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Finding a lawyer for doctors: Do I need an employment contract lawyer? What do physician contracts include? How long are most physician contracts?
A health care attorney shares insights on navigating the complexities of doctor employment agreements and the importance of hiring a healthcare lawyer for contract review and negotiation. Guest Richard Levenstein, JD, attorney at law at Nason Yeager, discusses common issues in contracts, negotiation strategies, and the long-term implications of contract terms on a physician's career. AMA Chief Experience Officer Todd Unger hosts.
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Speaker
- Richard Levenstein, JD, attorney at law, Nason Yeager
Transcript
Levenstein: There is no hard-and-fast rule with regard to negotiating. The negotiations must be reasonable in nature. Asking for something that is unreasonable and that really can't be supported destroys one's credibility.
Unger: Hello. And welcome to the AMA Update video and podcast. Today, we're talking about some of the most common questions that physicians have about employment contracts. Our guest today is Richard Levenstein, attorney at law with Nason Yeager in Palm Beach Gardens, Florida. I'm Todd Unger, AMA's chief experience officer in Chicago. Richard, we're glad to have you with us.
Levenstein: And I'm happy to be here, Todd, and look forward to answering some questions that you may have for me today.
Unger: Well, lots of questions from physicians about this particular topic, especially when they're getting their first job out of residency but beyond that as well. One of the most common questions that we hear is whether or not a physician should hire a lawyer to review the contracts that they receive. I imagine that you have some particular advice on that topic. What would it be?
Levenstein: My advice would be to always hire a lawyer and a health care specialist attorney with regard to a physician's employment agreement, whether it's the first agreement out of residency or whether it's an agreement well into one's career. Representing yourself in a situation like that is not a particularly good idea, because without knowing what to look for in those agreements, it's very difficult to protect one's interests.
Unger: So you obviously have a lot of experience in this particular topic, a person that would be great to talk to. But for the average physician out there who's looking to find a lawyer to review their contracts, how do they go about that? What's the best way for someone to look? What kind of qualifications should they be looking for?
Levenstein: Several ways. The state bar associations, many of which have health care law sections, will have attorneys listed in the state under that specialty. Many states have health care law certification boards, meaning board certified in that specialty.
The state medical societies will be aware of attorneys who specialize in health care. Local medical societies may have the same information. The American Society of Medical Association Counsel to which I belong, which is an organization of attorneys who represent physicians and represent medical societies at the national, state and local levels, also would be a particular source.
So there are many sources in which one can look for a health care attorney. And you can also ask fellow physicians who have dealt with health care lawyers and their practices and experiences to make a recommendation of one that they've been happy with.
Unger: Now, you see a lot of these contracts. I'm curious, just kind of at the top level, what are the kinds of common issues that people should really focus on?
Levenstein: So the one issue that always jumps out at the page, and especially for that first contract for residents, is the number on the page of the salary or compensation, which, of course, is many times what a resident had just finished earning. That is not the most important part of the contract. What's behind the dollars is the most important part of the contract.
And there are many issues which one needs to be aware. The term, length of the contract and the termination provisions need to be reviewed. We don't have time to go through the specific elements of those issues today. So I'm just going to name them so people will know what to look for when reviewing these contracts.
Compensation formulas—whether the compensation is a guaranteed salary or a draw against productivity, very important, the benefits that are to be available to the employed physician pursuant to the agreement. Covenants not to compete, not to solicit, of significant importance with regard to what happens upon termination and what happens in the life of a physician in the event of termination.
Fair market value clauses that would enable an employer to change the compensation amount based upon the fair market value of the compensation being paid, no longer being, in fact, fair market value, this is a very important clause, because one does not want to have a contract which has a clause that enables your compensation to be changed without safeguards.
Coterminous clauses—those are clauses that, upon termination of the contract, require a physician to resign medical staff privileges they may hold in connection with that employment. Sign-on bonuses and relocation bonuses—not only the amounts of what is paid, but what the repayment clauses are in the event of termination and what the obligations to repay all or part of those funds are.
