Who Owns the Medical Record as an Employed Physician? | Medical Records Ownership
Who has ownership of the medical record if you are an employed physician, and why does it matter? When you are an employed physician, you work for someone. You are an employee. And as an employee, at least at the physician level, you will have an employment contract. There will be language in almost every physician’s employment contract stating the medical record itself is the employer’s property. Even though the physician may have medical record access for that patient.
Reasons for Medical Records Ownership Clauses
There are a few reasons why that kind of clause is in an employment contract. First, if either party terminates the contract, the physician leaves without-cause. Or, for whatever reason, the employer doesn’t need the physician anymore. If there isn’t a language of who has ownership of the medical record, there could be a dispute if the physician leaves. If they take the medical records, then attempt to take the patients.
There are also considerations about continuity of care and storage access of medical records, which we must consider. Let’s kind of break that down. First, when a physician leaves a practice, let’s take primary care. Suppose a physician works as an employee for a primary care practice and decides to leave for whatever reason. That practice will send out a notice to all the patients stating, “Dr. Smith is leaving the practice. We will provide a new physician if you’re interested. If not, you can pick up your medical records at this location with a written notice.”
Primary Care Outside the Non-Compete
Once again, if they’re primary care and decide to stay within the area, the physician will also have a non-compete. It prohibits them from working within a certain period and geographic distance from the practice after the contract terminates. Let’s say the doctor wants to stay in the area. They’re outside of the non-compete, so they’re not violating it. They open their medical practice, and obviously, they can’t just take their patients’ medical records with them. Their past employer has ownership and access to the medical records.
Now, of course, they’re the patient’s medical record. So, the patient is always in any state. The state’s law or statutes will go through how a patient can properly obtain a medical record copy. In this case, say the doctor leaves the practice and opens their own. It will be on the patient to request a copy of their medical record. And if they want to move with the new physician. They can then ask that practice to send their medical records to the physicians who left their new practice. Or they can go ahead and get a physical copy themselves and then take that to the new physician. If you’re an employed physician, you do not have a legal right to take all the medical records with you. And I would suggest not doing that.
Primary Care Outside the Non-Compete
Once again, if they’re primary care and decide to stay within the area, the physician will also have a non-compete. It prohibits them from working within a certain period and geographic distance from the practice after the contract terminates. Let’s say the doctor wants to stay in the area. They’re outside of the non-compete, so they’re not violating it. They open their medical practice, and obviously, they can’t just take their patients’ medical records with them. Their past employer has ownership and access to the medical records.
Now, of course, they’re the patient’s medical record. So, the patient is always in any state. The state’s law or statutes will go through how a patient can properly obtain a medical record copy. In this case, say the doctor leaves the practice and opens their own. It will be on the patient to request a copy of their medical record. And if they want to move with the new physician. They can then ask that practice to send their medical records to the physicians who left their new practice. Or they can go ahead and get a physical copy themselves and then take that to the new physician. If you’re an employed physician, you do not have a legal right to take all the medical records with you. And I would suggest not doing that.
Continuity Care in Business
It opens liability for the physician, and it’s just bad practice. For continuity of care, there’s a notice period when a physician leaves a practice. Say the physician wants to leave and move on to a new job. Usually, they must provide either 60 or 90-days notice to their employer that they’re going to leave.
One of the reasons why that notice is required is to ensure continuity of care for that patient. A new provider is either set up or will assume the care of that patient. If there isn’t a provider to refer them to, they refer them outside the organization to someone else. A health care provider must also consider prescriptions. If they need to give bridge scripts until that patient finds a new provider. These are all things that physicians must consider when leaving the practice. But the medical records must stay with that employer.
The Doctor Doesn’t Own the Patient Medical Records
The problems arise if someone leaving the practice physically takes the records if they’re paper. Nowadays, more and more charts are electronic with all the EMRs. Or they could somehow access the medical records, download them, and take them to the new practice.
There are generally non-solicitation clauses in the employment agreement. It would prohibit physicians from actively going out and reaching out to their patients. And letting them know that they’re leaving or asking that patient to come with them. So, sometimes language in the non-solicit also states the record is a part of that. So, who has ownership of the medical records? The employer does. Not the physician.
