Category Archives for "Physician Contracts"

Apr 13

Not Giving the Notice Required Under a Physician Employment Agreement

By Dennis Hursh | Physician Contracts

I have had several physicians ask me if there is any reason why they can’t just give two weeks’ notice (or so) and leave a bad situation, even though their physician employment agreement requires notice of significantly longer. Having scoured the contract, they usually inform me that there is no penalty provided for leaving early.  Accordingly, the physician usually feels that the employer won’t be able to do anything to them if they simply skip out early. They ask me “After all, what can they do to me?”

Unfortunately, the real answer as to what they can do to you is “Quite a bit, actually.”

Money Damages if you Breach your Physician Employment Agreement

Although your physician employment agreement may not lay out the employer’s rights if you leave without giving the required notice, there is a large body of contract common law squarely on the side of the employer. It has long been established that where a party breaches the agreement (which is what you are doing if you leave without giving the required notice) the other party may recover its reasonable damages.
The damages to the aggrieved employer can be substantial. For example, if the employer must hire locum tenens to cover your patients, the cost of that locum tenens (minus what you would have been paid) could reasonably be claimed as damages. Although the physicians who work as locum tenens are not paid a princely sum, the companies which arrange for their services are paid very handsomely – so this could be several times your salary for the required notice period.

Credentialing and Patient Notification

The ability of the prior employer to claim money damages is not all that a jilted employer can do to a departing physician. Unless you are staying in town, and maintaining privileges at the same facilities where you currently treat patients, the former employer is likely to be contacted as part of credentialing. Anything less than a ringing endorsement is considered a red flag in credentialing.
Since your new physician employment agreement probably has obtaining credentialing as a condition of the offer, placing credentialing in jeopardy is not something that should be done lightly. The last thing you want is to quit at your current employer and then have the new offer revoked.

Moreover, bear in mind that (unless you negotiated otherwise in your physician employment agreement) the employer will be notifying your patients of your departure. Here again, it would be infinitely better to have a positive (or at least not negative) notification sent to your patients.

The Golden Rule

Finally, the employer may owe you money for things like unused vacation, accrued bonuses, or other benefits under your agreement. What do you think your odds of collecting that money look like if you breached the physician employment agreement that gave you those rights? Even worse, I have seen employers refuse to pay for tail coverage, even though the physician employment agreement provides that they will pay for that coverage.

Attorneys like to quote what we call the “Golden Rule”, which is probably not the one you learned. For attorneys, the Golden Rule is generally stated as “The one with the gold rules”. In other words, the employer will be holding money that is owed to you. It will be up to you to pry that money out of the employer. Litigation is always expensive and chancy. Your odds of success decline if you have breached the physician employment agreement that is the basis for the lawsuit.

My Advice for Physicians Who Want to Leave Without Giving the Notice Required by Their Physician Employment Agreement

I almost always recommend sticking it out for the required notice period. Even if they have been jerks, it’s almost always better to take the high road and leave on the best terms possible. As noted above, if you leave early, you could be sued for the money the employer must spend to replace you. The employer may give you less than stellar recommendations in credentialing requests, and may also notify your patients in a way that doesn’t make you look good. Even worse, the employer could refuse to pay you money that is owed, or refused to buy tail coverage even though your physician employment agreement provides that they are responsible for that.

Don’t let the absence of a specific provision in your physician employment agreement lull you into a false sense of security. The monetary cost of failing to give the notice required by your physician employment agreement can be substantial, and the effect on your reputation can be even worse.

And next time, get your physician employment contract reviewed to protect yourself!

physician's contract review
Nov 18

Physician Negotiation Basics

By Dennis Hursh | Physician Contracts

The following is an excerpt from my book, The Final Hurdle, A Physician’s Guide to Negotiating a Fair Employment Agreement.  Although it written with a physician’s first contract in mind, the advice is equally applicable to any agreement a physician is involved with.

