A contract is usually just a simple exchange of promises for something of value (called “consideration”). On a typical day, an ordinary person may enter into multiple informal contracts without even knowing it. When you go to the store, there is a promise to purchase the items in your cart at the tagged price in exchange for the store’s promise that they can sell the items to you. When you go to a restaurant, there is an implied agreement to pay for the meal you order from the menu. These are simple transactions that are so common that we can imply terms without the need to formalize them in an express writing.
Sometimes, however, there are transactions that require more attention. Most would understand needing a written contract for the sale of a home, but what about employment? Most employees work on an “at-will” basis, provided offer letters that do not convey any contractual rights to the employment. Physician contracts are significantly different.
A physician contract can avoid future issues if drafted carefully
Physicians’ groups hire physicians for their practice. These practices generally do not hire the physician without some due diligence and a physician contract. Physician contracts are more comprehensive due to the complexity inherent to the practice of medicine. A well drafted physician contract will help avoid future disputes and regulatory issues down the road. And if the practice is accepting payments from government healthcare programs, there is even more reason to write it down. Some defenses to violations of federal statutes, called “safe harbors,” will not be available to contracted physicians without a written contract.
Physicians are higher regulated, higher paid professionals who may have more than one channel or method of compensation and who are required by law to maintain a license. They may have privileges at various hospitals or work for multiple clinics. Even the information they create, collect, and transmit is considered sensitive and is regulated very carefully. A physician contract must harmonize the requirements of the law with the needs and circumstances of the parties. With so many moving parts, it is no wonder that physician contracts are behemoths; long and arduous, calculated to resolve every potential scenario.
14 topics every physician contract should cover
Generally, the parties will want agreement on the following topics:
1. Compensation and benefits
2. Qualifications
3. Standards
4. Independent Contractor vs. Employee
5. Representations and Warranties
6. Location
7. Work environment
8. Insurance
9. Indemnification
10. Regulatory Compliance
11. Intellectual Property
12. Non-Competition, if applicable
13. Recourse for violation
14. Venue in case of dispute
Additional topics to consider
By no means are these topics exhaustive. Some of these topics are highly regulated by federal and state law. For instance, whether a worker is designated as an independent contractor or employee is a fact-sensitive inquiry with serious consequences. It is largely determined by the Internal Revenue Service which has final designatory authority. Compensation in the form of referrals is also another highly regulated aspect of medical practice. Before agreeing in writing about these topics, consult with counsel about what is legal.
Standards, qualifications and regulatory compliance
Standards, qualifications and regulatory compliance of doctors is largely a state concern, but there are minimally acceptable ones that every physician should be expected to meet. The expectations should be outlined formally so there is little chance for misunderstanding. If the parties agree to the terms of engagement, then there is far less risk of full-blown problems downstream.
Representations and warranties
Many physicians groups will require the physician to make certain representations and warranties. Some of these representations will not be surprising. For instance, the doctor will warrant that they are authorized to work in the United States. Another commonplace representation is that the doctor will represent that they are licensed and will continue to be licensed. A less commonplace example of a representation is that they will not moonlight. If your practice prohibits outside work, then it is important to agree on it before employment begins. A physician’s group may represent that there will be adequate equipment and space for the doctor to work. The exact nature of the representations and warranties in a physician contract will vary widely and depend heavily on the unique needs of the parties.
Insurance and indemnification
Insurance and indemnification are sometimes intertwined and it is the task of a good attorney to untwine these considerations to make sense of it for the physician or physicians’ group. The bearer of risk when something goes wrong is a less than appealing topic of conversation but perhaps only capable of efficient resolution beforehand. And if things do go wrong, the procedure by which to bring a resolution to the dispute should be clear at the outset. Given the outsized legal and regulatory apparatus governing the medical industry, it is important to have the proper guidance.
Jabaly Law has worked with many physicians to help them navigate their contracts and other legal matters. If you would like assistance reviewing a contract, schedule a consultation today.
