Physicians should review their Employment Agreement or risk Violating Federal and State Law

InspectAny physician who is signing a new employment contract or updating an existing contract should review the contract with an experienced healthcare lawyer. Most contracts are prepared to benefit the hospital or medical practice that is employing the doctor. Employees do have the right to negotiate the terms of the agreement. Often, small changes can mean larger pay and reduced risks. It’s crucial for the physician to review with legal counsel what provisions should be included in the contract, what terms should be deleted, and which provisions should be modified.

The contract affects more than just your current salary and benefits. Contracts can affect your long-term rights and your ability to practice medicine if you change employers. Physician employment agreements can affect how you do business and where you can conduct your practice. Contracts need to address laws that can lead to litigation based on violation of Stark referral laws, anti-kickback statutes, and other laws.

Experienced healthcare physician employment lawyers negotiate a variety of practice, business, medical, and legal issues. Agreements will vary depending on the experience of the doctor, the type of practice, who the employer is, and who the employer is. Once you sign the contract, it becomes much harder to renegotiate it. The best time to negotiate is BEFORE you put your signature to the physician agreement.

Compensation issues

Experienced physician employment contract lawyers should review the following compensation issues according to the American Academy of Family Physicians:

  • Your pay should be commensurate with other doctors with similar qualifications. There are guides that can be used to determine how much, for example, an orthopedist with 5 years experienced including privileges at a prestigious hospital, can earn.
  • It should be clear that you are being paid as an employee and not an independent contractor.
  • The amount of salary and the length of salary should be set forth in writing.
  • Extra incentives should be clear, precise, and set forth in writing. These incentives must comply with Stark Law, anti-kickback statutes, 3rd, and relevant state law. These laws exist to protect patients from overbilling and unnecessary treatments.
  • If pay is tied to performance measurements, those metrics and benchmarks should be clearly identified

Benefit considerations

Physician employment agreements should cover a full range of benefit including:

  • Health insurance for the doctor (and possibly a spouse and children)
  • All relevant licensing fees and medical dues
  • Funds and time to complete any Continuing Medical Education requirements
  • Medical malpractice insurance. This should detail the coverage for any legal fees, what acts are covered, and what types of claims are covered. Generally, the AAFP recommends occurrence-based coverage which doesn’t depend on when the claim is made.
  • Vacation and sick time
  • Retirement plans

Other features such as moving expenses may be included. Understand how time off may affect any benchmark or incentive pay. Agreements should include opportunities for professional education and support in addition to CME requirements so you can stay current with all legal requirements.

The hours and days a physician is scheduled to work and when they should be on call should be set forth in writing. Experienced physician employment agreement lawyers help clients understand what schedules and call times other doctors with similar skills have agreed to. Physicians should understand how additions or subtractions to schedules and call-time may affect their pay.

Termination provisions – cause and without cause

The physician employment agreement should be set forth when the employer can terminate the doctor for cause and when they can end the contract without cause. The contract should spell out the termination rights and duties for both the employer and for the employee. Often, employees can terminate a physician contract without cause if they give timely notice (usually between 30 and 90 days). Some contracts require that the physician commit to work for at least one year.

Most employment contracts allow the employer to end a contract for cause. Good contracts require that the employer provide written notice of the cause and give the employer an opportunity to fix any breaches within a set time.

Restrictive covenants

Employers often try to restrict the ability of a physician to compete with the employer when the contract ends. Different states enforce these agreements differently. An experienced physician employment lawyer understands how your state balances the employer concerns with the doctor’s right to earn a living. Key considerations are:

  • The length/duration of the restriction. A one or two year restriction is viewed more favorably than a longer restriction.
  • The geographical range of the restriction. Doctors who work in a city generally should seek a smaller mileage radius restriction – even just one mile. Rural doctors may be subjection to wider geographical restrictions.

The AAFP suggests negotiating when restrictions might not apply – such as if you are terminated for cause.

Your physician employment agreement lawyer should review other related issues such as your ability to solicit former patients and employees.

Intellectual property issues

Generally, patient records remain with the employer. The employee may though, negotiate the right to access the records – for example; to provide better medical care, to show his/her credentials, or to respond to a malpractice lawsuit.

Doctors who contract with non-physician businesses such as medical spas may be required, by law, to own their medical records.

During the length of the contract, physicians should have access to all medical documents that are needed to provide quality medical care to patients.

Potential buy-in rights

Many employers do hope the relationship works out and that the employer and employee want to continue the relationship long-term. A well negotiated contract reviews the terms of any potential buy-in including:

  • When the buy-in can take place
  • The cost and payment requirements for any buy-in
  • The prerequisites for the buy-in

The AAFP also recommends that any loan agreements should be detailed regarding the purpose, the terms, and any payback provision. “When evaluating the contract, the physician should have access to documents detailing policies and procedures.”

Additional considerations

Experienced healthcare physician employment lawyers should also address these following contract issues:

  • Compliance requirements. Doctors need to understand their exposure to:
    • Stark referral laws
    • Anti-kickback statutes
    • State self-referral laws and any laws that regulate how fees are split

Doctors who fail to understand these laws, compliance issues, and the risks of non-compliance may be subject to criminal prosecution and civil liability.

