Doctor Employment Lawyer Blog

You are ready to move to a new hospital or practice group. You think you have a really great offer, but do you really? It is important to look beyond just compensation when assessing a physician employment agreement. Your current malpractice carrier may not cover you after you leave your current position. In most situations, supplemental insurance or "tail coverage" is needed to cover malpractice claims made after you leave employment.

In the past, malpractice coverage was usually "occurrence-based," which meant that as long as a you maintained coverage at the time of the alleged malpractice incident, you would be covered. However, with the rise of malpractice claims, "claims-made" policies have become more popular. Claims-made policies cover a physician for claims made during the period of time in which the insurance is maintained, and therefore must be continually maintained. However, when you change jobs, it can be extremely costly to obtain claims-made coverage with the new employer that would cover prior acts with the past employer. Thus, tail coverage would need to be purchased to protect you.

But, whose responsibility is it to foot the bill for tail coverage? Often times, this is negotiable. Occasionally, a hospital or practice group will pay for tail coverage complete. More commonly, you and your employer either share in the cost, or the employer may place certain conditions and terms under which it will pay for tail coverage. There are a number of unique and creative agreement possibilities.

It is important to assess your personal needs when agreeing to a doctor employment contract with regard to tail coverage. Properly negotiating your employment agreement will provide you with the financial certainty and flexibility necessary for you to be able to take advantage of attractive professional opportunities that may come your way.

written by Poonam Khatri

Most doctors we meet are so focused on patient care and medicine that they fail to protect their interests when signing their physician employment contracts. They proceed under the impression that, as long as they do well for their patients and build a successful practice, things will be fine with their employment. In most cases, that is an accurate assessment. However, sometimes doctors get into horrible employment situations and have almost no protections in their agreements. They get overloaded with administrative work; they are under paid because of a lack of adequate billing procedures; or they lack enough patients to build a practice because there is no marketing investment by the employer. Whatever the issue, sometimes good doctors get into bad employment situations.

You might think that a simple solution would be to resign and move on. And, sometimes that is the best and simplest solution. But, what about when you have signed a broad non-compete agreement or have committed to a community supported position that requires a substantial payout to terminate the contract? The costs of getting out of those contracts can be higher than the costs of suffering through the terms. But, no one should have to stay in a bad employment situation.

If you want out of a bad employment contract that seems to have no way out, you need to be a bit more creative about your departure. You need to analyze why the situation is so bad. Determine whether promises were made, but not kept. Identify who or what is making your employment dissatisfying. And, review your physician employment agreement. Does your employer have any obligations under the contract? Is your employer performing all of its obligations?

Find your leverage and create a plan of action. With contracts, there is almost always a way out. The key is finding the least expensive way out.

Earlier this month, the Illinois legislature passed a workers' compensation reform bill that slashed reimbursements to doctors who treat injured workers by 30%. Clearly, insurance companies will save big from the new law, but doctors are once again asked to do the same amount of work for less pay. In turn, practice revenues will be affected and, of course, so will doctor employment agreements.

I have repeatedly mentioned the trend towards tying physician employment compensation to receivables in this blog. A medical practice with

As a physician negotiating an employment contract, you need to be aware of the make-up of your potential employer's patients. Even if your compensation is not directly tied to receivables, collections determine the viability of a practice and the security of your employment. Due diligence is not just a practice for business owners. To establish a long term, successful career as a physician, you have to examine your employer's practice to the same degree you would examine your own.

Doctor employment agreements can range in duration from one year to five or more. Locking yourself in to a long term contract has its perks and drawbacks.

On the plus side, assuming you have properly negotiated the terms, your compensation and duties are locked in. You don't need to worry about renegotiating every year. You will know what is expected of you and what you can expect from your employer (to some extent at least). And, you can feel a bit more secure in your employment status.

Of course, locking yourself in for a lengthy term has some drawbacks as well. To begin, if you have not done your due diligence and are unfamiliar with the employer's culture, you may end up working in an uncomfortable, or even intolerable, environment. Moreover, you will be locked into your compensation terms even though a lot can change in five years. Not to mention the fact that a five year term does not guarantee that your employer will actually employ you for five years (typically either side can terminate without cause so long as the required notice is provided).

The fact that there are a lot of potential downsides doesn't mean a long term agreement is a bad agreement. The most important thing is that the terms of the agreement are consistent with your professional goals. Make sure you identify those goals before negotiating an offered employment agreement.

Lately we have been seeing private practice employment contracts that are dependent on hospital support. These are typically physician employment contracts in areas where there is a shortage of doctors practicing in that particular specialty. These can be great arrangements, but they can also be strait jackets for doctors that end up in a bad employment situation.

Physicians considering these types of employment situations should do their due diligence before accepting a position. Be sure that the practice's culture and processes meet your expectations. Research the reputation of the practice and speak with the physicians and support staff about how the practice operates.

Of course, this sort of due diligence should be performed regardless of the type of physician employment you are considering. But, the reason it is especially key in these situations is because you could up having to pay huge sums if you decide it's not working out. These employment agreements typically have a repayment schedule that is based on how much of the contract term is fulfilled. The sooner you want to terminate, the more it could cost you.

