Physician Employment Contracts

Our team of health care attorneys frequently help physicians, practice owners, managers and other health professionals draft and negotiate employment contracts. We also represent parties during contract disputes. Conflicts generally arise because of poorly drafted agreements that fail to clearly identify the parties responsibilities and expectations.

Often employers use standard employment contracts that may not be ideal for every employment situation. These standard contracts, often used as a starting point for negotiation, need considerable modification. Not surprising, employer drafted contracts are often written in favor of the employer. Therefore. physicians and other health professionals should fully understand their rights and responsibilities under the contract before executing the contract.

Our health care attorneys assist physicians and other health professionals with understanding the terms of their employment contracts. We also review contracts to identify areas of potential conflict that may lead to future litigation. As trained negotiators, we can also negotiate on behalf of physicians to remove unfavorable terms and add favorable terms to their employment contract.

Common Provisions and What They Mean

Termination Clauses – Termination clauses in employer-drafted contracts generally outline the terms in which the employer can terminate the physician prior to the expiration of the contract. Such provisions usually provide that the employer can terminate the agreement at any time “for cause.” The contract will likely define “for cause” to include any restrictions or limitations on the physician’s ability to practice and participate in Medicare and Medicaid. “For cause” may also include limitations that prevent the physician from fulfilling his obligations under the agreement and failure to maintain hospital privileges. The employment contract may provide that the employer can terminate the physician upon occurrence of a “for cause” event. Our attorneys can help negotiate to add a notice provision that requires the employer to provide notice of a deficiency and provide a certain period of time for the physician to correct the deficiency before the physician can be terminated.

Provisions that allow termination “without cause”, allow the party to terminate the contract for any reason. Physicians should be aware that provisions such as this limit the length of the contract to the period of notice required. In other words, a three-year employment contract that allows the employer to terminate employment without cause providing they give the physician 90 days’ notice, is really only a 90-day employment contract, not a three-year contract.

Physicians should also pay close attention to whether there is a fee (e.g. reimbursement of moving, training or recruitment expenses or signing bonus) to terminate employment. Often our attorneys are successful in having such provisions removed.

Physicians should ensure that their employment contracts contain a provision that allows the physician to also terminate the contract with or without cause.

Non-Compete / Restrictive Covenants – While courts may not enforce certain restrictive covenants, these covenants should be removed or reduced whenever possible, to lessen the likelihood of future litigation. If the provision cannot be removed, we often negotiate to restrict the covenant to cases where employment is terminated by the physician without cause. Our attorneys also negotiate to reduce the geographic region, length of time, and area of specialty that the covenant applies to.

Compensation and Incentives –Whether it is a small part or bulk of the physician’s total compensation, physicians are often paid bonuses or incentives to encourage better performance. Physicians who are eligible for productivity based compensation should ensure that their employment contracts specify how such compensation will be determined and paid. If the physician will also receive benefits, such as payment of health insurance, retirement account contributions, paid time off, CMEs, licensing fees, etc., the physician employment contracts should include these additional benefits.

Often compensation is included in the offer of employment. Physicians should pay close attention to the final employment contract to ensure that all agreed terms have been included in the final employment contract. This may be through incorporation of the offer into the employment contract.

Liability Insurance – Given the significant cost of malpractice insurance, physician employment contracts should state who is responsible for payment of malpractice insurance.  If the policy is claims-made, physicians’ need to consider whether the policy will require tail coverage when the physician leaves the practice. If tail coverage is required, the contract should state which party is responsible for payment of such coverage.

Assignment and Power to Contract – Some physician employment contracts will contain a provision for reassignment of payment from CMS and/or third party payors. This provision allows the employer to bill and collect payment for services rendered by the physician on behalf of the physician. The provision will also restrict the physician from billing for services rendered during he course of employment. Physician employment contracts may also contain a provision that grants the employer the right to contract with managed care organizations on the physician’s behalf.

Exclusivity and Outside Activities – Employers may seek to restrict the physician’s ability to perform outside activities through an exclusivity provision. Often these provisions seek to restrict the physician’s ability to practice medicine outside of the employment (e.g. moonlighting). These provisions may also seek to restrict other activities such as expert witness services, teaching and research. Some employers seek to require written approval from the employer before the physician can perform these outside activities. Often it is advised that these provisions be removed or at least reduced.

Missing Provisions – Often it is not what is in the contract, but what is missing that is the source of litigation. Our attorneys are experienced in drafting employment contracts and can easily spot missing provisions that would be beneficial to the employee or prevent potential conflict. For example, employment contracts should outline expected hours of service to be performed each week. Often employers will state a minimum number of hours required to be performed each week in order to meet the base pay requirement. Physicians may wish to add a maximum number of hours and/or negotiate for additional compensation should they exceed the maximum number of hours in a week.

Similarly, on-call coverage requirements should be outlined in the employment contract. Often physician employment contracts will state that on-call coverage is equitably divided between physicians. Physicians may wish to negotiate for additional compensation should their on-call their exceed a certain number of days.

Physician employment contracts should also outline the physician’s duties. This should include not only expectations regarding treatment of patients, but also any responsibilities regarding administrative duties, including record keeping, training expectations, and supervision of staff. Outlining any responsibilities requiring supervision of staff is particularly important when working with employees that the state requires to be supervised by a licensed physician. Both physicians and employers need a clear understanding of who is responsible for supervising these employees.

Compliance – The Government uses Stark, Anti-Kickback, and false claims laws to ensure compliance with government regulations, HCPCS and CPT coding systems. All contracts must be reviewed to ensure Stark and anti-kickback compliance. Special attention needs to be paid to potential false claims violations. Frankly, the devil is in the details.

How We Can Help

Often we are retained to help physicians understand their proposed employment contract and to review the agreement for potential problems that may lead to future litigation. However, the real value in our services is helping physicians negotiate more favorable terms, including compensation. Many people find negotiating with potential employer’s to be intimidating or stressful, or believe that employment offers are not negotiable. For some clients, we negotiate with the employer on their behalf. While others retain us to help them with negotiations between the employer and themselves.  In both cases, our goal is to help physicians obtain the best employment terms possible.

We also offer simple contract reviews for a fixed fee. This includes review of the employment contract and a meeting with the client (in-office or via telephone or video conference) to discuss potential areas of concern, ensure that the client understands their responsibilities under the contract, and answer any questions that the client may have.

Whether you are looking for assistance in understanding your employment contract, need assistance negotiating a more favorable contract, or need representation in a contract dispute, our attorneys would be honored to help.


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