Articles : Physician Employment Agreements - Not Always What The Doctor Ordered

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by Kenneth A. Eisner

Last month in Hospital News I wrote about the impact that a restrictive covenant in an employment agreement can have on a physician. While the restrictive covenant is one of the most critical and most vigorously negotiated provisions in a physician employment agreement, there are many other provisions of an employment agreement that are often overlooked by a physician, which provisions may also have a tremendous impact on the physician’s employment.

One of those provisions is the term of employment. In other words, for how long is the physician being employed? Typically, these agreements are between one and three years. Often overlooked by physicians however is how a termination without cause provision can undermine the term of the employment contract. Recently, I met with a physician who advised me that he is currently under contract for three years. Upon review of his employment agreement, I realized that while his statement about a three year term was accurate, the agreement also contained a termination without cause provision which entitled either party to terminate the agreement upon ninety days written notice without cause. This means that the employer can terminate the physician for virtually any reason so long as it is not for an illegal reason or one against public policy by simply giving 90 days notice. This makes the three-year contract effectively a 90-day contract.

It is not only important to understand the term of the contract, but also to understand what are the practice’s expectations of the physician while he is employed. For example, how is call coverage determined within the practice? Is this physician, who is now likely to be the low man on the totem pole, going to be the last physician contacted to establish a call coverage schedule? Will this physician be required to work most weekends and every holiday? In addition to the call coverage, it is imperative that the physician understand what the expectations are as to the number of hours that he is to work, including office time and making rounds. Several years ago, I negotiated the employment agreement of a gastroenterologist in New Orleans. While the employer was willing to make significant concessions in virtually all areas (including monetary and restrictive covenant), the employer was unwilling to make any commitment on matters such as call coverage and scheduling. I advised my client that we had successfully negotiated virtually every desired provision, but warned him that I expected that he would be miserable in the new practice. Sure enough, he was. He was on call for each New Year, Thanksgiving, Christmas, Father’s Day, Mother’s Day, Easter, and Mardi Gras. Believe me, it is not fun being a gastroenterologist on call in New Orleans during Mardi Gras. Fortunately, we were able to eliminate the restrictive covenant in his agreement and therefore, upon completion of his term of employment, he opened his own practice in New Orleans, which is now thriving.

I am not suggesting that it is necessary to define in the agreement the specifics of the call coverage or other scheduling matters (although there have been a few circumstances where this was necessary), but simply raising the issue with the employer and insisting for example, that my client’s work and call schedule be comparable with other physicians in the practice often weeds out problems in this area.

More important than the language that is contained in the employment agreement is the discussions that I insist that each of my physician clients have with as many members of the potential new employer as possible, before signing the agreement. Discussions with other physicians of the practice, especially recently hired ones, can provide tremendous insight into the inter-workings of the practice. Unhappiness among other physicians is typically a red flag for new physicians. Inquiries should be made into areas such as the length of time each physician has been with the practice and the turnover ratio with respect to physicians in the practice. Short-term physicians and heavy turnover are other red flags.

The more informed a physician is about the practice he intends to join, the better off he is. During the courting period of every relationship, including employment, everyone is on their best behavior. If the physician does not get a warm and fuzzy feeling during that time, things are not going to get better.

Finally, many physicians also desire to engage in other medically related activities, such as teaching, testifying, and lecturing. The agreement should address whether (a) the physician is entitled to perform these functions, and (b) who is entitled to the income derived from those activities. Along those lines, inquiry should similarly be made as to whether moonlighting is permissible.

In the next issue of Hospital News, I will discuss compensation arrangements of physicians, including perks and fringe benefits that are often available.

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