Top Physician Contract Review | A Favorable Contract for the Physician

Chelle Law’s physician contract attorneys will review your contract and identify the areas that need improvement. An attorney will assist you in negotiating the best contract possible. 

A physician’s contract should be taken apart and understood fully. Signing contracts before fully understanding each clause and implication could be disastrous. 

Each physician that requests assistance from a contract attorney receives:

Review

• Flat-rate pricing, with no hidden costs for any physician
• Review of your proposed employment agreement by a knowledgeable attorney
• Phone consultation with one of our attorneys to review the contract term by term
• Follow up with a review of the needed clarifications
• Available in any state

Contracts

Employment contracts are a pervasive and obligatory part of nearly all business and legal transactions. Well-drafted contracts help to enumerate the responsibilities of the involved parties, divide liabilities, protect legal rights, and ensure future relationship statuses. 

These touchstones are even more crucial when applying their roles to the case of a physician employed by a hospital, medical group, or other health care provider. 

While contract drafting and negotiation can be long and arduous, legal representation is necessary to protect your rights.

Physician Employment Contract

The present-day conclusion is simple: A physician should not enter into any contract without having the agreement reviewed by legal counsel.

Contract Review for Doctors | Mistakes Physicians Make

There is too much risk for physicians to take contract matters into their own hands. 

In addition to the specific professional implications, contract terms can significantly impact a physician’s family, lifestyle, and future. There are many essential contract terms and clauses which can present complex and diverse issues for any physician, including:

• Non-compete clauses
• Damages
• Indemnification
• Verbal guarantees
• Insurance statements

Contract Review Services

Additionally, often the most influential terms and clauses in any employment contract are the ones that are not present. A physician must review an employment agreement before signing it due to the advent of productivity-based employment agreements. 

Attorney Robert Chelle has practical experience drafting and reviewing physician contracts for nearly every specialty.

Physician Contract: Thorough Contract Review

A thorough contract review can benefit new residents, attending physicians, doctors entering their first employment contract, or established physicians looking for new employment. By employing an experienced attorney for your representation, you can ensure that you will be able to fully understand the extensive and complex wording included in your contract. 

By having a complete understanding of the contract, you will be in a better position to decide whether you want to enter into the agreement, which will affect your career life for years to come.

Independent Contractors

An independent contractor agreement is a vital part of the modern workplace. For many professionals, including in the healthcare industry, working as an independent contractor can offer several benefits, such as having control over your work schedule and enjoying the ability to collaborate with multiple companies. 

Negotiate Contracts

The financial benefits gained from having your contract reviewed and negotiated by an experienced healthcare attorney far outweigh the costs associated with a review. You are a valuable resource, and you should be treated and respected as such. 

Attorney Robert Chelle will personally dedicate his time to ensuring you are fully protected. He will assist you in the contract process to represent your interests fairly.

Review of Non-Compete Clauses for a Physician?

Most courts find that a non-compete agreement is enforceable if it is reasonable. The general test for reasonableness by a court or arbitrator would be:

• The restraint is not more than required to protect the employer,
• It does not inflict any untold hardships on the employer, and
• The restriction is not injurious to the public.

Non-Compete Buy-Out

Some states require a non-competition to include a buy-out. The buy-out amount usually equals one year’s compensation for the physician.

Is a Physician Non-Compete Enforceable in Every State?

No, some states prohibit or severely curtail the restrictions in physician non-competition clauses. Those states where a physician non-compete is currently banned or limited include:

• California
• Delaware
• Massachusetts
• Rhode Island

Breaking an Employment Contract with a Health Care Practice

Physician contracts with non-competition agreements were initially considered restraints of trade and thus were invalid based on public policy at common law; however, courts upheld the rule of reason due to many trade restrictions. Therefore, restrictive covenants between physicians not to compete after the termination of employment are generally enforceable as long as it is reasonable.

There are a few states which prohibit non-compete clauses. Please review your state laws for non-compete rules and regulations to see the specific rules for your state. 

The general test for reasonableness for these clauses and whether they hold on termination of employment include:

• The restraint is not more than required to protect the employer,
• It does not inflict any untold hardships on the employer, and
• The restriction is not injurious to the public.

In one such case, a practitioner had their non-competition clause deemed unreasonable after he was restricted from practicing his specialty after leaving the hospital where he worked. The judge ruled that this would be too harsh because there were only a few other hospitals in the area with subspecialties like this one. The employer, in this instance, felt that they needed to protect themselves by preventing knowledge transfers between providers.

Doctors | Mistakes Physicians Make | Example

Some doctors in Ohio must sign contracts promising not to seek employment with a competing company before an employer can hire them. These agreements have been controversial, but the law is currently taking action to help keep both parties happy for now. 

Recently, these clauses were enforceable only if there was some legitimate interest from the employer and would damage their ability to find qualified staff later or hurt public health care. 

Those who need legal advice should consult an attorney before signing any contract like this. 

You should know what rights may come into play down the road when things go wrong with your current job, regardless of whether non-compete reviews by lawyers seem necessary at first glance!