Dispute resolution, very important—whether the contract calls for arbitration or litigation in the event of a dispute or requires mediation, I think mediation is a great clause to have. I'm not a fan of arbitration, particularly. I'm much more of a fan of litigation, where the procedural safeguards and due process rights are more protected.
Arbitration is a private proceeding with limited protections. My advice to those who see an arbitration clause in their contract is that any clause should just state that in the event of a dispute, the parties may mutually agree to arbitrate but are not required to do so.
Private equity—if you're in a private equity situation, there might be additional considerations to be concerned about. If you are going to own stock or other equity ownership, the terms of a shareholders or other agreement, which would be concomitant with the employment agreement, need to be looked at, the buy-in provisions into a private practice environment after a certain period of time as an employee, the outside activities that a physician might be enabled to engage in, in addition to what their duties are as a physician.
Many physicians have outside activities they want to continue to engage in, such as teaching or testifying as an expert. And those contracts require those outside activities to be listed in specific nature in the contracts.
Unger: Now, Richard, I'm going to just interrupt you for one second here. For anybody that wasn't convinced that they needed an attorney to look at their contract, your answer to this question pretty much spells that out. There is a lot to be concerned about.
And I'm curious, in the scheme of things, how much flexibility do you find on the employer side to making adjustments to all of those dimensions that you talked about? And is there usually a difference between maybe a large institution and a smaller one in terms of that flexibility?
Levenstein: There are many differences with regard to the ability to negotiate. First, starting with the area of specialization that the physician is practicing in. Whether or not they're in demand in that location gives them additional leverage, as opposed to one physician who is in a specialty that was not in such high demand. But there are certain provisions that if a reasonable approach is taken by the attorney, a knowledgeable attorney who knows how to approach these issues, there's no hard-and-fast rule with regards to negotiating.
The negotiations must be reasonable in nature. Asking for something that is unreasonable and that can't be supported destroys one's credibility. For example, when dealing with a covenant not to compete, asking one to eliminate a covenant not to compete entirely, it's not a reasonable position because if they wanted to do that, they wouldn't have had it in the contract.
Asking one to limit the applicability of that covenant not to compete, such as it should only apply in the event of a termination for cause by the employer or without cause by the employee, something reasonable, hard to say no to without giving up a position that the employer is being unreasonable.
So if you can take a reasonable position that puts whoever you're negotiating with in an unreasonable position if they don't agree with what you're asking or flat out refuse to even discuss it is the way that I approach it, because I want the credibility with the other attorney and his or her client, that they know that I know where I'm coming from, and my client knows what he or she is looking for. And I get a better response with that attitude and that approach to negotiation.
Unger: Where do you see the biggest gains between the original agreement or contract that gets put in front of a physician and the outcomes that you typically generate?
Levenstein: Negotiating the covenant not to compete in any way that it can be limited, similar to what I just said, or the radius, the geographic radius, trying to limit it. And in larger institutions that have multiple locations, oftentimes they will try to use every location they have as a base for the radius. And so those kinds of considerations are really important.
The compensation formula—extremely important in this regard. If you're on a guaranteed salary, you know you get paid a certain amount every year. But if you're on a productivity basis where you have a draw against productivity, if you do not make whatever the productivity level is, you can owe your employer money back.
You never want to, if you can help it, have a client put into that position where they owe money back to their employer, because it means that the first money that you earn in paycheck or a portion of it goes to your employer before you take home money, because many of the contracts will provide as such.
And so you want to be very careful as to what the productivity formula is if you have to agree to such a formula. And you want an example of how it works in the contract so that when the time comes and you are trying to verify whatever your client is being told as to what they owe or don't owe, you can plug those numbers into the formula. And you also want the right and the obligation on the part of the employer to provide all of the backup documentation used to make such calculations with regard to the productivity formula that is applied. Those are really important.
