Physician Compensation Data: What Does it Mean, and What Can I Expect?

If you're a physician coming out of residency and about to head into your fellowship, you probably have your job search and that first GIANT first paycheck on your mind. After all, you've been training for years and years by now, and the light at the end of the training tunnel is in sight! If you're like most of our physician clients, you are wondering what you can expect to be paid once you start your job. You're also wondering how do you position yourself best for successful physician employment contract negotiations? One of the most important things you can do is inform yourself. First, keep in mind that you have gone through elite schooling and training to get where you are today. You are surrounded by top-notch colleagues, and you're each worth a lot! In fact, you may be worth more than you're comfortable saying out loud. You need to get the facts on the physician compensation data so that you have at least a ball park figure in mind on what your overall compensation should be. Which brings us to the next crucial point- once you see those all important numbers, you must become comfortable with them. They're not abstract, or subjective. They are representative and demonstrate what a physician in your subspecialty is earning.

So if you are an orthopaedic foot and ankle surgeon who is taking a job in Alabama, for example, and you look at the Medical Group Management Association's 2018 Physician Compensation Survey, and it tells you that the median total compensation for an ortho foot and ankle surgeon in the South is $525,000, then that is what you should aim for when it comes time to negotiate your contract.

If you are armed with the relevant information, you can rid yourself of the guilt sensation that so many physicians experience when they go to negotiate their physician employment agreements. Instead, you can feel confident that you are worth a certain amount in your given market, and you can approach the negotiation phase knowing that you aren't leaving money on the table, and you aren't selling yourself short.

For more information on what you can expect in the way of your physician compensation under your first employment contract, contact Leigh Ann O'Neill at 317-989-4833 or loneill@lauthoneill.com. Leigh Ann is a lawyer who focuses her practice on assisting her physician clients through the review and negotiation of their employment contracts. As part of this process, she is also able to assist clients by providing them the relevant MGMA compensation data. Call today to find out more!

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Physician Recruitment Agreements: Requirements and Key Considerations

Physician recruitment agreements are only appropriate and legally permissible in certain circumstances. Key requirements and conditions must be met in order to ensure compliance with Stark Law (Ethics in Patient Referrals Act) and the Anti-Kickback Statute (AKS). Then, if the conditions allow and a recruitment arrangement ensues, there are a number of key issues affecting the rights and obligations of each party and this post will focus on the important considerations that the physician should keep in mind. To begin with, Stark only allows hospitals to provide benefits for the recruitment of a physician if the physician is relocating into the hospital’s service area from at least 25 miles away. There are limited exceptions to this rule, but in general, the physician must genuinely be a new addition to the hospital’s service area. Further, the hospital must demonstrate a legitimate need for the physician (and whatever her specialty is) in the area.

Stark also requires that the arrangement is memorialized in a written agreement - to be signed by all three parties - and that the agreement contain certain provisions. Among those provisions is acknowledgement that the hospital’s remuneration paid to the physician is not conditioned on the volume or value of referrals the physician might generate for the hospital. Accordingly, the remuneration to be paid by the hospital must be set out from the beginning, not to be amended at a later date, and the payment must remain with the recruited physician (not the practice).

These technical matters and compliance with applicable laws are concerns that rightfully should lie with the hospital and the employing practice, after all, it is their attorneys who will draft the agreement. Therefore a physician presented with a recruitment arrangement should not be the one ensuring compliance with the law. However, there are many aspects of a recruitment agreement that the physician can and should have input on. People often think that recruitment agreements are non-negotiable, but this is largely a misconception.

There are various aspects relevant to the physician’s guarantee that can end up being very impactful and are often negotiable on the physician’s end. The first is the issue of reconciliation between the physician’s collections and her guarantee. While the hospital is bound to pay the physician the difference of any shortfall between her collections and the guarantee, what happens if the physician actually collects more than the guarantee? Is she allowed to keep the “surplus,” or is she required to pay it to the hospital? And who is responsible for the accounting associated with the physician’s collections and payment – the practice or the physician herself? Another question to consider is what happens with any income that the physician may earn from outside activities, such as moonlighting during her free time? Will that income be considered the physician’s property, the practice’s, or the hospital’s? Finally, if a signing bonus is offered, will the amount of that bonus be included in the outstanding loan amount reflected in the promissory note? In other words, is the bonus a true bonus and therefore the physician’s property regardless of what happens, or is the bonus attached to the guarantee and therefore potentially subject to repayment by the physician? Each of these matters can have huge impacts on a physician’s income and potential liability, and may be addressed in a variety of ways depending on the applicable recruitment agreement.

Looking at the bigger picture, one of the most important terms for a physician to consider is the “Guarantee vs. Commitment Ratio.” As noted in our previous blog, the guarantee is the amount of compensation the physician is guaranteed to earn over a period of time. Then, the commitment period is the length of time the physician is required to remain practicing her specialty on a full-time basis in the hospital’s service area. Therefore, the Guarantee vs. Commitment Ratio is a comparison between how long the physician will earn her guaranteed compensation to how long she is required to stay working in the area. If a physician’s salary is guaranteed for one year and her commitment period is two years, the ratio is 1:2. This is a very favorable ratio for the physician. Conversely, if the physician’s salary was guaranteed for one year but her commitment was four years, the ratio would be 1:4, and this would be less favorable due to the length of time she’ll have to remain after the guarantee is over. Once the guarantee is over (i.e. the hospital stops paying the physician’s salary), the physician will only earn as much as she brings in. If business in the area turns out to be slow, then she may be in a position of earning very little. This situation can turn out to be quite dire in that she will not have the option of relocating because she is still bound by the commitment period. In other words, the physician may have to remain working in an area that is simply not generating enough income, unable to move out of the area or else be in violation of her contract. Breaching the terms of a recruitment agreement is no small matter, as breach triggers the repayment obligation inherent in every recruitment agreement. As touched on in our previous post, recruitment agreements always contain a Promissory Note that holds the recruited physician liable for the amount of the guarantee paid by the hospital. The guarantee is structured as a forgivable loan that is forgiven over time, such that once the physician has worked in the service area for the entire commitment period, the loan/guarantee is entirely forgiven. If the physician leaves the area early and therefore breaches the commitment requirement, the physician will be liable to pay back a pro-rata portion of the guarantee.

An important issue coinciding with the question of commitment periods and liabilities in the event of breach is whether the physician is bound by a non-compete agreement pursuant to her employment agreement with the practice* (*in recruitment arrangements, the physician will also have a separate employment contract directly with the employing practice, to which the hospital is not a party). If the physician is terminated by the practice or decides to leave the practice voluntarily, the physician will have to remain practicing in the hospital’s service area or else be in breach of the recruitment agreement. This can be a potential nightmare if the physician is bound by the practice’s non-compete agreement, thereby essentially having to choose which contract to breach – she can either violate the non-compete covenant and face those consequences, or she can violate the commitment requirement and face liability for repayment. For this reason, a physician will ideally not be subject to a non-compete covenant pursuant to the employment agreement and this is a matter that is often negotiable by the parties. A common misconception is that non-compete covenant are prohibited in physician recruitment arrangements; however, that is not the case. A reasonable non-compete covenant can be allowed.

Click here to read our next installment in our Physician Recruitment Agreement blog series. For more information about physician recruitment agreements and whether your employment relationship is compliant with the Stark law, call Leigh Ann O'Neill at 317-989-4833, or email at loneill@lauthoneill.com.

