The Length, Complexity & Negotiability of Physician Employment Agreements

In the world of physician Employment Agreements, there are many aspects that are the same or similar across the board – regardless of the Employer’s location or entity type – but there can also be a great deal of variation. The length and complexity the Agreement is one factor, which coincides with how comprehensive it is, but there are also many aspects to consider in terms of which terms and provisions the Agreement contains, what aspects of the employment relationship are assumed or incorporated by reference, and finally – the overarching consideration – of whether the Agreement is “negotiable.” This blog will break down what exists out there, on all points of the spectrum, and what I often observe as a physician contract attorney.

            In a Twitter poll conducted by Joe Wolf, a partner in the healthcare division of Hall Render, physician respondents replied to his poll question regarding the length of their Employment Agreements. That poll found that approximately 40% of physicians have an Employment Agreement that is between 11 – 20 pages long. Another 25% said their Agreement was more than 20 pages, and the remaining respondents had an Agreement of five pages or less. While these responses were similar to what I see in my practice, I would note that a larger majority of my clients (about 60%) have an Agreement in the 15-20 page range. Regardless of the specifics, the point is obvious – physician Employment Agreements are not brief. They are not term sheets with certain aspects of employment relationship bullet-pointed. On the contrary, they are fairly long and long-winded, containing a great deal of complex language and details concerning both parties’ obligations and responsibilities pursuant to the employment relationship. And more, they are of course legally binding documents and must contain certain pieces of language and provisions in order to exist as a valid and enforceable contract.                            

On one end of the spectrum are the most robust of Employment Agreements, often used by large health care systems, which contain almost every provision imaginable and aim to embody every conceivable aspect of the employment relationship. On the other end of the spectrum are Employment Agreements that contain only the most straight-forward and important of employment details, such as the termination provisions and compensation method, while merely referencing other policies and procedures, which are intended to be incorporated by reference. For instance, such an Agreement might make reference to the Employer’s benefits policies, its Intellectual Property Policy, the entities’ Rules, Regulations and Bylaws, and/or the Call Responsibilities and Schedule. In these instances of incorporation by reference, it is important to remember that the entirety of the employment relationship will be made up of all applicable terms and policies, whether or not they are actually contained within the pages of the Employment Agreement.

            In serving physician clients, I often hear, “My Employer already told me that my contract isn’t negotiable.” So, is that case? Are Employment Agreements negotiable and subject to revision based on the physician’s requests? The answer, of course, is that it depends. Very broadly, I will say that in my experience, most Agreements are negotiable in at least some ways. By that I mean that in even the strictest of settings, such as an academic institution, it may be possible or even likely to successfully negotiate a couple aspects of your employment, while leaving the content of the Agreement uniform. For example, clients are often able to successfully negotiate adjustments to items like their Compensation or their Signing Bonus, despite being told the Agreement was “non-negotiable.” In those instances, what the Employer likely really means is that they will not adjust the language of the Agreement itself, or amend the scope of their Non-Compete, for instance.                                                                                                                        

As mentioned above, this strict approach and need to have their Employment Agreements very static and uniform for all physician-employees is most common in the academic setting. This is also frequently the case with large hospital systems that desire uniformity and stand by their efforts to not make any adjustments “for any one employee.” However, as with most rules in life, there are always exceptions. For instance, I recently worked with a physician who was re-negotiating a renewal to his contract with a large health system. He works in a highly specialized field and is revered for his immense experience and long-term success. In that scenario, he was able to dictate a number of adjustments to his contract, to both the content of the contract itself as well as his compensation method, because the hospital was not willing to lose him. In other words, he had very strong bargaining power.                                                                                     

Another frequent question I get relates to who will do the negotiating on a physician Employment Agreement. Most commonly and most appropriately, it is usually the entity’s legal counsel that engages in the negotiating process. However, in some situations it is a practice manager or CEO who negotiates directly with the potential physician-employee. And often, it is a combination of both. In these instances, it may be a practice manager who is the decision-maker regarding a physician’s specific duties and which location(s) they serve, and then it is the attorney who has to make the call regarding whether the Non-Compete or Termination provisions can be adjusted. In either case, it is important for physicians to understand their right - and arguably their duty - to be represented by counsel in the negotiating process. Not only should physicians exercise due diligence in ensuring they are making informed decisions in the process, they should seek representation in order to level the playing field. Employers invariably have more power in the employment relationship, and the fact that they (or their attorneys) are the ones that drafted the Employment Agreement means that the playing field is inequitable from the get go. The only way to make a fair and informed decision about entering into a contractual relationship is to be appropriately represented by legal counsel.

