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Physician Employment Agreements
K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt
Roger Tracy, Assistant DeanCarver College of Medicine
The University of Iowa
TODAY’S SEMINAR
• Based on >35 years of experience
• Applies broadly
• Elements of typical employment agreement
• Summary comments/focus on issues
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IMPORTANT CONTEXT
• Employment agreement =contract
• Integrated systems vs. independent medical practice
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WHY?
• Define the relationship
• Avoid misunderstandings
• Reasonable expectation:
– unambiguous
– balanced/fair
– comprehensive
– competitive
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K:\graphics\powerpoint\RT presentations\Contracts\Contracts Waterloo updated 11-20-08
RECITALS
• Names the parties
• Sets forth their qualifications
• States offer and acceptance of employment
• States parties mutually agree to the conditions and covenants
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TERM OF CONTRACT
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INITIAL TERM
• Integrated system: - 1-3 years then automatic renewal until terminated by either party
• Independent group: - 1 or 2 years (“buy-in”)
• Longer terms with loan repayment (3-10)
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RESPONSIBILITIES OF PARTIES
Employee
• Employer’s expectations
• Worksites (specify or mutual agrmt.)
• Call/coverage (equitable with others)
• Full time/no external professional services
(without prior approval)
• Employee’s representations
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RESPONSIBILITIES OF PARTIES
Employer
• Provides facilities, personnel, equipmt.
• Owns records, receipts and AR
• Performs billings and sets fees
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K:\graphics\ppt\rt presentations\contracts\Cedar Rapids 4-28-10.ppt
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COMPENSATION
• Integrated system:- Salaried with production incentive (most common)
- Salary eliminated after initial term (production)
- WRVUs used for calculating production (formulae are
changing/reform)
• Independent practice:- Salary with incentive (changes after buy-in)
• Flat salary /no production incentive- Some integrated systems/and some SS groups
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PC PHYSICIAN STARTING SALARIES*(Not including recruitment incentives or production bonuses)
2012-2013 Starts
PC PHYSICIAN STARTING SALARIES*(Not including recruitment incentives or production bonuses)
2012-2013
• Full Range: $150,000 - $220,000
• Most (80%): $170,000 - $190,000
Other points:
‒ In general, GIM is at the higher end, FM across full-range,
Peds at the lower end.
‒ Rural critical access hospitals start between $180,000-$220,000.
‒ Hospitalists (FM or GIM) are paid $190,000-$225,000.
‒ PCPs working in rural EM positions are paid $180,000-$220,000
(and up).* These figures apply to all primary care specialties.
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SIGNING BONUS
• >75% of employers offer one
• $5K — $75K
•Mean and mode = $25K
• Increasingly a “retention” bonus (repayable)
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COMPENSATION ISSUES
• Competitive base?
• Incentive? Achievable threshold?
• Method of payment after initial term
• Growth potential?- The practice
- The physician
- The formula
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FRINGE BENEFITS
Retirement Plan
Professional Dues Prof.
Liability Ins.
S-T Disability Health
Ins.
L-T DisabilityLife Ins.
Profit-Sharing
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FRINGE BENEFITS
• Pay attention (value=15-30% of base)
• Downward pressure
• CME allowance/professional D/L/M
• Retirement/profit-sharing—know 3 things:-Eligibility
-Employer contribution? (401K/403K)
-Vesting schedule
• Disability insurance
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TIME OFF(paid leave)
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PAID TIME OFF
• Vacation/CME/Other
• Integrated systems: 4-6 weeks ( )
• Independent practices: 4 weeks
• PTO lumped: 25-30 days (holidays?)
• “Professional” time off ( when pay is 100% prod.)
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TERMINATION (of employment)
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TERMINATION CLAUSES
• Mutual agreement at any time
• W/O cause: 30/60/90 – day notice by either party
• Immediately for cause: - Loss of qualifications (either party)
- Failure to perform/material breach (either party) (often not
granted to phys. but should be)
- Professional/personal behaviors (employer right/discretion)
• Death or permanent disability
- 30 – 180 days of disability
- Defined as unable to perform responsibilities
- Determination process
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ISSUE
TerminationProvisions
(unbalanced)
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TERMINATION CLAUSE ADVICE
• Provisions should be balanced between parties
• Obligations should be reasonable in a “w/o cause” case: - Waiver of tail insurance payment
- Waiver of non-compete clause
• “For cause” clauses should be stated objectively to minimize employer discretion
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NON-COMPETITION CLAUSE
(restrictive covenant)
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ISSUE
Restrictiveand
Enforceable
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NON-COMPETITION COVENANTS
• Legal in all but 10 states
• Enforceable if court deems restrictions:
– Reasonable in time and geographic scope
– Necessary to protect employer’s business
• Judge makes determination (case law)– Time: 1-3 years– Distance: PC—county line or 20-30 mi. (less in metro)– Other specialties based on service area– Liquidated damages: 50% of receipts or 100% of taxable
income
• Seek waiver tied to “w/o cause” terminationK:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt
LIABILITY INSURANCE POLICY ENDORSEMENT
(“Tail”)
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“Tail” Insurance Issue
• Applies to “claims made” form (and self-insured)
• Tail premium
- 2.3 X annual premium Y1
- 1.4 X annual premium past Y1 (premium↑)
● Issue: Who pays? physician? employer?
• Push for vesting if phys. obligated
• Seek waiver in event of “ w/o cause” termination
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ISSUE
Entire Agreement
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ENTIRE AGREEMENT CLAUSE
• If not in the contract, it doesn’t exist• Special considerations?
- Recruitment bonus
- Moving expenses- Certification exam expenses- Maternity leave arrangements- Practice modifications (equipment/pts.)
• Cite in contract/addendum/joint letter
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POSSIBLE ISSUE
Buy-in Terms
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BECOMING A SHAREHOLDER/”PARTNER”
• Why buy-in? … shareholder income distribution
• Explanation of terms- Need this before signing contract
- Language seldom in the contract
- If fixed amount, ask the amount
- If not, then method/terms
- Illustration if based on NBV of assets or deferred compensation
• AR should be excluded
• Intent s/b easy in – easy out (perpetuate organization)
• Hospital/integrated system – no buy-in
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BEST WAYTO
DEAL WITHCONTRACT PROBLEMS:
PREVENTION!
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PREVENTING PROBLEMS
• Pay attention to the “hot spots”
• Have all understandings in writing
• Meet face-to-face or by telephone
• Don’t reserve any questions—seek clarification
• Use attorney—but have physician or administrator
read it, too
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LOAN REPAYMENT/FORGIVENESS/SERVICE
• Has spread to other specialties from PC
• Frequency is above 30% and will go ↑
• Range $50K — $250K
• Forgiveness/service period: 3 – 5 yrs. (up to 10)
• Amounts per year: $20K — $40K (plus interest)
• Taxable as ordinary income (unless federal or state program)
• Forgiveness interval drives tax on interest
K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt