Tales From the Contract Review Crypt

Just as an internal medicine physician should not perform invasive procedures, a general attorney should not review or negotiate the terms of a physician’s employment contract.

I recently received a call from a physician whom utilized another attorney (general practitioner) to review and negotiate the terms of her physician employment contract. At the time, she thought all was well with her contract. It was not until she attempted to leave her current employment that she discovered the errors in the prior review. Similar to a surgery, omissions are not discovered until well after the contract is reviewed, and unanticipated pain experienced. In my new client’s case, the pain was paying several thousands of dollars. You see, she was of the understanding that she would not be liable for tail coverage upon the termination of her employment, regardless of when or the reason. It was not until she received her final paychecks and noticed the withholdings that she learned of her obligation to purchase tail insurance due to not fulfilling the initial term of her employment contract. Obviously, she was less than pleased, especially when she learned that spending a few hundred dollars for an experienced physician contract review attorney could have saved more than ten thousand dollars!

There are numerous articles on the internet noting the need for attorney review of physician employment contracts. However, many of those articles do not specify what type of attorney should be retained to review these contracts. To illustrate, it is one thing to say a person should consult a doctor when experiencing chronic chest pain or discomfort after exercise; it is another to say that the person should consult a cardiologist. If a person calls the family medicine physician and never sees a cardiologist, the person would not consult the best qualified professional for the issue presented. Similarly, when a physician retains a general practice attorney, or any attorney whom does not practice specifically in the area of representing physicians in employment contract matters, the physician is not consulting the best qualified professional for the issue presented.

There are only a few attorneys in the country substantively practicing in the area of physician employment contract review. If you are seeking an attorney to review your physician employment agreement, please consider The Holloman Law Group. We would welcome the opportunity to assist you. If you have any general questions regarding physician employment matters, please feel free to contact us. We can be reached directly by phone at 202.572.1000 or via email at info@hollomanlawgroup.com.

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When is the right time for physician employment agreement review?

I recently received a call from a nephrologist, (we’ll call him Jim) currently practicing on a locums basis as a hospitalist, and generally satisfied doing so. Jim was recently presented with the opportunity to join a practice as a nephrologist and contacted me to discuss how I could assist him. During our discussion, Jim explained that he had not yet received the employment contract, or anything in writing confirming the offer of employment, but would attend a reception for physicians joining the group, and would learn more about when he could expect to receive a formal employment offer.  He asked whether it was too soon to engage my services. I have no doubt that Jim is not the only physician considering when the time is right to engage a lawyer to review a physician employment agreement.

The appropriate time to retain an attorney to assist you is when the first documents outlining the terms of your employment are published. If the prospective employer presents a letter of intent (LOI) for you to sign, before signing it retain an attorney to review it and if necessary revise. While true, a LOI is rarely legally binding, it is issued for a reason: to confirm each party’s agreement to the terms contained in the LOI. For many employers, once the LOI is signed, its terms are considered mutually agreed upon. Therefore, when these same terms are included in the physician employment agreement, it can be considered acting in bad faith to revisit the terms in the LOI for the purpose of revising them. In fact, I have learned of situations where employers have rescinded offers of employment to physicians based on signing an LOI then later attempting to renegotiate the same terms once included in the physician employment agreement.  A quality attorney will review your LOI gratuitously as part of the review of the physician employment agreement. For insight into how to select an attorney to review your physician employment agreement, visit http://www.hollomanlawgroup.com/blog/?p=13.

If you are seeking an attorney to review your physician employment agreement, please consider The Holloman Law Group. We would welcome the opportunity to assist you. If you have any general questions regarding physician employment matters, please feel free to contact us. We can be reached directly by phone at 202.572.1000 or via email atinfo@hollomanlawgroup.com.

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Is it necessary to have my physician employment contract reviewed?

As a healthcare attorney representing physicians across the country earning my livelihood, in part, reviewing and negotiating physician employment contracts, the inconvenient truth is “maybe not.”  The truth of the matter is not all physician employment contracts warrant paying even a relatively nominal fee to be reviewed by an attorney; this is because unless the base line terms such as general geographic location and general description of duties (e.g. outpatient versus inpatient) are acceptable it is premature to pay to have the physician employment contract reviewed. Another important factor is whether a physician can see himself or herself having meaningful professional relationships with other providers in the practice (i.e. genuinely getting along with other, more senior physicians in the practice , if not, then I would advise declining the offer and continuing your search for a viable employment opportunity. Particularly true in the case of employment by a solo physician, if you know that you and the employing physician do not share the same values or philosophy with respect to patient care, I would advise politely declining the offer of employment and pursuing other employment opportunities.