            The attorneys of Lauth O’Neill Physician Agency are experienced and able to guide you through this process.

Restricted Activities: How Does Your Physician Employment Agreement Restrict Your Behavior and Income?

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As a physician, when you are offered an employment agreement, you expect it to outline your role and responsibilities, and tell you how much you will be paid. What you may not expect is the many ways in which the agreement can restrict your behavior. Whether entering employment in a hospital or a private practice, it is a near certainty that your physician employment agreement will prohibit certain activities on your behalf, and also may restrict your rights and interests to property and income. Two common provisions of physician employment agreements are addressed below: outside professional activities and intellectual property.

Outside Activities

Physician participation in professional activities outside of the employment agreement is an issue addressed in almost every single agreement that we see. When a physician enters an employment arrangement, the employer often wants to ensure that the entirety of the physician’s professional time and focus is dedicated to the employer. While this is not terribly surprising or unreasonable, such provisions can have far-reaching effects.

There is a plethora of activities that are uniquely available to physicians as ways to earn additional income and expand their professional focus. These activities include moonlighting, researching, teaching, serving as an expert witness on legal matters and working as a consultant for drug or device companies. Depending on what your employment agreement states, you may be entirely restricted from engaging in these activities. Further, employment agreements sometimes take a somewhat deceitful approach by sneaking in language indicating that if you do engage in outside activities, any income you earn will be the employer’s property.

Close attention to the applicable language is necessary to determine what exactly the employer aims to restrict, and then to decide on an approach for negotiating any disagreeable language.

Intellectual Property

Somewhat of a less common issue in physician employment agreements concerns rights to intellectual property. Generally found in agreements with large hospitals and academic institutions, these provisions aim to assume ownership for any intellectual property that a physician develops during the term of his employment. The agreement will state that the Physician irrevocably assigns to the Employer all rights, title and interest in inventions, discoveries or patents that the physician develops. In other words, if you develop any money-making ideas while working for the employer, you may in fact have no rights to them. Such provisions sometimes even go further to extend beyond the term of the employment agreement, such that any intellectual property developed within x years of the Agreement is also assigned to the employer.

While this type of provision is not problematic for all physicians, those who are affected should be mindful. Is it conceivable that you will engage in developing intellectual property in the future? If so, what rights will the employer assume by virtue of your employment relationship?

Before signing an employment agreement, physicians should take the time to seek the advice and counsel of an attorney experienced in physician employment matters. To consult with an attorney-agent about your employment agreement, please contact Lauth O'Neill at (317) 979-4833 or loneill@lauthoneill.com.

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Physician Contract Review Tips: Intellectual Property

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In this next installment in our 2015 Physician Contract Review Tips series, we are discussing a subject closely related to our last article on Outside Income-Generating Activities. That article discussed physician employment agreement language that dictates whether the employed physician can participate in outside activities and retain the income therefrom.  In this article, we are focusing on intellectual property issues that surround certain work product that physician employees may create.  The range of focus on intellectual property rights in physician employment contracts spans from no mention at all, to sweeping, overly-broad language that leaves the physician employee with no rights or interest in his or her own intellectual property.  For many physicians, intellectual property issues may not be a hot button topic, but for those physicians who foresee participating in invention, innovation, consulting, and research work, any language in your agreement having to do with intellectual property can be hugely impactful.

It is crucial that physicians understand each and every term of their employment agreement to the fullest extent, and it is also of utmost importance that physicians never assume they will not, at some point down the road, become involved in activities that might result in work product that is protectable. For instance, while you may not foresee working with a device manufacturer in the future, you also might not be comfortable signing over to your employer, for free, all of your future ideas, inventions, patents, copyrights, trademarks and other protectable work product. Some physician employment agreements do in fact go so far as to provide that the physician employee is agreeing to hand over to their new employer, at no cost, or at only a very minimal cost, their entire inventory, current and future, of intellectual property.  As one can imagine, agreeing to language of this sort could end up costing the physician employee an enormous amount of money in the instance where a piece of intellectual property becomes valuable in the future.  The moral of this article, as is true with physician contract reviews in general, is to not sell yourself short. Especially if you are just coming out of training, you may be hesitant to negotiate away certain contract terms that will limit your rights and interests down the road, but do not assume that they will always be irrelevant to you. They may in fact one day be more lucrative than your basic compensation you earn from providing medical services.

