A medical professional (Physician, APRN, Physician Assistant, et cetera) entering into an employment arrangement is often handed an employment agreement as the first step in the process. This article includes some guidance on the process and issues that arise in the employment contracting process.
Letter of Intent
In many business situations, negotiating the terms of an agreement starts with a non-binding letter of intent, which outlines the material provisions of the anticipated agreement. Having a letter of intent allows the medical professional to confirm a preliminary understanding regarding the basic terms of the employment relationship, and will help eliminate uncertainty regarding the back and forth of the parties’ discussions to that point.
Requirements to be met by the Medical Professional
The following are typically covered in the scope of the medical professional’s contractual requirements:
- Maintaining required licensure. What licenses will be required? Where will licenses be required?
- Will the medical professional be required to be board certified, or board eligible. Board eligible means that the medical professional has taken the steps to be eligible for certification but is not currently certified. The medical professional entering into an employment arrangement should be clear as to the employer’s requirements and intentions.
- What are the requirements concerning credentialing? Credentialing refers to qualifying for a provider network or health care institution. Where will you be required to have credentials? Are there any impediments?
- Most employers in the medical field will require that employees be qualified to receive reimbursement under private and public insurance programs.
- Employers typically also require that employees have not been an excluded Medicaid or Medicare provider, either at the federal or state level.
- An employer typically will require that a medical professional have no unresolved professional complaints against his or her license, or will require complete disclosure of all such complaints.
- Likewise, an employee will likely be required to disclose any pending litigation.
In deciding to take on employment, a medical professional should review and be certain they can meet the employer’s requirements.
Duties of the Medical Professional
- Will the position be part-time, or full-time? What is the definition of part-time or full-time?
- What are the scheduled hours of services? Can the scheduled hours be changed without the agreement of the professional?
- What are the requirements for the medical professional to provide call coverage? Are the requirements consistent with other medical professionals engaged for the same type of professional services?
- At what locations will the medical professional be expected to provide services?
- Does the agreement allow the medical professional to provide services to other employers outside the scope of the employment agreement?
- What arrangements are being made to provide professional liability insurance for those services?
- Will the medical professional be restricted from providing services to patients already being treated?
- What are the timing and other requirements for administrative or other duties, such as billing, serving on committees, or research?
Requirements to be met by the Employer
- Many employers in health care maintain electronic health records systems. Employers should agree to provide appropriate training and support on use and compliance requirements related to such systems. The employer should agree to provide the necessary space and equipment for the medical professional to perform required services. In addition, the employer should agree to provide licensed staff and other resources necessary to assist the medical professional in carrying out his or her duties under the agreement
- The employer should not be an excluded provider under the Medicaid or Medicare programs
- The contract should specify that the person signing it on behalf of the employers has the authority to do so.
Compensation and Benefits
In order to prevent fraud and abuse under federally funded healthcare programs, federal laws govern the amount and nature of compensation that may be paid to a medical professional. Here is a brief overview of some of the major concepts:
Medical professionals can not accept remuneration in return for referring an individual to a certain provider for medical care, or in return for purchasing goods and services which are paid for in whole or in part under a federal health care program.
Physician Self-Referral Statute (Stark)
Federal law prohibits a physician from referring patients to an entity with which the medical provider has a financial relationship; there are exceptions for bona fide employment relationships.
An employment relationship is bona fide if it meets the following criteria:
- the employment is for “identifiable services”;
- the amount of the remuneration meets the following requirements:
- “is consistent with the market value of the services, and
- “is not determined in a manner that takes into account (directly or indirectly) the volume or value of any referrals by the referring physician”; and
- compensation must be “commercially reasonable” even if no referrals were made to the employer.
42 U.S.C. § 1395nn(e) (2).
A component of commercial reasonableness includes the fair market value of the compensation to be paid to the physician, but can also involve other issues such as hiring all physicians of a particular specialty in order to control a market, or signing up an excessive number of medical directors when the actual volume of services would not justify that volume of personnel. In order to be commercially reasonable, CMS guidance provides that the arrangement must be sensible and prudent from the perspective of all of the parties, without regard to potential referrals. This includes, among other things, actually performing the contracted services.
- How will the initial compensation level be determined? The parties may want to obtain an independent assessment of the fair market value of the physician’s services.
- How often will the physician’s compensation be evaluated?
- Will the compensation be based on salary only, incentives, relative value units (RVUs), collections and productivity, or a blending of methodologies?
Finally, employee benefits to be provided, and the allocation of costs between the parties should be specified:
- Insurance and retirement plans
- Paid time off
- Professional dues, and continuing medical education
- Cellular telephone reimbursement, tablets, computers or other necessary equipment or supplies
While the common bases for termination are fairly standard (death, disability, for cause, no cause), some agreements include vague language for things like “lawless or disobedient behavior”, or disruptive behavior. Provisions for termination should be reviewed to ensure that the reasons for with cause terminations are clear. Additionally, carefully consider the notice period for a termination. If a medical professional is terminated for any reason, the amount of time for which compensation and benefits continues should be clear and reasonable. The impact of the various types of termination on other issues should also be considered:
- What type of continuation of professional liability insurance will be required and who will pay for it?
- If there are any non-compete or non-solicitation provisions in the contract, how do the provisions apply and what are periods that are covered?
- How does the agreement renew? Is renegotiation required? Does the agreement automatically renew? If the agreement automatically renews, consideration should be given as to how to avoid automatic renewal in the event that it is not desirable.
Professional Liability Insurance
What type of coverage is being provided?
- Claims Made Policy – the physician is insured for a claim if it is made while the policy is in effect.
- Occurrence Policy – the physician is insured for any injury occurring during the policy period, regardless of when the claim is made.
Who will be responsible for obtaining and maintaining malpractice insurance, and how will those costs be allocated to the parties? If a physician leaves employment, and the coverage is “claims made”, who will be responsible for paying for the tail insurance to cover those potential claims? For instance, if the physician is terminated for no cause, the physician may want to negotiate for the employer to provide coverage for the tail.
Covenants Not to Compete
If employment terminates, will the agreement provide that the physician is unable to practice within a certain geographic area for a certain amount of time, or to treat certain patients, or types of patients?
Will those restrictions depend on how the relationship is terminated?
What role will patient choice play in determining the applicability of the noncompetition provisions?
What are the applicable laws that may govern such noncompetition provisions, and will they be enforceable?
Indemnification provisions require one party to hold the other harmless from any losses that may occur because of that party’s conduct. If the medical professional is being asked to indemnify the employer for losses he or she causes, will the employer agree to make that provision mutual?
An alternative is to not have any indemnification provision at all, and rely instead on the professional liability and other coverages that are in place.
Ownership of Medical Records
Following termination, will the departing medical professional have ownership of the medical records of any patient he or she treated? In most cases, the employer will continue to own the medical records. Typically, the medical provider should have access to such medical records for purposes of defending a malpractice claim and always at the request and with authorization of a patient. The employment agreement should specify how the provider will be able to get access, and under what conditions, or cost?