As opposed to joining a practice with a short term view, if a physician needs immediate income, I would suggest exploring locum tenens options as you consider viable long term employment opportunities. If you join one employer but shortly thereafter begin interviewing with other potential employers, you should be prepared to address questions regarding your decision to leave your current employer. While early on in a physician’s career, it is expected the physician will change employers once or twice, it is viewed unfavorably if it becomes a pattern however.

If a physician is accepting an offer of employment intending to later resign, the physician should strongly consider retaining an attorney to review the employment contract to ensure post employment covenants, such as a non-compete, do not preclude or curtail future opportunities.  Similarly, if a physician is accepting an offer of employment intending to remain with the employer long term, and perhaps later obtain an equity interest in the practice, the physician should certainly have the employment contract reviewed to ensure the viability of becoming shareholder or partner in the practice. However, if a physician receives an employment contract with basic terms which are completely unacceptable, such as compensation, call schedule, paid time off, and practice location, rather than having the contract reviewed, the physician should first evaluate whether the opportunity has the potential to be a good fit, and if not, simply decline the offer.

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Key Considerations in Physician Recruitment Contracts

Physician recruitment contracts are more complicated and nuanced than standard physician employment contracts because as opposed to two parties, these arrangements involve three: the recruited physician; the employing practice; and the recruiting hospital. For the recruited physician, it is important to consider the respective motivations of the employing practice and the recruiting hospital, as these motivations both align and divide.

Motivations to Enter Into a Physician Recruitment Arrangement

The employer benefits from a recruitment arrangement as the expenses commonly incurred in hiring a physician are greatly reduced due to the hospital supplementing its expenses. Additionally, the employer has the ability to evaluate whether the physician employee is a good fit without realizing the expenses usually incident to such evaluation (most notably, paying the physician a base salary).

The recruiting hospital’s benefit is much more indirect than the employer’s benefit. In theory, the hospital receives no direct benefit in exchange for its payment(s) to the employing practice or recruited physician, as the case may be. However, in reality, hospitals often benefit handsomely in the form of facility fees generated from the treatment of the recruited physician’s patients, as well as patients of the practice, treated in the hospital.

Key Considerations for the Physician

1. Commitment to the Geographic Area. If a physician cannot, after an honest assessment, reasonably foresee remaining in the geographic area served by the recruiting hospital for the duration of the recruitment contract, the physician should seriously reconsider executing the recruitment agreement. Once the recruitment agreement is signed, it becomes legally binding and enforceable, no matter any change of heart or desire to relocate. Therefore, if there are specific, legitimate, and foreseeable events which could necessitate premature relocation, such as immigration concerns or the passing of an immediate family member, the physician would be wise to carve out exceptions to enforcement of the recruitment agreement in such instances.

2. Negotiable Terms. Understand that the arrangement terms are negotiable and you have a degree of leverage. Physicians may believe the hospital recruitment agreement is entirely non-negotiable, this is rarely the case. While it is true that the majority of the negotiable terms will be found in the employment contract, the recruitment contract is negotiable to a degree. Commonly negotiated provisions are: liability in the event employment with the initial practice terminates; hospital call coverage responsibilities; and whether the recruitment contract will preclude the employing practice from imposing a post employment restrictive covenant prohibiting the physician from practicing within the Hospital’s catchment area.

3. Compensation. Physician compensation is obviously a key consideration in any recruitment arrangement, but a particularly keen understanding of the compensation calculation is necessary when the compensation is not fixed but is a based on productivity, such as a work relative value units (wRVUs) model.  For a good explanation of wRVUs and how they impact physician compensation, please read “What is an wRVU and Why Does It Matter?” (available for free online at http://www.hollomanlawgroup.com/blog/?p=9).

4. Duties. The recruitment contract should specify what duties are to be performed in exchange for the hospital’s financial assistance. In addition to the requirement to maintain a full time medical practice within the hospital’s service area, physician recruitment arrangements often also require that the physician participate in the hospital’s call coverage schedule.

5. Term. A physician recruitment contract will have two terms: (1) a guaranteed income period, generally of twenty four months or less; and (2) a period during which the physician commits to practice within his or her specialty on a full time basis in the hospital’s service area (commitment period). If the physician fails to maintain a full time medical practice for the duration of the commitment period, the recruitment agreement would be breached and the hospital entitled to all or a portion of the sum it paid in association with the physician’s recruitment.

