Congratulations! After years of professional education and residency, you are highly qualified to practice medicine at the most sophisticated levels.

The truth is, medical school does a great job on teaching doctors how to practice medicine but does not teach doctors very much about managing a medical career.

If you are considering entering into a new employment agreement, here are seven big pitfalls to avoid:


1. Not understanding factors that impact take home pay.

Many hospitals and group practices pass the financial risk of practice down to physicians through the incentive model of compensation.

It is key to understand how the productivity metrics such as relative value units (“RVU’s”), or value measures like patient utilization, outcomes, or patient satisfaction will impact your take home pay.

Most importantly, the calculations or formulas used need to be easy to understand and not open to interpretation so that there will not be any room for misinterpreting the calculation methodology.

It is important to know whether a productivity metric is out of the physician’s control, such as billing and collections, and how much that factor will be weighed in calculating the physician’s compensation.

The agreement should also be clear about whether the physician will have any financial responsibility for payor recoupment in cases where the physician is not at fault.


2. Not having an agreement about tail coverage.  

The most common type of medical malpractice insurance policies are “claims-made” or “claims-reported” policies.

This means that the coverage only applies when a plaintiff actually sues for malpractice, which in some practices, can occur years after the care was provided.

If you change jobs, and as a result change insurance coverage, you will not be covered unless an extended reporting period (or “tail”) endorsement is added to the policy.

Tail coverage is expensive – often it is a multiple of the annual premium. The employment agreement needs to be clear about whether the employer or the employee is responsible for purchasing tail coverage.

If the employment agreement does not require the employer to purchase the tail coverage, then the physician could have a massive unexpected expense.


3. Not giving the physician access to medical and billing records.

It is the physician’s obligation to maintain medical records. But what happens if your employer maintains them for you and has control of them?

If you are subsequently sued, will your former employer give you access to the records?

What about if there is a Medicare/Medicaid audit for overbilling after you no longer have a relationship with the employer, will they give you copies of the records in question?

A physician favorable employment agreement will clarify who has the obligation to maintain medical records and billing records, and for how long.

If the employer will maintain control of the records, then the employment agreement needs to be clear that the physician employee will be given access to the records for reasonable purposes, and subject to confidentiality and HIPPA requirements.


4. Tying hospital privileges to employment.

If an employment agreement is with a hospital, the agreement may require a physician to give up medical privileges if the agreement is terminated.  Ideally, medical privileges should not be tied to an employment relationship.

For example, if a physician is employed directly by a hospital, and switch to a group practice that will be servicing the hospital, why should the physician be required to relinquish medical privileges and have to go through another credentialing process?

Medical privileges in a physician employment agreement should always be tied to the policies and procedures of a hospital’s medical staff and not to a specific employment relationship.

Your ability to serve patients at a hospital should not depend on who is your current employer.


5. Not being compensated for administrative duties. 

Employment agreements need to be specific about what the physician’s duties will be.  If the duties include administrative requirements (practice management, teaching, marketing, etc.), be sure that you are appropriately compensated for that time.

In smaller group practices, this can often lead to serious problems if the allocation of administrative duties becomes lopsided, or if the physicians are not compensated for their administrative work to support a practice.

In a hospital setting, a physician may be required to work a certain number of hours per week, and to provide administrative duties as well.

The agreement should be clear about whether the time requirements are inclusive of administrative duties, or whether the time requirements are only for clinical practice time.


6. Having an unclear path to equity.

Younger physicians are often lured to practices with an expectation that they will become partners in a group practice.

The employment agreement in that situation should provide a roadmap for the associate physician to become partner.  The roadmap will most likely contain quantifiable metrics and qualifiable factors – such as your colleagues’ evaluation of your performance.

The goal of clarifying the path to equity is to ensure that all parties can manage their expectations for how the relationship may develop.


7. Are restrictive covenants too restrictive?

It is typical for physician employment agreements to contain covenants that apply after the agreement is terminated.  These restrictive covenants may include agreements by the physician not to compete against the employer, not to solicit the employer’s patients, and not offer jobs to any of the employer’s staff.

It is very important to understand how these restrictive covenants could impact your career.

If, for example, you are in a smaller market with a limited number of practitioners in your specialty, and the agreement would restrict you from practicing within that market for a period of time, then you may not be able to practice medicine where you live unless you work for your existing employer!


Final thoughts:

Physician employment agreements are complex and have a number of moving parts.  Make sure you understand the issues involved in your agreement before signing.

The attorneys at GPS Law Group have decades of experience representing physicians and physician groups on a cost-effective basis.