Imagine that you have completed all the courses, passed all the exams, and are finally ready to take your first position. You have diligently pursued every lead, and now you have impressed the individual who does the hiring at a place you feel would be a good fit for you.

You are out at the nicest restaurant in town (possibly with your spouse, if you had time for a social life at some point in your educational career). The food is superb, and fine wine is flowing. The physician in charge is at the table, and the two of you are having an animated discussion. You feel this physician really understands the sacrifices you have made and already views you as a worthy colleague.

The candlelight, great food, interesting conversation (and, perhaps, the wine) are giving you a sense of collegiality and belonging. This job is starting to look like a lock! You are already savoring the offer that is virtually certain to come. You feel that those monstrous student loans really can be paid off, and you will still be able to live comfortably, almost luxuriously. It all just feels right.

The physician you are chatting with leans toward you and says, “You seem like a perfect fit! We’ll send you our standard contract, which we all have signed. Of course, like the rest of us, you’ll be agreeing not to practice medicine in this city if for some reason you ever leave us. You don’t have any problem with that, right?”

This seems like a no-brainer. “Of course not!” you hurriedly exclaim. It’s a great salary with great people, and everybody else has agreed to it, so why on earth wouldn’t you?

Whoa there, Doc!

It is perfectly natural for you to want to show that you are a team player at this point. After all, you worked your butt off to get where you are. You have excelled throughout your academic career, and through all the hard years of your residency (and maybe through a fellowship, too). Your compensation to this point has been slightly above subsistence – probably not as much as you would have been paid if you had worked at minimum wage for all those hours of studying, working, teaching, and covering call. If you are in a committed relationship, your significant other has endured much to get you to this point. Your educational loans are likely in the hundreds of thousands of dollars; you may feel that you are drowning in debt. Instinctively grabbing for the first life-preserver offered is only natural.

Still, at this point you desperately need both practical advice and expert guidance as you deal with the process of obtaining your first position. The simple fact is that the world of academic medicine is somewhat insular. Nobody would question your keen intelligence, and you have obtained, through plain hard work, an incredible amount of highly specialized knowledge. However, analyzing compensation structures and contractual terms for physician employment agreements is another “specialty” altogether. Just when you thought the race was over, you’re suddenly looking at an unexpected final hurdle. You can’t stumble now! You need a consult –stat!

You have sobering responsibilities, both to yourself and to those you love to make the best possible decisions at this critical juncture. The first contract you accept will influence the rest of your life – not just your professional career. It is vitally important to use every resource available to you to assure the best possible outcome.

My advice? Play the “dumb doc.” Please don’t be offended – this charade is simply a negotiation tactic that can be handy in several circumstances. You can gain time to consider a proposition, for example, or you can say it’s your advisers, not you, who are critical of the offer. By explaining with a smile that you “really don’t understand this legal and business stuff,” you can take full advantage of the expertise of your advisers. By the way, you are likely to see this tactic used against you at least once during recruitment and negotiation, so just recognize the tactic for what it is and go with the flow.

Doctor upset at paycut
Sep 06

Not All Physicians’ Compensation Should Be Average!

By Dennis Hursh | Physician Contracts

I recently negotiated physician employment agreements for most of an entire department at the flagship hospital of a local health system. Although I’ve negotiated hundreds of physician employment agreements, this negotiation was an eye-opening experience!

Although I was able to get quite a few major concessions in contract language, the physician compensation model that was offered still has me shaking my head.

Under the guise of “quality,” this health system is putting a major portion of the physician’s salary at risk. So, although modest salary increases were proposed (roughly equal to the cost of living), a physician’s guaranteed salary is actually reduced by almost 20%. The “quality” hoops that physicians are required to jump through to “earn” this final portion of their compensation include things like meeting attendance, “good citizenship”, and documentation and coding (along with a few criteria that might actually relate to quality, such as clinical quality and patient experience). Some physicians in other departments have productivity requirements as part of the “quality” measures they must meet (because, as we all know, payors view billing more as an important aspect of quality!)