6. Reimbursement Obligations. Essentially, the hospital’s payment to the employing practice is treated as a forgivable loan to both the recruited physician and the employing practice, repaid either in cash or forgiven on a pro rata basis via the physician’s full time practice in the hospital’s service area. In certain situations, for example due to immigration related limitations, a physician does not have the option of self employment.  Therefore, should employment with the initial employer end before the commitment period ends, the physician would be dependent on a subsequent employer to hire him or her, else the physician will be forced into a breach of the recruitment agreement, and consequently jointly liable with the practice to reimburse the hospital all or a portion of the sum paid in association with the physician’s recruitment.

7. Restrictive Covenants. In the event the physician’s employment is terminated, the physician will likely remain bound by the terms of the recruitment agreement (i.e. remain in full time medical practice in his or her specialty within the hospital’s service area). Therefore, the recruitment agreement should expressly state that the employment contract cannot restrict the physician from practicing within the hospital’s service area should the employment contract terminate prior to the expiration of the recruitment contract. If on the one hand the recruitment contract requires the physician to practice on a full time basis through the commitment period, and on the other hand the employment contract requires the physician not to practice within the hospital’s service area and resign all medical staff privileges upon the termination of his or her employment, the physician could find himself/herself in the unenviable position of determining which contract to breach.


A physician contemplating a recruitment arrangement must ensure that he or she fully understands the employment contract, the recruitment contract, and how each reconciles with the other. An ounce of prevention is worth a pound of cure. The nominal fee to have your contracts reviewed by an attorney specializing in health care transactions will undoubtedly pale in comparison to the legal fees you will incur should you intentionally or unintentionally breach a covenant contained in the contracts you sign.

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Preparing for physician employment interviews.

I regularly receive phone calls from physicians whom are considering employment opportunities and have employment interviews scheduled. When discussing the details of an employment opportunity with a physician it sometimes becomes glaringly apparent that  the physician was ill prepared for the employment interview, as critical questions were never posed, and as a result key information about the opportunity not yet known (or considered).

As the physician employment interview season approaches, I want every provider to be armed with information needed to properly evaluate a prospective employer, and get the jobs they want. To achieve this, it is vital that physicians interview well by asking thoughtful questions and providing thoughtful answers. I created the Physician’s Employment Interview Guide for one reason: to aide physicians as they interview employers. The Physician’s Employment Interview Guide is completely free (you do not even have to enter an email address to access it) and available online athttp://www.hollomanlawgroup.com/img/HLG_interview_guide.pdf.

Below are excerpted questions from the Physician’s Employment Interview Guide:

  • What is the payor mix?
  • What is the patient demographic (e.g. highly educated, professional, heavy Medicaid population)?
  • Are there any expansions, mergers, or acquisitions planned?
  • How does the practice assign patients to its physician employees?
  • How many patients would I be expected to be seen in an average day?
  • Will I be expected to cover satellite locations? If yes, how often?
  • What is my anticipated call schedule? Is there equal participation among all physicians in my specialty/subspecialty?
  • Why is there a need for a physician with my specialty/subspecialty in this geographic area?
  • How long has this position been vacant, and to what do you attribute this?
  • In the past five years, what percentage of physician employees have been offered the opportunity to become a shareholder/partner?
  • Is there a post employment non-compete,? If so, what are its terms? (If applicable in all instances of termination, “do you believe it is equitable to restrict my ability to seek subsequent employment if you terminate my employment without cause?”)

The full version of the Physician’s Employment Interview Guide is available online athttp://www.hollomanlawgroup.com/img/HLG_interview_guide.pdf.

If you have any thoughts on how to improve the Physician’s Employment Interview Guide or would like to discuss physician employment particulars, please feel free to contact me. I would welcome the opportunity to assist you. I can be reached directly by phone at 202.572.1004.

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What to look for in an attorney to review you physician employment contract?

You will find plenty of attorneys whom claim to be adept at reviewing physician employment contracts, largely in reliance on prior experience with employment contracts generally. You may later regret retaining a general practitioner or general employment attorney to review your physician employment contract. This is because errors in a contract review do not surface until after the contract is signed and the parties are bound by the terms of the contract, unfavorable or favorable.

Similar to procedures, there rarely is an opportunity for a “do over.” Consequently, any mistake or initial error has an irreversible effect. Accordingly, any provider would be wise to thoroughly evaluate the attorney he or she is considering. Below is a list of considerations to keep in mind:

  1. Does the attorney regularly review physician employment contracts?
  2. Is physician employment contract review an integral part of the attorney’s practice (as opposed to an ancillary service offering)?
  3. Does the attorney have the most recent MGMA and/or AMGA compensation data?
  4. Has the attorney published any material on physician employment contracts?
  5. How many years has the attorney been in practice representing physicians or physician groups?
  6. Is the attorney willing to offer any provider client references?
  7. Does the attorney or firm website focus on healthcare matters or general labor/employment matters?
  8. Does the attorney charge a flat fee or would you be charged by the hour?
  9. How polished is the attorney and/or firm website?
  10. If you are considering a contract review service (as opposed to a law firm), does it publish the name and contact information of the attorney(s) it works with in order that you can properly evaluate the attorney(s)?
  11. Is the price too good (i.e. low) to be true? (as in most cases, you get what you pay for!)
  12. Does the attorney offer his/her cell phone in order that you can reach him/her when it is critically necessary that you do so?
  13. Do you get the feeling that you would be dealing with a contract review mill, as opposed to receiving personalized attention with a reputable and experienced healthcare attorney?

