What Physician Business Expenses Should an Employer Pay For? | Employee Medical Expenses

When a physician signs an employment contract, the employer will reimburse the cost of many practice-related medical expenses and offer professional benefits. The items that the employer will reimburse will be listed in the employment agreement. An employer must also assess Tax implications with any reimbursed business expenses (a CPA can help with this). A signing bonus or relocation reimbursements are customarily evaluated by the employer’s income taxes and standard deductions.  

Accountable Business Expenses

An employer should pay for the following:

Continuing Medical Education: Physicians are expected to keep up with the latest developments in their field. They do this by attending conferences, seminars, and workshops that are relevant to their practice. Sometimes, a physician might need CE hours to renew his license or certification credentialing requirements. The employers should give the physician between  $3,000-$5,000 a year for CME expenses.

DEA Registration: Drug Enforcement Administration registration is required for all physicians who prescribe controlled substances. The costs of this can vary depending on whether a physician will write prescriptions only at his office and how often he plans to prescribe drugs from home to patients in need.

Licensing Board Fees: The employers should cover annual state licensing board fees. It is generally prorated depending upon the time of year you join the employer.
Professional Associations: A physician needs professional associations to maintain his skills and communicate and collaborate with colleagues in other practices or institutions.

Health Care Tax Issues

Every physician’s contract is unique. However, nearly all contracts for health care providers should contain several essential terms. Suppose these crucial terms in the contract are not spelled out in contracts. In that case, disputes can arise when there is a disagreement between the parties regarding 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. Still, the specific workdays are absent from the Agreement. Who prevails?

Other Blogs of Interest

• Does A Physician Have to Repay Relocation Assistance If They Leave?
• How Much PTO Should Physicians Get?

Employment Agreement Checklist Including Signing Bonuses

Spelling out the details of your job is crucial to avoid contract conflicts during the term of your employment. Below is a checklist of important 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 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 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 the employer’s permission before accepting those practicing medicine-related positions?
5. Disability Insurance: Is disability insurance provided (short-term and long-term)?
6. Medical License: Will the practice offer medical expense reimbursements 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 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, etc.)? Is there an annual review?
11. Practice 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 an 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 for paying 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 a 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 employers 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

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 provider employed by a hospital, medical group, or other health care provider. While contract drafting and negotiation can be long and arduous, legal representation is a must to protect your rights.

The present-day conclusion is simple: A doctor should not enter into any contract without having a physician’s contract reviewed by legal counsel.

There is too much risk for doctors 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 medical contract terms and clauses which can present complex and diverse issues for any provider, including:

• Non-compete clauses
• Damages
• Indemnification
• Verbal guarantees
• Insurance statements
• Paid Time Off (PTO)

Additionally, frequently, the most effective terms and clauses in any employment contract are the ones that are not present. With the advent of productivity-based employment agreements, any physician must have an employment agreement reviewed before it is executed. Attorney Robert Chelle has practical experience drafting and reviewing physician medical contracts for nearly every specialty.

Benefits of Physician Contract Reviewed

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 medical 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.

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 ensure that you are fully protected and assist you in the contract process. As a result, your interests are fairly represented.

Every physician’s contract is unique. However, nearly all contracts for health care providers should contain several essential terms. Suppose these crucial terms in the agreement are not spelled out. In that case, disputes can arise when there is a disagreement between the parties regarding 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. Still, the specific workdays are absent from the Agreement. Who prevails?

Suppose you have concerns about signing bonuses and claims-made or occurrence coverage, as well as your current malpractice insurance. Contact Chelle Law today if you want to have your employment agreement reviewed.

How Much Should an Employer Give a Physician for CME Expenses?

Physicians need to continue their education in the medical field by attending Continuing Medical Education (CME) courses. The cost of these courses can be a burden on an individual physician’s wallet. To reduce this burden, employers will cover the cost of CMEs for their employees as part of the contract benefits package.

Continuing medical education (CME) is a type of continuing professional development that helps physicians stay updated with the latest developments in their field. It can be done online, on-site, or through other means, such as books and journals. It is not just for physicians; it also includes nurses, pharmacists, dentists, physical therapists, and other professionals in healthcare fields. It helps people keep up-to-date on new treatments and technology while keeping them out of trouble regarding ethical issues within their profession. It has many benefits, so read this article to learn more!

Continuing Education for Medical Providers

Continuing Medical Education can help physicians keep up to date on new treatments and technology while keeping them out of trouble regarding ethical issues within their profession. As a doctor, you know the importance of continuing medical education to stay current with the latest advancements in your field. 

Continuing medical education can be done online, on-site, or through other means such as books and journals. Some people might take college courses where they can earn credits towards getting a degree if they want one. It is important not just for physicians but also nurses, pharmacists, dentists, physical therapists, and other professionals in healthcare fields. The requirements are variable but typically require 20 hours per year, with many employers requiring more than 40 hours annually.

