All Posts by Dennis Hursh

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About the Author

I am a healthcare attorney with over 40 years of experience, focusing on physician employment contracts. My book, The Final Hurdle, a Physician's Guide to Negotiating a Fair Employment Agreement, is available on Amazon.

physician employment agreement offer
Jul 05

The Physician Employment Agreement Offer

By Dennis Hursh | Physician Contracts

It’s only natural that when you receive a physician employment agreement offer your competitive drive kicks in. As a physician, you’ve no doubt considered yourself to be in competition your whole life. You were at the top of your class in high school, because you knew competition to get into a good college was fierce. In college you took all the hardest courses, and you knew you had to be at the top of the class to get into medical school. Given that background, many physicians feel they need to keep competing after they have received a physician employment agreement offer.

Almost uniformly, though, potential employers view the competition for the position as being over once they make an offer. There may very well have been several qualified physicians vying for that position. The employer may have sifted through a large number of curricula vitae. It’s possible that more than one potential candidate was flown in for interviews. Nevertheless, when a physician employment agreement offer is extended, most employers view the selection process as over. If the potential employer is acting in good faith, it has made its decision by the time the physician employment agreement offer is tendered.

Of course, the curricula vitae of the other candidates may be retained, “just in case.” But this employer has decided that you are the one. It has invested valuable physician time in sifting through the documents of all the candidates, invested money in bringing you in and putting you up when you interviewed, and invested more physician time in the actual interviews. Physicians earn a living by seeing patients, not by interviewing potential new employees. They have foregone significant income by investing their time in choosing their next colleague. This is not a process that they want to keep repeating until they strike the best possible deal among everybody interested in the position.

To reiterate – at the time the physician employment agreement offer is presented, the employer has made up its mind. The prize is no longer the position, it is the physician (you). Of course, I am not suggesting that you now become obnoxious or cocky. At the same time, however, it is important that you realize that you have a lot more bargaining power at this point then you may think you have. The employer probably views physician employment contract negotiations as a tedious step it needs to go through in order to achieve its goal of bringing you in as a colleague. The employer most certainly does not view the initial offer as “take it or leave it”, nor does the employer have a pool of other candidates it would be just as content to work with.

The bottom line here is that you should not be concerned about the employer’s reaction to a legal review of a physician employment agreement. Nor should you be concerned about the employer’s reaction to citing MGMA benchmarks in a physician employment agreement review. By all means, don’t hesitate to get a physician employment agreement review. But, most importantly, relax – the competition has been won!

trapped physician
Feb 20

Malpractice Insurance in Physician Employment Agreements

By Dennis Hursh | Physician Contracts

Problems with malpractice insurance  in physician employment agreements are horror stories that repeat themselves all the time. A new physician takes a position right out of training and signs the contract presented to her. After a few years, she is ready to move on to greener pastures in another town. She’s moving far enough away that her restrictive covenant won’t apply, and this time she’s getting her offer reviewed by a  competent physicians contract attorney.

Her attorney gives her a thorough written review of the physician employment contract, and they discuss the review over the phone. One of the lawyer’s comments about malpractice insurance puzzles the physician. Her attorney says that the new contract contains what he describes as a “common provision,” a clause to the effect that the new employer’s malpractice insurance will only cover her for claims arising from her new employment. Does her current employer have a “tail”?

The physician is absolutely convinced that her current boss has horns, but she has never seen evidence of a tail. Her attorney explains that a “tail” is a policy that covers the physician for claims that arise after she leaves her current position. Tail coverage isn’t always required—depending on the type of insurance her current employer carries, the physician may be
covered for those claims automatically. A casual discussion with the office manager at her current position reveals that the practice has claims-made insurance, so the physician will not be covered for any claims that arise after she leaves. Her current contract requires her to purchase tail coverage at her expense when she leaves. The physician is shocked to learn that the premium for the tail coverage is about a third of her yearly salary. She reluctantly decides that she can’t afford to change jobs now or in the foreseeable future. She is stuck in a position that she hates and has to turn down what seems like a dream job in comparison to her current servitude.