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Physician Compensation Concern: How Do You Know If Your Job Offer is Fair?

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A common fear we hear from our physician clients is: "I don't want to sound greedy, but do you think this employer has offered me a fair compensation structure? Are they offering me enough?" It's human nature- we want to be paid fairly for what we do, and we also don't want to be perceived as asking for too much. So how do you strike the right balance when it comes to negotiating the dollars and cents in your physician employment agreement?

It all starts with knowing what the market is paying someone like you. Are you in the Midwest? On one of the coasts? A metropolitan or rural area? There are a lot of factors that play into what an employer is willing to offer you, and what they legally can offer you. As physician agents and attorneys, we specialize in offering this type of insight to our clients. We review the Medical Group Management Association's physician compensation survey and tell you whether we think your job offer is fair.

While we offer this compensation analysis as part of our Analyze and Shape contract review service, some clients have already weeded through much of their agreement, and only want insight on the compensation piece. So we are happy to offer that as well. For a low flat fee, we can provide our analysis on just the compensation figures that have been offered to you, and how they relate to the market where you will be practicing. Call us today to find out more: 317-989-4833; or email Leigh Ann O'Neill at 317-989-4833.

Physician Recruitment Agreements: What Are They and What Do They Accomplish?

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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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Physician Student Loans: What Are Your Options?

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We all know that physicians are put through the ringer before they are finally able to place that “M.D.” behind their names. Years and years of education and training, around-the-clock shifts, sleepless nights, and a general sacrifice of time and freedom – these are only part of the burden that the doctors of America face. The biggest burden, with arguably the most serious and lasting effects, is a financial one - the amount of debt that physicians accumulate.

The average cost for one year of medical school in the US is $35,932 for an in-state school, and upwards of $60,000 for out-of-state and private schools. What’s more, these figures don’t factor in books (which are incredibly expensive) or general necessities like food, housing and insurance. The result is that students graduating from med school have an average debt of $189,000. Even worse, a third of graduates have lingering debt from their undergraduate education, with an average balance of $25,000.

No big deal, because doctors make a lot of money, right? Wrong. Physicians in residency earn only about $50,000 a year. This paltry salary is barely enough to pay the rent, let alone start making payments toward student loan debt. Facing this conundrum, young physicians have limited options for dealing with a very real problem. Some docs find themselves with no choice but to enter forbearance over the 3-5, 6, 7, or more years of residency. This temporary “solution” to the problem (if you can call it that) can add as much as $40,000 in interest to the total outstanding debt balance.

So, what options are there, and how can physicians best position themselves to manage their debt efficiently?

Refinance

Almost any type of loan can be refinanced, and student loans are no different. Using the refinance approach, you can take out a new loan and use those funds to pay off the existing loans. While this seems counterproductive, the benefit is that it gives you the chance to amend your repayment schedule and most importantly, secure a more favorable interest rate. An adjustment to the interest rate can be hugely beneficial, considering that the types of loans extended to med students are sometimes charged at the highest rates – the Grad PLUS Loan rate was 7.0% in 2017-18. Assuming student loan debt of $189,000 with a 7% interest rate, the borrower ends up paying about $74,000 in interest alone. Therefore, refinancing down to a more manageable interest rate can literally save a borrower thousands of dollars.

Lump Sum Extra Payment

            While receiving a windfall is not necessarily an option for all doctors, it is something to keep in mind. Today, the majority of physicians entering employment receive some form of signing bonus. Whether the bonus is $10,000 or $50,000, that extra money can make a significant difference to your outstanding debt. Of course, bonuses always come with strings attached. They generally require a physician to remain employed for a certain period of time before the bonus is fully “earned,” and they are of course taxed at a high rate (*see our previous blog post on Signing Bonuses). Nonetheless, applying the bonus (i.e. what you take home after taxes) as an extra payment to your student loan balance can save you thousands in interest. 

Income-Based Repayment

Another option is utilizing an income-based repayment plan. There are different federal income-based repayment programs, which set your monthly payments based on your current salary and cost of living. Depending on eligibility and the various repayment structures available under a plan, these programs will help to quell the balance increase from added interest. While these programs can be better than entering forbearance, they are not the most efficient option, and will not be your fastest or cheapest approach to eliminating student loan debt.

Student Loan Forgiveness Programs

             There are various programs around the country that will help pay off your student loan debt in exchange for a service commitment. These programs generally require you to work in a high-need, underserved area for a set number of years. Of course there is the trade-off to consider, including limits to your specialty, practice location and type of employer. Physicians can even explore repayment assistance programs offered by the military, regardless of whether they have served in the past or where they are in their career. Each branch of the military offers physicians the opportunity to enroll in service and receive student loan assistance in exchange. Lastly, there are many state-sponsored programs aimed to help physicians with their debt.

Employer Assistance

             For some lucky physicians, their future employer will offer student loan repayment as an added incentive pursuant to their employment agreement. This extra perk is something usually offered by larger hospital systems (as opposed to private practices), and is more commonly available in “less attractive” geographic regions of the country. When offered, employers will typically set out an amount to be paid per month or year toward the physician’s outstanding balance, and will sometimes make the payments directly to the lender. As with signing bonuses, loan repayment usually has strings attached and will generally be conditioned on a certain length of employment. Considering the long-term benefit that could be achieved, physicians should consider asking for loan assistance pursuant to their employment agreement, particularly physicians in high-earning specialties and those who have multiple employment offers.

For questions regarding physician employment, including review, analysis and negotiation of your employment agreement, contact the attorney-agents of Lauth O’Neill today at 317-989-4833 or loneill@lauthoneill.com.

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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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Not Quite Ready to Sign Your Physician Employment Agreement? Consider This!

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Helping physicians and other health care providers with their employment agreements in pretty much all we do. So we hear this question all the time: "I have been offered an employment contract, and I'm supposed to give them an answer right away. But I'm not sure yet that I want to accept it. What should I do?"

The pressure is on! Not only is the potential employer seemingly putting overt pressure on you to make a decision, but other factors are putting pressure on you as well: student loan repayment creeping up, mounting credit card debt from living off less-than-desireable residency or fellowship salary, your mom or dad constantly asking you "where are you going to work when you finish training?!", your spouse asking you, "when are you going to make up your mind about this job?!", your attendings asking you, "where are you going to begin your career?!", and so on and so forth. Like I said, you're really feeling the pressure from all angles. The last thing you need is a potential employer trying to rush you through the process.

Honestly, when a physician client calls me and asks me what to do in this situation, I am SO relieved. I am so relieved that they thought to call me, a lawyer, and ask for my help. That means I have the opportunity to talk them down from this sensation of needing to respond to their physician employment offer immediately. And, I can help them with the next steps. The next step is no where near as complicated as one might think: simply ask for an extension.

Many physician letters of intent or even physician employment contracts include some type of expiration date or other deadline. Most of the time these are in templated drafts of these documents, originally created by a lawyer or Human Resources personnel, in order to give some type of timeline in this process. However, they are almost NEVER hard and fast deadlines. In fact, I have never seen a scenario where a client of mine has asked for an extension on their response time, and it has been turned down. Instead, I always recommend to my physician clients, that they reach back out to their physician employment contact person and say something along the lines of, "Thank you very much for this offer/LOI. I am really excited about this opportunity. As you know, this is an enormously important decision, and I want to make sure I have given due consideration to my options. Would it be ok if I have an additional 2 [or more] weeks before this offer expires?" A few weeks in the scheme of filling a physician job opening is nothing. Employers typically spend months and months recruiting employees, so trust me when I say it is no big deal to ask for two more weeks, or even longer! You will likely find that the potential employer is more than happy to give you this additional time to make your decision. So do not be afraid to ask! The worst thing would be for you to rush into taking your first employment position out of training without having given the documents their proper attention and consulting with a physician contract lawyer.

