For their first job after medical/surgical training, physicians frequently sign an employment contract with an existing group practice. The provisions of that contract, and the exact language in which it is expressed, control their obligations, responsibilities, and rights in their new position, as well as their employer’s obligations and responsibilities to the physician.
CRITICAL CONTRACT TERMS
Many newly minted physicians make the fundamental mistake of thinking they can review and negotiate the employment contract on their own, without the assistance of an experienced contract attorney to help them understand the fine points of the employment contract. Unfortunately, that often proves to be a costly mistake. Here are some of the areas of employment contracts around which physicians would benefit from legal counsel.
Oral Promises versus Written Agreement. It is common in employment situations for matters to be discussed that do not end up in the written employment agreement. The physician may have been told she will need to take weekend call “one weekend per month” but the contract states “Physician’s professional obligations shall include night and weekend call in accordance with the rotation established by the practice.” Or, the physician was told that all employed physicians receive an annual cost-of-living increase, but the contract is silent on this point.
Because it is the written contract that controls the employment, if the number of call obligations or the cost-of-living adjustments is important to the employee, these issues should be precisely and accurately defined in the written contract.
Physicians often fail to research the prospective employer and the landscape of the employment situation. Physicians should exert the same due diligence researching an employer’s credentials as the employer exerts checking the physician’s credentials and background.
Physicians should try to find out how much physician and staff turnover has occurred. How profitable is the practice? Does the medical practice have substantial buy-out or deferred compensation obligations to retired partners? What is the malpractice history of the medical practice? Are there pending lawsuits against the practice? Are physicians trained in proper documentation and billing? Does the practice have a commitment to regulatory compliance?
Regarding the position, what would be the physician’s duties? What are the non-patient care duties? How often are the physicians on call? How are call duties determined and assigned? What is the volume of work? What does productivity pay involve? How are patients assigned?
In meeting the physicians in the medical practice, a physician should find out how long they have been there, what the patients are like, how physician extenders are used. Do the physicians and staff seem happy or tense? What is the reputation of the medical practice in the community?
Ambiguous Contract Language. If a physician must reread language in a contract to determine what it means, that may be an indication the language is purposely indistinct. Even if it seems clear to the innocent reader, there may be another way to interpret a provision that can result in a different legal interpretation. This is an area where an experienced contract attorney’s education and insight is needed.
Physicians often do not pay attention to the granular terms of the contract: the number of years the contract encompasses, the conditions for its renewal, and how and when it can be terminated. Physicians don’t want to be locked into a long-term contract with no provisions for salary increases and professional promotion, and no way to terminate the contract. Nor do they want to be held hostage to a clause that allows the employer to terminate without cause when they thought they had a two-year commitment.
Restrictive Covenants/No-Compete Clauses. Physician employment contracts often include language stating that if the newly hired physician leaves the medical practice, they will not compete with the former employer by practicing medicine within a specified geographic area for a specified period of time. Physicians must be aware of these no-compete clauses, as they prevent physicians from making a living wage in their community if their employer terminates the contract for any reason.
Physicians who separate from their current employer, voluntarily or involuntarily, and try to set up a new practice on their own or in another local practice in the community can be sued by their former employer to prevent them from doing so under the restrictive covenant. Therefore, it behooves physicians to negotiate a reasonable non-competition clause before the employment agreement is signed.
A knowledgeable contract attorney will know the state law regarding restrictive covenants and will discern whether the geographical restriction, temporal restriction, and scope of information that may be restricted by a post employment confidentiality covenant would be considered reasonable and enforceable by a court of law.
Malpractice Insurance Provisions. Malpractice costs are exorbitant, so physicians must ensure the employment agreement clearly states that it is the employer’s obligation to provide malpractice insurance at the employer’s expense. The contract should specify the dollar amount of insurance to be provided, and it should be adequate to protect a physician’s personal assets and meet any applicable requirements of state law.
If the law in the state where a physician will be practicing requires any additional payments to a state reinsurance fund, the employer’s obligation to pay should be stipulated in the contract. There should be clarity as to the scope of malpractice coverage and provisions as to how a legal defense will be handled by the insurance company in case the physician is sued.
Specific Terms and Conditions of Employment. Physicians often overlook whether their employment agreement specifically describes the actual conditions of employment: what the actual duties are and what human and other resources will be made available to facilitate meeting the employer’s expectations and duties. Physicians should discuss the granular details of these duties before discussing compensation so they can assess whether they are being offered a fair market value for their work.
Termination Agreements. A physician’s contract is not worth the cost of the paper it is written on if the employer can terminate the employee (physician) at will. The time to negotiate a fair contract is before the physician packs up the family’s bags and moves to a new city. A physician must be aware of what can trigger a termination. Fair triggers include:
90 days’ notice by either party.
Loss of medical staff privileges.
Identification of improper actions such as fraud, immoral behavior, and criminal activity.
Any event determined by impartial committee to be detrimental to the employer.
Material breach of the contract by the physician.
Illness or disability that prevents the physician from performing contractual obligations.
Material breach may include a failure to fulfill the obligations laid out within a contract or a failure to perform contracted obligations in a timely fashion. Vague provisions should be clarified. If an employer refuses to change the written language to achieve clarity, a physician should consider turning down the position.