When a Physician Employer Can Enforce an Employment Contract

Many ask, are non-compete agreements enforceable from a business? The contract is enforceable as long as a non-compete is written well and serves the employer’s interests but is not broader than necessary. 

Many myths have come about regarding non-compete agreements, and it is much better to be safe and sure about any contract you are signing as an employee.

Non-competition Agreements that are Too Restrictive

Non-compete agreements prevent employees from leaving and joining a competitor company. This type of agreement can be very restrictive, with some states limiting the enforceability or, if fully enforced, rendering it almost impossible for an individual who has left his previous job in that field to find work again. 

Non-competitive agreements may seem like they provide stability but do not protect companies since competition brings innovation within any business climate.

Mistakes Physicians Make

Non-compete agreements are preventing professionals from being able to find work in comparable jobs. Without adequately written and phrased non-competes, professionals won’t be able to change employment when they need or want to. 

The inability to change jobs has severe repercussions on a person’s life. After years of education and skills training, they cannot get a job with the same pay anywhere else because there is no competition for these positions within their geographic area!

When Courts Won’t Enforce a Non-competition Clause From a Business

Whenever a non-compete is signed, there has to be something of value given to the employee in exchange for signing the agreement. 

Being hired for the job is the typical value exchange for a newly hired employee.

Current employees must receive other considerations for value exchange; otherwise, the non-compete isn’t enforceable.

The courts also won’t enforce an agreement when it restricts the competition for too long a period. Usually, six months is considered normal. This time could vary from business to business. 

The courts may not enforce non-compete agreements if it restricts someone from working in a large territory. The towns, counties, or cities are often listed, but if too wide an area, it would be unfair and therefore not enforceable.

What is Tail Insurance?

Tail Insurance, also known as Extended Reporting Period coverage, must be purchased when a physician has claims-made professional liability insurance coverage. Tail insurance covers the gap between when a physician leaves an employer and when the statute of limitations on filing a medical malpractice claim ends.

Malpractice coverage is a type of professional liability coverage that helps protect physicians and other healthcare professionals from the financial risks associated with lawsuits in which patients claim personal harm due to an incident involving medical care. 

The coverage depends on how much the policy is worth (premium), and your specialty – personal injury attorneys are more likely to take cases against physicians working in hospitals than those who practice family medicine or internal medicine in private practice.

Most malpractice insurance carriers provide coverage with a deductible clause that can range between $0 -$100k per incident, with most doctors opting for higher deductibles due to lower premiums. 

A deductible clause in a malpractice policy stipulates that the insurance company will not provide coverage for any expenses incurred by the insured for injuries or damages up to an agreed-upon amount. 

The typical company’s deductible is usually $5000, but it can be higher, sometimes as high as $50,000, depending on individual state requirements and claims history.

How Much Does Tail Coverage Cost?

A good rule of thumb is that tail coverage costs around two times your annual medical malpractice insurance premium. Thus, if your annual premium costs $6000, your tail cost would be around $12,000. Your tail insurance cost is a one-time payment; it is not a yearly cost.

The basis for insurance coverage cost is the claims history of the provider and the number of individual and group patients seen per year. Providers with high annual visit counts will have a lower insurance premium since their claims are spread out over more people. Thus, the choice of claims made or occurrence is essential.

Additionally, doctors who perform below average in medical malpractice insurance claims will pay less than doctors who incur higher claim rates. 

The provider’s business risk profile determines the rate an insurance company will charge for the occurrence-based policy. 

Provider age is also factored into the equation, as younger doctors are at higher risk of committing acts that could lead to liability or making an error than older practitioners.

Who Pays for Tail Insurance?

The physician’s employment agreement will specify whether the physician or the employer pays for the tail insurance. Payment is a point of contention in many employment agreement negotiations, with resources from both parties advocating for their position.  

Claims-made coverage applies in cases where there may be periods when coverage is unavailable, such as physicians changing jobs. In these situations, the tail policy will protect for up to three years after leaving an employer. 

The tail policy also has other limitations and exclusions, making it difficult for physicians who leave employers often or have a history of high liability claims against them to find affordable malpractice insurance.

As with any insurance, it’s crucial that you understand what your tail covers before purchasing one. There are two types of tail coverage – open and closed – each with its benefits and drawbacks.

How Can a Physician Avoid Paying for Tail Malpractice?

• Negotiate for the employer to pay for it in the Employment Agreement.
• Have your new employer pay for your tail (nose coverage).
• Stay with the same insurance carrier, and the tail coverage will get rolled into a new policy.

Which Choice is Best for Physicians if there is a Paid Incident

Both policies offer the same policy limits issued by the same insurance carrier and endorsements against claims. 

The cost of occurrence based and claims-made coverage can factor into a doctor’s decision:

Claims-Made Cost: Assuming claims-made coverage is in effect, a good rule of thumb is that tail insurance costs around two times your annual malpractice insurance premium. Thus, if your annual premium costs $6000, your cost to the insurance carrier would be around $12,000. Your insurance cost is a one-time payment; it is not an annual cost. 