Virtual Continuing Medical Education (CME) Conferences

A sponsoring organization often provides credit for completed CME activities. For example, a medical association will provide credit for time spent listening to presentations at their annual meeting. And this information can be used on the physician’s CV or in seeking new employment opportunities with other organizations.

At a CME conference, physicians will see many lectures and posters on different topics in their field. CME is an opportunity to hear from experts about a topic that can be difficult to stay up-to-date with without reading extensively.

A conference may also have networking opportunities, sharing experiences, and discussing new developments in one’s practice area with other physicians who specialize in the same type of care.

Most CME Conferences Offers:

• They often include hands-on workshops where participants learn how to apply essential information learned during previous sessions.
• Lunchtime discussion panels provide attendees the chance not only to discuss what has been presented but also to voice their opinions publicly for feedback.
• Social events are another way that some organizations foster lasting relationships.

What Medical Expenses are Paid for?

• Travel
• Meals
• Lodging
• Conference Entrance Fees

Average Cost of CME the Employer Pay 

A recent survey revealed that employers often spend between $1500 to $4,000 per year in reimbursements for expenses that are included in the business expenses reimbursed to the physician.

Due to the recent pandemic, many continuing medical education conferences are being held remotely, negating the need for travel reimbursements. However, most employers still provide relocation assistance for physicians when they move to a new job. 

State Licensing Board Requirements for Physicians

Each state licensing board requires certain Continuing Medical Education credits to be completed yearly for a physician’s license to stay valid. To get these CME credits, physicians might take courses on new medical developments or participate in activities supervised by the board of directors at their place of employment or volunteer work.

CME hours are reported on Continuing Medical Education (CME) certificates that can be printed and shared with employers. It’s typically offered in several formats, including live events, online courses or webinars, journal articles, books, and conference proceedings.

The physicians will need to report their CME credits earned according to the guidelines set forth by their state board. A physician may choose one format for completion, such as attending two lectures at an annual meeting. In contrast, another physician might prefer completing twelve three-minute videos over six months. These options reflect different levels of learning intensity. Still, both would qualify as reporting 12 hours for this example year since they represent equivalent academic value.

Does a Physician Have to Repay a Sign-On Bonus When They Leave?

A sign-on bonus for a physician is a cash payment that is provided as an enticement to accept the position. A physician’s signing bonus can vary dramatically from employer to employer, but a standard range would be from $5,000-$50,000.   

When Is the Signing Bonus Given?

It will be spelled out in the employment contract professional benefits. Typical timing of the payment of the signing bonus includes:

• At the time of execution (when the agreement is signed)
• During the first pay period after the physician starts providing care
• At the end of the initial year of employment

When Does a Physician Have to Pay Back the Sign-On Bonus?

The employment contract will determine whether the physician must pay back none, all, or a portion of the signing bonus. A forgiveness structure will likely be provided, which dictates how much of the signing bonus is forgiven based on the length of the physician’s employment. For instance:

• If the initial term is 24 months, 1/24 of the signing bonus is forgiven each month.
• If the initial term is 36 months, each year completed will forgive 1/3 of the signing bonus.
• If the physician does not satisfy the initial term, they must repay all of the signing bonus.
• Is a Sign-On Taxable?

It’s no secret that relocating to a new city is often stressful. But have you ever wondered what, if any, tax implications come with it? Well, the short answer is “yes.” The IRS and state authorities consider signing bonuses paid by an employer as taxable income for employees. These are taxed like any other earnings each year through Form W-2. Employers may also offer additional benefits that help persuade you to relocate!

Bonus Requirements

Some signing bonuses come with requirements the company should explain in your job acceptance or bonus paperwork. For example, one might be a pay increase of 10% after you’ve completed three years on staff within two months of accepting the position. Another could involve participating a certain number of times per year for five hours to stay eligible for incentives.

Some companies offer signing bonuses. They will need their new employee to adhere to if they want it and are deemed worthy by upper management. These often include things like receiving an increased salary incentive package (i.e., a raise) once you complete three consecutive annual evaluations at work. And they were then required to participate part-time from home once every quarter because this is where most people telecommute.

If you are a signing bonus recipient, be aware that the company has set requirements for your stay with them. If you don’t meet these criteria before this time limit is up even by one day or hour, they will have to pay back their end of the bargain. It could mean paying taxes on money that was never theirs to keep it within legal guidelines.

Suppose there’s anything we all know about big business deals like sign bonuses. In that case, contract terms can change over time as situations evolve around us. For example, suppose the employees leave early due to personal reasons, such as medical leave from stress or illness out of work. But still manages not to break any other rules (no stealing), yet moves at some point.

Do Physicians Get Signing Bonuses?

