By Christopher E. Brown, J.D., The Health Law Firm, and George F. Indest III, J.D., M.P.A., LL.M., Board Certified by The Florida Bar in Health Law
This blog is the sixth in a series intended to provide a review of the basics of contracting for physicians and health professionals, primarily by discussing employment agreements. We will highlight many of the common provisions found in employment contracts, along with many of the mistakes and pitfalls that we see in our day-to-day practice.
By the end of the series it is our hope that physicians, nurse practitioners, and other health professionals will understand the common language and terms found in employment contracts for professionals so they can recognize mistakes commonly made when negotiating them. We hope to help make both employers and employees more knowledgeable about employment contracts so they can avoid potential problem areas and legal entanglements.
Our comments here are meant to provide general rules we have learned from our experience. However, please remember, every situation is different and there are exceptions to every rule.
Tip 14 - A Good Contract Identifies Typical Schedule, Where the Physician Will Work and Expectations About Call.
A contract that simply states the physician will “perform the usual duties of a physician” does not give either party much information about the expectations of the other party. Attention to this section is particularly important for physicians who wish to work part time, to work only a specific schedule, to work in a specific clinic, or who have special arrangements concerning call. This section can also be used to answer questions about what level of involvement in administrative duties is anticipated and whether certain community activities are expected.
Tip 15 - A Physician’s Compensation Should Be Set at a “Fair Market Value.”
Physician employment and compensation is subject to anti-kickback laws. Generally a physician’s compensation must be set at a fair market value demonstrating reasonable compensation. Fair market value is determined by comparing the entire compensation package, including benefits, insurance and signing bonuses to industry standards for the relevant specialty and geographic market. In almost any compensation arrangement, the physician and the employer will be protected from legal scrutiny when the compensation is determined to be fair market value, as long as other requirements are also met (such as a written contract, signed by the parties, at least a year duration, etc.).
Compensation usually has two components: salary and benefits. The typical employment agreement will provide for a guaranteed salary for the first one to two years. After that, the physician is usually compensated based on production.
It is important to remember that some medical groups might offer an employed physician an opportunity to buy into the group after a period of time as an employee. This type of an agreement in which the physician would be able to purchase shares or options in the group may or may not be part of the initial employment agreement.
Such arrangements might be referred to as a “buy-in” clause or “partnership” arrangement. It is very important to understand that if the group is a corporation or professional association (P.A., a type of corporation), then the ownership interest will be “shares” and the physician will become a “shareholder.” If the group is a limited liability company (L.L.C.), then the ownership interest is referred to as a “membership” and the physician will become a “member.” The term “partner” is often incorrectly used to refer to either one.
It is preferable to have these types of arrangements drafted separately from the employment agreement since their duration is likely to be longer than the employment agreement. It is always necessary to have all of the details spelled out, including the buy-in price and how it will be paid. Otherwise, it will not be legally enforceable.
Common benefits include: family health insurance, dental insurance, life insurance, an allowance for continuing medical education (CME), paid time off or vacation and sick pay, short-term disability insurance, long-term disability insurance and retirement plans.
Past and Future Blogs on Employment Contracting.
To review our previous blogs on physician contracting tips: click here for part one, click here for part two, here for part three, here for part four and click here for part five.
In our future blogs, we will continue to provide tips on various issues to watch for in health care employment contracts.
Contact a Health Care Attorney Experienced in Negotiating and Evaluating Physician and Health Professional’s Business Transactions.
At the Health Law Firm we provide legal services for all health care providers and professionals. This includes physicians, nurses, dentists, psychologists, psychiatrists, mental health counselors, durable medical equipment suppliers (DME), medical students and interns, hospitals, ambulatory surgical centers, pain management clinics, nursing homes, and any other health care provider.
The services we provide include reviewing and negotiating contracts, preparing contracts, helping employers and employees enforce contracts, advice on setting aside or voiding contracts, litigation of contracts (in start or federal court), business transactions, professional license defense, opinion letters, representation in investigations, fair hearing defense, representation in peer review and clinical privileges hearings, litigation of restrictive covenant (covenants not to compete), Medicare and Medicaid audits, commercial litigation, and administrative hearings.
To contact The Health Law Firm, please call (407) 331-6620 or (850) 439-1001 and visit our website at www.TheHealthLawFirm.com.
As a physician, do you have any questions about contracts? Tell us your mistakes or triumphs in negotiating your contract below.
About the Authors: Christopher E. Brown, J.D., is an attorney with The Health Law Firm, which has a national practice. Its main office is in the Orlando, Florida, area. www.TheHealthLawFirm.com The Health Law Firm, 1101 Douglas Ave., Altamonte Springs, FL 32714, Phone: (407) 331-6620.
George F. Indest III, J.D., M.P.A., LL.M., is Board Certified by The Florida Bar in Health Law. He is the President and Managing Partner of The Health Law Firm, which has a national practice. Its main office is in the Orlando, Florida, area. www.TheHealthLawFirm.com The Health Law Firm, 1101 Douglas Ave., Altamonte Springs, FL 32714, Phone: (407) 331-6620.
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The Health Law Firm" is a registered fictitious business name of George F. Indest III, P.A. - The Health Law Firm, a Florida professional service corporation, since 1999.
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