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PHYSICIAN CONTRACTING
Contract Terms
A. Compensation
o Hospitals and their affiliates are bound by law to
provide only “fair market value” total compensation
(including base and any productivity bonus) to
employed physicians.
o To identify FMV for physician compensation, many
opt to rely on data from reputable compensation
surveys such as the “physician compensation and
production survey” published annually by the
Medical Group Management Association.
 Types of Compensation:
 Fixed salary (amount and frequency paid)
 Performance component – know what it is and
whether you can control it.
AMA Principles for Physician Employment provides:
o “When a physician’s compensation is related to the
revenue he or she generates, or to similar factors, the

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physician should be clear in his or her understanding
of the factors upon which compensation is based.”
B. Benefits
o Insurance – consider importance of health, dental,
vision, disability, and life.
o Pension plan
 Employer contribution of matching funds into
401(k).
o License fees – paid by employer.
o Professional society dues – paid by employer.
o Vacation
 How much time?
 Can you actually take the time?
o Holidays
o Mid-week time off
o CME paid for by employer, and time off for CME
paid for by employer.

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C. Liability Insurance
o Who pays for it? Prefer that employer pays
o Types of insurance
 Occurrence coverage – covers acts of negligence,
which occurred while the policy was in effect,
regardless of when the claim is made.
 Claims made coverage – covers claims reported
against the physician while the policy is in effect.
o Some academic medical centers cover the
physicians under the hospital’s self-insurance
reserve, rather than going out and buying insurance.
 Have attorney review actuarial analysis to be
sure the reserve is adequately funded.
o What are the insurance limits?
 At least $1M/$3M
o “Tail Coverage”
 Need tail for claims made insurance coverage
(covers claims that are made during the policy
period for any occurrences), after the last policy
period. This covers occurrences that happened

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while you were employed, but the claim for
which is made after employment ceases.
D. Physicians Duties
o Described in a job description attached as an exhibit
to the agreement.
 Physician should make sure the exhibit is
incorporated by reference to the agreement, and
that any revision to it requires mutual written
agreement of the parties.
o Provision requiring physician is to abide by the
employer’s policies, procedures, rules and
regulations in the performance of his/her duties.
 This becomes problematic where the employer
may bind the physician to unknown and
amendable obligations outside of the employment
agreement.
o Either:
 [a] Such language should be deleted; or
 [b] The agreement must specify any of the
employer’s policies, procedures, etc. to
which the physician must abide, and either
[i] attach them to the agreement or [ii]
include them in a document referenced in

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the agreement, which is provided to the
physician prior to execution of the
agreement, and [iii] which may not be
unilaterally amended by the employer.
o The agreement should be carefully worded so that
nowhere does it oblige the physician to adhere to a
standard of care that is higher than required by law –
usually set by state law. Under no circumstance
should the physician agree to provide services
“according to the highest standards of competence,”
or “of optimum quality.”
 These standards may create unwarranted
liability by holding the physician to a standard
of care that is higher than normally imposed in
malpractice actions.
o Hours
o Will you be working full-time or part-time, and
specifically what does “full time” or part-time”
mean.
o Call coverage
o The call provision in an employment agreement
may be more onerous than the provisions of the
medical staff bylaws and department rules.

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 The physician needs to deal with this as a
negotiable item.
 Call coverage should be reasonable in terms
of frequency and scope of services.
 Compensation – the agreement should
address the FMV of the call compensation.
o Research time
o CME time and funding
o Administrative responsibilities
o Billing and Compliance
o AMA Principles for Physician Employment
provide:
“Employed physicians have a responsibility to
assure that bills issued for services they provide
are accurate and should therefore retain the
right to review billing claims as may be
necessary to verify that such bills are correct.
Employers should indemnify and defend, and
save harmless, employed physicians with
respect to any violation of law or regulation or
breach of contract in connection with the
employer’s billing for physician services, which
violation is not the fault of the employee.”

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o Restrictions on practice
o Admit to one hospital
o Refer only to physicians w/in hospital
 AMA Principles for Physician Employment
provide:
o Physicians should always make
treatment and referral decisionsbased
on the best interests of their patients.
Employers and the physicians they
employ must assure that agreements or
understandings (explicit or implicit)
restricting, discouraging, or
encouraging particular treatment or
referral optionsare disclosed to
patients.
o Intellectual property rights – employer typically
claims ownership of IP created in the course of
employment.
E. Employers Duties
 Pay physician
 Provide benefits

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 Provide facilities, personnel, equipment, office
expenses
 Pay business expenses of physician (subscriptions,
CME, society dues, business development, etc.)
F. Term of Contract
o If it doesn’t say anything, there is no particular term
and the contract can be terminated “at will” of
employer.
o Most desirable to have multi-year agreement of 3
years or more.
 Even if contract says term is for 3 years, if contract
also allows termination “without cause” then the
contract is really “at will” employment. The only
difference is the notice that may be required in a
termination “without cause.”
o Contract can renew automatically (“evergreen
contract”), unless notice given of intent to terminate
in advance of expiration date.
 You need to include provision for negotiation of
annual salary increase.
G. Termination of Agreement
o Two types of termination provisions:

