Contracts matter. While the cinematic version of a napkin-negotiated salary ends in a handshake, the reality is that a signature on a legally binding document offers a happier finale. Physician Employment Agreements are critical in establishing the terms of the relationship between a physician and their employer. These agreements outline the expectations, compensation, benefits, and responsibilities for both parties, making them essential to ensure clarity and legal protection. Whether you are a physician entering a new role or an employer looking to hire, understanding the key components of Physician Employment Agreements is vital. Below, we explore the 123s of Physician Employment Agreements to help you navigate this crucial process.
What is a Physician Employment Agreement?
A Physician Employment Agreement is a legally binding contract that sets forth the rights and obligations of both the practice and the physician. It includes terms related to compensation, duties, benefits, and other critical elements that define the employment relationship. These agreements are designed to clarify expectations, minimize misunderstandings, and ensure both parties are aware of their responsibilities. A well-structured employment agreement helps avoid potential disputes, sets clear expectations, and provides legal recourse if necessary.
Pre-Contract Due Diligence
Conducting due diligence before entering into an employment contract is crucial for making an informed decision that aligns with both current market conditions and personal career goals. First, it is essential to understand what is trending in the physician market. Hospital employment, private practice, and academia each offer distinct advantages, from malpractice insurance to student loan assistance and varying compensation structures. Hospital roles might offer stability, while private practice could promise growth and partnership opportunities. As such, physicians with the entrepreneur spirit often see more opportunity in private practice than in working for a hospital. With a competitive recruiting landscape, physicians often expect more from their contracts, and employers need to meet these expectations. As part of this due diligence, one should assess the reputations of prospective employers or partners by reaching out to colleagues, researching on social media, and consulting other professionals, as your own reputation will be influenced by those with whom you work.
Additionally, identify your “Plan A” and “Plan B” to clarify your goals with this agreement. Plan A should outline your ideal trajectory—whether it is job stability, work-life balance, ownership, or something else. Whether you are the practice or an employee, becoming clear on your goals with this relationship will inform your contract negotiations. This becomes a benchmark against which to measure contract terms. For instance, a physician aiming to join a practice for the long term may be more interested in the timeline and terms for partnership than the short term compensation and benefits. Plan B, your fallback strategy, ensures that even if the relationship does not pan out, you are positioned to adapt. Establishing these plans allows you to enter contract negotiations with clear priorities, ensuring alignment between your goals and the potential relationship.
Key Components of a Physician Employment Agreement
When negotiating and drafting a Physician Employment Agreement, several key elements must be considered. Below are essential components to ensure clarity, fairness, and legal protection.
The Written Contract
There is an old legal maxim: the oral contract is not worth the paper it is written on. While oral contracts are enforceable in most states, a written contract reduces risk for both parties. Contracts should not be developed based on loose terms and conditions, or through a chain of emails. Legally referred to as the four corners test, it is important to understand that if a term is not in the agreement, it does not exist. Most importantly, a written contract minimizes the risk of misunderstandings. By putting the employment relationship in writing, both the physician and the employer have a clear reference point for their rights and obligations.
Compensation
Compensation is often the focal point of the agreement. Compensation structures vary widely from straight base salary to complex production formulas, and as mentioned earlier, differently across hospital employment, private practice, and academia. For any compensation model involving the use of a formula, whether for the base pay or incentive bonus pay, it is paramount to ensure a clear understanding of the calculation components. This is where defined terms become important and should not be assumed or left vague. Clear definitions and even examples of the calculations can prevent unmet expectations or distrust arising from a lack of transparency.
The most basic compensation model is a base salary with potential bonus. In this model the physician is paid the base and at the end of a quarter or on an annual basis receives a bonus based on the discretion of the practice or a formula. The more complex compensation models will focus on Work Relative Value Units (“wRVUs”), which are used to measure the value of a physician’s work and calculate their reimbursement. Compensation to physicians under this model will focus on a certain number of wRVUs for each patient procedure or examination they perform. The more wRVUs a physician has, the more they earn. These are just two examples of the many different ways a physician can be compensated.
Outside of the traditional compensation, there are other compensation related areas to examine. For practices with other ancillary businesses, such as med spas, clinical laboratories, ambulatory surgery centers, etc., it is important to understand whether there are other current or future revenue streams to understand the full opportunity. More importantly, if a physician anticipates using their medical license to generate revenue outside of the practice such as call coverage or a medical directorship (i.e. outside activities), the agreement should specify how that compensation is treated, and confirm if the arrangement is compliant with state and federal law. Physicians should also carefully review additional perks, such as health insurance, continuing education, and other financial incentives that may impact their overall package. This could also include malpractice insurance, not only the premium while employed but who pays for tail insurance if the employment ends. A clear breakdown of these elements avoids surprises and sets expectations from the start.
Social Media: Before and After Photos
In certain fields like aesthetics, patient photos and social media presence can be essential to a physician’s professional identity. The photos and their associated records may even be required for board certification. The contract should address ownership and access to social media accounts and patient photos after the employment ends. The terms and conditions of the employment agreement must still comply with state and federal patient privacy laws. The ability to showcase patient success stories or maintain continuity in professional branding can have long-term effects on a physician’s career.
Restrictive Covenants
Restrictive covenants, such as non-compete agreements, are common in physician employment contracts. These clauses can restrict where a physician can practice after leaving the employer, typically within a defined geographic area and time period. They can prevent a physician from soliciting patients or employees of the practice. In most agreements, they will require confidentiality and non-disclosure of certain confidential and proprietary information. Physicians should carefully consider the implications of these provisions and is one of the primary areas where Plan A vs. Plan B is an extremely important consideration. Employers also benefit from these clauses by protecting their practice from immediate competition but also need to ensure the covenants are not overbroad but instead focused on protecting a legitimate business interest. However, it is important for both parties to understand the legal enforceability and fairness of these terms, especially as enforceability varies from state to state.
Tailoring Employment Agreements to Your Needs
Each physician and employer’s needs are unique, and as such, there is no one-size-fits-all approach to employment agreements. Factors such as the size of the practice, the region, and the specific field of medicine can all influence what should be included in the agreement. Understanding the nuances of Physician Employment Agreements is essential for creating a contract that aligns with one’s goals. By focusing on the key areas outlined above, it is possible to avoid common pitfalls and provide the expertise needed to create fair and effective agreements.
ByrdAdatto Can Guide You Through Physician Employment Agreements and Contract Negotiations
Whether you are drafting a new agreement or reviewing an existing one, we are here to assist you. ByrdAdatto helps physicians and employers navigate the complexities of employment contracts, ensuring you feel confident and protected while positioning your practice for long-term success. If you need assistance navigating Physician Employment Agreements and contracts, contact ByrdAdatto.