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Physician Employment Agreements

Physician Employment Agreements. Roger Tracy, Assistant Dean Carver College of Medicine The University of Iowa. K:graphicspptt presentationscontracts2013Family Medicine updated 8-12-13.ppt. TODAY’S SEMINAR. Based on >35 years of experience Applies broadly

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Physician Employment Agreements

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  1. Physician Employment Agreements Roger Tracy, Assistant Dean Carver College of Medicine The University of Iowa K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  2. TODAY’S SEMINAR • Based on >35 years of experience • Applies broadly • Elements of typical employment agreement • Summary comments/focus on issues K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  3. IMPORTANT CONTEXT • Employment agreement =contract • Integrated systems vs. independent medical practice K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  4. WHY HAVE CONTRACTS? K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  5. WHY? • Define the relationship • Avoid misunderstandings • Reasonable expectation: • unambiguous • balanced/fair • comprehensive • competitive K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  6. RECITALS • Names the parties • Sets forth their qualifications • States offer and acceptance of employment • States parties mutually agree • to the conditions and covenants K:\graphics\powerpoint\RT presentations\Contracts\Contracts Waterloo updated 11-20-08 K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  7. TERM OF CONTRACT K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  8. 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) K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  9. RESPONSIBILITIES OF PARTIESEmployee • 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 K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  10. RESPONSIBILITIES OF PARTIESEmployer K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  11. COMPENSATION K:\graphics\ppt\rt presentations\contracts\Cedar Rapids 4-28-10.ppt K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  12. 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 K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  13. 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. K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt PC PHYSICIAN STARTING SALARIES* (Not including recruitment incentives or production bonuses)2012-2013 Starts • Full Range: $140,000 - $225,000 • Most (80%): $150,000 - $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. • K:\graphics\ppt\rt presentation\contracts\Single Slide compensation rates update 11-8-12.ppt • *These figures apply to all primary care specialties.

  14. SIGNING BONUS • >75% of employers offer one • $5K — $75K • Mean and mode = $25K • Increasingly a “retention” bonus (repayable) K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  15. COMPENSATION ISSUES • Competitive base? • Incentive? Achievable threshold? • Method of payment after initial term • Growth potential? • The practice • The physician • The formula K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  16. Professional Dues Profit-Sharing Prof. Liability Ins. Retirement Plan FRINGE BENEFITS S-T Disability L-T Disability Health Ins. Life Ins. K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  17. 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 K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  18. TIME OFF (paid leave) K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  19. 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.) K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  20. TERMINATION (of employment) K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  21. 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 K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  22. ISSUE TerminationProvisions(unbalanced) K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  23. TERMINATION CLAUSE ADVICE • Provisionsshould 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 K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  24. NON-COMPETITION CLAUSE (restrictive covenant) K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  25. ISSUE RestrictiveandEnforceable K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  26. 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” termination K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  27. LIABILITY INSURANCE POLICY ENDORSEMENT (“Tail”) K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  28. “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 K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  29. ISSUE Entire Agreement K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  30. 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 K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  31. POSSIBLE ISSUE Buy-in Terms K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  32. 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 K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  33. BEST WAYTODEAL WITHCONTRACT PROBLEMS: PREVENTION! K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  34. 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 K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  35. K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

  36. 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

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