Compensation and Bonus Terms. The compensation of employed physicians is often based at least in part on a calculated formula that considers such factors as the number of patients seen, revenue the practice receives for those patients, and the overall practice profitability. If the physician’s income will be solely or partly based on anything other than straight salary, it is up to the physician to make sure that she understands the compensation formula and that it is fully and fairly set forth in the employment agreement or an exhibit that is incorporated into the contract.
The physician incentive plan or bonus provisions in many physician employee contracts are written to protect the employer, not the physician employee. Many factors may negatively affect the flexible portion of the physician’s compensation, including provisions that allow the employer unilaterally to revise, or even cancel, the incentive plan; the precise method by which the incentive portion of the physician’s compensation is calculated; and whether compensation depends on factors controllable by the employer and outside the physician’s control.
Examples of the latter include assignment of patients with inadequate insurance coverage and compensation based on net rather than gross income. A specific example: An employer manipulates a physician’s compensation by paying partners a higher salary so as to increase costs and thus reduce net revenue. Additionally, contracts may outline conditions that must be met before the incentive plan goes into effect, such as the practice site meeting certain net revenues or patient volume targets.
THE THREAT TO PHYSICIAN PROFESSIONALISM
Ascendant market fundamentalism has pressured physicians to practice as fiduciary to the organization. Employed physicians report to business-trained managers and may be subject to contractual obligations that threaten quality of care, patient safety, and the professional and fiduciary responsibilities they owe patients. The administrators who have MBAs may demand that the physicians succumb to market goals because they believe the theories they learned in business school apply to the practice of medicine.
In the new era of employed physicians, numerous provisions in their contracts impede their professional duties and fiduciary responsibilities.
1. Confidentiality clauses: The objective of medical care must be availability of uniform and excellent standard of care across all demographics and socioeconomic classes. Confidentiality clauses in physician contracts are often included to hide quality and safety issues, medical errors, unethical conduct, and malfeasance. These clauses can prevent physicians from meeting their professional, ethical, and moral responsibilities necessary to maintain the fiduciary responsibilities inherent in a physician-patient relationship.
2. Incentive clauses: Most physician contracts include clauses related to productivity incentives. These clauses provide inducements for activities that primarily increase employer income and tend to inspire overtreatment, in direct opposition to the professional responsibility that physicians provide healthcare that is based on judicious and cost-effective management of limited clinical resources, requiring conscientious avoidance of tests and procedures that are unnecessary and financially driven. The provision of unwarranted medical services exposes patients to risk and expense and limits the available resources for others in true need.
3. Referral restrictions: Many physician contracts prohibit referring outside the system, which can deter appropriate referrals for particular patients, thus decreasing quality of care. Many physician offices have physician navigators who direct the care of patients to specialists in the health system and take the control of referral away from the primary physician.
Contractual clauses interfering with referral to skilled physicians are in direct opposition to the professional responsibility of physicians to encourage continuous improvement in quality of care.
4. “Gag” and termination without cause clauses: Clauses that prohibit physicians from revealing quality and safety problems, medical errors, and unethical conduct, and bar physicians from revealing problems with electronic medical records that result in healthcare quality and safety issues (often emanating from confidentiality clauses in the contracts between hospital employers and electronic record vendors) directly interfere with a physicians’ professional responsibilities.
Clauses that allow termination without cause put physicians at risk for standing up for professional responsibilities and maintaining their fiduciary responsibility to the patient when it conflicts with the employer.
The gag clauses and termination without cause clauses directly oppose physicians’ commitment to reduce medical errors, increase patient safety, minimize overuse and misuse of healthcare resources, optimize patient outcomes, and stand up to the organization when behaviors surface that interfere with physician professionalism and fiduciary responsibility.
THE CONUNDRUM PHYSICIANS FACE
Physicians are juxtaposed between professional responsibilities and contractual obligations that limit their ability to meet professional responsibilities, and their fiduciary responsibility to their patients. This juxtaposition results from manifestations of corporate medicine, letting the demands of the marketplace undermine the goals of professional and fiduciary responsibility of physicians.
The ascendant market fundamentalism has pressured physicians to become entrepreneurial businesspersons rather than professionals. This shift in the physician’s fiduciary responsibility to the employer threatens the quality of care, patient safety, and physician professional values.
It is a daunting time for physicians, patients, and society. Given that the managers of large health corporations may not be willing to meaningfully negotiate the most egregious provisions in the contractual relationship with individual physicians leaves physicians feeling impotent, as these corporate demands are common across employers. The obstinacy of these organizations reflects their sheer market dominance.
What can physicians do to combat this provoked loss of professional values and fiduciary responsibility? They must negotiate before signing an employment contract, demanding professional values and fiduciary responsibility to the patient.
CONCLUSION
It behooves physicians to seek an attorney with expertise in physician contract law before having any discussions with potential employers. An attorney who is experienced with physician contracts knows the loopholes, pitfalls, and specific legal meaning that courts or legislation has given to what seems to the physician to be ordinary language. An experienced contract attorney is trained to spot ambiguities and knows what contract terms should be but are not.