What should a physician do if their contract is not renewed? This honestly doesn’t happen that often and we should probably define what is either not renewed or the contract is actually terminated. So the vast majority of physician contracts will have some kind of automatic renewal provision. For instance, let’s say you sign a contract. It has a two-year initial term. There’s usually some language in there that states, if it’s not terminated, the contract will simply automatically renew for another year and then it would just continue in perpetuity until one of the parties terminates the agreement.
Physician Employment Contract
Any contract will also have a termination provision. So, either party can terminate the agreement for cause. Meaning, someone breached the agreement and then either party can terminate it based upon who’s in breach. There’s another provision, and that is without cause termination. Generally, that states that either party can terminate the agreement at any time, for any reason, with a certain amount of notice to the other, generally, that’s 60 or 90 days, I would say. That probably makes up 90% of all without cause termination amounts. Going back to the specific topic, there will also be some kind of notice requirement if either party does not plan to renew the agreement and that should match the amount of without cause termination. It doesn’t make sense if either party has to give 60 days’ notice to terminate the agreement without cause that the notice requirement of, to not renew the contract would either be less or more than that. Other blogs of interest include:
Hopefully, that makes sense. It should be the same. Let’s just say you have a 60-day notice of intent not to renew the agreement. Well, it would be the same process of terminating the contract without cause. One party would give written notice if they didn’t want to renew the agreement. And then that would be it, you’d work out the 60 days. If for whatever reason, the employer didn’t want the physician to finish the 60 days, then the physician would still be paid for those 60 days. They just wouldn’t have to work.
Agreement Non-Renewal for Physicians
I’ve had physicians come and say, they don’t wanna renew the agreement. What should I do? And this might be a stupid answer. It’s to find a new job. They’re like, well, I kind of wanna fight for it. And that type of thing. Look, if you’re in a job and the employer doesn’t want you there, do not stay there. It makes zero sense on a personal level. It will be very awkward. The employer will find ways to get out of the agreement, or they’ll just give the without cause notice and move on. We also do license board defense when an employee is either disciplined or maybe the employer filed a board complaint. And that person says, well, I don’t want to leave.
I wanna stay here, fight whatever they’re doing. The employer will find a way, one way or another to get rid of that employee. And it will only cause more pain for the employee moving forward. So going back to the original topic of what to do, if it’s not renewed, you find a new job. That’s it, it’s hard. Sometimes it’s hard to say, well, why wouldn’t they wanna renew the contract? What did I do wrong? Probably we’re finding out why. Most of the time, it’s just production either. The physician just simply didn’t produce what the employer’s expectations were. Now, most of the time, the volume issue is not the fault of the physician. It’s a lack of marketing, a lack of referrals. Maybe the staff is poorly trained. Doesn’t do a good job of providing solid patient care experience.
Practice Employment Concerns
There are a number of reasons why someone’s volume won’t hit expectations, but it’s not, or it’s usually, not just the physician simply is too slow. Doesn’t wanna see the number of patients that are expected. So hopefully that was helpful as far as what to do. If your contract’s not renewed, find a new job.
What are Different Types of Physician Contracts?
What are the different types of contracts physicians can sign? Basically, there are two: You have an independent contractor agreement, and then you have the employment agreement. So, what are the differences between the two? An employment agreement means there is an employer, and the physician is an employee. They are a W-2 employee, meaning taxes are taken out of whatever compensation they have. And then the employment agreement will kind of go through the general terms of the relationship. How long the contract lasts, how it’s terminated, how they’re compensated, the liability insurance, restrictive covenants, non-compete, non-solicit, that type of thing. In an independent contractor agreement, you are not a W-2 employee. You’re a 1099 employee, which means, no taxes are taken out of whatever the physician is given via compensation.
The physician will be responsible at the end of the year to pay their taxes or quarterly. Another big difference is for most independent contractor agreements, the physician will be responsible for all the ancillary costs associated practice: Medical license, DEA, registration, professional associations, privileging and credentialing, malpractice insurance, whether they must pay tail. All those things are generally the cost of the independent contractor, not the person they’re working for. Sometimes, the employer who is utilizing the independent contractor will pay for certain things, but I guess another key point is an independent contractor will almost never get benefits as well. Health, vision, dental, disability, life insurance, retirement, there’s none of that is available. So, why would someone, if given the choice of being an employee or an independent contractor choose to be an independent contractor?
The entire point of an independent contractor agreement is that it’s kind of easy to get into and easy to get out of. And theoretically, the independent contractor should be able to make their own schedule, work when they want, that type of thing, although that doesn’t honestly happen very often. An independent contractor, if they’re smart, they’ll create an LLC and then they’ll have any of the money paid through that, set up a bank account, and then they can expense all those things that I talked about previously. I find that most employers who, I don’t know if force is the right word but only offer the independent contractor agreement option. Maybe not solely doing that, but many times they’re doing that to just avoid paying employment tax to the physician. Honestly, there’s not a ton of benefits in an independent contractor agreement for a physician. If it still includes restrictive covenants, kind of a long notice required to terminate the agreement.
Obviously, as I said before, they don’t get paid benefits or any of the other licensing. I find anesthesiologist, dermatologists are the two specialties that most frequently use independent contractor agreements. Some radiologists as well, but primary care, peds, cardiology, that type of thing, they’re almost always going to be employees. And then if you are working for a hospital or healthcare network, 100% of the time, you’ll be an employee rather than an independent contractor. Maybe you’re working at a hospital, but you’re working for a group that is contracted with the hospital to provide services. I guess that’s a possibility where you’d be an independent contractor, but it doesn’t happen very often. So, the two types of contracts for physicians are independent contractor agreements and employment agreements.
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