Do physicians get signing bonuses? The answer is yes. And we’ll get into who gives signing bonuses. What’s the average value of a signing bonus, and then do you ever have to pay it back? First, who gets signing bonuses? Any physician could give a signing bonus if they’re coming out of training or just switching jobs. Does everyone give a signing bonus? No.

Most places will at least give relocation assistance, usually between 5,000 to 15,000. Many will pay it directly to the moving company, but that’s not the same as a signing bonus. Some places will combine it to call it a commencement bonus. Then, it’s up to the physician how they want to use it. They could use it for relocation assistance or a down payment, for whatever they want. But let’s talk purely about signing bonuses right now. How does it work? Well, I would say now this is specialty-dependent. Usually, signing bonuses are somewhere between 10,000 to 50,000. When making the payment is necessary, some employers will pay it upon signing the agreement. Most employers won’t pay until the first pay period after the physician starts practicing with that employer.

Doctors Get a Signing Bonus and Relocation Assistance

The timing of that is essential. Sometimes people are just coming out of training, either residency or fellowship, and don’t have much money. You don’t get paid a lot in either of those scenarios. And suppose you must move to a city and put a down payment in a house or security deposit. Having some money upfront can help the physician make things more comfortable. That’s one area we can negotiate. When is the bonus paid? How much do you get? Well, there is no hard and fast rule that this specialty receives this amount. It is employer-dependent. Some are willing to pay a decent amount, and others say, no, you’re not getting one, no matter what. This goes for any contract negotiation. 

If you’re in a specialty that’s in high demand and has few out there, you certainly have more leverage. If you’re going to a town that’s harder to recruit, you certainly have more leverage in that scenario. I would ask classmates and others in your residency what you are looking at regarding your bonuses. You could ask some of the attendings and say, what do you hear about? What’s the average amount? Indeed, an attorney who deals with physician contracts can always give you a decent idea. Still, I’m telling you, it can vary wildly between cities and states and different employers. Another thing to think about is that almost every signing bonus will have a repayment obligation attached to it upon signing the agreement.

Term Length Affects Signing Bonuses

If the physician leaves within a certain period, usually the initial term of an agreement, I mean, how long it lasts, it’s going to be somewhere between one to three years. Many employers will tie whether physicians must pay the signing bonus back to that initial term. Then they’ll have forgiveness associated with it. So, I’ll use a couple of examples. Let’s say a physician joins the practice, its three-year initial term. The employer could say that 1, 30, and 6 of that signing bonus forgives for every month you’re here. So, you stay for those three years. You don’t have to pay anything back. Others can do it quarterly; some will do it yearly. And then maybe it’s only a year; it could be two, but you would rarely get a signing bonus.

Then if you left in the first year, you wouldn’t have to pay anything back. That’s something to think about when doctors are accepting a job. How much am I getting upfront? What will I have to pay back if I decide to leave the job before the initial term ends? In addition to assigning bonuses, some places under 10% could also offer student loan forgiveness. That’s another thing to investigate. A physician-owned practice would be infrequent to provide student loan assistance. It would have to be at the hospital or healthcare network. I would say the vast majority would be through a hospital or healthcare network that would be willing to offer student loan assistance.

Student Loans Payments

And in that case, there’s usually no repayment obligation. The employer would say, we’ll give you a hundred thousand for student loan forgiveness. Then, we’ll pay a certain amount of that a hundred thousand over three or five years, whatever it is. And then they’ll pay it at the end of the month, and that’s the forgiveness. The physician would never have to pay anything back. It certainly is worth negotiating a signing bonus. It needs to be reasonable. The worst thing a physician can do is ask for something completely unreasonable. It makes them look like they have no idea what’s going on or are greedy. That’s kind of like threading the needle.

This is an average amount to ask for, or it needs to be slightly over what they’re offering. So, do physicians get signing bonuses? Absolutely. The amount depends on the situation. Almost any physician should get at least some signing bonus when coming out, trading or moving.

Contract Negotiation Tips

How to negotiate a physician contract? In my mind, there are three different scenarios. One, you’re just coming out of training. Two, you’re switching jobs to an area of the country you’ve never been to. Three, you’re moving from somewhere within the place where you already live. So, negotiation depends upon leverage. Do you have it, or do you not? Let’s take coming out of training, for instance. For the most part, the only leverage someone has when they’re coming out of training is, are they in a specialty that’s hard to recruit for? I mean, that’s just the truth.

You are not bringing in any established patient base. You’re also relatively new to being out on your own. So, a learning curve will go into moving into any position. If you are either in an area that’s very difficult to recruit that could apply to any specialty, or you’re in a specialty that’s difficult to bring in and is super profitable. Those are two things. When you’re looking into it, how do I negotiate? And when people say negotiate, most of the time, they think about the bottom line, what is my base salary? But I think that’s a narrow mind. And this will apply to anybody. When looking at a job, some things are more important than just base compensation. 

