Physician Contract Review | Contracts for Physicians

Our physician contract attorneys can review your contract, identifying the areas that could be improved and an attorney will assist you in negotiating the best contract possible. A physician 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

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

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 insure 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 a long and arduous process, legal representation is a must in order to ensure that your rights are being protected.

Physician Contracts

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

There is simply too much at risk for a physician 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 important 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 times the most influential terms and clauses in any employment contract are the ones that are not present. With the advent of productivity based employment agreements it is imperative that any physician have an employment agreement reviewed before it is executed. Attorney Robert Chelle has practical experience drafting and reviewing physician contracts for nearly every specialty.

Doctors

New residents, attending physicians, doctors entering into their first employment contract or established physicians looking for new employment can all benefit from a thorough contract review. By employing an experienced attorney for your representation, you can insure that you will be able to fully understand the extensive and complex wording included in your contract. By having a full and complete understanding of the contract, you will be in a better position to make your own decision on whether or not 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. 

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 make sure that your are fully protected and will assist you in the contract process so that your interests are fairly represented.

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 for protecting the employer,
• It does not inflict any untold of hardships to the employer, and
• The restraint 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 is usually equal to 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 prohibited or limited include:

• California
• Delaware
• Massachusetts
• Rhode Island

Breaking an Employment Contract with a Health Care Practice

Physicians with non competition agreements in their contract were originally considered as restraints of trade, and thus were invalid on the grounds of public policy at common law; however, many restraints of trade incident to contracts were upheld based on the rule of reason.  Thus, restrictive covenants between dentists not to compete after termination of employment are generally enforceable as long as it is reasonable.

However, there are a few states which prohibit non compete clauses.  Please review your state laws for non compete rules and regulations to see what the specific rules for your state are.  The general test for reasonableness of these clauses hold that on termination of employment, a covenant  which restrains an employee from competing with his former employer is termed reasonable if:

• The restraint is not more than required for protecting the employer,
• It does not inflict any untold of hardships to the employer, and
• The restraint is not injurious to the public.

In one such case, a provider who was restricted from practicing his specialty after leaving the hospital where he worked had their non-competition clause considered unreasonable. The judge ruled that this would be harsh if it were enforced because there are only few other hospitals in the area with subspecialties like this one’s and they needed to protect themselves by preventing transfers of knowledge between providers.

Doctors

Some doctors in Ohio are required to sign contracts promising not to seek employment with a competing company before they can be hired. These agreements have been controversial, but the law is currently taking action on them that will help keep both parties happy for now. Recently it was found that these clauses were only enforceable if there was some legitimate interest from the employer’s end and would damage their ability of find qualified staff later or hurt public health care as well. Those who need legal advice should consult an attorney before signing any contract like this so they know what rights may come into play down the road when things go wrong with their 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? As long as a non-compete is written well, and serves the interests of the employer but not broader than necessary, the agreement is enforceable. Many myths have come about regarding non-compete agreements, and it is much better to be safe and sure about any agreement you are signing as an employee.

Non-competition Agreements that are Too Restrictive

Non-compete agreements are designed to 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 really do not protect companies since competition brings innovation within any business climate

Non-compete agreements are preventing professionals from being able to find work in comparable jobs. Without properly written and phrased non-competes, professionals won’t be able to freely change employment when they need or want too. This has serious repercussions on this person’s life as it can mean that after years of education and skills training, he or she 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. An exchange of value for a newly hired employee is typically that he is being hired for the job. For employees who have already been hired, some other consideration of value must be made or the non-compete can’t be enforced. The courts also won’t enforce an agreement when it restricts the competition for too long a period. Usually a 6- month period is considered normal. This could vary from business to business. The courts may not enforce non-compete agreements if it restricts someone from working in a large territory. Often the towns, counties or cities are 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 claims 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 believe they were harmed as a result of an incident involving medical care. The amount of coverage depends on how much the policy is worth (premium) as well as 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 that has a deductible clause that can range anywhere 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. A deductible clause in a malpractice policy stipulates that the insurance company will not cover any expenses incurred by the insured for injuries or damages up to an agreed-upon amount per incident. 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 tail coverage costs around 2 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 an annual cost. 

The cost of insurance coverage is based upon 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 important.

Additionally, doctors who perform below average in terms of medical malpractice insurance claims will pay less than doctors who incur higher claim rates. A provider’s business risk profile is also taken into account when determining the rate an insurance company will charge for the occurrence-based policy. Provider age is also factored into the equation, as younger doctors are considered to be 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.  This is a point of contention in many employment agreement negotiations with resources from both parties advocating for their position.   

