Nine items you don’t want to find in your employment contract Any one of these should be your cue to start negotiating
Published in the November 2006 issue of Today's Hospitalist
Ask attorneys to design their dream physician employment contract, and they’ll rattle off favorable terms like a “notice and cure” provision and the right to access your patients’ records after you leave.
But lawyers are also quick to name some of the nightmare clauses that physicians should try to negotiate out of any contract before they sign. We talked to three attorneys and put together a list of the top nine items you never want to see in an employment contract but probably will when you’re out looking for a job.
1. A non-compete. Also known as a restrictive covenant, these clauses spell out where you can’t practice and for how long after your prospective job comes to an end. Outlawed in California and frowned upon by courts in some other states, non-competes nonetheless still pop up in about half of all the hospitalist employment contracts reviewed by Joel Leonard, JD, a partner at Holland & Knight LLP in Portland, Ore.
“Often, they’re written to be quite broad,” Mr. Leonard says. “They map out a radius of 30, 50 or even 100 miles around where the company does business.” That can be particularly onerous if the group or hospital system you’re considering working for has more than one hospital.
“You might not even be able to moonlight in someone else’s ER,” he says, “or the non-compete could extend to more than one state.”
What to do? Try to negotiate a non-compete away. If you can’t, says Andrew Knoll, MD, JD, a former hospitalist and now a health care attorney with Scolaro, Shulman, Cohen, Fetter & Bernstein PC in Syracuse, N.Y., consider it a potential deal-breaker.
Mr. Leonard advises physicians to offer to sign a non-solicitation clause as an alternative. In the retail world of office-based medicine, a non-solicitation provision is an agreement that exiting physicians won’t solicit patients to follow them to their new practice.
In hospital medicine, a non-solicitation clause would instead pertain to soliciting fellow hospitalists or other providers and staff. “I call this the ‘anti-poaching’ clause,” says Mr. Leonard. “You agree to not solicit other employees.”
2. No reference to tail coverage. Instead of a big barrier, this is a black hole that you don’t want to find in a contract: no agreement on the part of the employer to pay your tail coverage to cover any liability claims that arise once you’re no longer employed.
“Often, a contract will say, ‘We’ll pick up your med-mal while you are here,’ " Mr. Leonard says, ”but as soon as you leave, you have to pay the piper. That can be a big chunk of change.”
For a hospital, not agreeing to pay tail coverage is really shortsighted, he points out. After all, who will plaintiffs sue: the physician with the medical school debt or the hospital with the deep pockets?
“They’ll sue both,” he says, “but tail insurance actually helps your employer.” If you can’t get a prospective boss to pick up the tail, then figure out how much that coverage would cost and negotiate a comparable amount, in the form of a signing bonus, to cover it.
3. Vague termination language. You should expect a contract to spell out reasonable causes that you can be fired for, such as losing your DEA license or being convicted of a felony.
What you don’t want to sign is a contract that allows an employer to fire you at its sole discretion. Similarly, you need to beware of contracts that have “three pages of reasons why they can fire you immediately,” says Joan Roediger, JD, a partner and health care attorney with Obermayer Rebmann Maxwell & Hippel LLP in Philadelphia. “The longer the list is, the more suspicious, so I tend to look at those very carefully.”
Instead, the contract should list reasonable causes for termination. “That gives me some negotiation room,” says Dr. Knoll, “and even opens up a lawsuit for a wrongful termination should the employers conduct not meet the standard of reasonableness."
4. “Sweeps” clauses. These often show up in contracts for inpatient physicians such as hospitalists and anesthesiologists. They tend to crop up in contracts for large national groups that manage local hospitalist services and for local, independently owned hospitalist groups.
“A sweeps clause stipulates that if the hospital decides to end its contract with the group you’re working for, then you’ll get swept out too,” Dr. Knoll explains. “It is a contractual agreement to resign your clinical privileges once the business contract ends.”
The clause protects groups that contract with hospitals from you stealing their contract, in effect. Can you negotiate such a clause away?