Other Considerations Aside from Base Compensation

One, what are the restrictive covenants? Suppose someone lives in an area. They have family and kids in the area. They absolutely cannot move after the contract ends. Sometimes, the non-compete could be the most crucial thing in a contract. A non-compete says you cannot practice for a period within a specific area. Another essential piece is who pays for tail insurance. Depending upon specialty, this could be an enormous part of a contract. If you’re an OB-GYN and must pay for your tail insurance, your underlying premium is $40,000 yearly. Your tail insurance will probably be around 80,000. So, who pays for tail insurance certainly could be the crucial thing in an employment agreement for an OB-GYN. If you’re being paid on production, let’s say you’re in a contract that’s just pure net collection.

Physician Compensation Models

An average range for a physician is 35 to 40% of net-collections is your total comp. Is there language in the contract that states that when the contract terminates, you’ll collect a 60-to-90-day window after the contract terminates? If you don’t have that, you work for free for two or three months, which nobody wants to do. Going back to what is important, it depends upon the person. Having the numbers is essential when you’re looking at base compensation. So first, they’re not always easy to obtain. Most places or most of the places use MGMA numbers. That’s a medical group management association, and most of the time, you must pay for that, and it’s expensive. So, no physician, at least most physicians, will not do that.

You could find someone with access to those numbers or try to get them. Or if you kind of Google around on the internet, sometimes you can find them the average RVUs production, average compensation. It is distributed into areas of the country. I honestly don’t think those are accurate when determining exactly how much and what part of the country. There’s just a feel for what someone is getting in this area. But then you also have to consider all the other things I just said. If someone has a base that’s $10,000 less, they don’t have to pay for tail insurance. Or the non-compete is extraordinarily small. That’s worth way more than $10,000 in some instances, and those are a few factors to think about.

Prominence as the Highest Leverage

Suppose you’re just coming out of training. Let’s say you’re prominent in the community as a primary care PE or cardiology. You have an established space, and you’re just moving into a new practice. Well, this is the highest leverage you can have. There will be no, or at least, there shouldn’t be much time needed to ramp up the practice. You’re just bringing people with you. Plus, when you have numbers in a community, these were my net collections, the RVUs I produced, or the weekly patient encounters. Those are absolute complex numbers you can use to negotiate compensation, moving to a different practice.

Specialty Negotiations for Physicians

And in that case, you have the highest leverage possible. Then obviously, you can negotiate all the ancillary things I’ve already spoken about. The last thing would be, if you’re moving, you’re out of training. You’ve been in practice for a while, and you’re moving from one city to another. You don’t have an established patient base, and that takes away some leverage. There are two factors that kind of work for you. One, are you moving to an area of the country that’s difficult to recruit? Very rural communities certainly pay more. That is because it’s harder to find physicians in certain specialties to come and move and live in those areas. Or two, if you’re in a specialty that is simply hard to recruit or highly profitable. So obviously, surgeons are difficult to find, or some other GI sub-specialties are always difficult.

If you’re moving to a different part of the country, the same analysis applies to coming out of training. However, you benefit from having some numbers of what you produced in your previous position. You can tell them; that this was the net collection I generated in my last position. Now, it doesn’t always translate from one state to another or situation to another. Maybe you’re going from private practice into an employed group. But having any data to back up what your production was is essential in determining your new total compensation in a new position. So hopefully, those are some tips on things to think about. I mean, honestly, just doing this video. I think I can make it into ten different videos, but this is an overview of negotiating.

How Do Physicians Earn a Bonus? | Physician Bonuses

How does a physician earn a bonus? Bonus is a broad topic, and there are many different bonuses. Well, first, if we’re going to take a bonus at the general level. You could have a signing bonus when the physician signs the agreement. You could have a relocation bonus, meaning they’ll cover the costs of your move. Then aside from that, you would have real bonuses that you would receive for compensation due to productivity. Let’s kind of break down each one. As far as signing bonus goes, if a physician is coming out of training, getting a new job, or they’re even switching. Many times the practice will pay them a bonus.

Physician Signing Bonuses

Usually, somewhere between $10,000 to $50,000, and that amount is taxed. Many physicians think, oh, I’m going to get a check for $50,000 or whatever the amount is, and that’s not true. It is taxed as well. It’s taxable income. Relocation assistance bonus, most places will pay between $5,000 to $15,000 to assist a physician in moving. Once again, that amount is taxed. Sometimes, a smart way of doing this is a physician could ask the employer to pay their move directly to the moving company. And generally, in that situation, it’s not taxed. Then the company pays the amount directly, which would make sense. Beyond just the initial bonuses, there are also productivity bonuses. Let’s say a physician gets employed with a smaller physician-owned group.

