The business of healthcare has changed a great deal in recent years. Reimbursements are lower than ever before, costs are up and regulatory restrictions are at an all time high. Given these conditions, it is more important than ever before that medical practices develop strong, thoughtful employment agreements with their physicians to set expectations and outline responsibilities among all parties.
It is essential that an employment agreement between a physician and a medical practice include the following elements:
- Job Responsibilities and Duties
- Compensation and Benefits
- Restrictive Covenants (e.g. non-compete provisions)
- Employment Term
- Termination Procedures
Job Responsibilities and Duties
This section of the agreement should include information on the nature of the physician’s duties. For instance, will the doctor be expected to practice in his/her specialty field and also take cases that fall into a broader area of classification? If the practice has multiple locations, will the physician be required to work at all offices? This is important to spell out in the event that multiple locations and facilities will require physicians to travel. It is also important since non-compete provisions often relate to the locations where the physician has provided services.
A statement should be included concerning the practice’s expectation that the physician is to be employed full time or part time, and whether or not the physician may work outside the practice concurrently unless permission to do so is granted by the practice. The practice’s expectations with regard to on-call duty, how the workload will be divided among physicians in the practice on an equal basis should also be included in the agreement.
Compensation and Benefits
The employment contract should include provisions for a salary, bonus arrangement and benefits package. While a guaranteed salary level is common in the initial year or two of the relationship, it is common to transition to a productivity model often based on worked relative value units (wRVU) or some other methodology. Benefits will typically include insurance (including malpractice insurance), retirement benefits, paid time off, and reimbursement for professional fees and expenses.
Organizations use restrictive covenants to protect valued relationships and information. In a physician’s employment agreement, these covenants prevent individuals from exploiting institutional knowledge for their own profit after leaving the practice. The agreement will typically include language that will prevent the physician from competing with the practice within a certain geographical area for a certain period of time. These restrictive covenants are designed to prevent the following:
- Solicitation of employees and/or patients
- Sharing of information that is confidential and proprietary, and
- Competition with the practice, even after termination
Many states have specific language that must be included in the contract to support enforceability. Texas in particular has requirements that are codified in Section 15.50 of the Texas Business and Commerce Code.
Employment Term and Termination of Contract
The practice should spell out the length of the employment agreement and include language providing for renewal of the contract at its conclusion if both the physician and the practice desire this.
The agreement should also delineate procedures for the termination of the agreement. Typically, an employment agreement is terminated for one of three reasons:
“Without cause” – Either party may give notice (30 to 180 days) to end the agreement without needing to show any cause.
“For cause” without fault – The agreement is ended due to circumstances that make the employment arrangement no longer viable. An example of this would be long-lasting or permanent disability of the physician.
“For cause” with fault – The employment of the physician is ended due to a failure to perform, or for some type of misconduct, including failure to abide by the terms of the employment contract.
Physician employment agreements must be constructed carefully to ensure all parties are adequately protected and fully understand the commitments each party is making. If you need assistance with health care contracts or any other facet of health care law for your hospital or medical practice, contact Larry “Max’ Maxwell at (972) 226-9700 for a free consultation.