In these cases, it literally pays to know what you are getting into before you sign the employment contract.

No one likes to think of the end of a relationship when you are just getting started. But, in employment, an end is inevitable. Hopefully, it is after a long and prosperous career. Regardless, physicians need to understand how their employment contract can terminate.

Most physician employment agreements set forth events that trigger termination "with cause" and "without cause." "Cause" typically means a serious breach such as suspension or loss of license, conviction of a felony, drug or alcohol abuse, loss of malpractice insurance, loss of privileges, or other material breach. These are serious events that would obviously affect a doctor's professional reputation.

Because the term "cause" is typically understood to be in connection with a seriously bad act, a doctor negotiating his/her employment contract should be careful that the definition of cause in the contract is sufficiently clear.

Our office has seen at least one situation where a practice group tried to use a doctor's tardiness as a basis for "cause." Although we were able to stop the employer from going forward with the termination and keep the physician employed through the term of her physician employment agreement, she may have avoided the situation entirely had she had her contract properly reviewed from the start.

Being terminated "for cause" can follow you throughout your career. And if you don't understand what "cause" means, how can you avoid it?

You can be the greatest doctor in the world, but it means nothing if patients don't know who you are or where to find you. Medical school and residency programs provide the training necessary to treat patients, but there is very little access to the business and marketing aspects of developing a medical practice.

Many private practices are moving away from guaranteed salary structures and implementing productivity based pay plans. This means that, in addition to treating patients, doctors are expected to market and grow their practice.

Employment agreements often reflect this type of pay plan, but have little information about how the practice will assist you in attracting patients. These types of employment contracts will typically provide a short period of guaranteed pay (anywhere from 6 months to 2 years). After that period, your pay will be solely based on collections resulting from your medical services.

As with any business, it takes time for a doctor to build a reputation and patient base within the practice. Make sure you know how the practice will support you in attracting new patients. And, more importantly, make sure you understand how collections are processed within the practice. It's no longer enough to be a great physician. You have to have great support. The only way to ensure that, is to have an employment contract that provides for that support.

Many physicians joining a practice want the opportunity to be an owner. And, many practice groups use future ownership as a potential benefit to physician employees. However, the terms of that future ownership interest are usually vague at best.

To some extent, an open ended, to be negotiated at a later date agreement may be beneficial to everyone. But, if your main objective in joining a practice is to be an owner, ambiguity means uncertainty. Including the minimal requirements for a buy-in will prevent you from being shocked by terms down the line.

I have seen a number of Physician Employment Agreements recently that determine compensation based on productivity. This can be very lucrative for a physician who is able to market his/her services or has already developed a large patient base. However, a doctor who joins a practice directly out of residency will face a number of difficulties in building a practice. This is especially true if the Employment Agreement does not identify marketing and promotion tools and support that will be provided by the practice.

What makes these compensation terms especially treacherous for new physicians is that the practice groups that most often use this form of compensation are also the practice groups that do not pay for the physicians' tail coverage.

If you end up taking a position and patient volume is low or collectibles are low and you need to leave because you are not making any money, you could also be required to pay large amounts of money to obtain tail coverage.

Taking your first job out of residency should not dig you into a deeper hole of debt, but if you are not careful it can. This is why I always try to remind physicians that, regardless of whether they hire an attorney, they must make sure they understand the terms of an Agreement before their signature goes on the page.

There are certain job requirements and considerations that only a physician might need to contemplate. For example, no other profession ever has to worry about getting hospital privileges or ensuring call coverage or completing CME courses. And for those physicians that do have to worry about those things, it is assumed that their employer will support them.

However, I have repeatedly seen physicians sign a employment agreements that are silent as to the level of support the employer will provide. This provides the employers with an opportunity to terminate you for breach of contract if you are unable to meet your obligations without their support. Since most doctor employment contracts have notice periods, terminating the physician for "cause" can save the employer a substantial sum of money.

Even if your employer orally promises you a certain level of support, that promise may not be enforceable depending on the written terms of your agreement. For this reason, it is imperative that you ask your employer to clearly delineate the level of support it will provide. Will it provide administrative assistance to handle the paperwork? Will call coverage be equally shared? Will it provide financial support for CME courses?

Asking these questions at the start of your employment can establish the trust necessary to create a long term relationship.

It is the time of year when physicians are completing their residencies and locating new positions. And, even those that are not moving on, usually find themselves faced with an annual contract negotiation. Yet, surprisingly, most physicians do not take the time to review their agreements and fully understand their obligations.

This is especially true when the physician has been with the employer for many years and complacency has set it. Just because you didn't read the last agreement does not mean you should continue to sign everything your employer places in front of you.

If you get only one thing from this blog, get this: Read your agreement.

Most physician employment contracts allow either party to terminate the agreement at any time by giving a certain amount of written notice. The notice period is typically 90 or 180 days. However, many physicians do not understand that the notice period is not a guarantee that he or she can work through that period.

