Basic Employment Contract Essentials

According to a survey by Jackson Healthcare, a physician staffing company, greater than 67 percent of practicing physicians were contractual employees in 2013. They were employed by hospitals, hospital or health care systems; physician owned practices, or worked as independent contactors.  The four primary reasons physicians gave for becoming contractual employees included: they don’t want to deal with administrative hassles, they don’t want to be a business person, they don’t have the money to start a private practice, or they believed that there are better opportunities working as an employee. All of the reasons provided were legitimate except for not wanting to be a business person. Like it or not, business concepts and practices have been and are part of the practice of medicine. One crucial business aspect for physicians has been and will be employment contracts.

Unfortunately, many physicians only review the first and last pages of their employment contract while only giving a cursory glance to the middle pages where the key components reside. The first page generally states whom the contract is for and with and the last page is the signature page. It is the middle pages that are the most important. In any basic employment contract, the middle pages should explicitly delineate the following contractual components:

1.     Defining the position – this section should indicate the place(s) and hours of employment in concise and easy to understand language leaving no doubt as to what is expected. As such, the section must provide a clear understanding of the job requirements including the name of the position, the qualifications necessary, and the essential duties it entails. Essential duties can encompass membership on committees, advisory boards, and other non-generating revenue activities. Very often, physicians find themselves working an extra 15 to 20 hours a week performing duties, which are not compensated and not listed as required or expected. Make certain all duties are clearly articulated.    

2.     Length of the Agreement – here the original term of employment and the stipulation of conditions applicable to extend, reduce, or terminate the contact are explained. Start and end dates are to be clearly indicated as well as the requirements to extend, reduce, or terminate the contract.

3.     Performance – when reviewing performance requirements pay close attention as to what parameters on which you are being assessed; i.e., make certain the parameters are applicable to your job duties and that they are able to be objectively measured. For example, your performance may be measured on the number of new patients you see, the revenue or costs you generate and/or on patient satisfaction survey scores you receive.

4.     Compensation – any contract you review will have a section on compensation. When you negotiate a compensation package, the figure must be stated in the contract and how it is calculated. For instance, does your salary contain a base figure; is any of your compensation based on the amount of work performed (relative value units), your performance appraisal, bonuses, and/or overtime? Are there methodologies for calculating bonuses and overtime hours? Are any of your compensation components phased in over-time? In addition, be sure you understand how expense accounts are handled. Lastly, if there are any monetary incentive programs how would you qualify and what are the objectives.

5.     Benefits – benefits include not only vacation time but also malpractice health, dental, vision and other insurances such as disability. With insurance benefits, know who pays for what, how much, and how often. Be sure you know who pays for professional licenses, continuing medical education, professional memberships and associated dues. Do not forget about holidays, retirement plans, employer contributions to such plans, and when you are vested in such plans.

6.     Termination – although this may not be a pleasant thought, the contact should address termination with or without cause. Be sure there are definitions for both scenarios and that severance terms are applied in each incidence.

7.     Other Essentials –other covenants that are frequently contained in an employment contract agreement include non-disclosure agreements, non-compete clauses, and property rights. Non-disclosure agreements basically require you keep the contents of your contract confidential and that you do not share any information deemed proprietary by your employer with anyone. Non-compete clauses may prevent you from practicing within a given geographic area once you leave your employer. In some states, non-compete clauses are not enforceable. Property rights clauses cover ownership of licenses, patents, and copyrights. You should check with an attorney for laws concerning these types of covenants in your employer’s state of operation.

I cannot emphasize enough how important it is to read the entire employment contract. If you do not understand any requirement, measure, or term ask for clarification in writing. Remember, it is incumbent on you to ask questions and you can only do that by thoroughly reading the contract. It is too late to go back once you place your signature on the last page. Understanding and being familiar with the essential elements of contacts whether an employment or service contact is a crucial business requirement for every physician no matter the practice setting. You can get more in-depth information on the business aspects medicine by accessing our various educational modules. Being aware of the business aspects of medicine will undoubtedly improve your medical practice and at the same time insure your peace of mind.


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