Physician Employment Agreements K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine...

$: Physician Employment Agreements K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt Roger Tracy, Assistant Dean Carver.$
Physician Employment Agreements

K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

Roger Tracy, Assistant DeanCarver College of Medicine

The University of Iowa

TODAY’S SEMINAR

• Based on >35 years of experience

• Applies broadly

• Elements of typical employment agreement

• Summary comments/focus on issues


IMPORTANT CONTEXT

• Employment agreement =contract

• Integrated systems vs. independent medical practice


WHY?

• Define the relationship

• Avoid misunderstandings

• Reasonable expectation:

– unambiguous

– balanced/fair

– comprehensive

– competitive


K:\graphics\powerpoint\RT presentations\Contracts\Contracts Waterloo updated 11-20-08

RECITALS

• Names the parties

• Sets forth their qualifications

• States offer and acceptance of employment

• States parties mutually agree to the conditions and covenants


TERM OF CONTRACT


INITIAL TERM

• 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)


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


RESPONSIBILITIES OF PARTIES

Employer

• Provides facilities, personnel, equipmt.

• Owns records, receipts and AR

• Performs billings and sets fees


K:\graphics\ppt\rt presentations\contracts\Cedar Rapids 4-28-10.ppt


COMPENSATION

• Integrated system:- 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


PC PHYSICIAN STARTING SALARIES*(Not including recruitment incentives or production bonuses)

2012-2013 Starts

PC PHYSICIAN STARTING SALARIES*(Not including recruitment incentives or production bonuses)

2012-2013

• 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.


SIGNING BONUS

• >75% of employers offer one

• $5K — $75K

•Mean and mode = $25K

• Increasingly a “retention” bonus (repayable)


COMPENSATION ISSUES

• Competitive base?

• Incentive? Achievable threshold?

• Method of payment after initial term

• Growth potential?- The practice

- The physician

- The formula


FRINGE BENEFITS

Retirement Plan

Professional Dues Prof.

Liability Ins.

S-T Disability Health

Ins.

L-T DisabilityLife Ins.

Profit-Sharing


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


TIME OFF(paid leave)


PAID TIME OFF

• Vacation/CME/Other

• Integrated systems: 4-6 weeks ( )

• Independent practices: 4 weeks

• PTO lumped: 25-30 days (holidays?)

• “Professional” time off ( when pay is 100% prod.)


TERMINATION (of employment)


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


ISSUE

TerminationProvisions

(unbalanced)


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


NON-COMPETITION CLAUSE

(restrictive covenant)


ISSUE

Restrictiveand

Enforceable


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 20-30 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” terminationK:\graphics\ppt\rt presentations\contracts\2013\Family Medicine updated 8-12-13.ppt

LIABILITY INSURANCE POLICY ENDORSEMENT

(“Tail”)


“Tail” Insurance Issue

• Applies to “claims made” form (and self-insured)

• Tail premium

- 2.3 X annual premium Y1

- 1.4 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


ISSUE

Entire Agreement


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


POSSIBLE ISSUE

Buy-in Terms


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


BEST WAYTO

DEAL WITHCONTRACT PROBLEMS:

PREVENTION!


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


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


Physician Employment Agreements K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine...

Documents

Transcript of Physician Employment Agreements K:\graphics\ppt\rt presentations\contracts\2013\Family Medicine...