If you have questions about your physician employment agreement or Letter of Intent, or want to know more about our contract review services, do not hesitate to reach out to the attorney-agents of Lauth O'Neill. We are here and ready to help any time. Call us at 317-989-4833, or email me, Leigh Ann O'Neill, at loneill@lauthoneill.com.

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Compensation Caps in Physician Employment Agreements: Why Do They Exist, What Are Their Implications, and How Can You Protect Yourself?

Compensation caps can be confusing and frustrating for the physicians who are subject to them. Instituted as a mechanism to avoid violation of federal laws, compensation caps aim to limit the compensation paid to physicians at a level that is “reasonable” and representative of fair market value (FMV). Why Do They Exist?

 Compensation caps are seen most commonly in the case of non-profit hospital employers that are exempt from federal income tax under the Internal Revenue Code. Accordingly, these hospitals must follow certain rules for how they compensate their employees (i.e. the pay must be “reasonable” for the services rendered), or else they risk losing status as a tax-exempt entity. Anti-kickback and Stark laws are additional causes for compensation caps, as they restrict compensation that may be construed as improper remuneration in exchange for patient referrals. Therefore, employers are very motivated to ensure that the compensation they pay is considered commercially reasonable, so as to quell any possible implication of improper behavior.

What is a Compensation Cap?

 Compensation caps are identified in the applicable employment contract. If a physician is subject to a compensation cap, her employment contract will identify the threshold of the cap, and will dictate the procedures that will take place if and when the physician’s compensation reaches the threshold. A cap may be “hard,” in which case there will be a definite stopgap on payment, or a cap may be “soft,” which means that the employer will initiate a review process in order to determine whether the compensation is reasonable and justified. The threshold at which a cap is set will depend on the physician’s specialty, and also will likely depend on the region of the country in which the physician works. There are various national surveys that track physician compensation (i.e. MGMGA, AMGA), and often the cap will be set at or near the 90^th percentile mark for a given specialty and geographic region. For instance, the MGMA data tells us that for Hematology/Oncology in the Midwest, physicians in the 90^th percentile earn an annual total compensation of $692,253. Therefore, an employer might set the cap for a comparable physician at this level.

Who is Subject to a Cap?

Theoretically, any employed physician who earns income on a productivity basis is subject to a compensation cap. However, logic tells us that only physicians who are highly productive will run the risk of reaching their cap. Consider, for example, a young physician in a high-earning specialty who does not have children or otherwise has the time and ability to work as much as possible. Think of those physicians who live to work and gear most of their focus toward solely their job. Another likely scenario is a physician who is the only available provider in her specialty in the region and therefore her services are in especially high demand. Of course, there is also the possibility of bad actors whose wrongful behavior results in especially high payment and triggers a cap, such as physicians who “upcode” or use other inappropriate coding/billing practices.

How to Protect Yourself

            If an employer includes a compensation cap pursuant to your employment agreement, it is there for a reason and you likely will not be successful in negotiating the cap out of the agreement. However, there are a few things that a physician can do to protect herself and ensure that she receives the compensation she deserves.                                                                            First, physicians should ensure that they have a clear understanding of what the cap is, and the employer’s protocols surrounding the cap. For instance, is the cap “hard?” Or if it is “soft,” what exactly does the review process consist of? And further, if the review process results in a finding that the compensation was not reasonable, what will happen? Will you be required to pay back a portion of your income? Will you stop working for the remainder of the year?

Second, physicians should have a firm grasp of their earning potential and how much they are earning as the year progresses. Accordingly, it is advisable to document the hours spent working, services provided and the compensation received. This way, you will have abundant evidence to support your argument that the compensation was fair and reasonable in light of how much you worked. In other words, you want there to be a clear and undeniable connect between the work you’re doing and the compensation you receive.

Lastly, if faced with a compensation cap, physicians should ensure that their contract entitles them to notice in the event that the cap and/or compensation review process will be initiated. This way, you will not be blindsided if it comes into effect. You will have the chance to get organized in terms of your documentation, and also to consult with an attorney or FMV consultant.

If you have questions about compensation caps, or other matters regarding your physician employment agreement, contact the attorney-agents of Lauth O’Neill.

Gender Pay Gap Among Physicians

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If you have not been blasted with reports about the gender pay gap in Hollywood, you may be living under a rock. Recent news articles and headlines have scoured the issue, and just about everyone is weighing in on the disparity between men and women’s incomes. Liam Neeson, for example, thinks the pay gap is “f---ing disgraceful.” While opinions and frustration levels vary, it is pretty much safe to say - nearly everyone is troubled by the pay gap.

Despite all the recent reports, it is important to note that the gender pay gap is not limited to those that grace the silver screen. Rather, the pay gap affects people across all professions and industries in the US. People, however, may be surprised to learn that the gender pay gap is alive and well among one of our country’s oldest and most revered professions: medicine. That’s right – although the year is 2018, reports indicate that female physicians – across all specialties - earn an average of 74 cents for every dollar that male physicians make. This figure translates to an approximate $90,000 per year. Even when the data is broken down based on medical specialty, there is no area where women earn as much as men. Of course, it is not news to anyone that the medical field is one that has historically been dominated by men. While male doctors still greatly outnumber females – approximately 66% of physicians in the US are men – women are entering the medical field at unprecedented rates. The number of women enrolled in medical school recently reached a 10-year high, and in 2015, female medical school graduates outnumbered males in several states.

One of the largest factors affecting compensation among men versus women is geography. The statistics prove that where you live does matter. In several cities, the pay gap is 30% or more (including Charlotte and Durham, North Carolina; Orlando, Florida; and Pittsburgh). Five other cities have pay gaps of at least 29%. It appears that the pay gap was the least significant (relatively speaking) in Sacramento, where female physicians earn 19% less than their male counterparts.

Perhaps the most disturbing aspect of this issue is an examination of when, if ever, the gap will close. Although the gender pay gap has certainly been inching closer and closer together (no one can deny the progress made in women’s education and workforce participation since the 19070s), the rate of change simply is not happening fast enough. Experts estimate that if the rate of change experienced between 1960 and 2016 continues, then women are expected to achieve pay equality in 2059. However, experts also advise that progress has slowed in recent years (since 2001, specifically), such that if the more recent and slower rate of change continues, women will not achieve pay equality until 2119. So, even if we take the more optimistic stance, women will continue to earn less money than their male counterparts for another staggering 41 years.

Having presumably achieved the same level of education and training upon entering the work force, why do female and male physicians get paid so differently? Unfortunately, there truly is not a good answer, but it appears that at least part of the problem is self-doubt and reluctance on behalf of women. Reports indicate that, in general, women feel less comfortable than men when it comes to negotiating their compensation, and therefore simply accept what is offered to them. Therefore, although the problems working professionals in our country face require a systemic response, it is clear that we also need women to stand up for their value and for female voices to be heard.

