Category Archives for "Physician Contracts"

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 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.

Call Coverage Requirements in Physician Employment Agreements

By Dennis Hursh | Physician Contracts

There are some physician employment agreement negotiations you just never forget. One of my more memorable negotiations involved representing a new physician, just out of fellowship, who was offered a position at a solo private practice. The practice’s current owner was ready to expand and wanted help with his 24/7 call coverage schedule.

Like most first offers, the draft agreement initially presented wasn’t perfect – but it didn’t seem particularly horrible, either. One of the goals of a good physician employment agreement is that it be crystal clear on the parties’ rights and responsibilities. This offer was a little fuzzy on several points, and I requested that the practice’s attorney clear up the ambiguities. One of the fuzzy points was assignment of call coverage.

The draft agreement simply provided that the employer would assign call coverage. There was no mention of how, exactly, call coverage would be assigned. I requested a specific schedule, or, at a minimum, a provision that call coverage would be equitably allocated.

However, when the other side presented the first revision, the offending language was unchanged. The practice’s attorney rather sheepishly explained that his client wasn’t willing to agree to allocate call coverage equitably. Since the solo physician had been practicing alone for six years, doing 24/7 coverage, he intended to assign 24/7 coverage to the new physician, “at least for the first few years.” The attorney was concerned that “there could be an argument” that the arrangement was not equitable.

Needless to say, more negotiations were in order. Eventually, I convinced the other side that they would never get anybody to help the physician unless he was willing to share call coverage. If we had not straightened that issue out, my client would have been miserable in the new position.

Smaller employers are likely to require much more flexibility in scheduling. If the practice only has three physicians, for example, call coverage is likely to spike several times throughout the year. Each time 1/3 of the physicians (i.e., each physician) takes vacation or CME time off, the call coverage will probably significantly increase for the remaining two physicians, who are temporarily doing the work of three.

Larger employers may provide an expected call coverage schedule (e.g., one night every eight and one weekend per month). These schedules will rarely be firm commitments. However, sometimes the employer will be willing to stipulate that call coverage will not exceed some limit (e.g., one night in four or two weekends per month).

The Medical Group Management Association (MGMA) publishes benchmarks for call coverage in various specialties. These benchmarks provide information on unpaid call coverage hours per week, as well as hourly, daily, and annual compensation for call coverage. Citing the MGMA benchmarks in a physician employment agreement review can be very helpful in negotiating a fair physician employment agreement. If call coverage isn’t specified, or if call coverage appears to be more than the median unpaid weekly hours, I always cite the benchmarks and request additional compensation for call coverage beyond median when I review and negotiate physician employment contracts.

Call coverage requirements in private practices can be complicated. Frequently senior partners will enter a glide path into retirement. That is, at some point the senior partner may stop taking call. In a larger private practice, increased call coverage may be negligible for the remaining physicians. However, in a smaller practice, removing one physician from call coverage can have a material impact. When negotiating a physician employment agreement, you have to balance the desire for a workable call coverage schedule for the new physician with quality-of-life concerns for the senior physicians. Sometimes the new physician simply has to “pay dues” with the understanding that when that physician is nearing retirement there will be payback. MGMA benchmarks can be useful in this scenario – although the new physician may be taking more call coverage than they really want, at least we can try to negotiate additional compensation for the additional burden.

No matter how well we negotiate provisions concerning call coverage assignments, I have found that the newest physician always seems to end up with call coverage on Christmas. Isn’t that a freakish coincidence?

Physician Employment Agreements with a Private Practice

By Dennis Hursh | Physician Contracts

Physicians who receive physicians employment agreements from a private practice have all the concerns with their employment agreement that any other physician receiving an employment agreement has. I’ve previously written about how private practice employers react when MGMA benchmarks are cited in a physician employment review. In addition to compensation and benefits, physicians in private practice, like all other physicians, are concerned about restrictive covenants, call coverage requirements, patient contact hours, term and termination provisions, medical records provisions, and malpractice insurance concerns.

Smaller private practices may require more from a physician than large health systems, especially in call coverage – if two physicians are required to cover all the patients of the practice, it makes sense that call coverage requirements (unless the practice has a call coverage arrangement in place with other practices) will be more onerous than if 15 physicians are sharing coverage.  In general, private practitioners tend to work harder than their colleagues in health systems.

So why even consider private practice? There are many possible reasons – a desire for greater control of your professional life, the ability to go back home, etc. For many physicians, though, a major lure of private practice is the ability to earn significantly more money over the course of your career.  Not only can private practice physicians participate in “side ventures” like ASC ownership, etc., but the overhead in most private practices is less than that of a health system.  Perhaps most importantly, owners of a private practice can profit from the excess of revenue earned over the salary and benefits of employed physicians.  So, while you are lining the pockets of the current owners, you are hopefully moving toward ownership yourself. Someday that new physician just out of training will be working for you!

If one of the biggest reasons to join a private practice is to eventually become an owner, it follows that one of the biggest (unique) concerns in reviewing a physician employment agreement from a private practice is ensuring that potential ownership is addressed. Since potential ownership is probably one of the major reasons you’re interested in this opportunity, you need to know if ownership is in the cards, even though you may be just starting your career with this practice.

Many physicians are upset that typical provisions in private practice physician employment agreements don’t promise ownership, but instead have language providing for a “review in good faith” – perhaps based on productivity, relationships with staff and physicians, etc.  Although it would be nice to have your partnership guaranteed, I think that overall these provisions are fair and ultimately beneficial to the practice and all the physicians. Although you may be a nice person, the next physician they hire could be a jerk.  You will hopefully spend the rest of your career at this practice, so maintaining a collegial atmosphere will be important to you down the road. You may end up grateful that not every physician hired is guaranteed to become your partner.

I have a whole chapter of my book on physician employment agreements on various methodologies for valuing your buy-in. The method used in various physician employment agreements with a private practice can vary greatly, but it’s vital that whatever the valuation methodology may be, it is clearly set forth in your employment agreement. Again, it’s the methodology that’s important – the actual figure is most likely not going to be provided.

Private practice for those who want control over their destiny is undoubtably challenging.  At the same time, it can be financially as well as psychically rewarding.  The first employment agreement may not guarantee ownership, but it’s critically important that a path to ownership is discussed.