Graduating Residents & Fellows

So you found a practice opportunity and they are talking about a Letter of Intent or an employment contract. Now what?

A Letter of Intent is a preliminary document used by some larger practices. Typically, a Letter of Intent outlines some of the more significant terms of employment, such as annual compensation, location, general benefits, etc. Letters of Intent are generally non-binding. However, once you agree to terms in a Letter of Intent, those terms are generally considered non-negotiable. Think of a Letter of Intent as a way to test your commitment.

Healthcare Law Offices of Jonathan S. Gunn

Physician employment contracts are filled with jargon. They also vary greatly from region to region. Legal interpretation is typically not taught in residency or fellowship. A licensed attorney with extensive experience with physician employment contracts in the region where you will be employed can not only explain the binding terms of a medical contract, but can recognize terms which may be unfair, over-broad, atypical or problematic. An experienced medical contract attorney can  recommend commonly acceptable alternatives and negotiation tactics. Mr. Gunn has personally handled more than 500 physician employment contracts.

What Are Covenants Not to Compete and Why Are They Critical?

A Covenant not to Compete (also called a Restrictive Covenant) is a contractual promise not to compete with an employer. They are usually expressed in terms of time and distance. Physician employers want Restrictive Covenants to protect investments made in promoting and supporting a newly hired doctor, so that after becoming established, the physician does not set up a practice nearby and compete. But are physician Restrictive Covenants really enforceable? The answer depends on the details. When a Restrictive Covenant is supported by adequate consideration, protects a legitimate business interest, and is reasonable in terms of time and distance, it is likely enforceable. However, exceptions do exist. A court may refuse to enforce an over broad physician Restrictive Covenant entirely or may, in some cases, redraw the terms to make restrictions reasonable. Enforcement may involve an injunction court order to cease practice, an award of monetary damages or both. It’s critical that physicians fully understand the terms and implications of all Restrictive Covenant provisions before signing a physician employment agreement. Anytime a physician changes employment, it is also essential to review the scope of any existing Restrictive Covenants to be sure that new practice activities will not violate prior contractual terms.

Why Does Professional Liability Coverage Raise So Many Difficult and Expensive Issues?

Malpractice liability insurance coverage is not only essential, but expensive, especially for higher risk specialties. Because of cost, most private practices provide malpractice policies of the "claims made" variety. In general, under a "claims made" policy, unless the same policy is in force on the day the alleged malpractice occurred and on the day the "claim is made", there is no coverage, unless an extended reporting endorsement or "tail" coverage is purchased prior to the claim. Depending on specialty and time in practice, the cost of tail coverage can be in multiples of the annual premium, sometimes reaching six-figures. Therefore, when a physician leaves a practice, the question of ongoing insurance coverage for "acts and omissions" during employment can become a thorny and expensive issue. As a result, many physician employment agreements require the departing physician to purchase expensive "tail" coverage when employment ends. However, reasonable and less expensive alternatives exist, but generally must be negotiated before the physician employment agreement is signed. After the medical contract is signed, there is relatively little incentive for the practice to negotiate.

What About After Hours Call?

When a physician's duties include after-hours call, the question of which doctor takes what call, where, and how often, is important to long term satisfaction. After monetary compensation, few issues can be as divisive as unfair distribution of after-hours call. Simple equitable contract provisions, negotiated up front, can help avoid unfair and unpleasant situations later.

What Are Non-solicitation Clauses?

When physicians part ways, two questions often arise: First, "What about the patients?" and Second, "What about the records?". While patients are free to contact any doctor they choose, a physician can contractually give up the ability to solicit, contact or even treat patients of the former practice. Such clauses are often referred to as Non-solicitation or non-treatment clauses. A Non-solicitation cause can also be used to prevent a departing doctor from recruiting or hiring physicians, mid-level providers, and other employees of the practice to join the departing doctor in a new venture. Such clauses may also apply to referral sources. But are Non-solicitation clauses in physician employment contracts really enforceable? Generally speaking, such provisions are enforceable against a doctor, but not enforceable against individual patients. Generally speaking, the medical records are the property of the practice. Physician employment and medical contracts should never try to restrict a patient's access to his or her own medical records. Finally, patient lists can be a protected Trade Secret and as such, must not be improperly taken, copied, compiled or used by a departing physician.

Compensation Issues

A physician employment contract should contain clear explanations of how compensation, both Primary (salary & bonus) and Secondary (expenses, time off, CME, health, licensing, and malpractice insurance, etc.) will be handled. A well written physician employment contract may avoid expensive misunderstandings. Compensation typically includes a guaranteed minimum salary, sometimes with potential for a production related bonus. After the first employment year, compensation typically transitions to a productivity model. Productivity may be measured on collections or upon Relative Value Unit (RVU) production. Under a collections model, the physician typically receives a percentage of actual net collections. Under an RVU model, a physician is paid a specified amount per RVU generated. As RVU production hits certain pre-established levels, the incremental compensation per RVU may also increase. RVU production requirements are typically based on published metrics. A growing trend is to base a portion of physician compensation on reaching various quality metrics, which may include patient outcomes, patient satisfaction, practice growth, and/or  other considerations. Whenever possible, clear mathematical formulas together with objective metrics should be specified. Where alternative or complex compensation models are employed, a medical contract attorney should be able to bring in financial and number crunching expertise into the physician employment medical contract review and negotiation process.

Do I Really Need a Medical Contract Attorney and What About Contract Negotiation?

A good physician employment contract is custom made to fit the situation and is fair to both sides. Unfortunately, some practices over-reach. There is no "standard" physician employment contract or agreement. Every practice utilizes a physician employment agreement developed for its practice. But do you really need a medical contract attorney to review the contract? The answer depends on multiple factors. First, physicians must recognize the difference between merely understanding the words and phrases contained in a physician employment contract and understanding all of the practical implications of those same words. A knowledgeable medical contract review attorney can explain complex terms and the practical implications, which sometimes do not need negotiation. Other times, there may be unfair terms and/or special considerations which call for creative solutions. Second, a medical contract attorney experienced with physician employment contracts will be able to formulate creative and alternative solutions that may be acceptable to both sides. A medical contract attorney can also suggest helpful negotiation points, priorities and strategies. Some physicians may wish to have a lawyer handle contract negotiations directly with the employer. Each and every situation is different. A medical contract review attorney should be able to provide the level of assistance that fits your particular situation. In choosing a medical contract review attorney, be sure to select an attorney that has handled at least 100 physician employment contract agreements in your chosen geography in the past few years. Experience is critical. Mr. Gunn has personally handled more than 500 physician employment contracts and regularly teaches residents and fellows. He also edits a chapter in the Law of Medical Practice in Illinois, a legal textbook.

What Are Merger and Integration Clauses?

Most physician employment contracts contain a clause that merges and integrates all agreed terms into the final written contract, thereby effectively nullifying all prior promises. A properly written merger and integration clause will render all verbal and even e mail promises null, void and unenforceable. Therefore, if any promise or term is important, efforts should be made to include the promise or term into the final physician employment contract agreement.