Legal Issue
The 5 Most Important Decisions in a
Physician Employment Agreement
by Scott Chase, JD
Over the years, physician employment agreements have become very standardized. However, there are
several provisions in such agreements that the to-be-employed physician must review carefully with his/
her attorney. The following is a brief summary of what I consider to be the 5 most important provisions
for a physician to understand and negotiate with the employer.
Working Facilities and Staff
An employed physician needs adequate
facilities, equipment, supplies and staff to fulfill
his/her responsibilities. Yet, most employment
agreements do not contain a provision that requires the
employer to provide those items.
The adequacy of staff also could affect compensation.
Consider a scenario in which the employed physician is
on a bonus system that relies on collections of his bills
by the practice. The contract should contain a provision
that the employer will have adequate billing and collection
services.
Liability Insurance
The employment agreement generally will
contain a provision for the employee/physician to
purchase “tail” insurance in case the agreement
is terminated. Tail coverage can be a substantial cost
and, thus, the contract should be written to ensure the
employee is not responsible for that coverage in all
circumstances, e.g., in case of termination for cause by
the physician. This provision is also one that can and
should be negotiated.
Physician employment contracts are one of the most
important financial undertakings in his/her life. Although
tedious, provisions should be reviewed, understood, and
negotiated to the fullest. The entire contract should be
carefully reviewed but the above items should receive the
most attention. DMJ
May 2019 Dallas Medical Journal 31
Compensation
First and foremost, the compensation needs
to be clearly written and understood. Many
compensation models are based on “Work
Relative Value Units (WRVUs),” which are calculated
by independent third parties and can be a trap for the
unwary. For example, the calculation of WRVUs can
change from year to year and the employment contract
usually provides for the current WRVU value to be the
compensation model. What happens if the WRVU value
decreases substantially in a given year? Answer: The
physician’s pay could decrease substantially as well.
Careful negotiation of the compensation provision could
ameliorate that occurrence.
Additionally, compensation usually includes employee
benefits—vacation, health insurance—and those can
sometimes be negotiated as well. Attention also should
be paid to the reimbursement of expenses such as CME,
credentialing fees and professional society fees.
Non-Compete
Texas has a statute specifically addressing
physician non-competes, i.e., restrictions on
where and when a physician can practice
his/her specialty after termination of the employment
agreement. However, the statute does not mandate the
time period, extent of the restricted area, or the exact
type of physician actions that would constitute a violation
of the non-compete. Furthermore, certain termination
circumstances could be negotiated that would render
the non-compete unenforceable or inapplicable. Thus,
the non-compete should be negotiated in that it provides
ample opportunities to advocate for favorable terms on
the physician’s behalf.
Outside Activities
Most physician employment agreements require
the employed physician to work full-time and
often provide that any outside fees earned, such
as expert witness fees, belong to the practice. However,
many physicians have pre-existing consulting arrangements,
charitable activities or other professional endeavors that
should be excepted from the restrictions on outside activities
and ownership of fees. Again, this is a provision that can and
should be negotiated.
Scott Chase, JD has practiced health law, corporate law, and intellectual
property law for more than 35 years. Mr. Chase is Board Certified in Health
Law by the Texas Board of Legal Specialization. Mr. Chase is a partner at
Farrow-Gillespie Heath Witter, LLP. His primary
practice focus is business transactions for physicians
and healthcare facilities, as well as healthcare
regulatory issues, such as the Affordable Care Act,
HIPAA and peer review. Mr. Chase handles general
corporate matters and trademark/copyright issues for
physicians and also for a variety of non-healthcare
clients.