Other Blogs of Interest
What is a Non-Compete for a Physician?
What is a non-compete in a physician contract? Of all things in a contract, besides compensation, this is probably the area I discuss the most with the physicians. It can have enormous ramifications on a professional’s career depending upon several factors that we’ll get into. Let’s do some basics as far as non-competes go.
In most physician contracts, there’ll be restrictive covenants. Restrictive covenants are things that the physician can’t do when the employment contract ends. Standard restrictive covenants would be a non-disparagement clause. You can’t badmouth the employer in some way. The non-solicitation clause prohibits actively soliciting patients, employees, other physicians, independent contractors, and business vendors from the employer. There would also be a non-compete.
What Does Non-compete Prohibit Health Care Providers From?
The non-compete essentially prohibits the physician from working within a specialty for a period in a certain geographic area. Let’s get into the details of that. First, in every contract, in the non-compete, there will be a section that details what the physician can’t do. Let’s say it’s an internal medicine physician working as a hospitalist. The non-compete would state that the physician can’t work as a hospitalist for some time within the specific area. One thing to consider here is if you are in a specialty where you can do different things. Let’s take the internal medicine physician as an example. They could do primary care, urgent care, ED, and they could be a hospitalist.
If the non-compete says you can’t practice medicine within that area, that can pose problems if the physician needs to be there. So, you want to ensure that it explicitly states your specialty for the employer. If you’re a hospitalist, it just needs to say, the physician can’t work as a hospitalist within that area or time. And not the practice of medicine. For many physicians who can do multiple things, an easy workaround the non-compete could, for a year, do something else. Although maybe not be a perfect scenario. Then, after that year, they return and work within their desired specialty. That’s the first thing. What does it entail? Is it the complete practice of medicine, or is it just in your specialty? It should be just in your specialty.
How Long Is the Non-compete?
Next, how long is the non-compete? Well, most non-competes are in a year. Many employers will stretch it out to two years. I don’t think anything above two years would be enforceable anywhere. If you are a physician, you do not want a non-compete longer than one year. It’s just a fair amount of time. I think, no, this is state-specific, right? I’m giving you a broad outline of this. I can’t go through all the states in this video. But most courts have held that one year is the limit they would consider a reasonable non-compete length. If you have a non-compete, you want to limit it to at least one year, nothing beyond that.
Geographic Restrictions of a Non-Compete
And then the geographic restriction. This is probably the most important one. Once again, generally, anywhere between 5 to 15 miles would be considered a reasonable non-compete. Now, in some states, they’ll push it for whatever reason. The Midwest states seem to put more than that. So, 20 miles is not uncommon. It would be best if you also thought about where your location. Twenty miles in a rural location that completely knocks you out of a city is certainly a lot different than 20 miles in a big metropolitan area which can knock out many potential opportunities.
Maybe you’re a cardiologist in a small town in a smaller state, and it says 20 miles from your office. Well, there may not be another office you could even get into within those 20 miles, so that doesn’t matter. Let’s say you’re in Phoenix, where I am, and 20 miles here could potentially knock out hundreds, thousands of jobs. So, you would like to limit it to a small geographic restriction. I’ve seen so many variations. It could be by county. In the south, they seem to use counties more than just mileage; typically, it’s as the crow flies. If it says, you can’t practice within your specialty for one year within 10 miles of the office. It’s not a Google map road of 10 miles. It is as the crow flies. So, stick a pin in it, 10 miles around that. That’s how you calculate it.
Non-Compete Matters to Most Health Care Providers
For many people, a non-compete might be the most important thing in a contract. On some others, it might not matter. For physicians who are in a city that they don’t have any ties to, they’re just there for the job. They don’t care if they’re there after the fact. Then we would spend more capital on getting different things changed in the agreement. Maybe the compensation or providing tail insurance or something like that.
But if you are a physician who is moving to an area to be near a family. Or maybe you have a family yourself. You don’t want to pull your kids out of school and move them across the country. Well, then the non-compete could be the absolute most important thing.
How Negotiable Are Non-competes?
