You will write a two-page paper after analyzing and discussing what you believe what the most important things a provider needs to consider. You will also need to describe what you think a

Physician Employment Contract Guide 2017

Introduction …………………………………………………………………………………………………………………… 2

Finding the Right Practice ………………………………………………………………………………………………….. 3 Resources ………………………………………………………………………………………………………………………………. 3 Practice Types ………………………………………………………………………………………………………………………… 3 Location …………………………………………………………………………………………………………………………………. 3 Practice Culture ………………………………………………………………………………………………………………………. 4 Growth ………………………………………………………………………………………………………………………………….. 4 Compensation Methods and Economics ……………………………………………………………………………………. 5

Negotiations …………………………………………………………………………………………………………………… 6 The Art of Negotiating……………………………………………………………………………………………………………… 6 Involvement of a Third Party ……………………………………………………………………………………………………. 6 Negotiating Tips for Physicians Seeking Employment ………………………………………………………………….. 7

Understanding the Contract ………………………………………………………………………………………………. 8 Benefits and Compensation ……………………………………………………………………………………………………… 8 Salary …………………………………………………………………………………………………………………………………….. 8 Non-Salary ……………………………………………………………………………………………………………………………… 8 Ownership/Partnership ……………………………………………………………………………………………………………. 9 Outside Activities ……………………………………………………………………………………………………………………. 9 Job Requirements …………………………………………………………………………………………………………………. 10 Restrictive Covenants …………………………………………………………………………………………………………….. 10 Contract Term ………………………………………………………………………………………………………………………. 11 Termination Criteria ………………………………………………………………………………………………………………. 11 Gap/Tail Insurance ………………………………………………………………………………………………………………… 12 Assignability …………………………………………………………………………………………………………………………. 12

Conclusion …………………………………………………………………………………………………………………….. 12 Sample Physician Employment Agreement ………………………………………………………………………….. 14

Self-Assessment Tool…………………………………………………………………………………………………………… ……….. 25 Physician Compensation and Benefits Worksheet …………………………………………………………………. 25

Timetable Prior to Practice Entry ……………………………………………………………………………………….. 27

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Copyright 2009, 2015, 2017. American College of Physicians, Inc. All rights reserved.

Disclaimer. The contents expressed in this Sample Physician Employment Contract Guide (“Guide”) do not necessarily reflect the official position of the American College of Physicians, Inc. (“ACP”), its officers, directors, employees, agents and representatives, and ACP makes no representations, warranties, or assurances, expressed or implied, as to the accuracy or completeness of the information provided herein, including by not limited to; any implied warranty of non-infringement, merchantability and/or fitness for a particular purpose. To the fullest extent possible by law, ACP", and its officers, directors, employees, agents and representatives shall not be liable for damages of any kind, including, direct, indirect, incidental, special consequential or exemplary damages, or other claims, arising out of the use of or the inability to use the Guide.

ACP is providing the information contained herein solely for informational and educational purposes and is not to be construed as legal advice, is offered "As Is" without warranty or condition of any kind whatsoever, and any action or outcome from its use is the responsibility of such user. Legal advice should be sought, in each instance, before entering into a binding employment contract.

Unless otherwise so noted, the contents of this Guide are protected by copyright and other intellectual property laws. Any unauthorized use, misuse or reproduction, retransmission, republication, or other use of all or part of any materials contained in this Guide by any third party is expressly prohibited, unless prior written permission has been granted by the American College of Physicians, Inc. (“ACP”).

2  American College of Physicians –Physician Employment Contract Guide

Introduction

Numerous publications, websites, recruiters, and other resources are available to help physicians find employment opportunities. This guide discusses the selection and employment contracting process that follows the identification of a suitable opportunity. It is intended to assist both individual physicians seeking employment and physician groups recruiting a physician.

Starting salary is a relevant but hardly the most important factor in the selection process. A physician’s job performance, degree of professional and personal satisfaction, and future career will be heavily influenced by the practice type, location and clinical quality of the group the physician joins, as well as by the fit between the physician’s own style of practice and that of the group. It is therefore critically important to both the practice and the physician candidate that they effectively communicate their

desires and expectations regarding the position.

Because the employment contract defines the conditions of employment and can therefore greatly impact future professional satisfaction and personal happiness, a physician needs to read carefully and fully understand every aspect of the employment agreement.

A contract’s legal terminology, such as ‘restrictive covenant’ and ‘assignability,’ can be confusing, and

some important contract provisions, if not understood, can lead to problems in the future. Other

provisions may need to be negotiated. Thus legal assistance from a qualified health attorney may be helpful.

