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Physician employment agreements, while oftentimes unnecessarily long and convoluted, are relatively straight-forward in comparison with physician recruitment agreements. Physician recruitment agreements take on an entirely new level of complexity in that they involve threeparties, as opposed to two in a standard employment agreement. In a recruitment agreement, the physician, the employing practice, and the recruiting hospital are all parties to the agreement, each with varying motivations, obligations and benefits.
So – what is a recruitment agreement? Young physicians often misunderstand recruitment agreements as an opportunity to be paid the big bucks for an ordinary job that they might take anywhere else. However, this is a mischaracterization. Recruitment agreements, while usually providing for generous compensation, always have very strict requirements attached and therefore have very serious potential consequences.
In a recruitment arrangement, the hospital essentially provides financial backing for an employing practice’s recruitment of a physician to join the practice. It can be very expensive to recruit and hire a new physician, and it can also be risky in that there is no guarantee that the employment relationship will go well (i.e. that the physician will be a good fit). In order to lessen the burden of these expenses and risks, the hospital steps in and assumes the responsibility for certain expenses associated with the new physician, generally paying the physician’s base salary for a set period of time. In turn, the hospital realizes the indirectbenefit of having the physician in its geographic region, ostensibly providing referrals to the hospital as well as performing treatments and surgeries at the hospital. Hospitals often benefit substantially from the fees generated by treatment of a recruited physician’s patients, and therefore the arrangement usually can be extremely beneficial to all parties involved.
As compensation for the recruited physician, the agreement will set out what is called a “guarantee.” The guarantee is usually applicable for one year, and during such time the physician is guaranteed to earn a certain level of compensation. This is effectuated by the hospital supplementing, as necessary, the physician’s collections. For example, if a physician is guaranteed $35,000 per month and her collections fall short of that, the hospital pays the difference. This way, a physician has a level of security in her income as she works to build and grow her practice.
As touched on above, these arrangements do not come without strings attached. Inherent in every physician recruitment agreement is a strict commitment to a geographic area. By signing a recruitment agreement, a physician is agreeing to continue practicing her specialty on a full-time basis in the hospital’s service area for a designated period of time (usually range from 2-4 years). If this commitment fails, the physician will be in breach and liable to pay back the hospital all or some of the compensation paid to her by the hospital. This pay back responsibility is memorialized and enforced through a promissory note, which is always executed pursuant to a recruitment agreement.
Beyond the basic aspects discussed here, physician recruitment agreements are incredibly complex and require careful scrutiny and consideration. Our next blog post will continue on this topic, focusing on particular considerations and cautions to keep in mind.
For help with your physician recruitment or physician employment agreements, contact our physician contract review lawyers at 317-989-4833.
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