If you are seeking an attorney to review your physician employment contract, please consider The Holloman Law Group. We would welcome the opportunity to assist you. If you have any general questions regarding physician employment contract matters, please feel free to contact us. We can be reached directly by phone at 202.572.1000 or via email at info@hollomanlawgroup.com.

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What is an RVU and why does it matter?

In gaining an understanding of work relative value units (wRVUs), it is important to understand the function of RVUs in qualifying physician productivity and in turn physician compensation.

Medicare establishes the base reimbursement levels for CPT® codes. Each CPT® code has a Relative Value Unit (RVU) assigned to it; the RVU is multiplied by a geographical adjustment (GPCI) and the conversion factor (CF).  The total creates the compensation level for a particular service.

There are three key factors that go into the determination of RVUs: Physician work; Practice expenses; Malpractice.
1. Physician work is the most important factor, accounting for approximately fifty two percent (52%) of the wRVU value.  This factor encompasses the services rendered to the patient by the physician, including time spent in active treatment, evaluation of test results, and any other effort expended by the physician to create an effective treatment plan. A code with a higher RVU work takes more time, more intensity or some combination of these two.

2. Practice expenses account for forty four percent (44%) of the RVU value and include the maintenance of equipment and facilities, as well as the costs for staff necessary for the rendering of quality medical services. The practice expense RVU is calculated using a methodology whereby the direct costs of providing a service are calculated (staff time, supplies and equipment time) and indirect costs are allocated. Indirect costs are those that cannot be directly attributed to the provision of a specific service, but to the provisions of services generally, such as having a waiting room or a billing service. Direct costs are those that can be assigned to a specific service; such as the actual supplies, equipment and staff time used for a given CPT code. Frequently, a CPT® code will be assigned a practice expense RVU for a facility setting, such as a hospital, and a different practice expense RVU for a nonfacility setting, such as a freestanding center, with the latter receiving a higher RVU. This is because free standing centers, such as ambulatory surgical centers, have higher practice expenses compared to hospitals, as hospitals have the benefit of higher volume and in turn a greater allocation of costs across departments.

3. Malpractice insurance premiums are the least substantial factor, accounting for only four percent (4%) of the RVU value. This factor is measured by the common cost of malpractice insurance for a provider engaged in the specialty or subspecialty.

Geographic Practice Cost Indices (GPCI)
GPCI accounts for the geographic differences in the cost of practice across the country.  Medicare calculates an individual GPCI for each of the RVU components — physician work, practice expense and malpractice. Medicare recognizes that it costs more to practice in Manhattan, for example, than in Memphis, and it adjusts payments accordingly. If, for instance, you are practicing in Manhattan, Medicare’s Geographic Practice Cost Index assigns a work GPCI value of 1.065, a practice expense GPCI value of 1.300 and a malpractice expense GPCI value of 1.480. Since the RVUs for each category are multiplied by their respective GPCI value (as shown in the equation below), the fact that these three GPCI values are greater than 1.00 increases both the RVU values and the resulting reimbursement. However, if you practice in Memphis you could have a work GPCI value of 1.00, a practice expense GPCI value of 0.908 and a malpractice expense GPCI value of 0.429. Those last two GPCI values are less than 1.00 and will therefore reduce their corresponding RVU values, and hence your reimbursement.

Conversion Factor
As noted above, the wRVU is then multiplied by the Conversion Factor (CF), which converts the RVU into an actual dollar amount. The dollar multiplier is updated on an annual basis according to a formula specified by statute.

The general formula for calculating Medicare payment amounts for 2013 is expressed as:

Work RVU x Work (GPCI)
+    Practice Expense (PE) RVU x PE GPCI
+    Malpractice (PLI) RVU x PLI GPCI
= Total RVU
x    CY 2013 Conversion Factor of $34.023
= Medicare Payment

If you are seeking assistance with a wRVU related matter, please do not hesitate to contact us. We can be reached directly by phone at 202.572.1000 or email atinfo@hollomanlawgroup.com.

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