1. Physician Employment Agreements
Roger Tracy, Assistant Dean
Carver College of Medicine
The University of Iowa
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2. TODAY’S SEMINAR Based on >35 years of experience Applies broadly
Elements of typical employment agreement
Summary comments/focus on issues
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3. IMPORTANT CONTEXT Employment agreement =contract
Integrated systems vs. independent medical practice
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4. WHY HAVE CONTRACTS?
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5. WHY? Define the relationship Avoid misunderstandings
Reasonable expectation:
unambiguous
balanced/fair
comprehensive
competitive
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6. RECITALS Names the parties Sets forth their qualifications
States offer and acceptance of employment
States parties mutually agree
to the conditions and covenants
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7. TERM OF CONTRACT
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8. INITIAL TERM - 1 or 2 years (“buy-in”)
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)
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9. RESPONSIBILITIES OF PARTIES Employee
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
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10. RESPONSIBILITIES OF PARTIES Employer
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11. COMPENSATION
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12. COMPENSATION Integrated system: Independent practice:
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
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13. PC PHYSICIAN STARTING SALARIES* PC PHYSICIAN STARTING SALARIES*
(Not including recruitment incentives or production bonuses)
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.
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PC PHYSICIAN STARTING SALARIES*
(Not including recruitment incentives or production bonuses) 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.
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*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)
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15. COMPENSATION ISSUES Competitive base? Incentive? Achievable threshold?
Method of payment after initial term
Growth potential?
The practice
The physician
The formula
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16. FRINGE BENEFITS Professional Dues Retirement Plan S-T Disability
Profit-Sharing
Prof. Liability Ins.
Retirement
Plan
FRINGE BENEFITS
S-T Disability
L-T Disability
Health Ins.
Life Ins.
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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
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18. TIME OFF
(paid leave)
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19. PAID TIME OFF Vacation/CME/Other Integrated systems: 4-6 weeks ( )
Independent practices: 4 weeks
PTO lumped: days (holidays?)
“Professional” time off ( when pay is 100% prod.)
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20. TERMINATION (of employment)
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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
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22. Termination Provisions (unbalanced)
ISSUE
Termination Provisions (unbalanced)
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23. TERMINATION CLAUSE ADVICE
Provisions should 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
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24. NON-COMPETITION CLAUSE
(restrictive covenant)
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25. Restrictive and Enforceable
ISSUE
Restrictive and Enforceable
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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 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
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27. LIABILITY INSURANCE POLICY ENDORSEMENT
(“Tail”)
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28. “Tail” Insurance Issue
Applies to “claims made” form (and self-insured)
Tail premium
X annual premium Y1
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
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29. ISSUE Entire Agreement
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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
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31. POSSIBLE ISSUE Buy-in Terms
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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
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33. BEST WAY TO DEAL WITH CONTRACT PROBLEMS:
PREVENTION!
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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
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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
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