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?
