Last Updated: Dec 12, 2014

The answers to the following frequently asked questions have been provided by Julia Gabis, Esq., and Dennis Hursh, Esq., health care attorneys.

What are the essential terms of a good contract?

Two categories need to be addressed:

  1. Responsibilities of the employer—The employer should agree to a defined compensation, with defined vacation, CME, and other benefits.
  2. Responsibilities of the physician—The physician must agree to a work schedule, on-call schedule, and other DEFINED requirements such as practice development, participation in medical staff activities, licensure in appropriate state, DEA if required.

All contracts should include, at a minimum:

  • The length of the term (preferably a firm commitment to a significant period, at least one year), with no right to terminate without cause during the term.
  • Written notice of termination at least 90 days before the end of the term and clear reasons for termination for cause unless it is important to the physician to be able to leave the position on short notice.
  • A comprehensible compensation package (i.e., benefits and the method to calculate incentive compensation, bonuses, etc. should be understandable).
  • Professional liability insurance coverage to be paid by employer, either occurrence or claims made with tail coverage.
  • If possible, no restrictive covenant; if included, a reasonable restrictive covenant both as to length of time and geographic limitation.
  • A provision that describes what happens to patient records upon termination, including who pays for copies of charts requested by patients.
  • Where appropriate the buy-in process.

It’s not a requirement but another important consideration is whether the contract provides funding to help you meet Pennsylvania’s CME requirements.

What is a restrictive covenant and is it legally enforceable in Pennsylvania?

A restrictive covenant is a prohibition against certain competitive activities both during and after the term of the agreement. It may include an agreement not to solicit other employees, vendors or payers of the practice for some period of time and an agreement not to compete within a certain geographic area for some period of time.

The covenant will be enforced by a court of law if reasonable in geographic scope and time. The doctor should assume that the covenant will be enforced, and should negotiate it accordingly.

What should I pay attention to in the negotiating process? Are there contract terms that are usually more negotiable than other terms?

You should look at the negotiation process as a courtship. A negotiating partner who is courteous, thoughtful and receptive bodes well for the relationship. On the other hand, a partner who is unwilling to negotiate or a negotiating process that becomes hostile and adversarial is cause for concern.

While parties are generally more willing to give on issues that are less important, all terms should be negotiable and the terms most important to you should be the main focus of the negotiation.

Time to ownership in the practice tends to be based on what those before you had to wait. If a buy-in to ownership is part of the agreement, the period of time to buy-in is generally based on the period required of other physicians in the practice. Employee benefits, such as health plans and pension plans, are probably not negotiable at all, or very little. Most employers are open to being held to reasonable standards with respect to discretion in setting fees, call coverage schedules, employee benefits, and virtually any other area in which some discretion is granted to the employer.

Is it realistic to expect my call schedule to be spelled out in detail?

Generally, no, but it depends on the size of the employer. For a large hospital system, it is not uncommon for considerable detail to be given with respect to call coverage schedules. On the other hand, if you are joining a practice as a second physician, much more flexibility will be required to juggle schedules of just two physicians. It is realistic, however, to expect the contract to provide that call coverage will be assigned on an equitable basis with other physicians in the practice.

What is productivity compensation? Does it make sense for all physicians?

Productivity compensation is generally based on some calculation of your revenue—either your billings or your collections—compared to practice overhead. Formulas for the calculation vary widely but should be understandable, reasonable, and provide a realistic incentive for you to receive additional compensation over your base salary. It should not be a substitute for a substantial base salary, particularly for physicians just starting out in practice. From a physician’s standpoint, the best method of using productivity compensation would be in a bonus formula. In other words, it would be preferable to receive a guaranteed base salary, but then be eligible for bonuses if productivity levels are high.

What are some of the more common problems or pitfalls with contracts?

In addition to contracts that fail to include adequate provisions identified in Question No. 1, beware of:

  • A negotiation that does not clarify the parties' expectations or understanding about potential buy-in opportunities.
  • Contract provisions that automatically tie termination of a medical staff appointment and clinical privileges to termination of the contract.
  • Termination of medical staff appointments and privileges is often required in exclusive contracts entered into by groups of hospital-based physicians such as radiologists and anesthesiologists.
  • Medical practices that have a history of short-term relationships with their physicians.
  • Contracts that are very one-sided, with the employer being given many rights with respect to “without cause” termination, assignment of the agreement, and other areas where you should have rights.
  • Productivity compensation language that does not provide appropriate precision in determining the productivity or even leaves determination of the productivity goal to the complete discretion of the employer.
  • Restrictive covenants that are extraordinarily broad. If you leave your employer’s practice, it is acceptable to require that your new office not be within some reasonable radius of your old office. You should not, however, be prohibited from maintaining medical staff privileges at the same hospital and treating patients at nursing homes and hospitals close to your old office.

Should billing requirements be outlined in the employment agreement?

Even though you won’t be sending bills to patients and insurers, you will have duties associated with billing. It’s important for you to know the process in your practice and to have input. Your contract should mention physician involvement in creating third-party billing standards. A reasonable time frame should be given for you to complete billing information and paperwork. You should be able to, upon request, audit all bills submitted on your behalf to determine compliance with laws and regulations.

Is it a good idea to have something in my contract about dispute resolution?

Your employment agreement should include a dispute resolution process for patient grievances and physician/employer related disputes. Some dispute resolution processes require arbitration in lieu of actions in a court of law. Questions to ask include:

  • Is the expense of arbitration evenly distributed among parties?
  • Must the arbitration be in accordance with the rules of the American Arbitration Association or the American Health Lawyers Association?
  • Are all parties to work together to choose an arbitrator or a panel of arbitrators?
  • May each party be accompanied by legal counsel and present evidence?

Why is it important to have an attorney review my contract? Is a health care attorney necessary and, if yes, why?

A contract is a legal document. Just as an attorney could very well find useful health information on the Internet, a physician might find useful information in general about contracts from various sources. A person needing medical care, however, is better off seeing a physician. Likewise, determination of the precise rights and duties of a contract is probably better left to a licensed attorney. An experienced attorney will be able to identify issues in a contract that you may miss and can protect your interests. Also, an attorney offers you the ability to raise difficult issues (like an increase in compensation or professional liability coverage) that you might be reluctant to raise.

A health care attorney may not be necessary, but an experienced attorney who is accustomed to dealing with physician contracts is a very big asset. Any attorney with significant experience in employment contracts will be an asset in reviewing and negotiating your agreement. Most likely, however, a health care attorney will have more specialized experience in the unique issues faced by physicians. If you’re leaving the state, an attorney licensed in that state will understand the unique laws of that state.

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