Types of Physician Malpractice Insurance

There are two types of physician malpractice insurance: occurrence and claims-made policies.

The first type of policy covers you for any claims that “occur” during the period of the policy. If a claim arises based on an alleged action or omission during the period the policy was in force, you are covered - no matter when the claim is presented. In other words, if a case is filed several years after you leave employment, based on alleged malpractice that occurred while you were employed and covered by that policy, you are automatically covered.

The second type of physician malpractice insurance is claims-made coverage. As the name implies, such a policy will only cover a claim that is made during the policy period (i.e., if a lawsuit is filed or threatened). If you leave employment and a claim is filed against you based on alleged malpractice that occurred while you were employed, this type of policy will not cover you.

There are several reasons an employer may purchase claims-made coverage. First, of course, it is cheaper than occurrence coverage. In addition, sometimes occurrence coverage is simply not an option - once the legal environment reaches a critical mass of craziness (as it did in Pennsylvania a few years ago), insurers stop selling occurrence malpractice insurance. As in much of healthcare, these crises tend to be cyclical, so the availability of occurrence insurance varies over time in any given state.

To protect the physician after leaving a position with claims-made malpractice insurance, a separate policy to cover any later claims that are based on alleged malpractice at the old position must be purchased. This is called “tail coverage.”

Tail coverage isn’t cheap. Premiums for a tail can cost as much as a third of a year’s salary. That’s why it is so important to make sure your employment agreement addresses payment for a tail when you leave.

The Bottom Line on Physician Malpractice Coverage

The employer should agree to provide malpractice insurance in reasonable amounts. For example, the coverage provided should be no less than the greater of state-mandated minimums or that required for the hospital staffs the physician is required to join. The type of coverage provided (occurrence or claims-made) is almost never subject to negotiation.

To protect yourself when you leave employment, you have to negotiate responsibility for payment of tail coverage premiums. That must be done regardless of what kind of insurance the employer is currently carrying. Even if the employer has occurrence insurance now, you must protect yourself if the employer subsequently switches coverage (either voluntarily, to reduce costs, or because occurrence coverage simply isn’t available anymore).

I remember the good old days when virtually every employer was willing to pay for a tail. Those days are long gone. Most hospitals are willing to pay for a tail, although that concession is not uniformly contained in the first offer. Private practices, however, are becoming less likely to offer to pay for tails, especially in the first offer.

I have found that many employers are willing to pay for all or a portion of the tail under certain circumstances, especially if the physician can convince them that it isn’t fair not to pay a tail. For example, I am frequently able to persuade employers to pay for the tail if they terminate the physician’s employment without cause or if employment terminates because of the physician’s death or disability.

As a fallback position, if I can’t get the employer to agree to pay for all of the tail coverage, sometimes I am able to obtain partial payment based on the length of employment. For example, the employer might pay a fifth of the tail’s cost for every year of service. That way, if the physician sticks around for five years, the employer pays all the tail’s costs.

However, many employers are not willing to pay for any portion of the tail if the physician terminates employment without cause or if the employer terminates the physician’s employment for cause. It’s a little hard to get the employer to pay for a tail under circumstances in which the physician embarrassed the employer, especially if that embarrassment involved legal exposure.

For those looking at a physician’s employment agreement with a private practice, the good news is that most practices do pay for a tail for the practice owners.

Problems with malpractice insurance in physician employment agreements are a big deal - physicians must ensure that they are protected, or they could be trapped in a job by financial restraints.

termination for cause physician
Feb 06

Termination “For Cause” in Physician Employment Agreements

By Dennis Hursh | Physician Contracts

The topic of termination for cause in physician employment agreements is obviously a delicate one. Employers have a  legitimate desire to make sure they can terminate a physician’s employment agreement if the physician terms out to be a lousy physician, or if patient demand just doesn’t justify paying the physician any longer.

A physician employment agreement should provide reasonable protection to both the physician and the employer if either party fails to live up to the bargain. The agreement should also provide reasonable flexibility for both parties to get out of the deal, even if the other party didn’t do anything wrong – or “without cause” termination of physician employment agreements.

