An Employment Contract Model for Joining a Medical
Practice


Robert I. Freedman, Esq

Medscape Business of Medicine. 2007; ©2007 Medscape
Posted 09/18/2007



Introduction

Recent physician graduates -- and even experienced
physicians -- are not always in a position to hang out
a shingle and wait for patients to come knocking at
their door. Instead, they may need to seek employment
with physicians in established practices, or with
medical groups, clinics, or other organizations that
hire clinicians.

The relationship between the physician being hired to
perform services and the person or company engaging
that physician's services is governed by an employment
contract. Once signed by both parties, the contract
constitutes a binding agreement between the parties
for the term of the agreement, and, often in some
respects, beyond the expiration or termination of that
document. The entity doing the hiring will furnish the
contract and the physician being hired will review it.
The potential employer should have the contract
drafted by a knowledgeable attorney, and the physician
being hired would be well advised to have it reviewed
by a similarly experienced professional.

Some of the more important terms of that agreement are
explored in this column. A summary of all of the terms
likely to be found in such an agreement is contained
in the following contract checklist.

Medical Employment Check List

Term
Duties and Performance
Qualifications and Licenses
Conformity with Laws, Rules, Regulations, and Policies
Salary and Benefits
Expense Reimbursement
Malpractice Insurance
Fee Determination and Accounting
Acceptance of Patients
Establish Rules and Regulations
Medical Records Are Employer's Property
Vacation and Other Paid Time Off
Termination of Agreement
Employee's Turn Over Obligation on Termination
Death or Disability
Limitation of Employee's Authority
Employee¹s Representations
Applicable Law
Binding Affect; No Assignment
Notices
Noncompetition and Nonsolicitation
Confidentiality
Amendment to Be in Writing
General Provisions


Duties
In most instances the employee will be required to
render services exclusively to the employer. If the
employee has any other obligations (eg, military
reserve, voluntary service for a charitable
organization) these should be stated as exceptions to
the exclusivity. The agreement should designate what
areas of specialization the employee is being hired to
engage in and whether there are any limitations to the
employee's practice in such areas. There might be some
general language to the effect that the employee is
expected to engage in activities to promote the
employer's practice and comply with all legal and
administrative procedures.

Employee Requirements

The employer would be well advised to require
submission of all necessary qualifications, including
Board certifications and state licenses; and the
employer should verify these. Failure to do so could
result in significant liability to both parties.

The employee will typically be required to:

Maintain his or her certifications and licenses during
the term of the agreement;
Comply with the state's mandatory continuing medical
education requirements; and
Otherwise comply with all rules and regulations
governing the employee's practice, including all
administrative procedures required by the employer.
Salary and Benefits

The salary is usually stated as annual compensation
and will depend on several factors including:

Nature of the practice;
Experience of the employee;
Location of the practice; and
Hours demanded of the employee.
The compensation may be paid weekly, biweekly or
monthly, depending on the employer's payroll
practices.

The compensation may include a bonus based upon the
productivity of the employee and/or the employer's
overall performance. If the agreement is for longer
than 1 year, there may be a provision for an increase
in compensation in successive years (usually 5%-10%).

Benefits may include medical and dental insurance,
life insurance, and disability and retirement
benefits. These benefits can have significant value.
Vacation time is also important and may be 3-4 weeks
plus some time off to attend required CME programs.

Expenses

The employee might request that the employer pay for
or reimburse certain expenses, such as the following:

Continuing education;
Attendance at conferences and meetings;
License fees, dues and subscriptions; and
If the employee is required to relocate, the costs of
relocation and moving.
If the employer does agree to cover these or other
expenses, the employer will likely place a cap on the
total reimbursement.

Malpractice Insurance

Any employer will want to cover their employees under
its malpractice insurance and will require them to
comply with any conditions necessary to conform to the
insurance carrier's requirements. An important
contractual provision is a "prior acts" or "tail"
policy that will protect the employer and employee
after the employee quits or is terminated from acts
committed while the employee was working for the
employer. A negotiated point is who will have to pay
for such a tail policy.

