Med Law Blog

PHYSICIAN CONTRACTS & ISSUES

INTRODUCTION

The structure, purpose and terms of every physician contract are different. The content and style vary with the institutional or private practice nature of the employer and the needs and leverage of the physician.  Following is a list identifying major issues or components.

I.          COMPENSATION

1.         Base Compensation.

A.         Fair market value compensation.

B.        Annual base compensation increases unless total compensation includes productivity.

2.         Productivity.

A.         Incentive compensation based upon activity (e.g., RVUs) must have the reasonable value attributed to the units of activity.

B.        Financial productivity - incentive compensation based upon financial activity can be based either upon charges or collections, and incentives based upon collections must be evaluated in light of the relative efficiency of the practice collection history.

C.        Compare projected productivity with past productivity within the practice.

D.        Are there resource, staff or other efficiency issues which could negatively impact productivity?

E.        Productivity based upon profits requires examination of the expenses being assigned to revenue pools.

3.         Signing Bonus.

4.         Relocation Expenses: moving, real estate subsidy.

II.         TERM AND TERMINATION

A.         Is the contract a guaranteed contract for an acceptable period of time, such as several years, or is it annually renewable at the discretion of either party?

2.         What are the termination provisions?

A.         Termination without cause upon 30, 90, 180 days notice.

B.        Termination for cause with the opportunity of notice and cure, which is the opportunity to correct alleged deficiencies.

3.         Severance Compensation:

A.         Premature termination.

B.        Termination without cause.

4.         May the physician terminate without cause before expiration? Some contracts are treated as guaranteed performance contracts for the period of the contract.

III.        DUTIES

1          Scheduled duties involve office hours, office locations, hospital coverage assignments and call responsibility.

2.         This call responsibility equally shared among physicians, equitably shared, shared only by a junior group, or discretionary.

3.         Are there other sub-specialists that can provide call or will you be on call 24/7 unless otherwise agreed?

4.         Can the duties be changed by other than mutual agreement, i.e., imposed upon the physician?

IV.        RESTRICTIVE COVENANT

1.         Evaluate the scope of the restrictive covenant in terms of time, protected area, and protected activities.

2.         Is the restrictive covenant applicable in the event of termination without cause?

3.         Severance compensation in the event of termination without cause.

4.         Is there a particular circumstance to protect?

V.         MALPRACTICE COVERAGE

1.         Occurrence malpractice provides coverage if the adverse event occurs during the term of the policy regardless of when the claim is made and requires no tail coverage.

2.         Claims made coverage covers adverse events that both occur during the term of the policy for claims that are made during the term of the policy, and an extended reporting endorsement or “tail” is required following the expiration of the policy.

3.         Departure issues do not arise with an occurrence policies because all of events are covered into the future but responsibility for the payment of a tail is a potential departure event involving claims made coverage.

4.         Awareness of occurrence or claims made insurance is important in determining termination obligations for entering into a new practice arrangement.

VI.        PRIVATE PRACTICE OWNERSHIP

1.         Private practice shareholder or ownership opportunities are usually expected within two or three years of joining the group.

2.         Private practice groups usually provide only promises or “letters of intent” which indicate that the practice intends to offer ownership opportunity following satisfactory performance, by without guarantees.

3.         Although few practices offer guarantees of ownership status, most practices will define the buy-in cost.

A.        Is it a fixed price or a formula price based upon a financial formula?

B.        Are there favorable payment terms?

C.        If the purchase price is based on a formula, can the practice provide an example of the most recent buy-in results?

D.        Will the repurchase price be the same as the buy-in price?

E.        Will ownership be equal among all physician shareholders in terms of financial and voting attributes?

VII.       EMPLOYEE BENEFITS

1.         Business expense allowance.

2.         CME allowance, including board certification time and tuition reimbursement.

3.         Health, life and disability insurance.

4.         Retirement plan participation.

A.        Financial contributions.

B.        Participation and eligibility.

C.        Vesting

VIII.      ACADEMIC ISSUES

1.         What is the relationship between employment and the academic appointment? If employment is guaranteed but conditioned upon an academic appointment and academic appointment is at the whim of the department, then employment is not guaranteed.

2.         Available resources - private practice resource requirements are typically more obvious and the private practice owners have the authority and the responsibility for providing agreed upon resources. The resources used in academic medical centers are frequently provided by various sources, i.e., physician practice plans, academic departments, hospital departments. Although the resources might be included in the budget by a department chair person, most budgets are merely “letters of intent” and cannot only be changed at whim, but the resources necessary for the budget may actually be under the control of third parties who have complete discretion whether to fund or not fund budget items.

