Physician Employment Contracting - Top Five Terms to Consider

Posted by Michael Jenkins on Thursday, June 13, 2019

Our health law team reviews, revises, and negotiates many physician employment contracts each year—contracts with major health systems, contracts with group practices, contracts with nonprofit health centers, and private practice buy-in deals. This experience gives us a view of physician contracting that may be a bit broader than the perspective of an individual practitioner who might sign a handful of contracts over the course of a career in medicine. We know that the value of a physician employment contract is significant given the annual salary multiplied by the years of work under the agreement. Getting things right on the front end creates a more satisfying work environment and allows the physician to concentrate on medicine instead of employment law.

Based upon our experience, here are the top five terms to consider when reviewing a physician employment agreement:

Compensation – This one almost goes without saying, but there are more favorable and less favorable ways of structuring compensation in healthcare employment agreements. What component of compensation is guaranteed, what component is based upon productivity? Is the compensation tied to fair market value salary studies? Will it increase over time? How might non-compensation terms such as schedule and call impact compensation? Are there any Stark Law or Federal Anti-Kickback concerns related to the compensation structure?

Schedule and Call – We see a desire to have clarity and control over work-life balance as a growing concern of physicians and other healthcare practitioners. It’s very important that the employer and the employee be aligned with a clear mutual understanding of schedule and call requirements. What happens if another practitioner in the group retires, moves, or is unable to work for another reason? Which party bears the responsibility for covering? Coming to clear terms on schedule and call will protect against potential frustration and mistrust down the road.

Professional Liability Coverage – What are the coverage limits? Is the coverage on a claims-made basis or an occurrence basis? Will the employer provide tail coverage following a physician’s departure? Is so-called “nose” coverage required?

Restrictive Covenants/Non-Competition – Does the agreement have restrictive covenants that are reasonable in scope and duration? Are the non-competition covenants consistent with the market? What options might the practitioner have in the community if they find themselves in a non-compete restricted period? How do the termination provisions interact with the non-competition provisions? Is there a buy-out? Do the enforcement provisions provide for attorneys’ fees?

Term and Termination – How long is the initial term? Does the initial term have an impact on repayment of things like recruitment bonuses, moving expenses, or student loans? How much notice does each party need to provide for no-cause termination? What are sufficient grounds under which a party can invoke for-cause termination?

If you have any questions, please feel free to contact Michael Jenkins or an attorney with BrownWinick's Health Law practice Group.