Believe it or not, the major potential haircut in physician compensation wasn’t what prompted me to write this screed. What really has my head spinning is this system’s treatment of more experienced physicians. As you would expect, physicians who have been with the system for many years are getting paid more than newly minted physicians. The system is addressing this “discrepancy” by freezing the compensation of these senior physicians until their compensation hits median compensation for all physicians in their specialty.

I call this the “Reverse Lake Wobegon Effect.” Whereas at Garrison Keillor’s fictitious hometown of Lake Wobegon, “all the children are above average,” this health system apparently believes that all of its physicians are perfectly average. Years of experience count for nothing, so apparently one person in a white coat is as good as any other (so long as the appropriate “quality” hoops are jumped through, of course).

Not surprisingly, as soon as the compensation freeze for experienced physicians was announced, one of the most senior physicians in the department jumped ship. Apparently, some health systems still recognize the benefits a seasoned professional brings.

I would like to think this physician compensation freeze is an anomaly, based on the monopolistic position this health system holds in its market. But as a physician’s lawyer, I am concerned about two things.

First, given the pernicious effect of covenants not to compete in physician employment agreements, many physicians with kids in school may feel trapped at this institution.

Secondly, I’m concerned that this misguided health system might start a trend. If we are truly going to increase the quality of the healthcare in this country, we have to stop treating physicians as a commodity. As consummate professionals, physicians tend to deliver at peak performance no matter how they are treated by their employers. Health systems need to stop taking advantage of the professionalism of physicians, and start recognizing it as the valuable asset it is.

I thought getting this off my chest would make me feel better about this situation.  Instead,  I find myself getting more upset the more I think about it.  Hopefully, this post will stimulate some conversation, and maybe in some small way slow down the trend of treating physicians as commodities.  That would be best for all of us – physicians and patients alike.

8 steps to selling
Mar 15

The 8 Stages of Selling a Medical Practice to the Hospital

By Dennis Hursh | Physician Contracts , sale of medical practice

I have represented physicians in dozens of sales of medical practices to hospitals, and I have noticed that these deals tend to follow the same path each time:

  1. Everybody loves each other. The physicians feel that this will be a great match. The hospital understands what they want and is extremely willing to do whatever it takes to make the deal happen. Warm and fuzzy best describes the atmosphere.
  2. The employment agreements and asset sale agreement  are produced. Perhaps because of an oversight, several of the promised concessions somehow didn’t make it into the agreements. The physicians assure me that the lawyers just didn’t get the deal right. We only need to point out the problems, and they will be fixed. All is good.
  3. I give my responses to the agreements as produced. The physicians feel I went a little overboard, since I seem to be questioning why the pieces of paper don’t match the discussion. A vague sense that the lawyers might screw up this deal begins to pervade the discussions.
  4. The hospital responds to my requested changes. It turns out the hospital “never” commits to doing some of the things the docs felt were agreed to in their discussions. The physicians begin to question whether they should be going forward with this deal.
  5. Negotiations continue. The hospital begins to perform its due diligence. The physicians feel that any examination of their practice is a breach of trust, and that the questions being asked are invasive. The doctors begin to develop a feeling that the “corporate folks” don’t understand the practice of medicine, and that the hospital is only interested in them for the value of their services. A definite sense of unease permeates discussions with the physicians.
  6. The hospital makes its final offer. It really isn’t what the docs understood the deal to be, and they feel  the process is driving them into a bad decision. A time of self-reflection for the physicians ensues.
  7. Some relatively minor issue (e.g., a document is requested that was previously supplied) puts the physicians completely over the edge. The deal is off!
  8. I end up soothing ruffled feathers, and the physicians decide that, all things considered, it isn’t a horrible deal.The documents are signed. The physicians are happy that the ordeal has ended.

I really wish I could make things better during this process. My hope is that physicians reading this will recognize that they are going through natural stages, and will have a little less angst as we work through this process together.

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