The physician-agents of Lauth O’Neill work solely on behalf of health care providers, and are experienced in the analysis and negotiation of physician employment contracts. If you have questions about your contract or compensation plan, contact the physician-agents of Lauth O’Neill.

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Physician Burnout – More Prevalent Than Ever

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Professional dissatisfaction among physicians is at an all-time high, with satisfaction rates steadily and steeply declining in recent years. Interestingly, dissatisfaction levels among other working adults and professionals in the US have seen only minimal changes.

A 2015 comprehensive study of physician satisfaction and perceived quality of life revealed that only 41% of physicians are satisfied with their work-life balance. Comparatively, 48% had reported satisfaction only three years earlier.

Dr. Christine Sinsky, a representative of the American Medical Association (AMA), co-authored the study and indicated that the causes of physician unhappiness are well known. Sinksy noted that physicians today face an unprecedented number of administrative tasks and documentation because of the demands imposed by electronic health records. Further, physicians feel pressure to relinquish elements of control over their practices to third-party payors and government regulators. She said, “It’s a cumulative effect of well-intended efforts adding up to a burden of work that no one anticipated…Physicians feel they’re spending their days doing the wrong work, and that leads to burnout.”

Beyond the demands related to EHRs, many physicians spend an exorbitant amount of time each week on various other uncompensated tasks. A survey found that internists spend between 12 and 17 hours per week on uncompensated tasks, and that physicians in general spend 21% of their time on non-clinical paperwork. Unsurprisingly, this time inevitably overflows into physicians’ private lives as they use personal time to tackle piling tasks that are necessary to maintain an efficient workday.

According to Dr. Joseph Valenti, a board member of the Physicians Foundation (a non-profit physician advocacy group), a variety of factors have made physicians less efficient and less profitable than ever. In addition to the amount of physician time dedicated to uncompensated tasks, there are rising costs associated with the need for additional medical assistants, nurses and administrative employees necessary to complete all the required work. Valenti says that this lack of efficiency equates to at least $50,000 of lost revenue per physician annually. Just four years ago, this figure was estimated at $25,000.

As physicians spend less and less time with their patients and more time than ever on the computer, the heightened level of physician burnout is not terribly surprising. After all, physicians go to medical school and rigorous years of training for a reason – to serve and heal patients, not to spend entire days checking boxes and filling out forms on a computer. While there is little anyone can do to combat the myriad factors creating this burnout-inducing atmosphere, there are some things that physicians can do to battle the burnout. Experts say that the most effective thing physicians can do is to create a game plan that focuses on the art of delegation. For many docs, this means hiring staff who are singularly devoted to particular administrative duties, such as obtaining prior authorizations. While there are certainly associated costs, not limited to these individuals’ salaries, experts say that the benefits achieved likely outweigh the costs. With the administrative work in the hands of appropriate staff members, physicians can refocus their time and attention in a way to create more satisfying and fulfilling workdays.

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Physician Billing and Coding – Who is Responsible for Mistakes?

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When physicians work with patients, they have a number of responsibilities placed on their shoulders. Not only do they need to communicate with the patient and address the cause for the visit (i.e. tend to whatever brought the patient in), but they are also required to document every aspect of the interaction in a very exhaustive way. Part of this documentation’s purpose is for the patient’s ongoing care and well-being, but a major part of it is dedicated to financial necessity – coding and billing for the work performed. Proper billing and coding is no small task and reports indicate that as many as 80% of all medical claims submitted to payors contain mistakes. Furthermore, those mistakes are estimated to equate to a whopping $68 billion. The matter of who will be held liable for those mistakes is an important one, considering the significance in the medical world and the economics behind it.

When a provider’s services are coded or billed inaccurately and then submitted for payment, it is a “false claim.” Used to combat these kinds of discrepancies is the Federal False Claims Act (FCA). Initially enacted by Congress during the Civil War to challenge fraud by suppliers to the Union Army (resulting in its moniker, “Lincoln’s Law”), the FCA is the most widely used tool for combating fraud against our government. The FCA imposes liability on any person who, “knowingly presents, or causes to be presented to an officer or employee of the United States Government…a false or fraudulent claim for payment or approval.” Therefore, in the health care field, the applicable language creates the potential for liability on any individual involved in the claim preparation and/or submission process. This includes both the provider and her employer, as well as any number of individuals responsible for preparing, computing or submitting claims to the payor.

While proper billing and coding is everyone’s responsibility, it is generally understood that the ultimate responsibility for compliance falls on the provider. After all, every claim contains the provider’s unique provider number as well as her signature, thereby theoretically signifying that everything has been reviewed and authenticated. As a result, if a fine or penalty is levied, it is generally directed at the provider. Despite this general trend, it is important to keep in mind that the law applies to everyone and it is certainly possible for ancillary staff to be targeted, especially if mistakes are recurrent. An example is found in the case of U.S. vs. Cabrera-Diaz and Arbona (106 F.Supp.2d 234 (D.P.R. 2000)). In that case, the United States government filed an FCA action against an anesthesiologist, alleging his improper submission of over $400,000 in Medicare billings. The action also targeted his “billing secretary,” Ms. Arbona. The Court entered a civil judgment against them in the amount of $1.3 million, and found that they were “jointly and severally liable” for the fraud. While this specific example highlights a case that was most likely based on intentional fraud, it is important to keep in mind that even if mistakes are innocently made, a claim of fraud can still be made.

The best way for providers to protect themselves is to ensure that all staff and personnel they work with are well-versed in the guidelines created by Medicare and third parties, and that they undergo proper training and certification. Taking steps to properly train staff and ensure their awareness of the potential for liability reduces the likelihood of inaccurate claims, and allows the provider to maintain her focus on quality patient care.

For questions or help with your own coding, billing, and collection responsibilities, or for general physician contract review assistance, please call Leigh Ann O'Neill at 317-989-4833 or email her at loneill@lauthoneill.com.

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Listen to our first Podcast, with @docofalltradez!

Not too long ago we were approached by @Docofalltradez, an anesthesiologist who not only cares for his patients, but in his spare time, educates physicians about avoiding burnout and protecting yourself financially. We were thrilled to join him to record our very first podcast, where we discussed a variety of topics, ranging from physician job searching, to physician contract review and negotiation, to what it means to have a physician agent working on your side. You can listen to the podcast, Surviving Surgery, by clicking here, and if you have ideas of additional topics you'd like to hear about, please leave a comment with your requests! We look forward to recording additional podcasts in the future!

As always, if you would like to learn more about our physician job search, physician contract review and negotiation services, please call Leigh Ann O'Neill at 317-989-4833 or email her at loneill@lauthoneill.com.

Physician Employment Signing Bonuses: What You Need to Know

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Reports indicate that about 80% of physicians are offered a signing bonus with their employment contract. The prevalence of employers offering such bonuses has grown, and depending on the specific employer, there are varying reasons why a bonus will be offered. Some employers advertise the opportunity for a signing bonus in order to create more interest in the position and attract more candidates. Alternatively, some employers prefer to offer the bonus only after negotiations have begun, and then use the bonus as a closing tool to guarantee that the physician will not renege on accepting the position.