There could be group-wide bonuses. If the practice is profitable to a certain level, the employer will give a discretionary bonus. This means that it’s not written how much the physician will receive in the contract. Assuming things go well, sometimes the owner will then spread the wealth and give them a bonus. Don’t expect to receive a discretionary bonus. It certainly is owner-dependent. Some owners are much more generous than others. I find that the owners who put discretionary bonuses in the contract follow through. It’s more of just a window dressing to entice the physician to sign the employment agreement and start employment with the practice. But it’s unlikely they’re going to receive a discretionary bonus. 

Concrete Bonuses

Concrete bonuses could be kind of three things. One, you could have a net collections-based bonus. This means once the physician collects a certain amount, monthly, quarterly, or annually. The practice would then provide them with a bonus. It could be an RVU-based bonus if the position generates a certain amount of RVUs monthly, quarterly, and yearly. The practice will also provide them with a bonus, or there could be a hybrid. It could be on some base salary, and then a certain amount of money collected over that amount will get a percentage of that. Like RVUs, they would have a monthly threshold, and once they exceed that, they could also get a bonus. There’s a variety of bonuses available to physicians. It just depends on what the employer is offering. I find that most employers probably aren’t that creative or imaginative when it comes to bonuses.

Physicians Earning a Bonus

So, it certainly doesn’t hurt for a physician to offer some other kind of bonus alternatives to them to see if they would be okay with that. I mean, most practices or owners of practices are willing to give a bonus when a physician is ultra-productive. They may not even know of the different ways that they can do that. I’m talking to a physician about how to negotiate or what to offer to the employer. Creative ways to bonus them are certainly one of them. 

Now, there are some practices, especially if you’re with a hospital or a health network. It’s unlikely they will make changes if they aren’t already there. But with a smaller physician-owned practice, at least I find they’re much more willing to make significant changes to the comp structure. That is more than the larger networks reluctant to change different contracts. Hopefully, that was helpful and kind of a quick review of how physicians can get bonuses.

Physician Independent Contractor vs. Employee

Considerations for physicians as employees versus an independent contractor. Let’s kind of break down both. If you’re an employee, you will receive a W2 at the end of the year. It just summarizes all the compensation you’ve received and then all the taxes the employer withheld from it. If you’re an independent contractor, you won’t receive a W2. You’ll receive a 1099 at the end of the year. And that’s just a summary of the compensation received from that business. They withhold no taxes from independent contractors. Let’s take the relationship between the two, and let’s start with when you’re an employee. 

Physician as Employees

The employees will receive all the benefits of normal employment. They’re going to pay for your malpractice insurance. They will pay for your health, vision, dental, life, disability, retirement, privileging, credentialing, and continuing medical education. And also probably provide you with moving expenses and another signing bonus. The employees will get a lot of ancillary benefits. 

Insurance in Independent Contractor Agreement

As an independent contractor, you’re not going to get any of those things. They’re not going to pay for your dues or fees. They may pay for your annual premium for your liability insurance, but I find that’s hit or miss. It’s very rare if you have a claims-made policy that they would pay for tail insurance. So, that’s something you’ll have to worry about as well. And then all of the other things, you’ll have to pay for yourself. You must find your own health, dental, and vision insurance.

You get disability, life, you set up your retirement, whatever you decide which way to go. All of that falls upon the physicians if they’re a  1099 independent contractor. Now, for some, ultimately, you come out ahead compensation-wise. As 1099, you can deduct all the things I just discussed. There are some tax advantages to being an independent contractor. I’m not a tax attorney. I’m not going to get into the specifics of that. But I would suggest reaching out to an accountant with experience with that. And can kind of walk you through what is the most advantageous compensation/tax situation for you. It’s going to be very specific to the job services. If someone potentially has the option of either being an employee or an independent contractor, they have to consider several factors.

What Situation Is Best for Your Medical Practice?

I find it’s rare for it to be the option of the physician. Typically, the position is either going to be this or that. It’s not up to you. I mean, it’s very rare when I review a contract that we have to discuss. Alright, well, I do have two options and two contracts. Which way do you think I should go? Most physician-owned businesses simply don’t give the option to the physician. It’s either one or another. Now, maybe you have two separate jobs services, an independent contractor and one as an employee. Then you’ll have to determine what situation is best for you. But it depends upon the physician. I find some physicians classified as independent contractors do some things wrong.

One, they don’t know where to go to get the things a normal employer would provide them. So, all those insurances and retirement and that type of thing. And they’re just not the type of person who is good at handling that side of their life. Then two, with no taxes withheld from their compensation, I find many of them spend what they get. Either they’re not giving their quarterly payments to the government. Or at the end of the year, they have an enormous tax bill they were maybe shocked to pay out. So, suppose you are going to be an independent contractor. In that case, you must be on top of setting aside an amount from each paycheck you’re getting from the business. That way, at the end of the year, you’re not entirely screwed in getting together all the money you need to pay for your taxes.

