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Avoiding Pitfalls in Physician Employment Contracts

Avoiding Pitfalls in Physician Employment Contracts

Faced with declining reimbursement, added expenses from implementing new technologies, and countless other factors (Figure), research has shown that many physicians are fleeing private practice to pursue employment in hospital systems. Most hospital employment contracts offer a guaranteed salary for 1 to 3 years that is equal to a physician’s salary the previous year in private practice. For many, the decision appears to be a no-brainer. However, these employment contracts can be wrought with ambiguous clauses that can leave physicians wishing they had taken a closer look before signing on the dotted line. Becoming Vigilant of Ambiguity in Contracts Employment contracts usually have guaranteed compensation for some period, according to Dennis Hursh, Esq. “Once that period ends, compensation is often based purely on productivity,” he says. “Physicians then have all the disadvantages of private practice—including declining reimbursement—but they’re not their own boss and don’t have the flexibility in schedule that comes with private practice. Productivity formulas can be so nebulous that they’re almost impossible to quantify. In addition, many agreements allow for periodic unilateral changes in the compensation formula.” One of the biggest issues with physician employment contracts occurs at termination, explains Hursh. “It’s important for physicians to know if their contract includes a covenant not to compete once the contract expires, meaning they won’t be allowed to practice anywhere within a given area or at specific facilities. The ramifications of such clauses are profound. In some cases, physicians who leave their job may need to pull their children out of school and start a new practice in a different location.” As the financial strings continue to tighten, many...
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