In legal jargon, the phrase “for cause” refers to termination of a physician employment agreement because the other party breached it. A party can terminate the agreement for cause if the other party didn’t do what it was supposed to do, or did something it wasn’t supposed to do. A party can also terminate the agreement “without cause” (or “not for cause”) even though the other side didn’t do anything wrong..

Grounds for Termination of a Physician Employment
Agreement

The first draft of a physician employment agreement typically contains numerous grounds that authorize for cause termination for the employer, but no similar right for the physician. The reasons a physician can terminate the agreement because the employer was at fault are usually somewhat limited. Generally, simply preserving the physician’s right to terminate the agreement if the employer breaches it (i.e., without listing the various ways that might happen) will be enough protection. This will allow the physician to terminate the agreement if, for example, the employer fails to pay the physician, or fails to do something else that it agreed to do.

When I review a physician employment agreement, I also try to give the physician the right to terminate for cause if the employer is excluded from any federal healthcare program (e.g., Medicare, Medicaid). This is important, since a physician can be excluded from these programs if the physician has a contractual relationship with a party that has been excluded.

The employer, on the other hand, likely will have a long laundry list of grounds to terminate the physician’s employment for cause. Some are hard to argue with, such as if the physician dies or is convicted of a felony. A physician’s ability to see patients will be severely limited if the physician is in the Great Beyond or behind bars. Similarly, if the physician loses his or her medical license, the physician will have little value to the employer.

Like everything else in the agreement, the exact language regarding termination for cause is critical. In this country, one is generally presumed innocent until proven guilty. However, many employers try to stipulate that a physician may be terminated for cause if the physician is indicted (i.e., formally charged with a crime). This point can be difficult to negotiate, since the employer’s reputation could be severely damaged if the media reports one of its physicians has been charged with a serious crime. Nevertheless, it may be worth fighting for the requirement of an actual conviction as grounds for termination. At a minimum, this ground for termination should only apply to felonies or crimes involving alleged healthcare fraud— a physician shouldn’t lose her job because of a speeding ticket.

A similar argument can be made for loss of hospital privileges. If the physician actually loses her privileges, then obviously her value to the employer is significantly diminished (and there is probably a reasonable question regarding her competence to treat patients, as well). However, initiation of the process to revoke privileges should not trigger termination of a physician’s employment. Medical staff politics can be ugly, and some physicians are not above questioning competence for competitive reasons.

The good thing about negotiating the language regarding grounds for termination is that there should not be any question as to how the provisions apply. Presumably, the fact of a physician’s death is not something the physician and the employer will argue about. An actual conviction and a revocation of staff privileges are also both clear-cut.

Negotiable Grounds for Termination of a Physician Employment Agreement

However, there are likely to be other grounds for termination of a physician employment agreement that are not so obvious. For example, disability is another common ground for termination. In this regard, the definition of “disability” is crucial, as is the method of determining a disability. The provisions regarding termination of a physician employment agreement because of a disability should be consistent with the provisions regarding compensation during the physician’s disability. One thing that physicians have going for them is the Americans with Disabilities Act. The ADA generally requires the employer to make “reasonable accommodation” to allow a physician to continue to work even though that physician is disabled.

It’s likely the employer will try to provide other grounds for termination that could be more subject to dispute. One fairly common ground for termination is the employer’s belief that allowing the physician to continue to treat patients would endanger those patients’ health (think of this as a “crappy doctor” termination). While few would argue that a crappy doc should be allowed to continue to treat patients, the quality of care a physician provides may be hard to measure. Occasionally, I have successfully argued that other provisions in an agreement protect the employer (for example, in a hospital setting, the ability to terminate the physician if privileges are revoked protects the employer). More often, I have had to settle for language that requires the “crappy doc” determination be reasonable and made  in good faith. Such language gives the physician some ability to challenge the determination, if necessary.