Distinction Between the Two

It’s probably safer and more secure to be an employee versus an independent contractor. Usually, the notice required to terminate the agreement is shorter than an independent contractor. That means either party can get out of the agreement without much notice to the other. Now, as a physician, continuity of care always has to be taken into account. If you’re an independent contractor unless you are in a specialty where it’s just like shift work. Or maybe if you’re anesthesia and pop in, you do the case and leave. But if you are a physician with a patient base and providing care to them, if you tell your employer, “I’m not coming in tomorrow, there will be some continuity of care issues.” It could lead to some board complaints or other problems down the road. So, it would help if you considered that as well. 

Notice Period Requirement

What is the notice required to terminate the employment contract? Employees usually have 60 to 90 days. Whereas if you’re an independent contractor, you don’t see many notice periods of less than 30. Still, sometimes it might be as low as two weeks for an independent contractor agreement. So, that’s a little breakdown between having an employee and independent contractor status in physician practice. As I said before, you need to look at the situation. And determining compensation-wise doesn’t make the most sense considering the tax deductions and that type of thing.

Can an Employee Terminate an Employment Contract?

The short answer is, obviously, yes. However, it will be determined based on the terms of the contract. In any employment contract, there will be a section that deals with the times, the employment contract’s length, and then termination, so how that contract ends. Let’s first talk about the terms of the agreement.

Most employment contracts will have a date, meaning it’s a year-long, two-year, or three-year contract. Then if the agreement doesn’t terminate, it will state a language. It will automatically renew for successive one-year terms. In that case, if a contract isn’t closed in another way after the initial period ends, it’ll just continue forever until terminated.

I would say there is a rarely fixed term with no language about automatic termination. If it’s just a two-year fixed term with no automatic renewal, it would just end at the end of two years, and that would be it. The parties can go their ways. 

What Are the Reasons for Contract Termination?

Now, regarding terminating the contract, the first part is that if there is no renewal, it ends, and the employment contract ends. Second, by mutual agreement. Suppose the employer and the employees agree that the relationship isn’t working. In that case, they can always, by contract, decide to move on, and then that’s it, you can move on. Next would be with-cause termination. In this case, if someone breaches the employment contract, there’ll be language that states why the employer can fire the employee. If you need a license to perform the activity and lose your license, or if insurance is required and you’re uninsurable. There are, I guess, vague behavioral clauses. 

If you’re disabled, you die, I mean, ordinary things, but there should also be a part called a cure. And so, in that case, if one of the parties believes the other party is in breach of an employment contract, the most common reason is just payment concerns. Either someone is unpaid, they were promised an amount in the associate employment agreement, or maybe the timing. Also, the bonus payment is involved, and there is disagreement over the professional owed amount. That’s always a big, I guess, the reason why there would be an allegation of breach of contract. 

What Happens if Breach of Contract Is Committed?

If you believe the employer breached an employment contract, you’d have to provide them with written notice. And then the cure period means the employer would have a period to fix whatever the breach of the associate contract is. Typically, that’s somewhere between 15 to 30 days. And the same can go for an employee. 

If the employer thinks the employee is in breach of contract, they give them written notice, and then the employee has 15 to 30 days to fix the breach. If the breach is unfixed, the other party still believes the other party is in breach. Usually, that party has the option to terminate the dental associate agreements immediately. The last and most common way in most employment contracts is without-cause termination. There’ll be language that states that either party can terminate the employment agreement at any time, for any reason, with a certain amount of notice to the other party.

Typically, it would be somewhere between 30 to 90 days. Suppose the professional is unhappy and wants to move on. In that case, they give written notice saying I’m utilizing the without-cause termination notice in the employment contract. Then they must work out for 30, 60, or 90 days. Then at the end of that period, they can move on without any concerns regarding terminating the employment contract. Yes, an employee can terminate an employment contract, but they must follow the terms of the agreement. 

Employment Contract Termination and Non-Compete Law

Just because an employee terminates the contract doesn’t mean it necessarily ultimately ends at that point. They could be required the employees if they terminate the contract. Many times, if given a signing bonus or relocation expenses, The employee would have to pay back a prorated portion of that if they left within the initial term of the employment agreement. Others could have non-compete associated with it.

So, just because an employee terminates the contract doesn’t mean that the non-compete doesn’t apply. It does, or at least it does in most circumstances if you’re in a state where non-competes are enforceable. How long will that last if there is a geographic restriction and then some temporary condition? That will continue even if the employee terminates the contract. If some malpractice insurance is involved and tail insurance is needed, it will say who must pay for that in the contract. Employees may also be responsible for that if they terminate the agreement. Although the employee can terminate the employment agreement, it doesn’t mean that there aren’t at least some strings attached. 

One of the highest priority things I look at in the contract when I’m going over it with a professional. How do you get out of the agreement? And then what do you have to do if it ends within a certain period? In that way, the employee can know that I need to set aside this amount of money if I must pay for tail insurance or if I must pay back the signing bonus. So, they’re essential discussions and things employees could negotiate before signing any employment agreement. Hopefully, that was helpful—kind of an overview of termination of an employment contract. 

