All Posts by Dennis Hursh


About the Author

I am a healthcare attorney with over 35 years of experience, focusing on physician employment contracts.

terminated 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

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.

can't start work
Jan 16

Starting Work Under a Physician Employment Agreement

By Dennis Hursh | Physician Contracts

It may seem like an obvious question, but many first drafts are not clear as to the date of starting work under a physician employment agreement. While many physicians may view the first position after training as a reward from the universe for all those years of medical school and beyond, employers have a somewhat different perception. To be blunt, employers hire physicians to generate revenue.

To protect the employer, many physician employment agreements provide a physician start date, but contain conditions that may move that date back. Virtually no employer wants a physician starting work under a physician employment agreement if the physician is not yet licensed to practice medicine in that state, for example. Similarly, few employers want a physician starting work under a physician employment agreement if the physician does not have federal DEA (and state equivalent) authority to prescribe medicine. These requirements are not a problem for most physicians, given the normal timeframe for recruitment and negotiation of physician employment agreements. As long as the physician is reasonably diligent in applying, the DEA and most state boards of medicine will process the application fairly quickly. Expecting a physician to be diligent in applying is hardly an unreasonable request from the employer’s perspective.

Starting Conditions Beyond the Physician’s Control

However, many physician employment agreements also impose starting conditions that are at least partially out of the control of the physician. One very common condition that must be met before starting work under a physician employment agreement is the requirement that the physician obtain hospital privileges and become accepted as a participating provider on major payor panels. Depending on when the physician executes the physician employment agreement and its proposed effective date, this can become an issue.

If the physician is executing a physician employment agreement in November with an assumed start date the following July or August, this condition should not be a problem.

Hospital Credentialing Issues

However, many physician employment agreements are not made final until April or May, with an assumed starting date of July or August. Hospital credentialing moves at a snail’s pace. Most hospitals require “primary verification” of the physician’s training, which means they need an official copy of the physician’s transcript directly from each school, residency, and fellowship program that the physician attended. They may also require a letter from the director of the residency/fellowship program(s). Obtaining those documents may take months.

Once the documents are obtained, and the physician’s file is complete, one or more committees will examine the files; then, they may want more information (elaboration on a less-than-ringing endorsement from the fellowship program director, for example). Although the hospital will have paid staff handling the credentialing file’s organization, physicians who are already on staff in the relevant department will perform much of the credentialing  analysis – and they are frequently not paid for this thankless task. The hospital staff will generally try to avoid imposing on the physicians any more than necessary, so the staff won’t give committee members a credentials packet until the staff feels it is complete. The staff will also schedule meetings to be convenient for committee members.

Although it may be a foreign concept to physicians coming out of training, working physicians engage in a practice called “vacation,” where they frequently hit little balls with expensive sticks at exotic locations. While engaged in this pursuit, these physicians are not available for meetings to look at credentials. Worse, from the new physician’s perspective, there is no “Dean of Vacations” to assure that the physicians all take their vacations at the same time, thereby assuring convenient availability for meetings. Hospital staff members, who are used to working at a glacial pace normally, refer to the summer as a “slow period.” If a physician’s credentials packet lands at the hospital during the summer, it can take months to get it in front of the committee.

As a result of such delays, some physicians with contractual start dates in July, August, or even September find that they have not been granted privileges when they are supposed to start work. The physicians may have moved into town and signed a long-term lease by then, all in anticipation of being employed at the start date. A similar phenomenon can occur with managed-care credentials.

Physician Employment Agreement Provisions

The physician employment agreement provisions regarding what happens if a physician doesn’t obtain hospital and managed-care credentials become critical if the physician finds him or herself in such a position. Physicians need to recognize the employer’s legitimate interest in not being forced to pay a physician when that physician is unable to generate revenue. At the same time, the physician should not be forced to continue in unpaid limbo while the process grinds forward. Negotiations around this issue can be tricky because of the economic importance of the matter to both the physician and the employer.

First, let’s talk about what the physician employment agreement should not provide. The physician employment agreement should not automatically terminate if the physician is not credentialed by the effective date, nor should it give the employer the unilateral right to terminate the physician’s employment agreement. Ideally, the physician employment agreement should also not be simply suspended until all credentialing is completed.

The physician employment agreement should distinguish between a failure to become credentialed and a denial of credentials. If the physician has been denied hospital credentials, that physician probably has some major problems in the credentialing file; it may be reasonable for the employer to refuse to wait for the physician to fix those issues. The physician employment agreement should also distinguish between failing to obtain credentials because of a lack of responsiveness on the physician’s part, and failing to obtain credentials because the hospital or managed care company is slow to process an application. The employer should agree to provide administrative assistance to the physician in credentialing and to use best efforts to expedite the process. Finally, the physician employment agreement should only require credentialing with major payors, not every payor the employer has dealings with.

Needed Flexibility

When negotiating a physician employment agreement, I always try to insert a provision requiring both parties to sit down in good faith and attempt to negotiate a mutually satisfactory arrangement allowing the physician to start at the original start date, even if credentialing is not complete. For example, if the physician has hospital credentials and has been accepted by every major payor of the employer except one, the employer may be able to schedule patients for that physician who are not covered by the slow payor. This may not be possible if a dominant payor has not credentialed the physician, of course. The failure to be credentialed by Medicare is going to have a lot more impact on a geriatrician than on a pediatrician, for example.

Similarly, if all the payors have credentialed the physician but the hospital has not, perhaps another physician can admit patients and do rounds until the new physician gets privileges. Both parties likely can find creative ways to work out something acceptable if the physician employment agreement is flexible enough.

The physician may need to be flexible as well. If the employer is willing to make concessions to allow starting work under the physician employment agreement, the physician must be prepared to make concessions as well – these concessions might include reduced hours and compensation until all the conditions provided for starting work under the physician employment agreement are satisfied.

patient contact hours
Jan 09

Patient Contact Hour Requirements in Physician Employment Agreements

By Dennis Hursh | Physician Contracts

The first draft of many standard physician employment agreements is silent on patient contact hour requirements. Often, the first offer provides that the physician is expected to work “full-time”, without defining that term.

Larger physician practices and health systems are often willing to stipulate that you are expected to work 40 hours per week (exclusive of call coverage requirements). At first blush, many physicians might feel that is eminently reasonable. A standard work week is 40 hours, right?

However, it’s important to delve into how many patient contact hours are required each week. Some employers specifically require 40 patient contact hours per week. If you are scheduled to see patients for 40 hours each week, you may be working significantly more than you initially anticipated.

In particular, if the employer does not utilize hospitalists, you may be expected to “round” outside of the 40 patient contact hours. This can be especially onerous if the employer admits patients to multiple hospitals.

And regardless of expectations regarding rounding, you can be expected to spend significant time on charting and other administrative activities. One respected journal has estimated that physicians in four common specialties spend, on average, 785 hours per physician per year just dealing with reporting on quality measures!

Physician employment agreements with a private practice are likely to require much more flexibility in scheduling. Patient volumes do not decline when a physician is absent because he or she is sick, taking vacation, or attending CME. Good patient care may require extended office hours during these periods, so that the remaining physicians can see patients within a reasonable time of an appointment request.

A true 40-hour workweek may be attainable if the employer is willing to agree to about 32 patient contact hours each week. That should give you adequate time for rounding, charting, medical staff meetings, and other administrative duties – and still allow you to have a life outside the practice of medicine.

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