Employers also frequently insert provisions authorizing for cause termination if the reputation of the physician or the employer is adversely affected by something the physician did. It’s hard to argue with the theoretical appropriateness of that provision. Yet here, again, it is crucial to insert language assuring that any such determination is reasonable and made in good faith. I am also usually able to get the employer’s counsel to agree that the reputation must be “materially” adversely affected by something the physician has done. Picking her nose in front of a patient certainly doesn’t enhance the physician’s reputation or that of the employer—but it shouldn’t be grounds for termination.

It is fairly common to allow the employer to terminate the agreement if the physician is excluded from a managed care company’s panel of providers. Obviously, a physician’s exclusion from a major payor’s panel would have a huge impact on the employer’s finances. However, it is important to limit the employer’s right to terminate the physician’s employment to instances in which the physician is excluded from panels of payors that are material to the practice. It is one thing to be excluded from participation in the Blues (particularly in an area where they dominate the market). It is quite another to be excluded from Mutual of Podunk, when the employer only sees about one patient a year with that insurance.

Some for cause termination provisions allow a “cure” period. That is, the provision will allow the breaching party to fix (“cure”) the problem within a reasonable time. The time allowed to cure a breach varies from as little as five days to 60 days or more. If the employer is given a cure period, the physician should generally be given one as well. However, physicians shouldn’t expect to be given a cure period for everything. Losses of medical licensure, exclusions from payor panels, and losses of hospital privileges can frequently be appealed, both internally and (sometimes) in the courts. If a physician is convicted of a felony, she may very well have appeal rights right up to the Supreme Court. That doesn’t mean that the employer should be required to participate in a work-release program if the physician gets out of the slammer every Wednesday while she is appealing a conviction. For this reason, most for cause termination provisions provide for immediate termination if the provision is triggered.

A for cause termination can have a major impact on a physician’s chances to obtain a good position elsewhere. If the termination is based on alleged clinical deficiencies, the employer will be required to report the termination to the National Practitioner Data Bank (NPDB). An NPDB report will not only make it harder for a physician to obtain employment, it will also impact the ability to obtain hospital privileges and to participate in payor panels.

Because of the devastating impact that a for cause termination can have on a physician’s career, the provisions relating to termination for cause in a physician employment agreement must be reviewed and negotiated.

fellowship program
Jan 30

A Fellowship Program Should Cover Physician Employment Agreements

By Dennis Hursh | Physician Contracts

There is no doubt that a physician completing a fellowship program in this country is superbly qualified to treat patients.  With board certification becoming a virtual necessity for employment, programs have to provide Fellows with all the clinical knowledge needed to excel in their specialty. ACGME accreditation standards are exacting, and an accredited program can be expected to matriculate physicians who are completely and thoroughly trained in all things clinical.

But there is one aspect of fellowship program training that stills seems lacking in many, if not most, of the fellowship programs I have interacted with.  In general, real-world clinical scenarios are completely and exhaustively covered.  But, unfortunately, real-world issues about how a Fellow will earn a living tend to be ignored.

Nobody expects a harried fellowship program director to turn out physicians who are able to interpret and negotiate a legal contract.  Still, I think it’s reasonable to expect that a matriculating Fellow is at least cognizant of the major issues he or she should be aware of when a physician employment agreement is presented.

As the author of a book on physician employment agreements (The Final Hurdle – a Physician’s Guide to Negotiating a Fair Employment Agreement) I find it particularly telling that physicians who buy my book on Amazon leave comments like “This book really opened my eyes to how much I did not know about contract negotiations.  None of the information in this book is covered in medical education curriculum.” As one reviewer indicated “This book should be given to every med school graduate and resident.”  Why do these physicians feel that their medical education was lacking?  I think it’s fair to say that they went into medicine predominately to help people.  But it is undeniable that they also expected to earn a decent living doing so. Matriculating Fellows rightfully expect to obtain a rewarding career after all their education.

What does this mean for fellowship directors?  I don’t think it means that a new course on “All the Excruciating Details of Contract Law Entailed in a Physician Employment Agreement” needs to be added to the curriculum. But fellowship directors should consider bringing in a competent physician’s contract attorney to speak to the Fellows, so they have a rudimentary understanding of what to look for in a physician’s employment agreement. I would love to be that person! If you would like to set up an appointment, please feel free to set up an appointment.

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