Golden Handcuffs

The use of the bonus as a “closing tool” can be very important, particularly for physicians who are just coming out of training. First off, young docs (more often than not) are in unstable financial situations. Meager salaries paid during residency and looming student loan debt leave many in a precarious situation and therefore they need a bonus just to make ends meet. A bonus may be used to help with the down payment on new home, or provide cash flow during the job transition, particularly if the doc’s significant other is seeking new employment as well. Also, employers need a way to guarantee that the physician who signs their employment agreement will actually honor that agreement and show up to work. Physicians just out of training may be fickle with their employment decisions, and may sign an agreement and then change their minds. If they have received a bonus and are contractually bound to pay back that bonus if they do not honor the employment arrangement, then they are obviously much less likely to break the deal. Hence, why signing bonuses are often referred to as “golden handcuffs.”

So – how do bonuses work? Bonuses are generally either offered as a lump sum payment, or otherwise are paid in one or two installments. As noted above, most physician employment contracts that provide for a bonus will require that the physician pay back the bonus if she does not show up for work, or if she does not remain employed for a specified period of time. In these cases, the applicable provision will provide that for every month that the physician remains employed, the requisite repayment will decrease on a pro rata basis, such that if the physician remains employed for x years, no repayment will be required at all. In this sense, the bonus is more like a loan that is forgiven over time. Alternatively, some employers will offer the bonus as a true bonus, with no strings attached. This is more common in situations where the doc is highly sought after, or the practice or hospital is underserved and in dire need of the provider’s services.

Will I Receive a Bonus? What to Expect:

Generally, hospitals are more likely to offer signing bonuses than are private practices. Furthermore, bonuses are more substantial when offered by hospitals and practices in rural areas. Conversely, employers in bustling metropolitan areas offer substantially smaller bonuses – surely a disappointment for physicians determined to live in big cities that undoubtedly have much higher costs of living. Bonus values also obviously vary based on specialty. Physicians specializing in family medicine will receive a lower bonus than an orthopaedic surgeon, for example.

Another important factor to consider in receiving a signing bonus are the tax implications. Bonuses are considered supplemental income, and on a federal level this type of income is heavily taxed. Further, state (and possibly city) taxes will further erode the bonus’s value. Specifically, the IRS specifies a flat rate of 25% on supplemental income. In some instances, an employer will a pay a bonus with a physician’s regular paycheck and treat it like normal W-2 wages, deducting the taxes before it is paid. More often, however, employers simply cut a physician a check for the full amount of the bonus, and then it is up to the physician to ensure payment of the requisite taxes when due. It is important for docs to also consider if receipt of the bonus pushes them into a higher tax bracket for the year, thereby having a further impact on the overall tax liability. These potential liabilities make it essential to discuss your bonus with your tax adviser.

For further information on physician contract review, analysis and negotiation, please contact the attorney-agents of Lauth O’Neill.

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Hospital Employment vs. Private Practice: What You Need to Know

In a previous blog post, we touched briefly on the issue of hospital-based employment versus private practice. Physician employment trends have seen drastic changes in recent years, with a myriad of factors leading the change. This post will shed some light on exactly what differentiates hospital employment and private practice, and the practical implications on physicians’ lives and careers. Employed vs. Not Employed?

Whether you are an established, working physician or a young doc just finishing training, you have probably either read or heard – physicians are seeking “employed positions” at higher rates than ever before. You may be wondering, what exactly does this mean? What is the alternative to being “employed?” For physicians, there are generally two different routes to take when searching for a job: either as an employee working for a hospital/large organization, or entering private practice (either as a partner in a group or as a solo practitioner). Upon joining a private practice, you will be an employee for a period of time (usually two years), and then you will (hopefully!) be offered the opportunity to “buy in” as a partner. While private practice used to be the gold standard for physicians, the climate has drastically changed.

Between 2000 and 2010, the number of physicians employed by hospitals grew by 34%. A 2016 report by Medscape (Read the Medscape report here). showed that roughly 80% physicians today are employed by hospitals, with 20% of physicians reporting a self-employment position. This shift is further evidenced by examining a breakdown based on age. For physicians 55 years and older, 45% are self-employed and 36% are employed. Conversely, for physicians younger than 40, 23% are employed and only 11% are self-employed. However, although older physicians continue to occupy self-employed positions at higher rates, they too are contributing to the shift to employment. Since 2014, the number of older physicians in employed positions has risen by 8 points.Why the shift?

A variety of factors have caused these changes, with health care market dynamics and physician preferences leading the way. To begin with, health care reform and declining reimbursement in many specialties has meant that physicians feel more uncertain than ever about the future. Together with this uncertainty is the fact that many private practices struggle to manage their overhead costs and in many ways, cannot compete with large organizations. Lastly, there appears to be a change in mentality of physicians leaving training wherein their priorities revolve around patient care and their daily practice, rather than any sort of entrepreneurial endeavors. In fact, physicians surveyed about their employed positions overwhelmingly reported that their favorite thing about being employed is “not having to deal with business of running a practice,” with the second leading response being “not having to deal with insurers, billing and other administrative aspects.”

A Breakdown of the Differences

Where and how you are employed can greatly affect everything from the way in which you are paid, to the benefits you receive, to your ability to strike a work/life balance. Below is a breakdown of some of the most significant aspects of employment and how those aspects might vary based on where you work.

Compensation

Employed Position: Often times, starting salaries offered to physicians in employed positions are higher than those in private practice. Employed physicians are also generally afforded the ability to earn productivity or incentive income in addition to their base salary. As employees of large organizations, employed physicians do not feel financial insecurity and do not fear any possibility of their payroll check bouncing. Lastly, while signing bonuses are typical in both hospital employment and private practice, the bonuses tend to be higher for those in employed positions.

Self-Employment Position: While base salaries may be lower and there may be less opportunity for incentive income, private practice does offer substantial money-making potential. Once a partner in private practice, you are entitled to portions of net profits, and you can also earn additional income from ancillary facilities and services. Although overhead may be high and cash flow might be a concern, private practice certainly has its benefits, not least of which is the many benefits derived from ownership and the equity-stake.

• It is important to note that the 2016 Medscape report indicated that employed and self-employed physicians are satisfied with their incomes at nearly identical rates. 38% of employed physicians reported that they are “satisfied” and 16% reported they are “very satisfied” with their income. Similarly, 36% of self-employed physicians reported they are “satisfied” and 17% reported they are “very satisfied” with their income These satisfaction rates suggest that any perceived differences in compensation are likely either negligible or are off-set by other benefits.

Benefits

Employed Position: Working for a large health system generally means that you will be exposed to less risk in terms of the compensation and benefits that are promised to you. As a hospital employee, you can likely rest assured that the benefits you are offered are comprehensive and that they will not be arbitrarily amended or revoked. Further, employees of large organizations have more certainty that they are being afforded the exact same benefits as their colleagues.

Self-Employment Position: While working for a private practice does not necessarily mean that you will not receive sufficient benefits or that they will be taken away from you, there is generally some more wiggle room for the practice owners to amend benefit plans based on practice needs and improving their bottom line. In some senses, however, the benefits offered may not be as substantial as in an employment setting. For instance, it is normal for physicians to receive reimbursement for their annual CME expenses and expenses associated with professional dues, memberships and subscriptions. A small practice may cap that reimbursement at a lower figure than a large organization. Another important benefit is malpractice insurance coverage. While it is the norm for physicians to have their coverage paid for by the practice or hospital, a private practice may be more inclined to leave the responsibility for tail coverage to the physician.

