What to Look for in an Employment Agreement Evaluating Essential Issues University of Pittsburgh School of Medicine November 17, 2017 Jessica A. Ellel, Esq. jaellel@hh-law.com 412-288-2260

Agenda Negotiating an Agreement How to Use an Attorney Key Contract Provisions: Term / Termination Salary, Incentive Compensation and Fringe Benefits Restrictive Covenant Office Location / Call Coverage Equity Opportunities Professional Liability Insurance / Tail Coverage Recruitment Agreements

Negotiating an Agreement STEP THREE Interview and get as much information as possible. Talk to the other members of the practice, if available. Maintain as much flexibility as possible in initial stage of search. Do not limit interview opportunities. Identify “drop dead issues” while in the interview stage STEP TWO STEP ONE Example If there is an incentive compensation arrangement, talk to the group to see if there is an actual probability/ possibility of reaching the target.

How to Use an Attorney Do not wait until you have already made a decision about a job to engage an attorney. Determine the role the attorney is to take (i.e., is it to give information or is it to negotiate with the other parties?). Identify up front the extent of review and how charges will be calculated. Engage an attorney who has an understanding of medical practices and issues before entering into an agreement.

Key Contract Provisions – Term and Termination Is term self-renewing or does employment end at a specific date? If term is self-renewing, is there a consideration for salary adjustment? Can contract be terminated by either party without cause? What effect may this have on relocation? Ramifications regarding restrictive covenant?

Key Contract Provisions – Salary, Incentive Compensation and Fringe Benefits Employee usually will receive a minimum base salary. Is the base salary at risk for not meeting productivity requirements? Use past practice and MGMA statistics to assess productivity goals. Is there an opportunity to receive additional incentive compensation? Is it reasonable to reach these goals? Understand Net Revenue Threshold, RVU calculations, credit for non-patient encounters.

Relative Value Units (RVUs) Key Contract Provisions – Salary, Incentive Compensation and Fringe Benefits Relative Value Units (RVUs) RVUs are nonmonetary, relative units of measure that indicate the value of health care services and relative difference in resources consumed when providing different procedures and services. RVUs assign relative values or weights to medical procedures primarily for the purpose of the reimbursement of services performed. They are used as a standardized method of analyzing resources involved in the provision of services or procedures.

Key Contract Provisions – Salary, Incentive Compensation and Fringe Benefits Medical Group Management Association (MGMA) publishes a manual, Physician Compensation and Production Survey, which identifies from physician surveys comparative salary information for physicians, including RVUs based on percentiles of compensation.

Differentiate between profit and nonprofit sector Key Contract Provisions – Salary, Incentive Compensation and Fringe Benefits Differentiate between profit and nonprofit sector Difference in retirement plan options available in private and non-profit organizations. Cap on compensation in nonprofit corporations.

Key Contract Provisions – Restrictive Covenant Termination without cause Failure to renew Automatic termination on fixed term Downsizing of physician network Equities Do radius calculation to identify what actual restrictive covenant means in reference to application of restrictive covenant.

Key Contract Provisions – Office Location and Call Coverage In large systems – can physician be moved to other locations without consent? Is restrictive covenant based on office locations? Is call equitable and consistent with expectations?

Key Contract Provisions – Equity Opportunities Does the employment contract commit to a timeframe for an offer? What are the voting rights of new owners? Hard Assets vs. Accounts Receivable New Employment Agreements Stock Transfer Restriction Agreements and other Shareholder Agreements Personal Guarantees for Practice Debt Buy Out Is the buy-in methodology fixed in advance?

Key Contract Provisions – Professional Liability Insurance Occurrence vs. claims made Occurrence coverage covers events during the policy term, regardless of when a lawsuit is filed Claims made coverage covers lawsuits filed during the policy term, regardless of when the event occurred “Tail” coverage provides occurrence coverage following a claims made policy Who bears the burden of coverage post-employment?

Key Contract Provisions – Recruitment Agreements Hospitals and health care systems may offer recruitment agreements directly to new physicians or indirectly to existing physicians Be realistic in budgeting for new practice expenses Limit loan amount to assistance needed Understand payback implications

Key Contract Provisions – Sign-On Bonus + Moving Expense Be mindful of repayment obligations For moving expenses, pay attention to Employer rules