3.         What is your recourse for denial of resources, i.e., termination, severance, release of restrictive covenants, etc.?

4.         What academic title/authority is provided?

5.         Who remains in control as the principal investigator of grants and other funding that accompanying you into a position or are awarded during your tenure?                        

| Posted By Michael Cassidy In Restrictive Covenants , Physicians' Contracts | 0 Comments | Permalink

RESTRICTIVE COVENANT UNENFORCEABLE

BY SURVIVING SPOUSE 

The Virginia Supreme Court ruled that a medical practice corporation, ownership of which had transferred from the deceased sole physician shareholder to his spouse and which was converted to a business corporation by state law, could not enforce a restrictive covenant because it could not practice medicine and had no enforceable interest. This same result could apply in Pennsylvania because it has the same combination of corporate practice of medicine and professional corporation laws. The Virginia case is Parikh v. Family Care Center and the case is available at: http://op.bna.com/hl.nsf/id/psts-6z2sn8/$File/parkikh.pdf. Although liquidated damages would prejudice your injunction rights, liquidated damages would be an effective resolution for this problem.

RADIOLOGIST DENIED ANTI-TRUST RELIEF

DESPITE PROVING CONSPIRACY

Dr. Saskia V. W. Hilton failed to demonstrate that “competition in the market for pediatric radiology services” was injured despite producing evidence that would have supported finding of an anti-competitive conduct by this hospital and its existing pediatric radiologist. The classic position is that the law protects competition not competitors.

See: http://op.bna.com/hl.nsf/id/psts-6z8qrp/$File/hilton.pdf 

CALIFORNIA PHYSICIAN NOT DAMAGED

BY BOARD CERTIFICATION REQUIREMENT

A California physician lost his medical staff privileges when he failed to meet the hospital’s new board certification requirements was found not to be entitled to pursue an action in court for damages relating to the termination of his clinical privileges because the court rule that the decision of the hospital, under California law, was a quasi legislative act of general application, in the form of the adoption of minimum qualification standards for clinical privileges, which did not create an individual cause of action. See: Tran vs. MissionHospitalRegionalMedicalCenter at:

http://op.bna.com/hl.nsf/id/thyd-9prg/$File/Tran%20v%20Mission%20Hospital.pdf

| Posted By Michael Cassidy In Credentialing , Restrictive Covenants , Physicians' Contracts | 0 Comments | Permalink

Restrictive covenants are often the most complicated clauses in a physician employment contract.  Medical practices and their lawyers are constantly striving to make these non-competition agreements more protective, more comprehensive and more enforceable.  Sometimes this "more is better" approach backfires!

| Posted By Michael Cassidy In Restrictive Covenants | 0 Comments | Permalink

The District Court of Appeal of the State of Florida affirmed a lower state court holding that certain aspects of a restricted covenant were not enforceable. In Florida Hematology and Oncology v. Rambabu Tummala, M.D., the Practice had terminated Dr. Tummala allegedly after he began questioning certain billing practices. Although Dr. Tummala was subject to a restrictive covenant prohibiting competition for two years within fifteen (15) miles of any office of the Practice, Dr. Tummala immediately opened a competing practice within the proscribed area. The Practice sought an injunction forcing the restrictive covenant. 

| Posted By Michael Cassidy In Restrictive Covenants | 1 Comments | Permalink

In MurfreesboroMedical Clinic vs. Udom, the Tennessee Supreme Court ruled that restrictive covenants are not enforceable against physicians, unless specifically prescribed by law. In handing down this decision, the Court overturned an appellate court decision enforcing the restrictive covenant. Although restrictive covenants are otherwise enforceable in Tennessee, the Court found that interfering with patient freedom of choice was sufficient justification to reject enforcement.

| Posted By Michael Cassidy In Restrictive Covenants | 0 Comments | Permalink

In WellSpan Health v. Bayliss, the WellSpan Health System, the primary components of which are York Hospital and Gettysburg Hospital, attempted to enforce a restrictive covenant against a physician in all counties listed in the non-compete section of an employment contract, despite the fact that WellSpan had no physical presence in three of the counties. The trial court enforced the restrictive covenant by enjoining Dr. Bayliss from practicing in York and Adams counties, but not Lancaster County. The Superior Court affirmed the trial court, affirmed that restrictive covenants are enforceable when reasonably designed to protect identifiable interests, but also acknowledged the necessity to balance the public interest involved.

| Posted By Michael Cassidy In Restrictive Covenants | 0 Comments | Permalink