Restrictive Covenant

Nearly every physician who begins employment, regardless of where, is required to sign some form of restrictive covenant (covenant not to compete) in conjunction with their employment contract and/or partnership agreement. In fact, as attorney agents who specialize in analysis and negotiation of physician employment contracts, we have only ever seen a handful of contracts that did not contain a restrictive covenant.

The validity and enforceability of a restrictive covenant depends on state law, and the precise terms and restrictions of covenants vary. Whether a physician goes into employment in a hospital or private practice, it is a near certainty that she will be restricted from certain behaviors if the employment relationship terminates. The only way to ensure that the restrictive covenant is as least restrictive as possible - and therefore most favorable to the physician – is to have it reviewed and negotiated by an attorney experienced in these matters.

Work/Life Balance

Employed Position: One of the benefits of working as an employee is the comfort that comes with having your duties and obligations clearly defined, and therefore limited. In general, employed physicians report that they have a better work/life balance than their self-employed counterparts. Part of this work/life balance is the fact that employed physicians generally enjoy more regular hours than self-employed physicians, and therefore can rely on time away from work. Further, employed physicians generally have less on-call responsibilities than self-employed physicians. Notably, however, despite the favorable regularity in hours, employed physicians report that what they dislike most is that they do not have control over their hours and are completely subject to management’s direction and rules. In other words, they lack autonomy.

Self-Employment Position: For anyone who is self-employed, no matter what the field of work, there is always a certain level of autonomy and freedom. Self-employed physicians report satisfaction with their ability to “practice medicine my way” and have a higher level of control over their schedules. Certainly, this autonomy comes at somewhat of a cost. Self-employed physicians often carry much more personal responsibility and are required to partake in business management aspects that employed physicians never experience. It appears that self-employed physicians are happier and more satisfied than employed physicians, which may be a result of their enjoyment of having control. 63% of self-employed physicians reported that they are satisfied with their work, compared with 55% of employed physicians.

• Interestingly, satisfaction rates among both groups have significantly decreased since 2014, especially for employed physicians. The satisfaction rate for self-employed physicians fell from 74% to 63%, and the satisfaction rate for employed physicians fell from 73% to 55%.

If you are a physician who has received an employment contract offer from a hospital or private practice, and you would like a lawyer to review your contract and assist in negotiating changes to the contract, please call Leigh Ann at 317-989-4833, or email her at loneill@lauthoneill.com.

FINAL INSTALLMENT: Top 10 Reasons Why Physicians Should Seek Legal Review of Their Employment Agreements…

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9. Avoid Awkward Confrontation – Have Your Lawyer Handle It Instead!

             For many, it is simply human nature to avoid confrontation. Particularly in an employment setting, individuals are more likely to let certain things slide rather than “ruffle feathers.” As touched upon in our initial post in this blog series, this attitude, in conjunction with a physician’s desire to simply seal the deal and begin working, often results in a hastiness in signing the employment contract they are offered.

Upon receipt of your employment offer, any number of things may cross your mind.

I thought that my base compensation would be higher…

 Why should I have to pay for my malpractice insurance tail coverage?

 Are my call responsibilities reasonable and fair compared to the other physicians?

            Despite lingering concerns, you may feel pressure to simply accept the offer as is. Furthermore, you may have a feeling of guilt or unease with regard to requesting amendments to the agreement. After all, you do not want to appear greedy in the eyes of the person or entity that just offered you a job. As a result of these feelings, many physicians sign the employment agreement they are offered without engaging in any negotiation at all. Without the representation of an attorney experienced in these matters, that may be exactly what you do.

If you hire an attorney to review your employment contract and negotiate it on your behalf, all of your unease will be erased. First, for any requested changes to the agreement, those requests will not be coming from you and you will not have to feel like the “bad guy” (even though you shouldn’t, anyway). Instead of saying, “I want to be paid more” you can say, “My attorney advised that the offered compensation is lower than the MGMA median data for my specialty, and I would like to explore ways to improve this.” Better yet, if you hire an attorney to do all negotiation on your behalf, you won’t have to say anything at all. Your attorney can handle the negotiations directly with employer’s legal counsel from start to finish, and you can sit back and relax until the agreement is ready for your signature.

10. Peace of Mind

             Finally, we have arrived at our final reason why physicians should have their employment contracts reviewed by legal counsel – peace of mind.

Entering into a contract is always a serious step, no matter what the subject. Whether you are hiring a contractor to work on your home, or memorializing a multi-million-dollar business deal – the stakes are always high because you are legally binding yourself to an agreed-upon arrangement.

Physician employment agreements are no different. They are legally-binding contracts with far-reaching effects. Further, they are always written by attorneys representing the interests of the employer, rather than your own. The inevitable bias that always exists in the creation of an employment contract is reason enough to seek review by someone who is obligated to protect your interests.

There is a simple solution to alleviating that inevitable bias and diminishing mounting anxiety – hire an attorney whose only job is to represent and protect your interests. Achieve peace of mind knowing that you made the right decision and that all your bases are covered before taking the next step of your career.

The attorney-agents of Lauth O’Neill Physician Agency work exclusively on behalf of physicians (as well as other medical providers, such as Physician Assistants and Nurse Practitioners). We offer a flat-rate contract review service, and also will negotiate your employment agreement on your behalf. Please reach out if you would like to learn more or have any questions about what we do!

Leigh Ann O’Neill

loneill@lauthoneill.com

(317) 979-4833

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Top 10 Reasons Why Physicians Should Seek Legal Review of Their Employment Agreements…

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Our continued blog series on why physicians should seek legal review of their employment contract....

9. Ensure Your Right to Access Information During and After Employment:

 Physician employment contracts are typically very comprehensive, addressing just about each and every issue that could potentially surround or arise out of a physician’s employment. As such, the attorneys that draft physician employment agreements on an employer’s behalf work very hard to cover all bases so that no loose ends remain, regardless of how the employment relationship ends.

From an employer’s standpoint, having a comprehensive employment contract that protects all employer interests is the ultimate goal. Unsurprisingly, an important part of this is ensuring that the employer’s confidential information and documents are protected. Therefore, a provision that we see in just about every single employment contact that we review is one that addresses documents and patient medical records. More often than not, the applicable language will read something like this:

All patient records, documents, reports, notes, forms, recordings and information are the exclusive property of Employer. All such documents and memoranda kept or made by Employee during the course of her employment and related directly or indirectly with the business of Employer or duties of Employee with Employer shall remain the property of Employer and shall be returned to Employer upon termination of this agreement for any reason.

While these provisions are entirely understandable and reasonable, they can always be made more favorable to the physician-employee. Physicians often do not realize that they may require access to such documents and information following the term of their employment for a variety of reasons. For instance, if a malpractice claim arises, the physician will require certain documents in order to defend herself. For this reason, we always advise the inclusion of language that will specifically permit the physician’s access to employer’s medical records (following termination for any reason) in the event that the employee requires the documents to defend herself in any sort of case or proceeding where the documents are relevant.

Further, another important issue to consider is the documents and information that a physician might be working on pursuant to any research projects. Consider if you have an ongoing research project, and then your relationship with your employer turns sour. If employment is terminated and employer has retained its right to keep all documents and records as its exclusive property, then you may have no choice but to leave behind the research that you’ve been working so hard on. While this sounds nightmarish and certainly unfair, this might be exactly what the language of the employment contract dictates.

