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Physician Employment Agreements: Do Physicians Know What They’re Signing? American Society of Medical Association Counsel Fall Conference November 18, 2022
Judith Jurin Semo Richard Levenstein Judith Jurin Semo, PLLC Nason Yeager, PA
© 2022 Judith Jurin Semo
Objectives • At the conclusion of this activity, participants should be able to : • Understand key legal issues when negotiating employment contracts with • Private practices • Staffing/management companies • Hospitals • Appreciate strategies to protect themselves when negotiating such contracts
Do Physicians Know What They’re Signing? • Protections • Risks • Ability of Employer to make unilateral changes • Termination • Post-termination baggage
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Summary Checklist (For Physicians)
• How long will agreement be in effect? • Are the duties clear?
• How fast, & on what grounds, can Employer terminate? • What options for physician employee to terminate?
• How much will physician employee be paid? • What are the benefits? Employee’s contribution?
• Any amounts subject to repayment? • Obligations after agreement ends?
Summary Checklist: Employer Perspective • Consistency w/other physician employment agreements • Flexibility • On work assignments/locations • To change compensation • Ability to terminate w/o cause • More recently: Ability to make changes/terminate in the event of “material adverse change” • Protection after agreement ends
Work Duties
• Are work duties clear? • If employer has multiple offices/facilities, where will physician be assigned? • How far away can Physician be assigned? • Note that work locations can affect scope of a noncompete • How often will physician be on call?
Are Duties Subject to Change?
Physician agrees to provide services at Hospital or other health care facilities designated by Employer. . . . Physician also shall perform any other activities deemed reasonably necessary for Employer’s benefit. See Exhibit A, attached hereto & incorporated herein by reference, & which is subject to change from time to time by Employer.
No control over where Physician will work
What “other activities”? Time req’d?
Duties can be changed at any time!
Protection Area: Compensation
• How much? • Base? • Sign-on bonus? Conditions? • Formula? Clear? • Incentive/performance-based pay? • Call pay?
If the compensation looks too good to be true, ask why!
The better the compensation, the greater the need for a longer term
• For all call, or just 1 st call? • For late afternoon/evening?
• Severance pay?
Compensation
For unassigned times on the schedule, Physician will have the opportunity to work those hours, for which Physician will be compensated in accordance with the terms of Exhibit B, which is attached hereto & incorporated herein by reference, and which is subject to change by Employer.
More protective: “rates may be adjusted, provided that they are not less than the rates on Ex. B”
Subject to change – payment rates may
be cut – or eliminated
Compensation: Concerns • Will compensation stay current over life of agreement? • If multi-year, consider “escalator” (automatic increases in compensation) • To keep compensation at fair market value levels • Potential for Employer to change compensation
methodology over life of agreement • E.g. , “billable minutes” productivity
Compensation: Productivity Physician agrees that his/her patient care efficiency and productivity will be consistent with his/her peers in the Department. “Efficiency” & productivity not necessarily in Physician’s control!
Also, if Physician has administrative duties, Physician necessarily will have lower “productivity”
Subjective & Susceptible to breach
“Cap” on Compensation?
The total compensation (including base salary, excess call pay, extra shift pay, quality incentive compensation, & medical administrative directorship compensation) will not exceed $___,000) for any year of the Agreement, as measured by Employer.
External benchmarks are per “FTE”; if work extra, working > 1.0 FTE
Too easy for Physician to lose extra pay for extra work, or other earned compensation
FMV “Adjustment” to Compensation? Physician's compensation may otherwise be subject to adjustment on an annual basis to remain consistent with Employer policies and procedures and Fair Market Value and commercially reasonable standards in accordance with Employer’s right to review Physician's performance at least annually.
Any ability to terminate before lower compensation is effective?
Is “adjustment” prospective only or retroactive?
Performance Metrics • How much money is tied to achievement of performance metrics?
• How measured? • Who measures?
• Target score? Realistic? • Within physician’s control? • Any review/appeal if disagree on score?
Performance Standards Physician shall be evaluated based on factors that include:
• Physician’s productivity and efficiency in handling patient matters • Physician’s willingness & effectiveness to promote the practice & himself • Physician’s interest in the practice from an entrepreneurial standpoint • A clear demonstration of the ability of Employer and Physician to work together with good rapport and understanding
What do these mean???
