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How to Review a Contract for How to Review a Contract for Owners & Employed PhysiciansOwners & Employed Physicians

John A. Lutz, FACHE, FACMPEJohn A. Lutz, FACHE, FACMPEPrincipalPrincipal

Lutz Healthcare Consultants, LLCLutz Healthcare Consultants, LLCNYSAFP Winter Conference January 31, 2009NYSAFP Winter Conference January 31, 2009

Lake Placid, New YorkLake Placid, New York

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PurposePurpose

The purpose of this interactive session is to provide you with The purpose of this interactive session is to provide you with an understanding of the elements contained within and factors an understanding of the elements contained within and factors to consider before executing an Employment Agreement.to consider before executing an Employment Agreement.

It will address both Employment Agreements for employed as It will address both Employment Agreements for employed as well as physician owners. well as physician owners.

It will also address the differences between physician It will also address the differences between physician employment in an academic (or hospital) employment situation employment in an academic (or hospital) employment situation and a private practice environment.and a private practice environment.

Before signing any agreement, especially an employment Before signing any agreement, especially an employment agreement, please ask an experienced attorney who specializes in agreement, please ask an experienced attorney who specializes in health care employment law to review the agreement. It may be health care employment law to review the agreement. It may be the best money you ever spent for legal advise. the best money you ever spent for legal advise.

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Common Employment Agreement Elements:Common Employment Agreement Elements:

1. Preamble1. Preamble::

Names of parties;Names of parties;

Type of business entity (i.e. Professional Corporation [PC], Type of business entity (i.e. Professional Corporation [PC], Professional Limited Liability Company [PLLC], Corporation Professional Limited Liability Company [PLLC], Corporation [Hospital], etc.); &[Hospital], etc.); &

Effective Date. Effective Date.

2. Recitals2. Recitals::

The "whereas“ paragraphs; often giving background, such as The "whereas“ paragraphs; often giving background, such as "Group is a medical group practice having offices in the State of "Group is a medical group practice having offices in the State of New York and wishing to employ a physician in the specialty of New York and wishing to employ a physician in the specialty of family practice ..." and "Physician is a board certified family family practice ..." and "Physician is a board certified family physician licensed to practice medicine in the State of New York physician licensed to practice medicine in the State of New York and wishes to be so employed. ..." and wishes to be so employed. ..."

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Common Employment Agreement Elements (Con’t):Common Employment Agreement Elements (Con’t):

3. Definitions3. Definitions: Can help shorten and simplify a complex : Can help shorten and simplify a complex agreement. Defined terms usually capitalized throughout the agreement. Defined terms usually capitalized throughout the document.document.

4. Primary Obligations of the Physician4. Primary Obligations of the Physician: Duties, minimum : Duties, minimum hours (i.e. full or part-time status); minimum credentials (e.g., hours (i.e. full or part-time status); minimum credentials (e.g., board certification or eligibility, NYS license, Drug Enforcement board certification or eligibility, NYS license, Drug Enforcement Agency & hospital privileges); whether outside work is Agency & hospital privileges); whether outside work is permitted; intellectual property rights & for purposes of third-permitted; intellectual property rights & for purposes of third-party reimbursement, declaration of employer’s sole right to party reimbursement, declaration of employer’s sole right to bill and collect (with reassignment of fee income to employer).bill and collect (with reassignment of fee income to employer).

5. Primary Obligations of the Employer: 5. Primary Obligations of the Employer: Salary and benefits, Salary and benefits, working facilities, staff support, equipment & supplies to be working facilities, staff support, equipment & supplies to be provided by employer.provided by employer.

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Common Employment Agreement Elements (Con’t):Common Employment Agreement Elements (Con’t):

6. Mutual Obligations6. Mutual Obligations: Documentation, correct coding, records : Documentation, correct coding, records maintenance, privacy & billing compliance.maintenance, privacy & billing compliance.

7. Term and Termination Provisions7. Term and Termination Provisions: Not less than one year : Not less than one year and not more than two without opportunity for termination and not more than two without opportunity for termination without cause or notice. Employer usually needs ability to without cause or notice. Employer usually needs ability to terminate with or without cause, often needs ability to suspend terminate with or without cause, often needs ability to suspend physician without pay, if s/he loses license, hospital suspends physician without pay, if s/he loses license, hospital suspends privileges, and needs broad statement of cause for termination privileges, and needs broad statement of cause for termination of an employee who poses a risk to patients or to the practice. of an employee who poses a risk to patients or to the practice. Agreement usually legally binding from date signed, although Agreement usually legally binding from date signed, although employment may not start until a later date. Many employment employment may not start until a later date. Many employment agreements also include non-compete and/or non-solicitation agreements also include non-compete and/or non-solicitation covenants that continue after termination for a defined period covenants that continue after termination for a defined period of time.of time.

8. General Terms & Conditions8. General Terms & Conditions: So-called "boiler-plate" : So-called "boiler-plate" language.language.

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Common Employment Agreement Elements (Con’t):Common Employment Agreement Elements (Con’t):

9. Signature Page9. Signature Page: Blanks must be filled in before signing, such : Blanks must be filled in before signing, such as effective date of agreement & addresses for all notices.as effective date of agreement & addresses for all notices.

10. Exhibits10. Exhibits: Exhibits are useful to apply terms that vary from : Exhibits are useful to apply terms that vary from one employee to the next or that may be subject to frequent one employee to the next or that may be subject to frequent change, such as employee benefits.change, such as employee benefits.