How You Can Terminate an Agreement

You probably shouldn’t, and your employment contract probably prohibits it. In any agreement, it’s going to state how you can terminate an agreement. It could be for-cause, without-cause, mutual termination, or maybe the initial term ends. But in most cases, I mean most contracts are terminated without-cause termination. Without-cause termination, either party can terminate the contract with a certain amount of notice to the other. Typically, around 30 to 90 days is a standard amount for most employment agreements. Suppose you are an employee, and for whatever reason, you don’t want to work for the employer anymore. In that case, you must follow those terms written on the without-cause termination notice.

And it always needs to be written. It’s going to state that you must write a letter. And then, it will also say if it’s a 60-day without-cause termination. The employees has to provide it 60 days prior, work it out, and after the 60 days are over. The employees are free to go once the contract terminates, and the employees are free to move on. They want to go where they want to go after that—considering if there’s a non-compete or a non-solicit. Still, we’re not going to get into that today. 

How Do Employees Communicate a Notice?

The most crucial part as far as this goes is that it will be called “notice” or “notices.” It’s toward the back of the employment agreement initially provided by the company. And this will state who, then how you need to provide notice if there is communication.

Employees could provide in writing a certified letter or overnight hand delivery of whatever termination notice you’re going to provide. And that would then be considered adequate notice. Very few contracts allow email as an effective notice medium. If you gave, let’s say, you wrote an email telling your employer. I’m giving you without-cause termination notice, and I have 60 days. X will be my last day of work. I appreciate the opportunity. Well, if email is not an effective communication medium within that notice section, that’s not considered effective notice. And then, the employer could make you work for another 60 days until you provide adequate notice. So, that’s the essential part. You need to look in the notices section and determine if the proper way to terminate the employment agreement includes email. 

I can tell you if I review a hundred employment contracts, 98 of them will not include email or fax. And you certainly can’t just verbally tell your employer you’re leaving. It must be in writing. And most often, it has to be sent either by certified mail or hand-delivered. It depends on whether you work for a small practice or a vast conglomerate with locations in every state. It’ll be impossible to hand-deliver the notice if you must provide notice to the headquarters, and that’s halfway across the country. 

The Consequence of Notice Not Received

To be safe for the most part, you need to write a letter. You’ll have to print it out and send it via the certified mail that the employer is using. Usually, it’s one or two. You must send it to the owner if it’s a smaller practice. If it’s a big conglomerate, you have to send it to probably your boss plus the legal apartment of the company as well. If you look through, how much notice do I have to provide? And then how do I have to provide effective notice? You’ll be safe. 

I have a couple of scenarios, and people have called me after the fact. And they’ll say I sent a letter to my employer’s email. I told them I was going to terminate the employment contract, and they didn’t say anything. I assumed that my contract would end on a specific date. The employer was mad about the employee leaving the company. The employer ticked off that they were leaving. So, what they did was they just sat on it for 45 days. And then, 15 days before the physician thought he was going to leave, they said, you didn’t provide us with effective notice. Email isn’t an effective form of communication to provide notice. You owe us another 60 days until you give us adequate notice, meaning a written letter sent via certified mail. 

And so, the physician had already lined up another job, he had a start date in mind, and then he had to return to the new employer. He would say, I apologize; I will have to delay my start date by almost two months. That was a tough pill to swallow for the physician. If you follow the terms of the notice section, then you should be okay.

What is the Best Without Cause Termination Length in a Physician Contract?

Nearly every physician’s employment contract contains a provision. It allows either party to terminate the agreement for any reason with a certain amount of notice to the other party. The typical amount of without-cause termination notice is either 60 or 90 days. 

Without Cause

Terminating employees is an important business decision to employers. There are two types of terminations: with-cause and without-cause. To fire an employee for violating company policies or committing unethical acts can be justified as termination with-cause. On the contrary, firing them for poor performance alone may not be enough to discharge the employee. This type of dismissal of an employee should instead fall under “termination without-cause.” You must understand which kind you’re terminating before deciding whether it would adversely affect other departments within your organization.

Termination Without Cause

Terminating an employee without-cause is a common practice among private employers. Employee dismissal can occur for several reasons, such as budget problems, operational restructuring, and downsizing. The phrase “termination with-cause” might be more accurate since the employer has grounds to fire someone who isn’t performing up to expectations or meeting certain criteria in their contract. However, they do have this right under work at-will laws present in some form across all 50 states. Unless moving forward would violate state or federal employment law.

How Does a Physician Provide Notice?

There will be a Notice Section in every physician employment contract. This section will detail how notice can be given: personal delivery, via certified mail, email, fax, etc. The physician must provide written notice of intent to terminate the agreement. Verbal notice is not sufficient. 

