agreement so the physician only works part-time or the Agreement so the physician only works part-time or give higher level of benefitsgive higher level of benefits

Compensation: Fee StructureCompensation: Fee Structure Fee Structure Types (cont.):Fee Structure Types (cont.):

Variable Based on ProductionVariable Based on Production Usually, Physician is paid a set amount of prior month’s charges minus Usually, Physician is paid a set amount of prior month’s charges minus

adjustments.adjustments. Purpose: incentivize physician to work diligently and effectively. Purpose: incentivize physician to work diligently and effectively. Employer assumes risk of collection, but compensation may be Employer assumes risk of collection, but compensation may be

adjusted downward to reflect practice’s bad debt (depending on the adjusted downward to reflect practice’s bad debt (depending on the contract)contract)

Agreement should specify when and how payments are made.Agreement should specify when and how payments are made. Variable Based on CollectionsVariable Based on Collections

Under this model, physician is paid based on percentage of collectionsUnder this model, physician is paid based on percentage of collections Purpose: employer and physician incentives to generate revenue Purpose: employer and physician incentives to generate revenue

alignedaligned Disadvantage: average collection wait is 60—90 days so payment on Disadvantage: average collection wait is 60—90 days so payment on

collections delayed by that amount.collections delayed by that amount. Percentage of Profit Percentage of Profit

Net income is the amount remaining after deduction or payment or all Net income is the amount remaining after deduction or payment or all practice expensespractice expenses

Not recommended by the AMA; akin to partnership because it blurs Not recommended by the AMA; akin to partnership because it blurs the line between the physician and the employerthe line between the physician and the employer

Compensation: BonusesCompensation: Bonuses Is it clear and understandable?Is it clear and understandable? Is the bonus achievable?Is the bonus achievable? May be based on:May be based on:

Percentage of salaryPercentage of salary if certain revenue milestones met; if certain revenue milestones met; agreement should specify whether based on production or gross collection agreement should specify whether based on production or gross collection

and where post-terminations collections creditedand where post-terminations collections credited agreement should contain example of how calculated agreement should contain example of how calculated

Percentage of CollectionsPercentage of Collections Most commonMost common over targeted quarterly or annual goalover targeted quarterly or annual goal sometimes bonus or percentage increases on escalating basis the more sometimes bonus or percentage increases on escalating basis the more

physician exceeds production goalphysician exceeds production goal Percentage of productivityPercentage of productivity

pay a percentage of prior month’s production of bonus if exceeds threshold pay a percentage of prior month’s production of bonus if exceeds threshold amountamount

should define “production”should define “production” Managed care bonusManaged care bonus

not recommended by the AMAnot recommended by the AMA compares physician’s production, RVUs or patient encounters with others in compares physician’s production, RVUs or patient encounters with others in

the groupthe group

Compensation: Compensation: Other ConsiderationsOther Considerations

AdvancesAdvances Purpose: even out physician compensation Purpose: even out physician compensation

from month-to-month with an accounting at from month-to-month with an accounting at the end of a certain periodthe end of a certain period

If amount due is more, employer obligated to If amount due is more, employer obligated to pay physicianpay physician

If amount due is less, physician obligated to If amount due is less, physician obligated to pay back employerpay back employer

Review of Compensation and AdjustmentReview of Compensation and Adjustment Patient FeesPatient Fees

Who sets?Who sets? Do they impact physician compensation?Do they impact physician compensation?

Employer-Paid BenefitsEmployer-Paid Benefits Professional Liability InsuranceProfessional Liability Insurance

Will physician be listed as an additional insured on employer’s Will physician be listed as an additional insured on employer’s policy?policy?

Is there additional insurance for additional activities outside of Is there additional insurance for additional activities outside of medical practice (such as participation in peer review, medical practice (such as participation in peer review, committees)?committees)?

What type of policy? (i.e., “occurrence” or “claims-made”)What type of policy? (i.e., “occurrence” or “claims-made”) Will the employer pay for tail coverage?Will the employer pay for tail coverage?

Dues and License FeesDues and License Fees Vacation, CME, Sick Leave, Holidays, etc.Vacation, CME, Sick Leave, Holidays, etc. Moving expensesMoving expenses Insurance: health, life, disability Insurance: health, life, disability Any repayment of bonus requirements upon termination? Any repayment of bonus requirements upon termination?