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 For cause
 Without cause
o Termination “For Cause”
o Permits employer to terminate employee or for the
employee to quit, on little or no notice because the
other party has done something so serious to
materially breach the contract.
o AMA “Principles for Physician employment”
provide:
o Physician employment agreements should
contain provisions to protect a physician’s right
to due process before termination for cause.
Physician employment agreements should
specify whether termination of employment is
grounds for automatic termination of hospital
medical staff membership or clinical privileges.
o Termination “for cause” can be abused.
 Physicians should consider each “cause” listed in a
termination “for cause” provision and either be
willing to live with it or remove it.
 Ambiguity is the principal problem with many “for
cause” provisions. The provisions may not

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adequately describe the conduct that is forbidden.
Such common vague provisions include:
o Unprofessional conduct
o Conduct tending to place the practice or
hospital in a bad light.
o Conduct injurious to the reputation of the
practice or the hospital.
o Disruptive behavior.
o The physician employee should try to remove
or restrict such ambiguous provisions.
 Modify such terms to require repeated and
serious conduct (such as “frequently
repeated conduct seriously injurious to the
reputation of the hospital”)
 Link the terms to patient care (such as
“disruptive behavior directly affecting
patient care”)
o Common termination “for cause” provisions, which
can be cured:
 Failure to maintain proper medical records.

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 Failure to prepare medical records in timely
manner.
 Failure to bill and code properly.
 Repeated disruptive behavior.
 Repeated failure to cover call.
o Common “for cause” termination provisions, which
are incapable of cure.
 Death or permanent disability
 Loss of license to practice medicine.
 Exclusion from Medicare or Medicaid
 Conviction of a felony.
 Loss of medical staff membership
 Loss of clinical privileges necessary to perform
services.
o Termination “Without Cause”
o Employment contract provisions that allow
termination “without cause” allow either party to
escape an unacceptable professional situation without

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having to prove the other party has done something
bad like materially breach the agreement.
 The key issue with termination “without cause”
provisions is the time frame for termination (i.e.,
the “notice period”).
o Time Frames
 Termination without cause clauses typically allow
either party to end the agreement by giving the
other party somewhere between 30 and 180 days
prior notice.
 From the employee’s perspective, a longer notice
period is preferable to a shorter period.
 A longer period means that the employer will
either have to allow the employee to keep working
and earning, or the employer will have to pay the
employee the value of his/her services for the
notice period, in exchange for the employee
leaving employment sooner than the contract
requires.
 The physician employee should seek a 180-day
notice period.
o It is important that termination provisions not allow
the hospital employer to find fault with the physician
for reasons that do not make sense from the

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physician’s professional perspective. The physician
needs to be the sole judge of the standard of care, and
determine what services ought to be provided to
his/her patients. Nothing in the termination
provisions should undermine the autonomy of the
physician employee in said regard.
Principles for Physician Employment provide:
(a) “Employed physicians should be free to
exercise their personal and professional judgment
in voting, speaking, and advocating on any matter
regarding patient care interests, the profession,
health care in the community, and the independent
exercise of medical judgment. Employed
physicians should not be deemed in breach of their
employment agreements, nor be retaliated against
by their employers, for asserting these interests.”
H. Notice to Patients When Physician Leaves
Employment.
o Ability to send notice to patients so they can follow
you.
 Need access to patient lists and medical records.
 How are costs related to this to be handled? Who
pays: you or employer?

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I. Covenants Not to Compete
o Acceptable during term of employment.
o A well-written noncompetition provision will prevent
a physician from practicing within a certain
geographic area surrounding the employer, and for a
prescribed period of time after termination of the
physician’s employment.
o AMA Principles for Physician Employment provide:
 “Physicians are discouraged from entering into
agreements that restrict the physician’s right to
practice medicine for a specified period of time or
in a specified area upon termination of
employment.”
J. Dispute Resolution
o AMA Principles for Physician Employment
 “Physician employment agreements should
contain dispute resolution provisions. If the parties
desire an alternative to going to court, such as
arbitration, the contract should specify the manner
in which disputes will be resolved.”
 Physician should prefer single arbitrator to a
panel, which is more expensive.

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 Attorneys fees
 Who pays for dispute resolution
 If contract says loser pays, it means physician
could get stuck paying both his/her own
attorney fees and fees of attorney for
employer. Should try to avoid this.
K. Amendment of Contract
 Physician should require mutual agreement of the
parties to any amendment.
L. Assignment Clause
o Many contracts allow employer to assign the contract
to a successor organization.
 Physician may not want to be in another
organization and not want assignment.
Difference between hospital employment and medical
staff appointment
o Employment and medical staff appointment are two
different things.
 Medical staff appointment is a condition of
employment.

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 Employment may also be a condition of medical
staff appointment (exclusive contract for services)
 Because of federal and state law, physicians have
fair hearing rights to protect their medical staff
appointment.
 Yet there is no such right to a fair hearing before
losing employment.
 The physician should assume the employment
agreement controls employment, and hearing
rights conferred by the medical staff bylaws do not
apply to employment, but rather only to medical
staff membership.
 This is not to say that physician employees have
no rights regarding employment, but the physician
employees usually have to enforce those rights in a
lawsuit, often having been terminated.
 The physician should be certain before signing the
employment agreement that all employment rights
the physician wants are included in the agreement.
 As to medical staff rights, a physician should be
vigilant and not inadvertently waive any medical
staff rights by virtue of becoming an employee.

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Good Axiom for Physicians entering into employment
contract negotiations:
 From The Rolling Stones –
“You can’t always get what you want, but if you
try sometimes, you might find, you get what you
need.”