The Employer's Authority

The employer will want to set the employee's billing
rates; have ultimate decision as to what patients to
accept; and to be the owner of all medical records,
charts, case histories, radiologic and laboratory
reports prepared by or worked on by the employee
during the term of employment.

Term and Termination

Term. To be binding, the agreement should set forth a
term (usually 1-3 years), during which the contract is
to be in effect. The agreement may terminate at the
end of the term and require a new agreement for any
continuing employment or it may automatically renew
for a like (or other) term unless the parties agree
otherwise. The agreement may also terminate within the
term period for reasons discussed below.

Termination. The employment agreement will usually
contain a litany of causes that could give rise to the
termination of the employee's services, including but
not limited to the following:

Losing one's certification;
Engaging in criminal conduct;
Furnishing false information on the application;
Abusing drugs or alcohol;
Failing to qualify for malpractice insurance; or
Abandoning duties to a patient.
Agreements may also have a catch-all reason of failing
to act professionally.

Usually the employee can terminate at any time (the
13th Amendment outlawed involuntary servitude), but
the employee would typically be required to give
advance notice of termination -- usually 3 to 6 months
-- so the employer can rearrange schedules and seek
out a replacement. In the same sense, the employer
might want the right to terminate the employee's
contract without cause, but also with a reasonable
notice period.

Noncompetition and Nonsolicitation

Other than compensation, the addition of a
noncompetition and/or nonsolicitation clause to an
agreement is often the most contentious clause in the
employment agreement. Basically, this restrictive
covenant states that the employer will have added
specific and beneficial investments to the employee's
career and that the employee will have received
confidential and proprietary information from the
employer. Furthermore, the employer has good reason to
protect its interests against competition from the
employee. Therefore, most contracts will require that
the employee not engage in the designated practice of
medicine, in the designated location for a designated
period of time.

Many law cases have centered around the legality of
such restrictive covenants in general and restrictive
covenants in the medical profession in particular. The
argument against them is that patients should have the
right to choose their own physicians and restrictive
covenants limit that right. Each state has its own
laws and precedence regarding this issue. By way of
examples, in a New Jersey case, a 2-year restriction
on a neurosurgeon practice was held as reasonable but
the 30-mile radius was determined to be too broad. In
Illinois, the courts upheld a restriction of 5 years
and 5 miles against a cardiologist. The courts need to
balance the conflicting public interests of freedom to
contract with the highly personal relationship of
physician and patient. To be upheld a restrictive must
satisfy the following requirements: (1) it must be
related to a contract for employment; (2) it must be
supported by consideration; and (3) it must be
reasonably limited in both time and territory.

The American Medical Association discourages the use
of restrictive covenants in that they disrupt
continuity of care and potentially deprive the public
of medical services.






Case 1: Dr. Washington Seeks Employment and Discovers
a Restrictive Clause

Young Dr. Washington has finished his residency and is
scouting around for employment in his home town of
Jeffersonville. Through a friend he learns that the
Lincoln Park Medical Clinic is looking to hire a young
physician for its family practice. Dr. Washington goes
on a few interviews, impresses the clinic's
management, and is offered employment. A few days
later he receives an employment agreement.

Much to Dr. Washington's surprise, a provision in his
employment contract states that if his employment with
the clinic expires or is terminated he must agree
that, for a period of 2 years,

He will not practice within a 2-mile radius of the
clinic;
He will not advertise or announce the opening of his
practice within that same radius; and
He will not solicit the clinic's patients.
Dr. Washington believes that this must be an error in
the agreement but learns, to his chagrin, that the
clinic management is serious about these provisions
and that there was no error. At this point, Dr.
Washington decides to seek an attorney.

The attorney advises Dr. Washington that the
objectionable provisions in the contract are perfectly
legal; but that they are not written in stone and
might be negotiated. With the attorney's assistance,
Dr. Washington negotiates the period down from 2 years
to 6 months, and the radius from 2 miles to 1 mile.
This gives Dr. Washington a fighting chance to open
and then grow a practice of his own in Jeffersonville
some time in the future.







Robert I. Freeman, Esq., Partner, Cowan DeBaets
Abrahams & Sheppard, New York, NY

Disclosure: Robert I. Freedman, Esq., has disclosed no
relevant financial relationships




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