Three Things Groups Need to Update in their Physician Employment Agreements

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With the Florida Supreme Court’s decision last month on non-compete agreements, the time is right for physician groups to evaluate the terms of their physician employment agreements and consider changes in time for a January 1st effective date for an updated contract.  Thursday, October 26 at 12:00pm (EST), I’ll be holding a brief webinar (click here to register) to discuss that decision’s impact on employment agreements, as well as these few other topics:

Non-Competes.  If your non-compete provisions do not specifically address referral sources, now is the time to add that language to your non-competes.  In September 2017, the Florida Supreme Court held that referral sources can be considered protected business interests, such that perhaps a physician could not leave a practice and accept patients referred by individuals and companies that referred to the group. (click here for the Supreme Court’s Opinion). The consolidated cases at hand in the Supreme Court’s case dealt with home health agencies and their physician referral sources.  The employees who left the employer were recruiters, not physicians. For a home health agency to treat a patient, that patient must be referred, or certified, by the physician to need home healthcare.  The employee took lists of physician referrers and solicited them when she left.

It will be interesting to see how this will apply if the departing employee is a physician.  The types of referrals or certifications may be distinguishable.  Nonetheless, physician groups should add to their non-compete sections to make the most of this case law.  Most physician employment agreements already contain geographic, time and practice restrictions (for example, the physician can’t perform any medical services (practice) within 10 miles of the office (geographic) for 2 years (time)).

For a background on non-compete law leading up to the most recent decision, including a more in-depth analysis of how to draft non-competes, click here.

Maternity Leave, Disability and Retirement Issues.  More than one-third of currently practicing physicians will be 65 or older within the next decade, according to one study. For a more in-depth look into issues that may arise in physician retirements, click here to read Ann Bittinger’s article Bye Bye Baby Boomers: Plan Now For a Wave of Physician Retirements in the American College of Gastroenterology Magazine  Facing short-term retirement and perhaps more health issues among physician employees (and physician owners – that’s another, interrelated issue), employment agreements must lay out how the group will address physicians being out on disability or protected leave, wanting to go part time and wanting to leave the practice. According to the American Association of Medical Colleges, enrollment in medical school in 2015 was split evenly among the genders.   I walk group clients through these points:

  • Is your group big enough to be subject to FMLA and ADA (Family and Medical Leave Act and Americans with Disabilities Act).
  • What leave do you want to allow in addition to FMLA and ADA, and will it be paid? Will it apply to some physicians and not others?
  • Will you allow for part-time work, to ease into retirement?
  • Do you pay for disability insurance?
  • Does disability insurance cover maternity leave?
  • How much notice is your group going to require of a physician retirement?
  • What succession planning have you done for leadership and subspecialty positions?
  • In what ways can your group utilize workers needing accommodation for short periods of time, to create a win-win?
  • How do you want to treat physician employees who may be on leave for a while, but may want to come back (treatment for a major illness like cancer, for example)?

Typically, all of these things are addressed in the physician employment agreement to protect the practice.

Compensation Structures, MACRA and Stark Law Compliance.  If you haven’t considered incentivizing your physicians for things like participating in MACRA or other innovative payment methods, now is a good time.  Now more than ever, physician buy-in is essential in staying ahead of payer reimbursement changes.  Incentives promote cooperation, but they must be implemented properly.  The Stark Law makes it illegal for a physician to refer patients to entities with which he or she has a financial interest, unless an exception is met.  Physician employment usually fits within the bona fide employment exception, or perhaps the personal services exception, but when compensation evolves to more than a fair market value flat salary, Stark can be implicated.  That doesn’t mean Stark prohibits bonuses or incentive pay by any means, but the bonus structure must be based on personally performed services (usually), not things the physician referred to the practice.  For example, a bonus can’t be paid for a percentage of the prescription drugs dispensed by the practice that the physician prescribed.  Despite the many prohibitions, there are ways to creatively and legally tailor incentive compensation programs to align with the strategic plan of the group.

It’s time to consider these issues.  Pull up your physician employment agreement and see how your group addresses these currently.  Typically, most groups walk into their initial contract cleanup consultation with me, having prepared by reviewing their contract template in advance, saying “Ann, I don’t see where X issue is addressed.”  And they are right, it usually isn’t.  And typically, if unaddressed going forward, that vagueness comes back to bite the group very soon.