Physician groups should strive to find a new associate who will work well within the group’s existing culture and will get along with existing staff. Groups should look beyond the first clinically well qualified

candidate willing to accept the group’s salary offer and consider the intangibles that will make the

potential candidate a good team player, productive, and a credit to the practice. And it is in the group’s

interest to be sure the physician candidate fully understands the group’s expectations and the conditions of employment before signing any agreement.

3  American College of Physicians –Physician Employment Contract Guide

Finding the Right Practice

Before a senior resident or fellow begins to think about signing an employment contract, there are a

few things he or she should consider. Even a ‘grizzled veteran’ physician looking for a new

employment opportunity should pause to consider the type of practice in which he or she wants to work and the preferred geographic location.

Resources

Professional publications or physician recruiters are two sources to check when looking for a

position outside one’s immediate geographical area. A physician’s local hospital or personal network

of colleagues, teachers or medical school and residency training alumni may also be excellent suppliers of information.

Today the Internet has become a major additional tool in the search for career opportunities. There

are websites that permit physicians to tailor their searches by specialty, type of practice, and location. Other sites focus on physician management opportunities, and some list opportunities in the managed care, hospital, or pharmaceutical industries. There are a host of resources available; and a

physician searching for the best opportunity should make full use of the advantages each source provides.

Group practices should consider the benefits of advertising position openings in several of these resources; however, the cost vs. benefits of advertising in different venues must be considered.

Practice Types

A physician should also consider what type of practice would best suit his or her needs and preferences.

Types of practices include, but are not limited to: solo, small group, large group, hospital or health system owned; health maintenance organization -based (HMO); single or multi-specialty; outpatient,

hospitalist, or a combination of the two; traditional, direct patient contract, hybrid, or government. Listing the characteristics, pros and cons of each type of practice can be advantageous when trying to make the decision. For example, a physician concerned with independence and primary decision-making

may wish to start a solo practice; however, he or she must be aware of the associated financial risk, or even the possibility of failure. A physician who is more risk averse may prefer to join a staff model HMO

or hospital owned group, but must be willing to accept reduced autonomy.

Practices hiring a physician should also consider the fit. Does the candidate have experience in your

practice environment? Will the candidate’s skills and personality fit well into your practice setting?

Hiring even a highly qualified candidate who predictably will have difficulty adjusting to your practice or community can lead to unhappiness and disruptions that serve neither you nor the candidate’s interests.

Location

When deciding on practice location, consider both the working and the living environments, such as the local school system, places of worship, availability of leisure activities and proximity to the hospital. The cost of living, crime rate, and transportation system may be personal priorities as well. Physician practices hiring a new physician should consider whether or not the candidate has previously worked in the geographic area, or a similar environment, may be an indicator of the physician’s willingness to stay long term. Reference checking on a local candidate also tends to be much easier.

Practice Culture

4  American College of Physicians –Physician Employment Contract Guide

There also are important subjective issues that both parties need to consider before agreeing on an

employment contract. The practice’s culture and value system should sufficiently correlate with those of

the physician. A physician should learn everything possible about the practice make-up by observing

practice operations, meeting owners, other employed physicians, staff and patients. Talking with colleagues unaffiliated with the group about its reputation and culture is highly recommended.

A physician may ask to follow one of the group’s physicians around for a day. This experience will enable the physician to listen for patient comments that may reveal patient satisfaction, quality and continuity

of care. The physician can discover first-hand what kind of system is in place to track patients’ test results, how much paperwork the group’s physicians have to do, and how the patient flow is managed. Also take advantage of this informal opportunity to ask the physician you are following about the practice’s culture and problems as well as his/her own satisfaction and contentment within the practice.

Likewise, a practice hiring a new physician should consider whether or not the candidate fits the practice

culture and what impact the candidate’s presence will have on the organization. During the hiring

process, the interviewer should ask open-ended questions designed to encourage the doctor to respond with in-depth answers that will reveal the physician’s character, values, job expectations, and potential personal problems. The group should ask for and investigate references from previous employers and the physician’s training program (if it is recent), contact hospitals where the physician previously held

admitting privileges, confirm that licensure is current, and check the National Practitioner Data Bank (www.npdb-hipdb.hrsa.gov) for possible malpractice, licensure, or other adverse actions. Finally, a

standard police check can provide added comfort in making the final selection.

Practice Economics and Growth

A physician should inquire about the financial condition of the practice as well. Practice stability is very

important when deciding on long-term employment. Consider how long the practice has been in business, its expenses, revenue, debt, and financial future. If the financial health of a prospective

employer is shaky, working conditions may be poor. Inquiring about the practice’s accounts receivable, especially the gross or net collection ratio, will help provide a sense of the practice’s collections success

and solvency. Along those same lines, practice potential and market potential are influential factors. Growth,

income, status, and mobility are aspects of practice potential that must be carefully considered. Market potential both has to do with community factors (the ratio of physicians to population locally,

population growth rates, local per capita income levels, and other demographic factors) and with the practice itself (reputation, size of patient base, number of new patients received annually, etc.)The physician and practice should also discuss the practice’s referral network, ancillary providers, hospitals,

and payers. To determine the payer mix one can ask the following questions.