If you’re with a private physician practice, I find much more leeway in negotiating the non-compete. Many larger hospitals and healthcare companies may say, take it or leave it. We’re not going to negotiate. I also find that some of those big hospitals change their non-competes frequently. We have a vast healthcare network where I live. Every year, it fluctuates between different mileage and whether you can join a private practice. And that’s exempt just kind of goes back and forth. You certainly have leverage in getting that changed in some instances. Honestly, I wish I had a better answer for you. But in some cases, it’s going to be a take-it-or-leave-it offer.
So, you need to think about, alright, what’s the most important to me? And then you always have to get to the point where once again. If you have to stay in a community, you won’t have any options to practice there under the non-compete terms. Then you have to figure out a way to move on.
Some jobs are not worth it. And if you accept a job, you’re getting the non-compete. They are enforceable. And nearly there are only a few states where it’s not enforceable. When you sign that agreement, you must understand that that non-compete will likely be enforced if necessary. Whatever terms you agree to are the terms that will hold.
Non-Compete Negotiation Tips
Lastly, if you are negotiating a non-compete, you may offer some concessions in other areas. For instance, with the non-solicit, it may say you cannot attempt to solicit patients, employees, whatever. Well, you could say, for example, I agree not to hire, not just solicit. I will not hire any employees or any other physicians or independent contractors. That way, you’re less of a threat.
If you’re like a primary care type specialty, you will open a new office. The biggest concern of any employer is they bring a physician in, leave, then take all patients and employees. And that old employer is stuck. Maybe giving somewhere else might be worth the employer agreeing to amend the non-compete in some way. So, those are the basics of a physician’s non-compete.
What is the Proper Way for a Physician to Terminate a Patient?
How does a physician properly terminate a patient from their medical practice? There are several considerations for ending patient relationships. There are generally three main things that the physician must do, so they can’t be accused of either patient abandonment or some other kind of ethical lapse.
First, the physician needs to provide written notice. I would suggest sending a certified letter to the address on file of the patient. I would also send them an email. That way, the patient can’t state that they never received any notice. You also need to provide a reasonable amount of time for the patient to find a substitute provider.
Now, this is specialty-dependent. It’s easier for some patients to find a replacement than others. But unless there’s an egregious act on the part of the patient, you can’t just terminate the patient on a Monday and say, I’m done providing any care for you, move on. So, you need to find a reasonable amount of time to allow them to find a new provider. You could even assist in that, but I guess ultimately in that scenario, it would depend on why you’re terminating the patient.
Usual Reasons to Terminate Physician-Patient Relationship
Now, there are several factors in terminating a physician-patient relationship. One, maybe the physician is retiring and not transitioning to practice with someone else. Perhaps they’ve taken a new position out of town, and they’re moving. I mean, those are everyday things that can happen. If a behavioral concern on the patient’s side complicates things, maybe they became verbally abusive to staff or the physician. Maybe they have mental health issues, and it’s just making the care impossible. Maybe like in pain management, they signed a pain contract with the physician and violated it. The physician obviously could then terminate them from the practice.
The reason you’re going to terminate the physician-patient relationship with the patient will also kind of dictate. I would think of the assistance that you provide to them. One, written notice, two, give them time to find a replacement, and then three, provide bridge scripts. Once again, depending upon specialty, if the patient is on psych meds or some life-saving medication, the physician needs to provide at least a reasonable bridge script, allowing them time to find a substitute physician.
Providing Medical Record Access ASAP
And then lastly, you need to provide information on how the patient can access and retrieve their medical record. Every state board has kind of details as far as what a physician must do in providing the patient’s medical record. And then also what a patient must do to request it. I mean, for most states, the patient has to request it in writing, and then some states allow for a reasonable fee to get the medical record copy, and then they have to state it has to be reasonably available within a short period.
I have had plenty of clients who have gotten in trouble for not providing the patient’s medical records on time. Sometimes, the physician has no idea this is going on, and maybe an office manager had some clashes with the patient. They decide to terminate them, and then mess around with quickly providing the medical records for whatever reason. Well, ultimately, that can fall on the shoulders of the physician. So, I want to ensure that the patient gets the medical records quickly.
