Physician Please Don’t Heal Thyself – Talk to Your Lawyer About that Employment Contract!

By:      Lisanne L. Mikula, Esquire

Employment contracts for physicians are nothing new; however, the trend toward larger, corporate healthcare systems has dramatically altered the terms of physician employment agreements and the factors which a physician must consider prior to signing an employment agreement.

Physician-owned practices have largely gone by the wayside, giving way to practice groups which are owned by or affiliated with a large healthcare network.  A “bottom-line” corporate mindset, coupled with the increasing costs of providing patient care and the fiscal uncertainty of the health insurance landscape, has reformulated the way physician contracts are drawn up.

For example, the compensation structure of physician contracts is often not limited to a salary-based system.  Many physician employment contracts provide complex compensation schedules which tie income levels to new patient generation.  A physician who has spent years steeped in medical training may be unfamiliar-and perhaps uncomfortable-with adopting a “marketing” mindset which will enable the physician to financially thrive in his or her practice.  Many physician employment contracts now allow the employer to terminate the physician’s employment-despite the physician’s talent as a practitioner-where the physician has failed to meet his or her target for patient development.

The requirement to develop a patient base is particularly difficult for a physician who is just starting out in the medical profession or relocating to a new geographic area.  Without the established experience within a community which generates a patient referral network, a physician who is new to the field or to a region faces greater challenges.

Frequently, a health care network may provide financial support for such a physician, which can be paid back by remaining in the health care network or providing certain needed services within the community for a set period of time.  These arrangements, while often beneficial to physicians, can backfire where circumstances arise which make the physician unable to fulfill that service obligation.  Disability, a change in a family situation, or the inability to meet the demands of the practice group creates a possibility that a physician may not be able to honor his or her commitment to remain in service to the network or the community for the required time period.  Failure to fulfill the service requirement means that the physician will be required to repay the financial support-an obligation that could equal hundreds of thousands of dollars and might be payable in a relatively short period of time.

Further, physician contracts often contain covenants not to compete with the practice group and not to solicit patients following the end of employment.  These types of restrictions can significantly impact the physician’s ability to obtain new employment. For example, let’s assume a physician’s employment agreement prohibits the physician from practicing for a 2 year period within 10 miles of the employer’s location. If working for a physician-owned, standalone practice, the physician will be barred from working within a 10 mile radius.  If, however, the employer is a practice owned by a health care system with multiple locations throughout a geographic region, the restricted area could stretch much further than a 10 mile radius.  Not only would the physician be forced to re-establish himself or herself in another area, but if the physician is under any obligation to remain in a particular region-to repay financial support provided to support their practice or for student loan forgiveness-the restrictive covenant might force the physician to breach that agreement-leading to substantial unanticipated debt.

It is critical that physicians contemplating entering into an employment agreement review its terms carefully with an attorney to make sure the physician understands the agreement and takes steps to minimize the risk of adverse consequences in the event the employment relationship fails.

The attorneys at the Law Firm of DiOrio & Sereni, LLP are experienced and available to help you. Contact Lisanne L. Mikula, Esquire at 610-565-5700, or send her an e-mail at [email protected].

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