Considerations with Longer Notice

• Greater than 90 days notice
• More time to prepare for a new job (travel, credentialing, etc.)
• Awkward work environment
• Hostility from employe

Considerations with Shorter Notice

• Less than 90 days’ notice
• Less interaction with the employer
• The new employer does not have to wait long for the physician to start.
• Not enough time to prepare for a new job (tail insurance, credentialing, housing, etc.)

Term Length Of the Employment Agreement

The term of the employment agreement refers to how long the contract lasts. Most physician employment agreements are between 1 to 3 years, with automatic renewal after the initial term ends.

Contract duration clauses are often found in employment contracts to outline how long the contract would last. This is typically for an indefinite amount of time. But if the contract stated a specific date on when it would end, that could also be included. An example of this might include someone being hired with no specified term length and then coming back after they have completed their degree or reached some other goal set by both parties. For this reason, that work can resume more easily without starting from scratch whenever something happens outside their control. Specifically, graduating college in four years instead of six because you could go part-time while working during your first two years before going full-time once classes stopped for summer break.

Termination Without Cause

You would be wise to use a duration clause when defining an agreement’s effective period. This can help protect the employee’s interests should the contract need early termination. This also helps clarify what type of early termination is possible for both parties involved. It includes things like whether or not it would end on its own accord at some point, if any specific events trigger an automatic expiration date (such as a breach), and more!

When creating a contract, both parties should know what the terms are. If there is a duration clause in place, it’s common for either party to be able to renew with one another if they desire. And as long as you spell out your conditions within the duration clause, this can also prevent confusion about when their time would expire and how much notice one must give before termination of service takes effect.

Not every contract has an exact end date. Meanwhile, those that do usually allow flexibility on behalf of both parties. They may still want to continue after expiration or wish not to terminate before its conclusion. You could always include these personal clauses into the main document, explaining them clearly, so everyone knows where they stand at all times- including yourself!

For Cause Termination

Companies usually have an employee handbook to outline the standards of behavior expected from their employees. A separate code of conduct may also be in place, outlining specific incidents for termination should they happen within a company or on its premises. Common causes that lead to immediate dismissal include violence and drug abuse. On the other hand, theft is not uncommon either, as well as sexual harassment, depending upon the severity and number of offenses committed by one individual. The more severe cases typically result in automatic termination with lesser violations. Consequently, it might require progressive warnings before finally being terminated if it reaches a point where other options are no longer viable.

When the Length Does Not Require

The one instance where the initial term of the agreement matters is if the physician must repay a sign-on or relocation bonus if they leave within the initial term of the agreement. The agreement will dictate how much of the sign-on bonus is forgiven based on the physician’s employment length. For instance:

• If the initial term is 24 months, 1/24 of the sign-on bonus is forgiven monthly.
• If the initial term is 36 months, each year completed will forgive 1/3 of the sign-on bonus.
• Or, if the physician does not complete the initial term, they must repay all the sign-on bonuses.

Set Term With the Employers

Simply put, not all employees enjoy the same protections when it comes to employment. This is why it’s so essential for individuals negotiating a contract to be fully aware of their options before committing themselves and signing on that dotted line. For example, an at-will employee can get let go without notice if they don’t do what their employers want them to do. Think back to your favorite show where someone gets fired because she didn’t sell enough lemonade in one day! Meanwhile, some contracts specify fixed terms like two years or more. These agreements would detail specific reasons and probation periods (if applicable) for termination without-cause should either party fail to uphold certain obligations set forth by this agreement.

60-90 Day Notice

When an employee must quit their job, the employer requires the employee to give notice that the relationship is ending. It’s typical for a physician to provide between 60 to 90 days notice required before terminating employment so both parties can prepare accordingly.

An employment contract is a formal agreement between employees and employers. In which the two of them agree to work together. Fixed-term contracts are one type. But there are also other jobs with more fluid timelines, such as hourly wages or commissions based on performance.

Termination | Terminated Without Cause

Employers can terminate employees early in a fixed service contract if the employer provides valid reasoning and proof. However, employers must provide evidence that an employee was not fulfilling their obligations before termination can occur. Suppose an employee wasn’t providing services agreed upon in a contract but had been given sufficient time for absences due to illness or injury. Hence, they could cancel it without giving notice. However, if either party provides no reason, this would fall under “constructive dismissal.”

An employee who signed a fixed term of employment has certain rights when considering being dismissed from work earlier than expected, based on an agreement with the company during the negotiation stages. One such right relates to whether or not they met duties per the original terms set.

Consultation with Chelle Law

When your PA agreement is reviewed by a contract review attorney, you will find financial benefits which end up outweighing the cost of the review. Leave it to the experts. If you are in need of assistance with an employment agreement or contract review schedule a Physician Assistant Contract Lawyer with Chelle Law today!