While the access to documents and information following a physician’s employment is crucial, it is also important to address access to particular pieces of information during and throughout the employment relationship. In many cases, a physician’s compensation is partially or entirely comprised of productivity income (i.e. income that is dependent on the type and frequency of services provided by the physician). Additionally, the calculation of a physician’s income may take into account overhead and other expenses of the practice. In these cases, management or administrative staff will calculate the compensation due to the physician based on those services that she provided and any applicable deductions. Therefore, it is important for a physician relying on such calculations to be in a position to review the applicable information and ensure that her compensation is accurate. In these situations, we always advise the inclusion of language that will entitle the physician to reasonable access to financial and other information in order to verify the calculation of her compensation under the agreement.

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Top 10 Reasons Why Physicians Should Seek Legal Review of Their Employment Agreements…

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Continuing our blog series on the Top 10 Reasons Why Physicians Should Seek Legal Review of Their Employment Agreements…

6. Potential Liability for Events Out of Your Control: 

            Physician employment contracts often contain provisions that put physician-employees on the hook for potential liability arising from various events and circumstances that are out of the physician’s control. Conversely, employment contracts often exclude language that would indemnify physicians from particular sources of liability. As attorney-agents working on behalf of physicians, our job is to identify those potential sources of liability and amend the applicable contract language so that our physician clients are not held accountable for issues or circumstances that are outside of their control.

One potential source of liability that we regularly work to avoid is damages arising out of billing and collection practices. When a physician works for an employer, whether it is a hospital or private practice, the responsibility to bill and collect for the physician’s services is almost always placed on the employer. This work is typically done by billing staff who use physicians’ provider numbers to enter the information and then bill and collect for the services. In the event that the billing staff makes an error while using a physician’s provider number, the physician may be held accountable, despite the fact that the physician made no errors himself.

Another area that we often see physicians being placed in unfair positions is with regard to termination provisions. Most physician employment agreements contain both “without-cause” termination provisions and “for-cause” termination provisions. Generally, the for-cause provisions indicate that the physician can be immediately terminated if he commits certain acts of wrongdoing, such as being convicted of a crime or losing his license to practice medicine. However, employers sometimes try to include for-cause termination provisions that are completely out of the physician’s control. One example is a provision that reads: Employer shall have the right to immediately terminate the Agreement, without prior notice, in the event of the bankruptcy, receivership, dissolution or merger of the Practice. Provisions like this are troublesome, as it does not seem fair or reasonable to terminate an employee immediately and “for-cause” based on the employer’s insolvency or change in business organization.

7. Understanding the Effect of Termination Provisions:

In the excitement of being offered a job and the hastiness that often causes physicians to hurriedly sign the employment contracts that they are offered, many important contract provisions are merely skimmed over or entirely overlooked. One of the most important aspects of an employment contract is the termination provision, and it is imperative to review that provision closely and have a clear understanding as to your rights and the employer’s rights.

As mentioned prior, employment contracts generally contain both “without-cause” termination provisions and “for-cause” termination provisions. The without-cause provisions allow both the employer and the employee to terminate the employment agreement, for any reason or no reason at all, upon providing the other party with a specified number of days of advance notice. The number of days of notice required is very important. The notice periods we often see range from 60 days to 180 days. If a physician wishes to leave his current employment position, he will have to plan substantially ahead in order to adhere to the notice requirement. The period of notice is also important as it may make the difference between a physician moving seamlessly to another employment position or having a period of unemployment. In the event that an employer desires to terminate a physician’s employment without cause, the physician will have to use that time to job search and secure a different employment position, and so a sufficient amount of time is desirous for the employee in that situation. It is also important to note that if an employer wants to terminate an employee, it will almost always do so via the without cause termination provision. This is because using the for-cause termination rights opens the employer up to challenge and law suits if it is not clear that the employee has committed any violations or wrongdoing. Rather than face the possibility of challenge or backlash, employers prefer to simply utilize the without cause right and make a clean break.

For-cause termination provisions will allow the employer to terminate an employee based on the employee’s commission of various wrongdoings, one of which is often a blanket provision including “any material violation of the employment agreement.” While employees are held accountable to adhere to the employment agreement and avoid any violations of the same, employers are often not held to the same standard. For this reason, it is important that employment agreements always include language that similarly holds the employer responsible for adhering to the agreement. In the event of the employer’s failure to fulfill its duties and obligations under the agreement (i.e. failing to pay the physician in accordance with the applicable compensation provision), the employee should have the right to terminate the agreement for cause.

Finally, when considering a contract’s termination provision, another crucial aspect to consider is how termination will affect your compensation. Will you be paid for services provided up to and through the actual termination date, or will compensation cease upon receiving notice of termination? Especially for physicians being compensated under production models, it is very important to clarify these aspects.

To learn more about these and other key provisions in your physician employment contract, please contact Leigh Ann O'Neill at 317-989-4833 or via email at loneill@lauthoneill.com.

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Top 10 Reasons Why Physicians Should Seek Legal Review of Their Employment Agreements…

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Continuing our blog series on the Top 10 Reasons Why Physicians Should Seek Legal Review of Their Employment Agreements…

5. Legal Provisions That Have Far-Reaching Effects. Physician employment agreements are full of legal verbiage and phrases, which should come as no surprise because they are legally-binding documents written by lawyers. Aside from the general organization of a contract and its components that are required to make it an enforceable contract, the actual content and provisions that directly dictate your life and career can be overwhelming.

Perhaps the most significant of these legal provisions is the Restrictive Covenant. Restrictive covenants, otherwise known as “Covenants Not to Compete,” are found in the majority of the physician employment agreements that we review. The purpose of restrictive covenants is to restrict a physician’s ability to practice medicine for a specified duration of time and in a particular geographic region following the term of employment outlined in the agreement. In other words, the employer is saying: When you’re done working for us, we don’t want you to work in X region for X amount of time. Kind of crazy, right?

Restrictive covenants are even more daunting in that they are almost always enforceable by means of injunctive relief. An agreement’s restrictive covenant provision will usually provide the employer with the right to injunctive relief in the event of the physician’s violation (or even threatened violation) of the restrictive covenant. An injunction is a remedy used in civil suits whereby a specified behavior is prohibited. Therefore, when injunctive relief is used to enforce a restrictive covenant, the employer will seek a court order prohibiting the physician from practicing medicine in violation of the covenant. The effects of this can obviously be dire, given that a physician can literally and legally be prevented from working. While some sort of restrictive covenant is found in most physician employment agreements, whether or not the covenant is enforceable is another question. The enforceability of restrictive covenants is based on state-specific law and only an attorney licensed in a given state can speak to whether or not the restriction is reasonable and enforceable. Some states are more “employee-friendly” and have very strict limits as to how an employer can limit individuals’ right to work. The only way to get a clear understanding of what a restrictive covenant means and how it will apply to your life and work is to have it reviewed and analyzed by legal counsel. Additionally, attorneys experienced in physician employment matters are familiar with negotiating these provisions, and can offer various approaches in order to satisfy the needs of the employer while simultaneously making it more favorable to the physician employee.

