Physician Employment Agreements with a Private Practice

The first employment agreement may not guarantee ownership, but it’s critically important that a path to ownership is discussed.

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 physician benefits, physicians in private practice, like all other physicians, are concerned about physician covenants not to compete, 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.

You may also be interested in my posts about MGMA compensation analysis, physician productivity compensation, negotiating physician employment agreements, letters of intent in physician contracts, the “standard” physician employment contract, without-cause termination in physician employment contracts, and negotiating your first physician contract.

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Dennis Hursh

Dennis Hursh

Dennis Hursh has been providing healthcare legal services in Pennsylvania since 1982. Since 1992, he has been a physician's lawyer serving as Managing Partner of Physician Agreements Health Law. Dennis has devoted his life to serving physicians and medical practices. He is the author of the definitive book on physician contracts "The Final Hurdle - a Physician's Guide to Negotiating a Fair Employment Agreement, and a frequent lecturer on physician employment agreements.

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