For more information on physician contract review tips, please contact Leigh Ann at 317-989-4833 or loneill@lauthoneill.com.

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Physician Employment Contracts: What Really is in the Contract?

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One of the things we often hear in law school is that the terms of an agreement are dictated by the "four corners" of the contract. In other words, only what is literally contained within the four corners of the pages of a contract are included in the actual binding agreement. To many clients I work with, this news is somewhat surprising. In many cases, clients have been working with potential employers for months, going over the details of their physician employment contract, only to finally get a copy of the actual agreement and find that everything discussed has not been included.

This can be a very frustrating part of the contract negotiation process. By the time an agreement comes around, physicians are often very excited to be done with the process, and want to sign the agreement and be done with it. I always caution physicians to not be hasty in signing their employment agreements, and instead, be completely confident that any term they cannot live without is in writing, as part of the agreement. This can mean bonus compensation, special equipment or support staff promised, or even your family's health insurance benefits. If it's not set out in the agreement, the employer has no obligation to provide you with it.

Likewise, I often talk with physicians who have requirements in their contract they may not be readily willing to adhere to. For instance, the possibility of traveling to any office location the employer maintains. Often the employer will assure the physician employee that such language is merely standard, and they won't be required to actually follow through with many of these requirements. This may be true in some cases, but as long as the terms are included in the agreement, the employer will be in a position to enforce these duties and responsibilities.

Therefore, it is very important that physicians have a thorough understanding of what their employment agreements are offering them, and what they're requiring them to do. Only then can the physician make a truly informed decision in accepting an employment agreement.

For more information on physician contract review and negotiation issues, please contact Leigh Ann O'Neill at 317-989-4833 or loneill@lauthoneill.com.

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Physician Recruitment Agreements: Free Money?

When a private practice wants to hire a new physician, but they don't have the capital to pay the new physician's salary on their own, they often partner with a hospital to fund the deal.  The physicians, who are many times straight out of residency or fellowship, are often told of the recruitment agreement, "it's like free money."  Well, not exactly. While physician recruitment agreements often work out for all parties involved, there are some instances where the ending is not so happy.  Along with the various legal concerns that come with physician recruitment agreements - key among them being meeting the applicable Stark law exception requirements - there are also very serious considerations that physicians must take into account that have the potential to spiral into disaster.  First, the recruitment agreement will provide that the hospital will offer "support" in the form of a monthly salary guarantee to the new physician, and in exchange, the physician agrees to remain practicing in the community for a specified length of time- the "forgiveness period."  As the specified length of time passes, the amount of money the hospital has loaned in the form of the salary guarantee will be incrementally forgiven. The ratio of the "support period" to the "forgiveness period" typically ranges anywhere between 1 support year in exchange for 1 forgiveness year, and 1 support year in exchange for 3 forgiveness years.  Point being, when physicians accept a recruitment agreement, they must be prepared to stick around and practice in the community if they are not otherwise able to pay off the amounts they have borrowed from the hospital.  This can be a gamble, as physicians may be recruited to a community that does not have the volume of patients needed to support the addition of the new physician.  In these cases, physicians can end up "upside down" in their recruitment agreements, where they cannot afford to stay in the community following their support period, and are forced to move elsewhere to find business, and therefore are stuck with a hefty loan to pay back.

For this reason, among others, it is also important for recruited physicians to carefully consider what amount of salary is reasonable for them to accept from the hospital each month; in other words, physicians must be reasonable in calculating what you are able to live on each month, and don't overdo it.  The more you accept from the hospital, the more you will potentially be liable for following the support period if for any reason you are not able to continue practicing in the community.

Above all, it is essential that you have a physician contract lawyer review your physician recruitment agreement and your accompanying physician employment contract, as various regulatory requirements must be met.  Beyond that, because physician recruitment agreements carry some amount of risk, recruited physicians should carefully select a physician contract attorney who practices in this area regularly and who can adequately protect your interests.