Physician employment agreements also often include other provisions and restrictions that, once identified and analyzed, are really not fair to physician-employees at all. Sometimes these provisions are sort of “snuck in” among other terms and therefore physicians sign the agreement without even realizing what they’ve agreed to. An example is a contract term that irrevocably assigns to the employer all rights, title and interest in inventions, discoveries, patents and ideas that the physician develops. In other words, if the physician develops any potentially money-making ideas while working for the employer, the employer will be entitled to that money and the physician will have no rights to it at all. Sometimes these provisions even extend beyond the term of employment, so that if the physician develops anything in the year or two following the contract term, those rights will still be assigned to the employer. Additionally, we have also seen such provisions attach to inventions and patents that a physician completed before even working for the employer. These types of provisions are clearly worrisome, and the cause for concern is two-fold: first, physicians often do not realize what they are agreeing to when they sign an employment agreement containing a provision like this, and; second, employers position themselves to unfairly and unjustifiably benefit from a physician’s hard work that had nothing to do with the employer.

For information about these and other physician employment contract issues, please contact us at 317-989-4833 or loneill@lauthoneill.com.

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Me vs. My Employer: Part 2

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At the end of last month, we began our blog series on our Top 10 Reasons Why Physicians Should Seek Legal Review of Their Employment Agreements. Part 2 of the series continues below:

3. Knowledge of What is Fair and Reasonable. As we discussed above, physicians are often eager to sign the employment agreements that they are offered, almost without even a second thought. Coming fresh out of training, young physicians are accustomed to earning a pittance for their hard work and time. So it is no surprise that when they see that first offer and realize they will soon be paid a real and substantial salary, they are ready to dive right in. The only problem is that these physicians are not in a position to gauge whether the offer is fair and reasonable based on current market norms and standards. Obviously the salary offered is a huge part of this, but there are a variety of other aspects to consider as well, including but not limited to the following: fringe benefits; reimbursement for relocation expenses; reimbursement for CME expenses and professional subscriptions and dues; and contribution toward student loan debt. The truth is, the only people who are really capable of offering an objective review of whether a contract’s terms are fair and reasonable are professionals who work with and on behalf of physicians. Such professionals (attorneys and CPAs, mostly) review and analyze a large number and variety of physician employment agreements and as a result, have an objective understanding of what physicians are being offered. Further, such professionals have on objective understanding of what physicians can reasonably and justifiably request of their employers. Additionally, only certain individuals have access to the facts and statistics concerning physician income. The Medical Group Management Association (MGMA) publishes annual data that breaks down physician compensation based on specialty and the geographic region of the country where the physician is employed. The MGMA does not make this information available to the public, but rather is only accessible to members who subscribe and pay a substantial fee

4. Lifestyle Factors You May Not Consider. When a physician receives an employment offer, her eyes are bound to go straight to the Compensation provision, paying little to no attention to the remaining terms. While the compensation offered is certainly important, there are additional provisions of any given contract that are even more likely to affect a physician’s day-to-day life and lifestyle.  For instance, physician employment agreements often lay out a physician’s on-call responsibilities, but do so in a very vague way. Such ambiguous terms often put physicians in a position of agreeing to responsibilities that are completely open-ended and undefined. – basically an “agree now to what we may or may not dictate later” sort of situation. Not good. Physician employment agreements similarly often dictate that a physician will be responsible for certain administrative duties, with the extent of these duties being undefined. Agreeing to such responsibilities without an understanding of what they entail can have serious effects on a physician’s practice and quality of life.  Aside from contract provisions relating to aspects that are analogous to medical practice, there are many that influence your life in more direct and significant ways. Practice locations, for example, are often undefined and may require a physician to serve any and all existing and future locations. You may assume that this is standard, but consider the potential repercussions. If a new practice location is opened an hour drive away from your home and you are subject to serve it, your daily life could be greatly impacted. Consider also if a contract requires your residency within a particular county, zip code or mile radius of a practice. Such fine print is often overlooked and can have enormous effects on your life and the life of your family.

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Me vs. My Employer – Why Do I Need an Attorney?

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            For physicians, no matter what your specialty, the road leading to employment is longer than that of any other profession. Beyond your formal education, there are multiple years of arduous and grueling training. It is no surprise that once it finally becomes time for physicians to accept an employment offer, they are incredibly eager to do so. This eagerness often translates into hastiness and a desire to simply “seal the deal” as quickly as possible. As a result, physicians regularly accept the first offer that they receive, and do not seek legal guidance concerning their employment contracts.

This sentiment is entirely understandable – not only are you eager to start working (i.e. start getting paid), relationships with potential employers are often very friendly, with both parties expressing a great deal of optimism. Therefore, many physicians have a mindset of believing that the employer has their best interests at heart and do not feel it necessary to seek counsel. While it wouldn’t be fair to say that potential employers don’t have your best interests at heart, it is more important and accurate to realize that an employer’s first priority is always the employer – no question about it. Unsurprisingly, the employment contract that is offered to you will have been drafted by an attorney who represents the employer, and therefore will most certainly be drafted in a way to be most favorable to the employer. Therefore, it is of paramount importance to ensure not only that you are adequately protected, but also that you are receiving a fair bargain. The importance of counsel is even more heightened by the fact that physician employment agreements are long, convoluted documents containing a great deal of sophisticated legal terms and phrases. This fact alone begs the question: how can physicians be expected to sign a contract that they may not even fully understand?

Seeking the legal guidance of an attorney experienced in physician employment issues can have lasting and significant effects for both your career and your personal life. As attorney-agents working exclusively for physicians and other health care providers, we have the experience and knowledge necessary to not only shape your agreement into its most favorable form, but also to advise you in terms of all of the aspects that will most certainly affect your personal life and that of your family.    To sum it up, this series of blog posts will highlight our Top 10 Reasons Why Physicians Should Seek Legal Review of Their Employment Agreements:

1. Due Diligence and Responsibility. Physicians are intelligent people – no one doubts that. The only problem is that your education and training has always been geared toward specific areas and skill-sets that do not include any business or legal acumen. It is safe to say that you have never taken a legal course or received any sort of education regarding contracts or employment law – and why would you?             One of the best markers of intelligence and sophistication is the skill of delegation, which requires the knowledge of when to utilize outside resources. Consider all of the aspects of life that require knowledge and skills outside of the average person’s wheelhouse. Buying a house - purchasing insurance - filing your taxes – investing money. These are all things you would not do on your own, but rather seek professionals to guide you. So why would you sign a contract without seeking the same sort of guidance? Especially when the contract is one that has the power to dictate the course of your career and also the operation of your day-to-day life. Therefore, the wisdom to seek the guidance of those with the appropriate knowledge and experience not only showcases a person’s good judgment, it also highlights a very respectable level of care and attention to detail. Remember that no man is an island and there is no prize for those who insist on “going it alone.”
2. Unbiased and Informed Insight. More often than not, individuals (and particularly physicians) are shy and hesitant to really dictate their worth and make demands on their own behalf. Part of this is related to natural humility and not wanting to brag or make haughty declarations. If you ask someone to make a list of her own best qualities, that list may not be extensive. Alternatively, if you ask that person’s friends and family to make the same list, it would likely showcase a lengthy, comprehensive, and wide-ranging documentation of everything that distinguishes her from others. Aside from this tendency toward an overly modest outlook, there is also the fact that physicians, especially those coming right out of training, do not have experience in employment matters and therefore simply are not informed as to what they are worth and what they should be asking for. When we work as attorney agents on behalf of our physician clients, we are in a position to highlight all of our client’s values, traits, and unique characteristics accurately and without bias or shame. Further, based on our considerable experience, we are able to make fair, reasonable, and justifiable requests in order to get our client the best possible deal.      

Stay tuned for the continuation of our Top 10 Reasons Why Physicians Should Seek Legal Review of Their Employment Agreements!

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