Malpractice insurance, another important issue—the coverage while one is employed, if one is leaving a job, what we call nose insurance for that new employer to pay, tail insurance for the prior employer. That employee needs to be covered for claims made between the time they leave their employment and start the new employment.
Similarly, on the way out, tail insurance, you want to talk to your new employer about tail insurance. And most importantly, who pays the cost of tail insurance, which can be very high. Ideally, you want the new employer to pay both the nose insurance, if the old employer is not paying it, and the tail insurance on the way out. Oftentimes you can only get one, and anything you can get towards payment of those costs from your employer is a gain and a win.
The coterminous provision is important, too. A physician who gives up voluntarily medical staff privileges at a hospital in connection with his or her employment most likely is giving it up at a hospital that the employer has some control over. And if you're staying in the area because you can, applying for privileges at that hospital or new because you had to resign may be a difficult task because of that employer's control and influence at that hospital. So I try to negotiate out coterminous provisions if at all possible.
Unger: Now, that's a lot to think about. I'm curious, is there any difference between the types of factors that you're talking about for, say, somebody coming out of residency versus a physician that's kind of well into their career and looking at a change?
Levenstein: Sure. The person well out of the career first is generally someone who's more financially secure, doesn't necessarily have student loans that are outstanding and have to be repaid, and their economic situation is more stable than a resident who comes out of residency with student loans, oftentimes a young family and the obligations that go with that and who are more inclined to look at the financial aspects of the contract and maybe not concern themselves with the other elements of it unless someone has pointed them out to them, as I just have done this morning, this afternoon.
And the economic situation or the economic standing of the two physicians in those categories is an important factor that sometimes drives negotiations in many ways. But the basic elements of the contract that I described are common, whether it's the first contract or the last or middle contract.
With this exception, the first contract that a resident signs can oftentimes be the most important he or she signs, because it can set the tone not only for their career, but for their lives going forward, at least, for the length of term of that first contract.
Unger: That's really good advice. One kind of nosy question. I mean, residents are coming out of their years of school and training. And they are worrying about outsized student debt, things of that nature. Is this a big package do you afford, this kind of negotiation for a contract? And how do they stack that up against the value?
Levenstein: Let me answer that this way. I think—and I'm not here to toot my horn as a lawyer. But I think that the money that is spent on a health care lawyer negotiating these contracts is the best money that a physician spends, because it can alter, as I said, at all levels, not only their career path, but their lives and lifestyle, because oftentimes the covenant not to compete can limit their ability to leave, depending on what triggers it, and keep them in the location where they are because of the economic factors involved and the fear of having to move and start again.
Also, young physicians, in some instances, might have offers to repay their student loans by their employers. And again, that's not free. It comes with repayment clauses that reduce the amount of repayment by the term that one stays in that employment proportionately so that if it's a three-year contract and you leave after one year, you still can owe two-thirds of whatever was paid to pay those loans off back to your employer.
So again, many factors all need to be looked at together. And a lawyer with experience in negotiating these contracts, a health care lawyer is important. And there are lawyers who negotiate contracts all the time that are not health care contracts. I can tell you that employee positions contracts are far different than any other employee contracts because of the many issues that I've just gone through and described for you.
Unger: Richard, this has been so helpful in understanding what it takes to really evaluate those contracts and make sure that you're protected for the future. Thank you so much for joining us and helping physicians navigate what is clearly a complicated process.
If you found this discussion valuable, you can support more programming like it by becoming an AMA member at ama-assn.org/join. That wraps up today's episode, and we'll be back soon with another AMA Update. Be sure to subscribe for new episodes and find all our videos and podcasts at ama-assn.org/podcasts. Thanks for joining us today. Please take care.
Disclaimer: The viewpoints expressed in this podcast are those of the participants and/or do not necessarily reflect the views and policies of the AMA.
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