Physician Employment Agreements Presented by Stephanie Eckerle and Ashley Osak
Steps to Take Prior to Negotiating an Agreement: Employer Due Diligence References Education/Training Licensure Interviews Joint Patient Care Letter of Intent/Memorandum of Understanding
Steps to Take Prior to Negotiating an Agreement Physician Due Diligence Use advisors Employer s patient demographic Employer s payors Employer s strategic plans Financial obligations of employer Management of employer Ethical/Religious directives Letter of Intent/Memorandum of Understanding
Types of Agreements Employment Agreements Independent Contractor Agreements Locum Tenens Agreements Ownership Agreements Physician Recruitment Agreement Collaborative/Supervisory Agreements
Basic Contract Provisions Who are the parties? What is the effective date of the agreement? Is the physician a primary care physician or specialist? Is the physician an employee or independent contractor? What facilities will the physician be expected to work at? Is the physician full time or part-time?
Physician Obligations Standard of care Professional Judgment Compliance with laws and policies/procedures Charitable mission of employer Documentation/medical records Anti-discrimination clause Administrative duties Quality improvement and peer review
Physician Obligations Supervision of other employees Teaching obligations Exclusivity Participate in governmental healthcare programs / managed care plans Representations and warranties of physician Telemedicine/Multi-state practice obligations Work schedule: Minimum patient contact hours ICU/Hospitalist/Outpatient Minimum or maximum administrative hours On-call hours or limitations All professional time to be dedicated to employer
Physician Obligation: Work Schedule/Hours Medscape Physician Compensation Report 2015
Physician Obligation: Work Schedule/Hours Medscape Physician Compensation Report 2015
Employer Obligations Management of practice Office space Personnel and administrative support Compliance Medical malpractice insurance (claim v. occurrence; tail insurance) Setting professional fees Handling billing and collections Allowing physician to review all claims made to payors Representation regarding suspension, limitations and exclusion from participation in Medicare or Medicaid Payment of compensation and other benefits Other insurance carried by employer
Physician Compensation Overview of Legal Issues State Law: Prohibition on Fee Division Prohibition on Referrals Prohibition on Fees for Admitting Patients Corporate Practice of Medicine
Physician Compensation Overview of Legal Issues Federal Law: STARK Law Anti-kickback Law Internal Revenue Service Regulations
Physician Compensation Fair Market Value Physician compensation must be fair market value demonstrating reasonable compensation. Fair market value is determined by comparing the entire compensation package, including benefits, insurance and signing bonuses, to industry standards for the relevant specialty and geographic market. AMA Annotated Model Physician Employment Agreement
Physician Compensation Compensation Options Signing Bonus Starting Bonus Student Loan Repayment Compensation for Supervision of Mid-level Providers Fixed Base Salary Compensation Based on Percentage of Collections Stock or Ownership Options
Physician Compensation Compensation Options Base Salary with productivity bonus based on work RVU Compensation based solely on work RVU Quality Incentive Compensation Citizenship Compensation Compensation by participation in distribution pool
Physician Compensation Compensation Options Income derived from patents, publications, etc. Clinical Trials Sale of products (i.e., skincare products, supplements)
Physician Benefits Will the benefits be listed in the agreement or in an employee handbook or policy? Professional licenses and dues Continuing medical education expenses Sick, vacation and CME time Business expenses Cellphone, laptop, pager Moving expenses Health insurance Life and disability insurance Retirement plan Worker s compensation Automobile/travel allowances
Physician Compensation Allowance for Compensation Modification Agreements may allow for modification of compensation in the event of the following: Certain government actions Decision by independent or internal compensation committee Change to hospital/practice group compensation model
Non-competition Clauses Three Prong Analysis Whether the restrictions are wider than necessary for the protection of the employer in legitimate interest The effect of the promise upon the employee / Scope of restriction The effect upon the public
Non-competition Scope of Restriction Geography Time Type of activities prohibited
Non-competition Geographic Restriction Case-by-case analysis Methods: radius; state-by-state, county-by-county; territory Analyze location of employee s work (i.e., main location; satellite offices; teleconference issues; regularly worked; regularly scheduled) Unreasonable restriction if geographic scope stems from locations where employee has not worked
Non-competition Prohibited Activity What did the employee s job duties entail? Are the prohibited activities in line with the employees job duties? Are the prohibited activities broader than the duties of the employee? Examples: Eye doctor could not be prohibited from practicing health care of every kind. Infectious disease doctor could be prohibited from practicing internal medicine.
Non-Competition Time Period Case by case analysis 1-3 years found reasonable
Exceptions to Non-competition or Exclusivity Clauses Charitable work Consulting services for other entities, such as pharmaceutical or device companies Teaching Reciprocal coverage arrangements Moonlighting Buy-outs/liquidated damages Waiver by Employer (i.e., termination without cause by employer; private practice exception)
Term of the Employment Agreement Physician start date Initial term. Physician agrees to begin providing Medical Services beginning no later than January 1, 2012 ( Commencement Date ). This Agreement shall continue in effect for four (4) years ( Initial Term ) from the Commencement Date, unless or until earlier terminated in accordance with the terms of this Agreement. Extension terms. The Employer shall have the right to extend this Agreement on the same terms and conditions for an additional period of one year giving the Physician written notice no later than sixty days prior to the end of the Initial or then current term. This Agreement shall be renewed automatically for succeeding terms of one year unless either party gives notice to the other at least sixty days prior to the expiration of any term of that party s intention not to renew. Probationary trial period.
Termination of the Employment Agreement: Termination Options Prior to the start date if licensure/credentialing/privileges not obtained By one or either party upon X days notice (without cause) By mutual agreement of the parties Immediately by the employer or employee for cause or after cure period Due to illegal arrangement Due to disability of physician Due to merger, consolidation or dissolution Due to bankruptcy
Termination of the Employment Agreement Immediate Termination by Employer Physician s license is revoked, suspended or limited Physician s ability to prescribe or dispense drugs is revoked Physician cannot be insured Physician s medical staff membership or clinical privileges are revoked Physician fails to maintain board certification Physician is suspended, excluded, debarred or sanctioned by any federal or state health care program Physician is charged with a felony or certain misdemeanors Physician dies Physician s quality of patient care/behavior poses serious threat of health or safety to any patient, staff member or visitor
Post-Termination Considerations Can the agreement be terminated prior to expiration? Patient records Notification to patients Non-compete and non-solicitation clauses Return of documents, computer, cell-phone Non-disparagement clause Medical malpractice insurance Purchase of medical equipment by physician Repayment of signing bonus/student loan payment
Consult with Counsel Physicians should never be coerced into employment with hospitals, health care systems, medical groups, insurance plans or any other entities. Employment agreements between physicians and their employers should be negotiated in good faith. Both parties are urged to obtain the advice of legal counsel experienced in physician employment matters when negotiating employment contracts.
Thank you! Stephanie T. Eckerle seckerle@psrb.com 317-612-8963 Ashley N. Osak aosak@psrb.com 317-612-8952 * This presentation is for educational use only. Please consult with legal counsel should you have any questions regarding the information provided in this presentation.