The American College of Physicians offers resources and information for multiple insurance options through AGIA Affinity for individual doctors and any practice.

Occurrence Cost: Tail insurance doesn’t apply under an occurrence-based insurance policy, so the annual premium for an occurrence-based policy is approximately 35% more than a claims-made policy. If the average claims-made policy yearly premium is $6000, an occurrence-based policy would cost $8100 in coverage. 

To determine the cost of insurance coverage, one takes the claims history of the provider and the number of individual and group clients seen per year.

Providers with high annual visit counts (or the number of admitted seen if in-patient) will have a lower insurance premium since their claims are spread out over more people.

A retroactive date defines how far back in time claims can occur for your policy to cover your claim. If a claim happens before the date the insured’s policy is effective, the insured’s policy won’t provide retroactive benefits from the carriers for when the incident occurred. It’s a feature and form of claims-made professional liability coverage.

Contract Review Checklist

Every physician’s contract is unique. However, nearly all contracts for health care providers should contain several essential terms. 

Disputes may arise due to disagreements between the parties concerning a specific point when these essential terms are missing in contracts.

For instance, if the doctor is expecting to work Monday through Thursday and the employer is expecting the provider to work Monday through Friday. The specific workdays are absent from the agreement. Who prevails?

Spelling out the details of your job is crucial to avoid contract conflicts during the term of your employment. 

Below is a checklist of essential terms that contracts should contain (and a brief explanation of each term):

1. Practice Services Offered: What do the clinical patient care duties include? Are you given time to review administrative tasks? How many patients are you expected to see (like in pediatrics)?
2. Patient Care Schedule: What days and hours per week are you expected to provide patient care? What is the surgery schedule? Are you involved in the planning of your schedule?
3. Locations: Which facilities will someone schedule you to provide care at (outpatient clinic, surgical sites, in-patient services)?
4. Outside Activities: Are you permitted to pursue moonlighting or locum tenens opportunities? Do you need permission from the employer before you accept those practice medicine-related positions?
5. Disability Insurance: Is disability insurance provided (short-term and long-term)?
6. Medical License: Will the practice offer reimbursement for your license? Will an advisor be provided?
7. Practice Call Schedule: How often are you on call (after-hours office call, hospital call (if applicable))?
8. Electronic Medical Records (EMR): What EMR system is in use in the practice of medicine? Will you receive training or time to review the system before providing care?
9. Base Compensation: What is the annual base salary? What is the pay period frequency? Does the base compensation increase over the term of the agreement? Is there a yearly review or quarterly review of compensation?
10. Productivity Compensation: If there is productivity compensation, how is it calculated (wRVU, net collections, patient encounters)? Is there an annual review?
11. Practice Contract Benefits Summary: Are standard benefits offered: health, vision, dental, life, retirement? Who is the advisor of human resource benefits?
12. Paid Time Off: How much time off does the job offer? What is the split between vacation, sick days, CME attendance, and holidays? Is there an HR guide?
13. Continuing Medical Education (CME): What is the annual allowance for CME expenses, and how much time off will you receive?
14. Dues and Fees: Which business financial expenses are covered (board licensing, DEA registration, privileging, AMA membership, Board review)?
15. Relocation Assistance: Is relocation assistance offered? What do the repayment obligations include should agreement termination occur before the expiration of the initial term?
16. Signing Bonus: Is an employee signing bonus offered? When is it paid? Do you have to pay it back if you leave before the initial term finishes? Are student loans paid back? Is there a forgiveness period for student loans?
17. Professional Liability Insurance: The offered types of liability insurance (malpractice): claims made, occurrence, self-insurance?
18. Tail Insurance: If tail insurance is necessary, and if there’s a contract termination, who is responsible for paying for it?
19. Term: What is the length of the initial term? Does the contract automatically renew after the initial term?
20. For Cause Termination: What are the grounds for immediate termination for cause? Is a review provided to dispute the termination?
21. Without Cause Termination: How much notice is required for either party to terminate the agreement without cause?
22. Post-Termination Payment Obligations: Will you receive production bonuses after the contract terminates?
23. Non-Compete: How long does the non-compete last, and what is the prohibited geographic scope?
24. Financial Retirement: Is a financial retirement plan offered?
25. Non-Solicitation: How long does it last, and does it cover employees, patients, and business associates?
26. Notice: How is the notice given? Via hand delivery, email, US mail? Does it have to be provided to the employer’s attorney?
27. Practice Assignment: Can the employer assign the agreement?
28. Alternative Dispute Resolution: If there is a conflict regarding the contract, will mediation or arbitration process be utilized? What is the standard attorney review process for conflict? Who decides which attorney oversees the process?

Physician Contract Review by Health Care Attorney

Coming into a new organization with a favorable contract can put the physician in a positive financial situation for years to come. Before you sign the most important contract of your life, contact Attorney Robert Chelle for assistance.

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