“You can ask,” Dr. Knoll says. “All of these items are negotiable.” He points out, however, that when he represents medical groups instead of individual physicians, he makes sure to put such clauses in the contract “because they’re very protective.”
5. Generic work expectations. A hospitalist contract should clearly spell out work expectations, including the length of shifts and the number of shifts you’ll be working per month.
What you don’t want to see is “just basic, generic language that you’ll be scheduled to work fulltime,” says Ms. Roediger from Obermayer Rebmann. She notes that hospitalists often contact her and want to change jobs because of unrealistic work expectations: “They’re working 12-hour shifts, a lot of weekends and every holiday,” she says, “and they don’t believe that’s fair or equitable.”
6. Broad gag provisions. Gag provisions generally prohibit a physician who is employed by an institution from presenting any evidence that the hospital or any of its personnel did anything wrong.
Some gag provisions may be reasonable, says Mr. Leonard, such as language that says you agree to not join a plaintiff in a lawsuit against the hospital or medical group. “But they’re often written much more broadly, saying you can’t support any plaintiff or any complainant against anyone at the institution,” he points out. “Those raise serious ethical issues.”
Physicians in some states including Oregon, according to Mr. Leonard, have an affirmative ethical duty to report a colleague’s incompetence, impairment, or gross or repeated acts of negligence.
“Every once in a great while, you’re going to run into a bad doctor or a person in a hospital who’s doing bad things,” he says. “You don’t want to sign a contract that says you can never blow the whistle.”
7. Unattainable productivity bonuses. Beware of contracts that offer productivity bonuses with unrealistic thresholds. Dr. Knoll recently saw a contract that offered a physician a bonus of 35 percent of everything he billed over $450,000.
“You’re just not going to get there,” he points out. Instead, he prefers to see terms to pay physicians a much smaller percentage (say, 5 percent) of everything they bill, or a smaller percentage over a reasonable billing threshold of $200,000, for instance.
8. One-way indemnification clauses. These should also make you nervous. Such clauses, for example, indemnify you for any loses incurred by a hospital or group for over-coding. If you agree to that indemnification, the hospital can turn around and try to get you to make Medicare whole for the amount apparently overpaid.
Instead, Dr. Knoll says, you want the hospital to be on that hook. “If I’m the hospitalist, all I do is hand in the information and the hospital is doing all the billing,” he points out. “Because it’s the hospital that’s much more likely to make the error, the hospital should be responsible for the penalty.”
9. Waiting periods for benefits. According to Ms. Roediger, your employment package should include benefits, particularly health care coverage, that take effect when you begin your job. If not, the contract should state that your new employer will pick up the cost of maintaining previous benefits until the new ones kick in.
“You can’t necessarily mandate that they provide you with immediate benefits if the company manual says there is a waiting period,” she notes. “But as part of your package, you should negotiate for them to pay your COBRA until you are eligible.”
Contract terms you want to see
Here are items that attorneys say physicians should try to include in an employment contract:
• Access to your patients' records. When you leave the job you’re now negotiating, you still want to be able to access your patients’ records in the event of a malpractice or administrative claim. A lack of that access “hamstrings me when I defend physicians at administrative proceedings,” says Andrew Knoll, MD, JD, a former hospitalist and now health care attorney with Scolaro, Shulman, Cohen, Fetter & Bernstein PC in Syracuse, N.Y.
• Partnership track language. If you’re considering joining an independent group, make sure the contract spells out when you’ll be considered for partner. “More likely than not, what you’ll see is an agreement to discuss it without anything binding,” Dr. Knoll says, “but I at least want to see that. I want to know that in two years, we’re going to talk about me getting an interest in the company.”
• A notice and cure provision. Such a provision allows you to cure something that potentially puts you in breach of your contract. A familiar example is not paying your medical license fee on time. (As Dr. Knoll points you, you should negotiate for your employer to pick that up!)
“You hand over your credit card number and your license is re-activated, but you can be fired,” he says. “If you can cure the problem, you want a notice and cure provision for issues that are potentially terminable."