Expiration of Physician Employment Agreements

Expiration of physician employment agreements is becoming a growing concern. As more and more health systems are swallowing up smaller systems, I have been getting contacted by physicians who are concerned that their employment agreement has “expired”. For example, a physician’s employment agreement may provide that the agreement ends on June 30, 20xx. It is becoming more common for that date to come and go with no new agreement offered. Physicians in this position are rightly concerned about their status.

The good news in this situation is that most physician employment agreements are “evergreen”. That is, they automatically renew at the end of each term. Therefore, the physician’s employment agreement will remain in full force and effect even though the “expiration date” has passed.

In the somewhat unusual case where the physician’s employment agreement does not automatically renew, the physician should still be protected. Contract law generally provides that where both parties continue to perform under the agreement (i.e., the physician continues to provide services and the employer continues to pay compensation and benefits) the contract is considered “affirmed”. Therefore, the contract will be treated as if it had not expired.

Although you may be relieved to know that the employer is still obligated to keep paying you, you should still keep track of the expiration date. I was recently contacted by a primary care physician whose three-year contract had expired a few months ago. She had an offer from a nearby competing health system of about $60,000 a year more salary. When I spoke to her current employer’s lawyer about the situation, a new and much more lucrative contract was quickly forthcoming.

It is rarely a good idea to allow an old contract to continue. Your value to the employer may have increased significantly, either through changes to market compensation or because of your reputation among referring physicians. In addition, if you didn’t have an experienced physicians’ contract lawyer review the first contract, there could be significant legal traps that can be removed or lessened in a new contract negotiation.

You may also be interested in my posts about for cause termination of a physician employment agreement, without cause termination in physician employment contracts, and physician covenants not to compete.

To learn more about the critical issues to be aware of when negotiating a physician employment agreement, you can see my podcast of the four most common traps in physician employment agreements, my physician employment agreement checklist, or, for the most extensive discussion on the topic, my book on physician employment agreements. For specific information on topics you might be interested in, see my posts about physician productivity compensation, MGMA compensation analysis, medical record provisions in physician employment agreements, letters of intent in physician contracts, physician covenants not to compete, and call coverage requirements.

If you would like us to review your new agreement, you can start your review here. We also offer a free consultation to see if we can help.