Claims-made coverage is used in cases where there may be periods of time when coverage is not available, such as physicians changing jobs. In these situations, the tail policy will provide protection for up to three years after leaving an employer. The tail policy also has other limitations and exclusions which can make 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 type of insurance, it’s important that you understand what your tail covers before purchasing one. There are two types of tails – open and closed – each with their own 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 (referred to as nose coverage).
• Stay with the same insurance carrier and the tail 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, along with the same 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 tail insurance costs around 2 times your annual malpractice insurance premium.  Thus, if your annual medical 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: Since tail insurance is not needed under an occurrence-based insurance policy, the annual premium for an occurrence-based policy is approximately 35% more than a claims-made policy. So, if the average claims-made policy annual premium is $6000, an occurrence-based policy would cost $8100 in coverage. The cost of insurance coverage should be based upon the claims history of the provider and the number of individual and group clients seen per year. Providers with high annual visit counts (or 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 prior to 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 contract is unique.  However, nearly all contracts for health care providers should contain several essential terms.  If these essential terms in the contract are not spelled out in contracts, disputes can arise when there is a disagreement between the parties as to the details of the specific term.  For instance, if the doctor is expecting to work  Monday through Thursday and the employer is expecting the provider to work Monday through Friday, but 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 are the clinical patient care duties? Are you given time for review of 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 you be scheduled to provide care at (outpatient clinic, surgical sites, in-patient services, etc.)?
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 of 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 used in the practice of medicine? Will you receive training or time to review the system prior to 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 an annual review or quarterly review of compensation?
10. Productivity Compensation: If there is productivity compensation; how is it calculated (wRVU, net collections, patient encounters, etc.)? Is there an annual review?
11. Practice Contract Benefits Summary: Are standard benefits offered: health, vision, dental, life, retirement, etc.?  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 a HR guide?
13. Continuing Medical Education (CME): What is the annual allowance for CME expenses and how much time off is offered?
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 are the repayment obligations if the Agreement is terminated prior to 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 is completed? Are student loans paid back?  Is there a forgiveness period for student loans?
17. Professional Liability Insurance: What type of liability insurance (malpractice) is offered: claims made, occurrence, self-insurance?
18. Tail Insurance: If tail insurance is necessary, who is responsible to pay for it when the Agreement is terminated?
19. Term: What is the length of the initial term? Does the Agreement 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. Practice Post Termination Payment Obligations: Will you receive production bonuses after the Agreement is terminated?
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 notice given? Via hand delivery, email, US mail, etc.?  Does it have to be provided to the employer’s attorney?
27. Practice Assignment: Can the Agreement be assigned by the employer?
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, turn to Attorney Robert Chelle for assistance.

Additional Information

Backing out of a physician contract. Let’s kind of talk about the differences between signing a contract and not starting versus terminating a contract once the physician has already started providing care. Let’s take the second one first. When a physician signs a contract and then begins employment, starts providing care for the employer, there will be a section in the employment agreement that states how the contract can be terminated. It’s several ways. One, if it’s a fixed term, meaning, it’s just a two-year contract and then it ends, then it’s not renewed, that’s the contract to end in that way. The contract could be terminated for cause, meaning, one side breached the contract and then decided to terminate the contract immediately once the breach wasn’t fixed.

There’s always going to be a without cause termination in an agreement. It just means either party can provide a certain amount of notice, usually 60 to 90 days to the other party. If the physician is the one terminating the contract, then they would just have to work out those 60 to 90 days, then they can move on after that. And then lastly, you could have a mutual agreement where both parties just say, you know what, this isn’t working out. You don’t need to give notice. You can just pack up and move on to something better. That’s not backing out of the contract. That’s terminating the contract. In my mind, when I talk to physicians, if they have signed the contract but haven’t been at the job yet, that’s what I would consider backing out.

Either there’s family problem so you can’t move to the city that you thought you would, maybe you get married, have children, or have an illness. I mean, there’s a ton of things that can happen in a year or two. And so, in that scenario, the physician must decide. Now, they cannot be forced to work, obviously. It’s not like if you sign an employment agreement, the employer can just say, no matter what, you must provide care for us. However, there are consequences for the physician potentially if they back out of an agreement. Some agreements will have direct language that states if the physician signs the agreement, but doesn’t start with the employer, there may be penalties involved.

Maybe they would have to pay back the recruitment fees or any dollars spent on credentialing or privileging, maybe they paid for their license, DEA registration, maybe they forwarded a signing bonus or a resident stipend. In those scenarios, if the physician backs out, they’re likely going to have to pay those things back. And then the other scenario is if the practice suffers damages, meaning, they were relying upon this physician to start, they had a physician ready, they invested capital, maybe build out more rooms. They could state to the physician, we did all these things, expecting you to start. You signed a contract that said you would start, and you didn’t. So, it’s possible the employer could sue the physician and come after them for those damages. Now, that’s not something that generally happens.

The best approach to take in my opinion is if you’re a physician and things have changed, you don’t like the job anymore, or whatever, you just need to approach whoever the recruiter is, the owner of the practice, the medical director, someone in a position of authority and say, these are the problems, I am not able to take this job right now. I really appreciate the opportunity, but I’d like to end this amicably and move on. And if there are one of those extenuating circumstances, I find almost all employers are going to be understanding. I mean, they’ll be disappointed most likely, but they’re not going to feel any kind of anger towards the physician. Now, if it’s a scenario where the physician just simply got a better offer and they’re leaving for purely monetary reasons, the employers may not be as forgiving in that scenario. Just saying to an employer, oh, I got a higher paying job. So, I’m leaving.

That will open them up potentially to more liability than not. Now, I wouldn’t suggest that anyone start a job if they’re not interested in being there, that’s a recipe for failure.  The physician first needs to talk to whoever the recruiter is. Second, send a letter that just states they’re not planning to start. And if they’re good personal reasons, you might want to list those out in the letter, although that’s not necessary. And then just say, hey, I want to resolve this amicably. And if you do owe them back money from the stipend or the relocation, signing bonus, or whatever, then obviously, you must pay that back. So, that’s how to back out of a physician’s contract, and differences between terminating the contract and backing out of the contract.