What are they? (i.e., repayment of signing bonus, loans, etc.)What are they? (i.e., repayment of signing bonus, loans, etc.) Under what circumstances?Under what circumstances?

What control does Employer have over reduction or What control does Employer have over reduction or elimination of benefits?elimination of benefits?

Termination or CancellationTermination or Cancellation How can termination occur?How can termination occur?

AutomaticAutomatic Without CauseWithout Cause

Advance notice required? Should be long enough to secure other Advance notice required? Should be long enough to secure other employmentemployment

For CauseFor Cause What type of cause? Should be “material cause”What type of cause? Should be “material cause” Any time to cure breach? Should be reasonable timeAny time to cure breach? Should be reasonable time Who determines breach? Is there an appeal process?Who determines breach? Is there an appeal process? Avoid catchall provisions such as clause providing for termination if Avoid catchall provisions such as clause providing for termination if

continued employment is detrimental to the practice as unilaterally continued employment is detrimental to the practice as unilaterally determined by employer. determined by employer.

What happens after termination?What happens after termination? Agreement should explain arrangement for payment of physician in Agreement should explain arrangement for payment of physician in

light of termination for services rendered to patients while employer light of termination for services rendered to patients while employer makes medically appropriate referralsmakes medically appropriate referrals

What happens to physician access to patient records after What happens to physician access to patient records after termination?termination?

Can physician initiate? Can physician initiate? If so, how does it interact with non-compete provisions?If so, how does it interact with non-compete provisions?

Covenants Not to CompeteCovenants Not to Compete

Are there any restrictive covenants? Are there any restrictive covenants? Is it reasonable? Enforceable? Is it reasonable? Enforceable?

The more specialized the practice, the The more specialized the practice, the larger/greater the restriction(s) could be.larger/greater the restriction(s) could be.

What is the prevailing practice for similar What is the prevailing practice for similar practices in your area?practices in your area?

Is physician be willing to be bound by it?Is physician be willing to be bound by it? Even if not reasonable, is physician Even if not reasonable, is physician

willing to litigate its enforceability?willing to litigate its enforceability?

Other Points to ConsiderOther Points to Consider Arbitration or MediationArbitration or Mediation

Arbitration can generally be faster and Arbitration can generally be faster and possibly less expensive than litigation, although possibly less expensive than litigation, although costs are usually split between partiescosts are usually split between parties

Intellectual PropertyIntellectual Property IndemnificationIndemnification

No indemnification by physician on employer or other No indemnification by physician on employer or other partyparty

No shifting responsibility from employer to physician No shifting responsibility from employer to physician ConfidentialityConfidentiality Partnership Partnership AmendmentsAmendments Incorporation or Integration clauseIncorporation or Integration clause

Does the contract incorporate all Does the contract incorporate all inducements made to the physician?inducements made to the physician?

Some Helpful ResourcesSome Helpful Resources

American Medical Association, American Medical Association, Annotated Annotated Model Physician Employment AgreementModel Physician Employment Agreement (2000).(2000).

Bonnie Darves, Bonnie Darves, Physician Employment Physician Employment Contracts: Recent Developments Spell Contracts: Recent Developments Spell Good News, Problem AreasGood News, Problem Areas, N.E. J. Med. , N.E. J. Med. (Aug. 2008).(Aug. 2008).

Bonnie Darves, Bonnie Darves, Physician Compensation Physician Compensation Models: The Basics, the Pros, and the Models: The Basics, the Pros, and the ConsCons, N.E. J. Med. (Sept. 2004)., N.E. J. Med. (Sept. 2004).

DisclaimerDisclaimer

The information in this The information in this presentation is intended to provide a presentation is intended to provide a general overview of issues that you general overview of issues that you may encounter while you are may encounter while you are negotiating an employment contract. negotiating an employment contract. The information provided here does The information provided here does not constitute legal advice. In not constitute legal advice. In negotiating your own contract, negotiating your own contract, please consult an attorney. please consult an attorney.

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(Founder and C.E.O of Saxbee Consultants)

Email :-saxbeeconsultants@gmail.com

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