Summary
To summarize, it needs to be in writing. It would be best if you gave them time to find a new physician with services similar to your specialty or practice. You need to provide bridge scripts if possible or necessary. Then you need to give them access to the patient’s medical records. There are patients you can’t satisfy, and no matter what, it will likely end up in a board complaint. If you’re covering what you’re required to do and acting ethically in terminating the patient, there should be no issues regarding a board complaint. Just sticking your head in the sand and not dealing with the patient is a bad idea.
There are some obligations when you’re providing medical care to someone. And even though you may want absolutely nothing to do with them just because of how they’re acting, or maybe they’re disruptive, you still must go through the steps to ensure that you’re giving a good transition to a new provider. Continuity of care is essential. That’s why these general guidelines are in place. To ensure that even if someone is disruptive, they’ll still get the care they need. So that it doesn’t become a huge issue down the road.
What are 4 Reasons for Termination of a Medical Contract?
What are four reasons that parties can terminate a medical employment contract? Let’s discuss the differences between why parties would terminate a contract and how they can terminate an agreement. The “why” doesn’t matter. What matters is the language in the contract that tells the provider how they can complete the contract. There are four common ways for an agreement to be terminated.
Fixed Term Contract
First, in a contract, it’s going to list the terms of the agreement. The term just simply means how long does the agreement last. Now, some contracts have a language that automatically renews after the initial term, usually for one year. Let’s say it’s an initial two-year term. It’ll automatically continue for an additional year unless terminated in three ways. After this, we’ll talk about that next. Some contracts have no fixed term at all. It states that as soon as the contract is signed, it continues forever unless terminated. The first way to terminate the medical contract is for the initial term to end. There’s no renewal language, neither party wants to renew the contract, and that’s it.
Mutual Agreement Termination
Next would be by mutual agreement. Both parties can terminate a medical contract by mutual agreement. Let’s just say the provider starts, just not the right fit, the employer says, you know what? This isn’t the right fit. We’re not going to require you to give us notice. We’re not going to need you to work anymore. Let’s wash our hands of the situation. And you both can leave. A mutual agreement is the second way you can terminate a medical contract.
With Cause Termination in Medical Contracts
The third way is for-cause or with-cause termination. This means that if a provider or the employer is in breach of contract, there will usually be language that states one of the parties has to give written notice to the other that they are in breach of contract and the reasons why. And then, typically, there would be a cure period.
Cure Period
A cure period simply means how much time a party must fix or cure the breach. Let’s say a provider had productivity bonuses that the employer should pay out monthly in their contract. The employer is not paying it on time or at all. In that situation, the provider would then send a written notice to the employer stating you’re in breach of contract.
You’re supposed to pay me a monthly bonus, and you’re not. If you don’t fix this within whatever the allotment is, let’s say 15 days, then the provider can terminate the contract immediately for-cause. The third way of ending the medical agreement is for-cause or with-cause termination. It doesn’t happen very often that people would end a contract with-cause.
Typically, the parties would work out the differences in advance of that. But it does provide some leverage, I guess, to both sides if one of the parties isn’t holding up their end of the bargain. From the employer’s side, let’s say the contract states that the provider must take one in four calls and then refuses to take calls. Well, then they’re in breach of contract. The employer will then basically state, you’re not taking calls. You’re in breach. You need to start taking calls, or we will terminate the agreement immediately. So, it goes both ways.
Without Cause Termination – A Physician Would Want This in a Contract
And then the last and the most common way to terminate a medical contract is through what’s called without-cause termination. Nearly any employment agreement is an At-will contract. And that simply means either party can terminate the agreement at any time, but for a medical provider, it’s a certain amount of notice. Usually, 60 to 90 days is the industry standard for terminating an employment agreement without-cause in the healthcare industry. Now, why do you have to give this much notice? Let’s say you’re a provider, unhappy, and want to leave. You have a better opportunity. The contract states you have 60 days without-cause notice. Then you’d send them in writing saying, I’m terminating the agreement per the without-cause termination section. Then you’d work out your 60 days, and then you’re free to move on.
Reasons Why Without-Cause Termination Is Important
The reason why this is important and why it needs to be in the contract is if a provider starts with somebody and the practice made it out to be much better. The volume is much better, and your productivity incentives are going to be great, the hours are going to be reasonable, and it’s not. There’s no language in the contract where the provider can terminate it without-cause. That contract could trap them until the initial term ends.
