Articles : All Physician Employment Agreements Are Not Created Equal

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by Kenneth A. Eisner

At the beginning of the television show The Apprentice, music to the tune of “money, money, money, money” is played. While in my previous articles in Hospital News, I focused on some of the qualitative aspects of a physician employment agreement, including restrictive covenants, length of employment, and expected services to be provided in this article, I will focus on the “money, money, money, money” aspects of a physician contract.

The primary type of compensation in a physician employment agreement is the salary, the agreed upon amount that the health care provider will pay the physician for a certain period of time. For a new employee, a practice may also be willing to pay a signing bonus. If the physician is required to move to join the provider, the employer may also reimburse for moving expenses.

In addition to the base salary compensation, some providers are willing to pay incentive compensation. This incentive compensation is based upon the productivity of the physician as well as the provider. In other words, both the provider and the physician must be profitable in order for the incentive compensation to be paid. In reviewing the physician’s productivity, practices typically look to the monies that are received by the practice as a direct result of the services provided by physician. In ensuring the potential for incentive compensation, physicians must be mindful of the billing cycle. A physician can be busy from the moment that he or she arrives at the new practice. However, because of the billing process, very little money is received from the services provided by the physician during the first 90 days. This delay can result in the difference in the first year between a significant incentive bonus and no bonus at all.

Often in rural areas, especially where there is a community need, providers are willing to make a loan to a physician, which may be forgiven over a number of years if the physician remains with the provider. For example, the provider may give a $100,000 loan, which is forgiven at a $33,333 rate per year. If the physician is still with the provider after three years, the entire debt is forgiven. If the physician is able to negotiate a loan, the physician should also attempt to carve out circumstances surrounding the termination of employment that permit the forgiveness of the debt to remain even if employment is terminated prior to the designated term. For example, if a physician terminates the agreement because of a breach by the provider, the physician should not be required to pay back the loan.

Healthcare providers typically provide additional benefits to physicians. These benefits include health insurance, for the physician minimally and usually for the physician’s family. Other benefits that may be provided include life insurance, dental and vision insurance, disability insurance (which is typically long-term), and medical expense reimbursement plans. In addition, the healthcare provider usually pays certain expenses of the physician, including license fees, board certifications, and DEA registration. Healthcare providers also often pay for continuing medical education reimbursement and publication subscriptions and dues for medical staffs and societies, however placing limits on each of these types of expenditures. One approach is to negotiate for the healthcare provider to place the expenditure limit in the aggregate on all of those items as opposed to each individual item. For example, if the limit is $2,000 for continuing medical education and $1,000 for society and medical staff dues and publication subscriptions, attempt to negotiate a limit of $3,000 for all of these items. It does not cost the provider an amount in excess of the budgeted amount but may benefit the physician. Other expenses sometimes reimbursed by providers include gas mileage from facilities, a monthly phone plan, and other reasonable business expenses.

Finally, most healthcare providers have some type of retirement or profit sharing plan in which the healthcare provider contributes.

In the articles that I have written in the past few months, I have set forth numerous non-monetary and monetary issues that are negotiable. In the original article that I wrote, I addressed how many physicians believe that the contract under which they are currently employed and the contract under which they intend to be employed are boilerplate. I hope that through these articles I have dispelled the notion that all physician employment agreements are equal.

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