I recently spoke with a physician who was shocked when her employer exercised the 90 day notice period by providing written notice and asking her to immediately leave the practice. The physician was paid during the notice period, but no notice of her departure was provided to patients or referring doctors. She was understandably upset because her patients were left with the impression that she did not even give them the courtesy of letting them know she was leaving.

This physician had believed that the notice period was a promise that she could continue to work for her employer during the 90 day period and use that time to inform patients and referring doctors of her departure. Instead, she was discovered that, as long as she was paid through the notice period, the employer was not under any obligation to allow her to treat patients during that period. Nor was her employer required to work with her to notify patients or referring doctors of her departure.

Leaving a practice without any notice to your patients or referral relationships is likely to damage relationships that may have taken years to cultivate. Patients don't usually understand that the employer owns patient information and a doctor likely will not have access to such information after leaving a practice.

The lack of notice can be damaging to the employer as well. Patients often impute the conduct of a treating physician to the practice as a whole. Leaving a patient wondering what happened to his or her physician is not likely to create a trusting doctor-patient relationship.

Working out an agreement about how to notify patients and referring physicians regarding a physician's departure at the start of the employment relationship is beneficial to all parties. It allows the doctor and the employer to protect their reputations and minimize patient confusion. It ensures patients are informed about whom they can contact about their treatment issues. And, it ensures that referring doctors know who will be taking over the departing physician's practice.

Of course, trying to work out those details at the end of an employment relationship is usually an exercise in futility.

Even doctors make bad decisions when it comes to employment. Whether it's signing an employment agreement without understanding the terms, taking on a position with a hospital or clinic that doesn't operate the way you thought, or joining a team that doesn't share your values; sometimes you just end up in a place at which you don't want to be.

If that time comes and you are a party to a non-compete agreement, you need to know whether the agreement is enforceable and, if so, where you can or cannot work. In Illinois, there is often a mistaken perception that non-compete agreements are not enforceable. However, the case of Mohanty v. St. John Heart Clinic, S.C., 225 Ill. 2d 52, 866 N.E.2d 85 (Ill. 2006), the Illinois Supreme Court affirmed the enforceability of restrictive covenants for physicians. In that case, the court concluded that reasonable restrictive covenants amongst physicians do not limit patient access to physicians and encourage established physicians and practices to hire and train less experienced physicians. The court further determined that a decision to ban such agreements amongst physicians should be left to the legislature.

At the same time, not all non-compete agreements are written in a way that is reasonable and enforceable. Knowing what you an and cannot do before you move on and accept another position ensures that you avoid unnecessary legal expenses associated with defending a claim that you breached your agreement. At the very least, you should read your agreement carefully before accepting a new position.

Physician Employment Contracts have unique issues, but most doctors look at the compensation provision and sign. It's understandable that a physician might think that his/her pay is the most important aspect of the employment agreement, but in fact there are issues that might make it difficult to ever move on to a new employer or start your own practice. While there are a number of concerns a doctor should address before signing an employment contract, below are the top five issues:

1. Malpractice insurance: Occurrence based or claims based? If the coverage is claims based, you will likely be responsible for purchasing tail coverage to continue coverage after termination of your employment. This can be extremely costly.

2. Duties: You may think that your duties are obvious or self explanatory, but every practice has its own way of divvying up responsibilities. You may have administrative duties for which you are responsible that require a large investment of time. If you don't address this before signing, you are agreeing to those responsibilities without question.

3. Non-Compete Agreements: Many doctors don't understand how far their non-compete agreement really covers. By signing your employment agreement, you may be restricting yourself from working in the same metropolitan area for some time after your employment ends. At the very least you should be cognizant of where you can and can't work in the future.

4. Non-Solicitation Agreements: You may have already spent years building your reputation and patient base, but most physician employment agreements explicitly state that all patients that visit the practice belong to the employer. If you are bringing a significant number of patients to your new employer, you should at least protect your future relationship with those patients.

5. Marketing: Many physicians have the mindset that patients will just show up. In today's environment, doctors have to market just like everyone else. If your compensation is dependent at all on productivity, you need to be certain that your practice is going to be marketed to the public. This isn't an exhaustive list, but being aware of these issues can help a physician negotiate a contract that he/she is happy with throughout the employment relationship and beyond.

I recently heard a story about a General Surgeon who signed her private practice employment contract without reading anything other than the compensation section. It turns out that the agreement she signed states that she was hired as a Primary Care Physician.

While this may not affect her employment at first, it could be an issue is things between her and her employer ever turn sour. Just like any other career, when a doctor starts a new job everything is exciting and positive. However, after the honeymoon phase ends and both sides reveals their flaws, things may not be so rosy. Errors like this one in your Physician Employment Contract could give your employer an opportunity to terminate your employment without any of the benefits for which you may have contracted.

Furthermore, if the employment contract is so inapplicable that even your specialty is incorrect, what else may be wrong? Are call duties clearly spelled out? Is the non-compete limited in scope? These are all important issues that can affect your employment and your future career. Make sure you know what you are getting into before you sign.