  • Audit rights. Doctors should negotiate the right to review books, records, and financial documents to verity they’re getting the compensation that was agreed to in the physician employment contract – if the employer is billing and collecting on your behalf.
  • The right to a balanced contract. The contract should be reviewed from start to finish so that each employer right is balanced by a corresponding right or clarity as to the employee’s rights and obligations. Sample issues that should be reviewed include confidentiality requirements and indemnification rights.
  • Liability limitations. The terms of liability should be clear and, if possible, caps on liability should be negotiated. Liability issues that should be addressed include an understanding of the employee’s duties and obligations regarding implied warranties.
  • Negotiating which venue and which laws apply if there are disputes. It makes a difference if disputes are heard by arbitrators or by courts. It should be clear where disputes are heard and which state’s laws apply. Some states, for example, are known not to favor restrictive covenants.

Stark Law, Anti-Kickback, and Additional Laws and Regulations

Stark Law

Stark Law is federal law. It forbids physicians from referring patients to an entity called “designated health services.” (DHS) – if the doctor has a financial interest in that DHS. The law applies to patients w who use federal health programs such as Medicare and Medicaid.

An experienced employment physician attorney understands what acts constitute a referral and what entities qualify as a DHS. The lawyer will also review what exceptions to Stark Law apply.

One specific exception directly refers to personal service arrangements. The personal service arrangement exception requires the following:

  • The contract should be put in writing, be signed, and set forth the services required.
  • The contract should cover all the services the doctor (or immediate family members of the doctor) will provide the DHS
  • The total services can’t be more than what’s reasonable and necessary to conduct business.
  • The agreement must be at least one year in length. Some additional requirements may apply if a physician is terminated.
  • The compensation should be set in advance and should not be more than the fair market value of the services.
  • Compensation should not (unless a physician incentive plan is involved) consider the volume or value of any referrals or any other business income
  • The services provided can’t violate federal or state law
  • Additional requirements your healthcare lawyer can explain such as the preferences of the patient for specific practitioners.

Another specific exception is the physician incentive plan exception. Here the volume or value of referrals can be considered if many complicated requirements are met such as that payments can’t affect the quality of medical care the patient requires.

Anti-Kickback Statute (AKS)

This federal law is similar but also different from Stark Law. It forbids exchanges or offers to exchange items of value to induce someone or some entity to refer them federal health care business such as Medicare-related or Medicaid-related patients, goods, facilities, or services.

The Anti-Kickback statute allows for safe harbors which protect certain types of financial practices from civil and criminal prosecution. An experienced healthcare attorney can explain when to use a safe harbor and how to use it to reduce the risk of prosecution.

The AKS provides safe harbors in the following practice areas. The precise terms of the safe harbor must be met to qualify:

  • Investments
  • Space rentals
  • Equipment rental
  • Sale of a practice
  • Warranties
  • Discounts
  • Group purchase organizations
  • Warranties
  • “Qualifying” Referral services
  • Price reductions for specific health plans
  • Investments in underserved areas
  • Rural practice recruitment incentives

Many other safe harbors may apply.

Personal service contracts are another safe harbor to the AKS. To qualify:

  • The physician employment agreement must be in writing
  • The agreement should cover all services the doctor provides
  • If the agreement is for part-time services, additional terms are met
  • The agreement is for at least one year
  • The terms are set in advance, are based on the fair-market value, and don’t consider “the volume or value of any referrals or business otherwise generated between the parties for which payment may be made in whole or in part under Medicare, Medicaid or other Federal health care programs.”
  • The services don’t violate state or federal law
  • The aggregate services for which compensation is paid are reasonably necessary

This practice service contract safe harbor is similar but not identical to the Stark Law exception. An experienced healthcare Stark and AKS lawyer can explain the key differences. For example, Stark Law only applies to Designated Health Services.

In general, “if there is a self-referral problem, then you must find an exception. On the other hand, if there is a kickback problem, then the arrangement is not necessarily illegal, but it’s good practice to look for a safe harbor and see if there is a fit and evaluate the arrangement as a whole.

One possible remedy that healthcare lawyers review to reduce the risk of violations of Stark, AKS, and other referral or fee-splitting laws is the possible use of an MSO – a Managed Services Organization. “The MSO model is very clean. The MSO (management services organization) provides management and administrative services, and in exchange collects a fee.”


If you’re a successful physician, chiropractor, acupuncturist, or other licensed healthcare provider, and you want to provide overflow patients to another practitioner you hire, is it a kickback […]

Additional compliance and regulatory laws

Additionally, experienced health care lawyers will review whether the following laws may affect the physician healthcare employment contract:

  • Other federal laws such as the False Claims Act which regulates the submission of bills to federal agencies
  • State anti-referral and anti-kickback laws
  • Other applicable laws that govern truth in advertising, medical devices and drugs, and other matters.
  • Compliance issues for HIPAA
  • Regulations by the FTC, FDA, OSHA, and other federal and state agencies.

Proper risk management is key to protect yourself from risks that may arise from employment contracts.

Physicians who wish to work for a hospital, medical practice, clinic, or other employer should review their contract with an experienced healthcare attorney. The lawyer will review the following issues:

  • Compensation
  • Benefits
  • Intellectual property
  • Buy-in provisions
  • Termination requirements
  • Restrictive covenants
  • Audit rights
  • Compliance with Stark, Anti-Kickback Statutes, and other federal laws
  • Compliance with state laws
  • Many other practical, financial and legal issues

A healthcare attorney reviews health provider employment contracts by explaining your legal obligations and risks. We will review what benefits and interests you are likely leaving out and negotiate that these interests be part of the contract. We will request modifications to help verify compliance with Stark, Anti-Kickback statutes, HIPAA, and other laws. A fairly negotiated contract is often in the best interests of the employee physician and the employer because a satisfied employee makes for a better worker.

Contact Cohen Healthcare Law Group, PC. to protect your interests and reduce the likelihood of litigation over contract terms or applicable federal and state laws.

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