So, you always want to have without-cause termination. And as I said before, typically 60 to 90 days. If you have 180 days, you want to negotiate that down to a reasonable amount. Now, the reason why there are between 60 to 90 days in most contracts is for continuity of care purposes. Maybe if you’re in sales, you don’t need 90 days lead time to leave.
But if you’re a medical provider with a patient base, there needs to be some time to transition them to a new provider, refer them to different providers, or provide bridge prescriptions. So, they don’t just go cold turkey until they find a new provider. That’s normally why there are 60 to 90 days. Just to allow enough lead time to make a smooth transition and provide continuity of care for the patients. So, those are the four reasons you can terminate a contract. Either the term just ends, mutual agreement, for-cause termination, or without-cause termination.
What Is Considered Patient Solicitation?
What is considered patient solicitation? First, why does this matter? Suppose a healthcare provider has signed an employment contract. In that case, there’s likely going to be a section that’s called restrictive covenants. And then, in that section, there will be several things the provider can’t do after the contract terminates. The most common restrictive covenants would be a non-compete, non-disparagement clause, and confidentiality. And then what we’re going to talk about today is a non-solicitation agreement, and any non-solicitation agreement will essentially say the provider can’t actively solicit. Usually, elicit patients or employees of the employer for a period.
An Example of Patient Solicitation in Medical Practice
Let’s say you are a primary care physician and you have decided to leave the employer, and they have, let’s say, a 10-mile non-compete. You decide to establish a practice outside the non-compete, so you’re not violating that. Are you allowed to blast an email or send direct marketing to your patients from the old employer? The answer is no. That’s what the non-solicitation agreement would stop. It stops the act of solicitation of your current patients. Now, the practice can’t stop patients from coming with you, meaning a non-solicitation agreement can’t dictate someone’s healthcare provider. But they can dictate that the physician, in this instance, isn’t the one initiating contact.
Some of the questions I usually get are, alright, well, let’s say I’ve given notice. It’s widely known that I’m leaving and seeing a patient, and they ask me, hey. I hear you’re leaving. Where are you going? Is that considered solicitation? In my opinion, no, that wouldn’t be an active solicitation. The doctor’s not initiating it. They’re simply providing information already known, and the patient requested it. So, in that circumstance, yes, you can say to the patient, yes, I’m leaving. And here’s where I’m going.
Now, where people get in trouble is they would go into the EMR and download a list of patients they currently have. And then, as I said before, send out a direct email to all of them saying, hey, I’m leaving. Here’s my new practice. Please come with me. That’s what this would prohibit.
General Marketing Is Not an Example of Patient Solicitation
Some other issues are, alright, let’s say I go to my new job and do general marketing. So, I put up a billboard or send direct mail to a specific zip code. Is that considered solicitation? And for the most part, no, it’s not. If you’re not actively targeting your patients and doing general marketing, that’s not considered a solicitation. They can’t stop you from doing those types of activities.
Asking Co-employees to Join Your New Practice
Next, employees. One of the biggest fears, and this is in private practice specifically, is bringing in a new provider. They establish relationships with the staff, so the MAs, the RNs, the front office, the office manager, and maybe the other providers. Then, when they leave, they take all the staff with them. A non-solicitation agreement can also stop a provider from actively soliciting employees.
And if they’re a savvy employer, they’ll stick in there “you just simply can’t hire them for the restrictive period.” A standard restriction for a non-solicit is about one year. So, you can’t solicit these people one year from when the contract terminates.
If it states you cannot hire them, which would be considered enforceable for the most part, you can’t hire them. There’s nothing you can do about it. If it says you can’t actively solicit them, then once again, you can’t be the one to initiate contact. So, no emails, voice messages, text messages, or direct messages through social media. You can’t do any of that.
Now, if someone approaches, let’s say that front office staff says, hey, I hear you’re leaving. I’d be interested in coming with you. If they’re the ones to initiate the contact, you are not the one actively soliciting them. Over time, more and more contracts have inserted you “cannot hire them” into the language. And it’s wise for the business to do that. Once again, you can’t initiate contact with the employees.