 What percentage of revenue comes from Medicare, private insurance and self-pay? Also ask the percentages for capitation and deeply discounted fee for service plans?

 How reliant is the group on specific payers? (Excessive dependence on a few payers increases the practice’s vulnerability to downward pressure on reimbursement rates.)Is the practice part of an IPA or PHO that negotiates provider agreements and fees for the practice?

5  American College of Physicians –Physician Employment Contract Guide

The practice should be prepared to discuss these issues openly with physician candidates and to provide them the basic information they will need about the practice and community in order to make informed decisions.

Compensation

A key issue on the mind of anyone seeking employment is compensation. Although a salary may be negotiated during the hiring process, the compensation methodology for a particular practice usually is not negotiable. Many compensation models exist, including those based on individual productivity alone, share of practice income, salary guarantees, individual productivity less expenses, and multi- variable incentive bonuses tied to practice reimbursement and other objectives.

The practice and physician candidate should each consider how well the practice’s compensation scheme matches the candidate’s personality, working style, and preferences. For example, a physician wishing to be compensated for team effort may opt for a practice that pays physicians an equal share of practice income–but must recognize that no financial incentives will be paid for extra individual productivity. By contrast, a physician seeking a high degree of autonomy might look for a practice offering an “eat what you kill” arrangement in which physicians are paid strictly on the basis of their individual productivity,

less assessments for the practice’s overhead and expenses.

In considering feasible levels of physician compensation, it helps if both parties start from a common understanding of basic practice economics. The funds a practice has available to compensate physicians depend on the payments received from patients and payers for patient services rendered by the

physicians. Contractual agreements with insurance carriers reduce these payment amounts to levels well below the practice’s listed “charges” for the services (e.g., actual collections run about 70% of gross charges for general internists). From its actual receipts the practice must pay staff and other operating expenses (roughly 65% of receipts for general internists). The remaining funds are those available to pay physician benefits and salaries, plus any retained earnings, ownership income, capital investments, etc.

These residual funds may increase or decrease depending on the prosperity of the community, the lucrativeness of insurance contracts, the practice’s billing success and collections ratio, and its ability to hold down overhead expenses. Regardless of its internal economics, however, a practice must at least match the “going rate” for physician compensation in its geographic area, if it is going to attract and retain good physicians.

6  American College of Physicians –Physician Employment Contract Guide

Negotiations

Some residents believe they have little choice but to accept “in toto” the contract as it is originally presented to them. Others make the mistake of thinking everything is negotiable. The truth lies somewhere in the middle and will vary depending on individual practice circumstances. While practice economics and the need to be fair to previously hired physicians may limit a group’s flexibility, common negotiating ground usually can be found on the issues that are most vital to a reasonable physician.

The Art of Negotiating

Physicians should enter negotiations with a clear idea of what they want and what is minimally

acceptable. The goal of negotiation is to create a win-win solution, not to win at the expense of the other party. A physician must negotiate whatever terms he or she feels are truly essential to job satisfaction. A fear that hard feelings might develop even before employment begins sometimes inhibits physicians

from saying what’s really on their minds. Neither a physician nor an employer will be well served by the physician accepting a position only later to become miserable due to contract terms he or she failed to

address during the negotiations. Being forthright without being abrasive or unrealistic is therefore essential to the process.

It is wise for both parties to be creative and flexible in negotiations. A physician can introduce his or her

ideas but must be able to accept modification of demands or requirements, since no one realistically can

expect to get everything desired. While each party to a negotiation pursues their own interests, each should regard the other, not as a contestant, but as a collaborator in the search for overlapping

objectives. Try to generate options that accommodate both sides. Search for an arrangement that assures both parties a fair measure of satisfaction.

Experts believe that the time for a physician to negotiate the best deal possible is the honeymoon

period right after the group has made an offer to the physician. A physician however should keep in mind that the posture he or she adopts during the negotiating process will be discussed and remembered for a long time thereafter. Likewise, a physician can gain insight into the likely future

relationship with the group from the nature of the give and take in the contract discussions.

Prior to offering a contract, the employer group should decide how flexible they are prepared to be

during contract negotiations. Are they willing to make changes to the offer? How many changes and to what extent? The group should have a clear understanding among themselves about the issues on which

they are prepared to bend in order to attract a good candidate. They should give clear guidance to the physician (or other practice representative) who will negotiate with the candidate. These instructions should include the specific salary range within which the group’s representative is empowered to

negotiate. The instructions should also make clear when the negotiator must return to the group for further guidance on particular contract elements.