Benefits
• Are benefits subject to change? • Employers generally insist upon being able to change benefits & level of employee contribution • Caution on “Paid Time Off” being a benefit subject to reduction • Protections (very hard to negotiate): • Advance notice • Limit on extent of your increased cost • Increase in compensation to offset increased cost of benefits
Vacation & Paid Leave Physician shall be entitled to time off and sick leave in accordance with Employer’s policies. Physician’s ability to leave for vacation is conditional upon Physician making arrangements for hospital and emergency call coverage in her/his absence.
If PTO is set by policy, Employer can
Will Physician be compensated if not able to take time off?
Does this mean Physician cannot take time off if Dep’t is short-staffed?
reduce PTO unilaterally
Protection Area: Insurance
• Tail coverage upon termination of employment is critical to preserving Physicians’ options • Less flexibility to leave (from practical perspective) if Physician faces expense of tail coverage
Insurance: Consent to Settle
Physician agrees that Employer has the right to investigate, negotiate, & settle any claim, demand, suit, or action without Physician’s consent or approval. Physician further agrees that Employer may apportion liability, if necessary, for any mandatory state, federal, or other reports without Physician’s consent or approval. PROBLEM! Employer can settle any claim Physician’s name is reported to NPDB
Term and Termination
• How long will agreement last? • Termination: • Under what circumstances? • How long is the notice period? • Without cause? • Is the right mutual? • Can you terminate? • On what notice period?
Term and Termination Either party may terminate this Agreement, w/o cause, by providing at least ninety (90) days’ written notice of termination. In the event of termination without cause, Employer reserves the right to require Physician to cease performing (& cease being paid for) services for Employer at any time during such ninety (90)-day period, & the last day of such service shall be the effective date of termination of the Agreement. Subject to IMMEDIATE termination if terminated w/o cause! Eviscerates 90-day notice period
Term and Termination
Employer may terminate this Agreement immediately for cause. For this purpose, “cause” shall mean any of the following reasons: . . . • The occurrence of circumstances that make it impossible or impracticable for the business of Employer to be continued
Very broad & unspecific ground; should not be “for cause” termination
Can be terminated immediately (for cause) if business is down
Termination For Cause • For-cause termination often is immediate** • Grounds need to be specific • Not
• “Perform duties in cooperative fashion” • “Perform efficiently and competently” • Negotiate for “notice & cure”
** For-cause termination may affect other contract provisions – e.g. , may result in Employer not paying for tail coverage
“Non-Compete” • “Covenant not to compete” or “restrictive covenant” • An agreement on Physician’s part not to practice in a designated geographic area for a specified period of time • Often applies during the term • Severe restriction on Physician’s options if applies post-termination • For how long? • Where? What radius? • Enforceability depends on state law
Noncompete - Remedies • Must Physician pay costs of enforcing the noncompete? • If so, disincentive to challenge it • Read fee provision carefully
• Sometimes applies to any enforcement • Even if Employer is not successful
**Noncompete - Strategy • Consider negotiating that noncompete does not apply if • Employer terminates without cause, or
• On renewal, Employer offers lower level of compensation, or • Either party terminates during first 6 months of employment, or • If contract terminates due to “change in law,” or • Physician terminates for cause
Penalty for Violating Noncompete?
If Physician violates the noncompete, Physician agrees to pay Employer, in addition to any other relief . . ., immediately upon demand liquidated damages equal to the greater of (a) 100% of the total compensation paid to Physician during the 12-month period immediately preceding the termination of employment hereunder, or (b) 70% of Physician’s gross billings within the 12-month period following the violation.
70% of gross billings could easily exceed what Physician earns
Huge penalty!
Indemnification
Physician agrees to defend, indemnify, and hold harmless Employer for any and all actions, claims, & demands whatsoever, including court costs, expenses, & attorney’s fees, related to or arising from any act or omission of Physician in the performance of Physician’s obligations hereunder.
Potentially unlimited liability
Applies even if Physician is not negligent
**Policies • If Physician negotiates any changes to standard policies, make sure to provide: • In event of a conflict between the employment agreement and the employer’s policies, the employment agreement controls
Final Thoughts • Physicians must understand the deal before they sign • Not after problems have arisen • Even if they cannot negotiate deletion of all the problem provisions • Understanding how the agreement will work can empower them to select their course of action more wisely
Thank You!
Judith Jurin Semo Judith Jurin Semo, PLLC
Richard H. Levenstein Nason, Yeager, Gerson, Harris & Fumero, P.A. rlevenstein@nasonyeager.com (772) 215-0731
jsemo@jsemo.com (202) 329-8500
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