Non-Solicitation Agreements Are Enforceable
Overall, yes, non-solicitation agreements are enforceable. They’re there for a reason. As I stated before, they don’t want someone coming in and then yanking their entire staff or a patient base. Is there any kind of negotiation as far as a non-solicitation agreement? Not really. Maybe you could negotiate some types of activities that would make it beyond the edge of solicitation. Still, for the most part, this is kind of like an all-or-nothing clause.
Like with the non-compete, you can usually play around with the time, meaning how long it lasts or the geographic restriction. So, five miles instead of 10 applies to one office instead of two, and the specialty is listed. What you can’t do, like maybe you’re internal med. You could do urgent care, hospitalists, ED, primary care, and focus on the specialty. Whereas with the non-solicitation agreements, you can’t solicit your patients. That’s about it.
Family Medicine Contract Negotiation Tips
These are negotiation tips for family medicine physicians with new employment contracts. There are two scenarios. If you’re coming out of training, and if you’re an established physician in an area, you are either moving into a new practice or potentially getting bought out by a larger practice or hospital network. The negotiation tips may be a little different for both, but I guess the general strategy is probably the same.
Contract Negotiation: Look at the Compensation
For anyone in family medicine who’s been offered an employment agreement, the first thing you need to consider is the compensation. Suppose you’re entering a new area where you have no ties. In that case, you need to ensure a guarantee for the first two years, which means that many organizations now require productivity components through RVUs or net-collections.
So, suppose you immediately start a job and are on productivity from the beginning. In that case, you will make less than you would if you receive an income guarantee just because it takes time to build a practice. Usually, somewhere between 12 to 18 months for practice to reach maturity. If you’re earning, let’s just say, on net-collections. If the average accounts receivable cycle for a claim is 30 to 90 days, you could be working for a month before you see a dime of that. You need to ensure an income guarantee for the first two years. Then if it does shift into maybe just RVU based, or as I said before, just net collections-based, you’ll be able to gauge your compensation.
And they’ll usually use the second-year data to indicate what you’ll make in years three and beyond. You need to identify the compensation structure and ensure you’re guaranteed for the first two years.
Finding out what kind of going rate in the area is beneficial. MGMA data is what I generally use. It’s not the be-all and end-all. It means the numbers are helpful information to know what’s the median salary for a family medicine physician. Or hospital-owned versus private practice. But it can still vary greatly.
Contract Negotiation Tactics Beyond Compensation
The benefits matter. Malpractice insurance and restrictive covenants like the non-compete. All those factors can determine whether a job is good or not. And so, just basing it off one number is shortsighted. I find it very helpful to talk to your classmates, especially if you’re just coming out of training, seeing what they’re making or offers from their jobs. If you’re established, it’s kind of, I wouldn’t say, unprofessional, but most people aren’t willing to talk about how much they make after you’ve been out for a long time. So, that probably won’t be as effective, but you also know your value.
If you’ve been out for a while and know how much you make. I generate this many RVUs per year. These are my net-collections. That kind of data is very helpful. Don’t be afraid to ask for more. Now, it has to be a reasonable amount if you’re being offered 200 and you ask for 400, and it’s a family medicine physician, they’re going to laugh you off. Small jumps are kind of, I think, almost expected on the employer’s side.
Bonuses
And then you also must think about bonuses like signing bonuses and relocation assistance. These are also things that should be in the contract as well. The signing bonuses vary wildly on geography. If you’re going into a city or an area that’s hard to recruit, it’s more rural. It’s not as desirable for the general population. You’re simply going to make more money and get a higher bonus.
Moving into a Big City vs. Rural Areas
If you’re moving into a big city or there’s a lot of competition because people want to live there, the salaries will be depressed. I know it’s counterintuitive when you’re like, well, if I’m moving into a more expensive area, the salary will reflect the cost of living. It’s not. It doesn’t because, for instance, I live in Scottsdale. People want to live here, and when you have 50 candidates applying for one position versus a rural town in South Dakota where there are two, there’s less leverage for the physician to negotiate a higher salary. So, don’t be surprised if you’re looking into a bigger city where the pay will not reflect the cost of living compared to other places.
