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 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.