Involvement of a Third Party

Since an employment contract is one of the most important financial decisions a physician makes, any

misunderstandings can cause painful consequences. The contract offered by the group should be carefully reviewed or crafted by the group’s attorney to be sure it protects the group’s interests. Similarly the candidate physician should seek legal counsel to at least review the contract. Because certain aspects of physician employment are unique, it is important to select an attorney with previous health care experience. A knowledgeable health law attorney may be recommended by colleagues or

by the local/state medical society or bar association. Such lawyers can help identify potential conflicts

7  American College of Physicians –Physician Employment Contract Guide

and suggest alternative contract language. While the cost of hiring an attorney usually is money well

spent, physicians must guard against relying so heavily on legal counsel that they do not fully

understand the contract provisions with which they alone must comply once it is signed.

Some advisors recommend that a physician employ a consultant to help conduct the actual negotiations. A skilled negotiator can evaluate terms, re-draft contract language, and bring additional negotiating expertise to the table. The right consultant may also help the negotiations build a win/win agreement without creating discord. However, involvement of a third party lawyer or contract

negotiator to help the physician can also introduce some tension in the relationship with the group, especially if the practice itself prefers not to employ such outside professional assistance. Since few employment situations absolutely require the added expense of hiring a third party negotiator, most physicians tend to rely on the free negotiating advice available from their attorney, colleagues, or even a search firm that introduced them to the opportunity.

Negotiating Tips for Physicians Seeking Employment

1. Gather information and be prepared. Find out as much about the practice in advance as you can.

What questions can you anticipate from them? What do you want to know? Determine what you want to accomplish. Similarly the practice should obtain a CV, cover letter, and list of references

from each candidate prior to scheduling interviews to screen out those candidates who may not fit the practice’s criteria.

2. Treat people with respect. From the receptionist to the partners, show courtesy and

consideration. It creates a great first impression.

3. Negotiate from the perspective of mutual benefit and fairness. Whenever you are seeking a

concession, explain why it is fair. If it could benefit patients or the practice, point that out. Always have logical reasons for what you want and why you are asking for it. If it involves financial

consequences, be prepared to consider giving up something else in exchange.

4. Set priorities. Before you come to the table, review, rank, and list critical factors. What is

negotiable? What is not?

5. Develop a strategy. Consider how you will obtain your most important points. Are they easy or difficult for this practice to offer? Which other points are easy for the practice to offer or

concede? Start with an easy point to negotiate. Get a feel for the process and the people involved. Tackle your hardest issue midway, and conclude with light ones.

6. Return to unresolved issues after most of the bargaining is done. At that point, added pressure to find common ground creates a greater bargaining base for both parties, because the success of everything you’ve done so far hinges on resolving these few remaining issues.

7. Get it in writing. When you negotiate a change in the contract, make sure that change is in writing, not simply a verbal agreement.

Understanding the importance of point number 7 is critical. Every material aspect of the contract on which the parties agree should be recorded in writing. Verbal pledges can be made in good faith, but over time memories grow short, details blur, and/or circumstances change. The person making the pledge may leave the group. Oral pledges are hard to prove after the fact. Most employment contracts indicate that only the commitments specified in the contract are considered binding.

8  American College of Physicians –Physician Employment Contract Guide

Understanding the Contract

The contract defines the employment relationship between the physician and practice. Even if an attorney or professional consultant helped negotiate or review the contract, ultimately the decision to

accept the offer rests with the physician. There are specific terms and benefits the contract should address before either party signs on the dotted line.

Compensation and Benefits Salary and Incentive Pay

Salaries vary widely depending on geographic location, specialty, and years of experience. It is up to the

physician to convince an employer that he or she will be sufficiently productive and cost-efficient to

justify the desired level of compensation. It is very important for a physician to fully understand the compensation formula the group will use to calculate salary and incentive pay.

Pure salary is unusual beyond the first year of employment. Therefore the methodology and variables for calculating incentive payments usually determine the attractiveness of the offer. Most of the incentives that will be tied to productivity are variously defined in terms of RVUs, charges, net or gross collections.

Sometimes other performance variables added to reflect patient satisfaction, utilization, quality improvement measures (especially for hospitalists), “citizenship,” etc. Too many incentive criteria makes for confusion and frustration on the part of physicians. It is important to analyze which of the incentive variables may, in part, be beyond the physician’s control. For example, “net collections” are influenced by

the contracts as well as the effectiveness of the group’s billing and collections staff– so how good are they?

While compensation formulas vary considerably, each practice ultimately must agree t

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