Negotiation Skills: Talk to Your Classmates
But once again, set up a meeting and talk to your classmates and see what they are offering you. If you’re moving into a hospital network, some programs can also provide student loan assistance. You’re not going to get that from private practice. They won’t offer you student loan assistance if they’re in private practice. So, if it’s important to you, you need to look more rural and with networks, and they may have that opportunity. Some states also offer that. If you work in certain healthcare shortage areas, that might also be something you investigate.
Negotiating the Type of Malpractice Insurance
The next thing to look at is what type of malpractice insurance they offer. Is it occurrence-based or claims-made? Or I guess if you’re with a hospital network, they could be self-insured. If you have a claims-made policy, which is more for private practice, you need to look at who must pay for tail insurance. Tail insurance is generally about twice what your annual premium is. For family practice, usually somewhere between 6,000 to 8,000 annual premium. So, your tail cost would be somewhere between 12,000 to 16,000. That’s a one-time payment, but that’s one thing you don’t want to look at. You can certainly negotiate for the employer to pay for tail insurance. Or if it’s an occurrence-based policy, you don’t need tail insurance.
An Important Thing to Know: Non-compete Clause
Another thing you want to think about and attempt to negotiate is non-compete. These vary wildly as well. Usually, one year is the maximum length we’d like for a non-compete. And then really, depending on the area, it could be anywhere from 5 to 30 miles. Two things you want to think about as far as that and trying to negotiate: one, you want the specialty as specific as possible. What I mean by that is that some family medicine physicians can do multiple things. They could do urgent care. They could do the primary practice. Some could be a hospitalist or whatever.
If you have a job, you want it narrowly tailored to that job. Let’s just say you have a non-compete where you can’t be in family medicine and private practice for a year within 15 miles of your location. Well, if it’s just like, you cannot move under any circumstances, and you must stay in that area, well, you want the specific specialty that you’re in for that employer to say that it’s just family practice in private practice in that area. And therefore, you could do urgent care, be a hospitalist for the year, and then move back into private practice if you want.
You also want to limit the number of locations. Is it just your primary location, or if you’re working in multiple locations, is it the non-compete attached to each of those locations, or if they’re a bigger corporation or health network. They have facilities throughout the city. Is it 10 miles from everything that they own? You want to narrow that to just your primary practice location, or maybe if you’re splitting your time, but you’d want to avoid non-competes that state it applies to everything the employer owns.
Do You Have to Repay Anything?
And then the last thing to think about, do you have to repay anything if you terminate the agreement? If you’re given a signing bonus, relocation assistance, or student loan assistance if you don’t stay for a certain period and were to terminate the contract without-cause, you would have to pay back some of those things. Some things to negotiate would be, for instance, let’s say you had a $30,000 signing bonus and a three-year initial term, you want to make sure it’s forgiven either, I mean, monthly would be the best. So, 1/36 forgiveness, meaning, for every month that you’re there, 1/36 of the signing bonus is forgiven. And so, if you stay for three years, you don’t have to pay anything back.
Now, some places will try to do it yearly. And in that scenario, let’s say you’re in year three, and you terminate the contract in the middle of the year. Well, if it’s yearly forgiveness, you just gave up six or seven months of forgiveness, and then you must pay back $10,000 instead of maybe four or five. Honestly, there are a million things you can negotiate in a contract. I was just trying to hit the highlights and the things that are usually most important to family medicine physicians.
What is the Stark Law Recruitment Exception?
Today, I will discuss recruitment agreements; the interplay between the employment agreement the physician will sign as a new job. What a recruitment agreement is, and the downsides and upsides.
What is a recruitment agreement? The stark and anti-kickback laws allow hospitals to provide certain financial incentives to medical practice in their efforts to bring in a new physician into the area. What does that mean? If a physician is moving to a new job, either out of training or somewhere else. Most of the time, it’s with young physicians or people newly out of training. They will sign an employment agreement with the physician practice itself.
Income Guarantee in Medical Practice
However, there are also some opportunities for a hospital to supplement that physician’s income for the first year. And provide some other incentives too. So, you could have a recruitment agreement with an income guarantee. They will essentially pay the medical practice a certain amount to supplement the physician’s salary. They can provide moving expenses, signing bonuses, and student loan repayment. Or they could also cover costs from the practice associated with bringing the physician in, most likely through overhead. There are a lot of opportunities for a hospital to supplement a medical practice. Why do they do this? Possibly, the medical practice could not financially afford to bring in a physician without these supplements. Or it’s also just a smart way for a practice not to pay as much money as they usually would.