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Agreement Agreement DifferencesDifferences

Employed Employed PhysicianPhysician

Owner Owner PhysicianPhysician

PreamblePreamble

RecitalsRecitals

DefinitionsDefinitions

SameSame SameSame

PrimaryPrimary

ObligationsObligations

Duties, work Duties, work hours, hours,

credentials, credentials, full/part-time full/part-time

status & on-call status & on-call obligations are obligations are clearly stated in clearly stated in

Agreement. Agreement.

SameSame

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Agreement Agreement DifferencesDifferences

Employed Employed PhysicianPhysician

Owner Owner PhysicianPhysician

Mutual Mutual Obligations & Obligations &

ResponsibilitiesResponsibilities

Responsibilities Responsibilities should be clearly should be clearly

stipulated in a stipulated in a Job Description Job Description attached as an attached as an

Exhibit.Exhibit.

Responsibilities Responsibilities are commonly are commonly

broad & less well broad & less well defined.defined.

ExpectationsExpectations

(What specific (What specific metrics & targets metrics & targets

will be used to will be used to evaluate my evaluate my

performance?)performance?)

Should be written Should be written clearly as clearly as

expectations & expectations & obligations/ obligations/

responsibilities responsibilities often mean often mean

different things to different things to different people.different people.

Becoming Becoming increasingly more increasingly more important among important among owners to clearly owners to clearly

state state expectations in expectations in

objective & objective & measurable measurable

terms.terms.

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Agreement Agreement DifferencesDifferences

Employed Employed PhysicianPhysician

Owner Owner PhysicianPhysician

Term & Term & Termination Termination ProvisionsProvisions

Clearly states Clearly states term (i.e. one or term (i.e. one or

two years) & two years) & termination termination

provisions (i.e. provisions (i.e. mutually consent, mutually consent,

notice, with notice, with cause, without cause, without cause, death & cause, death &

disability.disability.

Term renews Term renews annually. annually.

Termination Termination provisions provisions

“mirror” employed “mirror” employed physician, except physician, except

it will refer to it will refer to either either

Shareholders’ or Shareholders’ or Members’ Members’ Operating Operating

Agreement. Agreement.

General Terms & General Terms & ConditionsConditions

SameSame SameSame

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Agreement Agreement DifferencesDifferences

Employed Employed PhysicianPhysician

Owner Owner PhysicianPhysician

Signature PageSignature Page Signed & Dated Signed & Dated by Employed by Employed Physician & Physician &

Managing Partner Managing Partner or President of or President of

Practice/HospitalPractice/Hospital

Signed & Dated Signed & Dated by Owner by Owner

Physician & Physician & Managing Partner Managing Partner

or President of or President of Practice Practice

ExhibitsExhibits Job DescriptionJob Description

Benefits Benefits SummarySummary

Should be same Should be same as Employed as Employed

PhysicianPhysician

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Agreement Agreement DifferencesDifferences

Employed Employed Physician:Physician:

Academic or Academic or HospitalHospital

Employed Employed Physician:Physician:

Private Private PracticePractice

Mutual Mutual Obligations & Obligations &

ResponsibilitiesResponsibilities

No mention of No mention of responsibilities to responsibilities to generate revenue generate revenue

to support to support employed employed

physician’s physician’s compensation & compensation & benefits. Usually benefits. Usually

inclusive of patient inclusive of patient satisfaction and satisfaction and

other less objective other less objective metrics. What metrics. What about grants & about grants &

intellectual property intellectual property rights?rights?

Clear Clear expectations of expectations of

employed employed physician’s physician’s

performance, performance, including including

economic, economic, clinical & patient clinical & patient

satisfaction satisfaction outcomes.outcomes.

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Questions you Questions you should be should be

asking asking yourself?yourself?

Employed Employed Physician:Physician:

Academic or Academic or HospitalHospital

Employed Employed Physician:Physician:

Private Private PracticePractice

The Checklist:The Checklist:

1. Business 1. Business TermsTerms

Are there any Are there any business terms I business terms I cannot accept?cannot accept?

Salary, benefits, Salary, benefits, work hours, work hours,

duties, duties, responsibilities, responsibilities,

obligations, obligations, restrictions & restrictions &

rights, rights,

Same.Same.

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Questions you Questions you should be should be

asking asking yourself?yourself?

Employed Employed Physician:Physician:

Academic or Academic or HospitalHospital

Employed Employed Physician:Physician:

Private Private PracticePractice

The Checklist:The Checklist:

2. Expectations2. Expectations

(What specific (What specific metrics & targets metrics & targets

will be used to will be used to evaluate my evaluate my

performance?)performance?)

Can I meet these Can I meet these expectations? expectations? Who & how are Who & how are

they being they being measured? What measured? What

do I receive if I do I receive if I meet them all? meet them all? Some of them? Some of them? Non of them?Non of them?

Same.Same.

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Questions you Questions you should be should be

asking asking yourself?yourself?

Employed Employed Physician:Physician:

Academic or Academic or HospitalHospital

Employed Employed Physician:Physician:

Private Private PracticePractice

The Checklist:The Checklist:

3. Termination3. Termination

(What happens if (What happens if this relationship this relationship does not work?does not work?

Notice.Notice.

Cause.Cause.

Patients.Patients.

Patient Records.Patient Records.

Staff.Staff.

Equipment.Equipment.

Restrictive Restrictive Covenant.Covenant.

Non-Solicitation.Non-Solicitation.

Retirement.Retirement.

Disability.Disability.

Death.Death.

Same.Same.

Severance.Severance.

Buy-Out.Buy-Out.

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ExamplesExamples

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Additional QuestionsAdditional Questions

04/19/2304/19/23 (c) 2009 Lutz Healthcare Consultants, LLC(c) 2009 Lutz Healthcare Consultants, LLC 1717

Thank you!Thank you!