In most of the specialty services, it would be someone who must build up a practice. Most physicians moving into a new job are not very profitable for the first year or two. Once again, kind of specialty-dependent and practice-dependent. Are they replacing somebody? Are they coming in from the cold? Do they have any ties to the community? All those things kind of factor in. It usually takes 12 to 18 months for practice to reach maturity. If you’re in family care and joining a physician practice, you’d continue seeing more volume for the first 12-18 months.
Rules of What Hospitals Can Do
What are the rules that dictate what a hospital can do? The conditions that need to be there? I’m just going to go through the list.
One, there must be a documented need in the area for the physician specialty. It needs to be in writing. The hospital will give a contract to the physician and the qualified health center, and they will both sign it. The physician must relocate their medical practice to the area. They must move into the geographic area served by the hospital. What is the geographic area? Mostly, it’s the lowest number of contiguous zip codes from which the hospital draws at least 75% of its patients. So, there will be an attachment at the back of every recruitment agreement that lists zip codes. The physician must serve those zip codes. For the recruitment agreement, the physician must move at least 25 miles from 25 miles into the geographic area.
Recruitment Exception
There are also some exceptions for rural communities and residents. Those who’ve been in training and want to stay in the area. A few minor exceptions exist. But for the most part, the things I mentioned dictate whether a hospital can provide the recruitment agreement. What does the recruitment agreement look like? It’s a contract like an employment contract and dictates the terms of their offer. And most importantly, what the forgiveness period is. The hospital does this so they can bring in specialty health services.
Down the road, I guess initially. They will get downstream revenue from referrals from this physician. I mean, that’s the whole point of bringing them in. Even though they provide an income guarantee, a signing bonus, and overhead expenses for the first year, which is standard.
Forgiveness Period for the Health Physician
They will require a forgiveness period, meaning the physician must stay in the area for several years. It’s usually three, sometimes four. Then each month they’re in that area providing care, the hospital will deduct a fraction from the overall loan amount. Let’s say a hospital sends 200,000 to the medical practice. That 200,000 amount, after the first income guarantee period, usually one year, will be three-month forgiveness. So, the hospital will forgive 1/36 of that 200,000 every month. And this means that no one must pay it back if the physician stays for the forgiveness period. In this case, if it were three years, no one would owe any money back to the hospital.
The hospital, as I said, will hopefully gain more by having that physician in the community and utilizing the downstream revenue from recruiting referrals into the network, which should more than cover whatever they paid out to bring the physician into the community.
Downside
The downside to the physician. Depending upon the agreement’s language, they’re responsible for that amount of money if they leave the area. Usually, it would be a joint responsibility between the practice and the physician. But for the most part, if the physician leaves early, they will have to pay back that money.
It can be a significant amount of money for some physicians and some health specialties. I’ve seen up to 500,000 after the first year, not that it’s specialty-dependent. But it could be a lot of money. Let’s say the relationship goes sour with whoever the employer is. Maybe there aren’t opportunities in the area to switch to a new group and continue in the geographic region. It can be a big problem.
Benefits
The benefits of a recruitment agreement. If the job couldn’t exist, the medical practice couldn’t afford to bring a new physician into the area. Then clearly, the recruitment agreement creates a job opportunity for the physician. So, it may be necessary. I mean, it’s a no-brainer for a hospital medical practice. They essentially can have an entire year of physicians’ salary supplemented by a hospital. They would take advantage of that if they could, and some practices are savvier than others.
Some of those agreements will require that, and they should. There’ll be no non-compete. If the physician must stay within a certain area to not violate the agreement. And the contract is terminated with the original employer. Still, there’s a non-compete that forces them out of that area. Well, that is a massive problem for the physician. Most recruitment agreements will prohibit the employer from placing a non-compete into the agreement. That’s one thing to look for.
So, that was a little breakdown of physician recruitment agreements, stark law, and anti-kickback statute. It could be a valuable tool for a physician. But it could also be a disaster if not worded correctly. Or if the employer has thought of all the permutations if the physician leaves the practice.
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