American College of Physicians: Internal Medicine — Doctors for Adults ®

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Seven things internists need to know about signing contracts

From the September 2000 ACP-ASIM Observer, copyright 2000 by the American College of Physicians-American Society of Internal Medicine.

By >Ingrid Palmer

With most residents deciding to work for a large group practice or some other type of employer, contract negotiations are a more important part of life after training than ever. But all too often, experts say, physicians fail to examine the details of a contract before signing on the dotted line. Here are seven tips that can help you become happily employed:

1. Hire a lawyer.

Too many physicians read part of an employment contract and assume they understand what it means. Legal jargon may sound obvious, experts say, but it could mean something much different than what you have in mind.

"One of the biggest mistakes physicians make is entering into a contract without having a lawyer review the contract first," said Gregory A. Hood, FACP, a generalist with Kaiser Permanente in San Diego who has reviewed contracts for his practice.

At the very least, physicians should have a lawyer look over their contracts to "make sure the terms are fair for both parties," said Susan E. Ziel, JD, an attorney with Krieg, DeVault, Alexander & Capehart in Indianapolis. Even in academic medicine, where negotiations are usually minimal, it is prudent to have an attorney look over the contract, advised Robert A. Winn, ACP-ASIM Associate, who recently finished negotiating a research/academic appointment at the University of Colorado.

After examining a contract, your lawyer should give you a list of questions or requests to take into negotiations. Typically, health care attorneys only advise their physician client and do not get involved in actual negotiations. However, a lawyer may speak directly to employers in cases where serious legal issues need to be addressed, said Ms. Ziel.

2. Get specifics.

Avoid vague wording whenever possible. For instance, if a contract says you will become a partner in two years, ask if you'll receive all of your shares on your two-year anniversary date or if you'll gain shares incrementally throughout your first two years.

Also have your lawyer make sure that compensation terms comply with state and federal fraud and abuse laws. Find out what happens if you become temporarily disabled. Ask who is responsible for paying your membership dues and subscription fees. Make sure that your unused vacation days will be paid out to you if you leave the practice voluntarily.

Groups usually pay liability insurance, but the policy may not cover you once you leave. Be clear on the term of this insurance and find out who is expected to pay for a tail policy, which protects you from lawsuits if a patient sues you months or even years after an incident, if you part company. A general rule of thumb: The party that terminates the contract should be the one to pay for the tail policy.

3. Talk it out.

Don't be afraid to talk to potential employers about your concerns. Experts say that the time to bring up any problems is before the contract is signed. "One reason why people wind up unhappy with their contracts is that they never talk it through," Dr. Winn said.

Make sure the contract answers all of your questions. "If it's not written in the contract, you didn't agree to it," Dr. Hood warned. For example, some physicians groups may not have a set policy on how to become a partner, but it's very important to have that process spelled out in the contract before you join a practice.

If you adopt a wait-and-see attitude, you may end up feeling dissatisfied after a few years and you'll have nothing in writing to help you make your case. You also need to make sure that the contract terms comply with state laws, which can vary widely across the country.

The ideal situation is when both parties feel like they're getting something when they leave the negotiating table. Otherwise, Dr. Hood said, it's a bad deal for everyone. Even if you think you've won, he said, "in the end, you're going to lose" because one party will inevitably have bad feelings about the situation. That negativity will affect your working relationship.

4. Watch out for restrictive covenants.

Contracts often include non-competition clauses that restrict doctors from practicing within a certain geographic area if they leave the group. This can be a problem if you live and practice in Boise, Idaho, and you want to continue working there, said Dr. Hood. That's why he—and other experts—recommend negotiating these covenants out of a contract.

"A restrictive covenant is the No. 1 reason a person needs a lawyer," said Patrick Malloy, a management consultant in Manhasset, N.Y. He suggests trying to get a six-month no-fault grace period built into the contract, which gives you six months to become familiar with the practice. If it doesn't turn out to be a good fit, you can leave within that time and still practice medicine in the area. Employers find this solution acceptable because six months does not generally give physicians enough time to build a patient base that they can steal if they leave, according to Mr. Malloy.

Experts say that as a general rule, courts don't like to enforce non-competition clauses. In a few states and rural areas, restrictive covenants are not enforceable. If the employer won't remove the language from the contract, Ms. Ziel encourages changing the wording so that you're restricted from practicing in the same geographic area only if you choose to terminate the contract. If they employer terminates the contract, however, there should be no restriction. You can also try to reduce the geographic area covered by the clause.

5. Define documentation/billing requirements.

With so many different Medicare and managed care regulations governing practice, many employment contracts now specify that medical records and coding must meet certain standards of detail and quality. The contract will probably list the consequences of not complying with this mandate. It should also state that compliance with these guidelines is expected of all employees and partners.

While such language may seem punitive, Dr. Hood said that it can actually help protect new doctors or partners. For instance, if the group gets audited and your patient visits are well documented, you have upheld your contract. Without a clause defining compliance, you could be held responsible to pay off fines incurred by other members of the group who have sloppy or inaccurate charts.

6. Spell out who pays for high-tech tools.

Health lawyers say that contracts should address technology like home Internet connections, cellular phones and handheld computers, all of which are being used increasingly by internists.

Items that you use to look up records or lab results after business hours, like laptop computers and modem hookups, are usually considered a cost of doing business and should be covered by the practice. In any event, Ms. Ziel said the contract should clarify who is responsible for picking up which costs.

7. Define what you'll be paid if you leave.

Practices often don't receive payments for services until a few months after services are rendered. Some physician groups say that if you leave a practice voluntarily, you forfeit any reimbursements that haven't yet been paid—even if you have already performed the work. Experts suggest trying to negotiate such language out of a contract, especially if you had to buy into the practice up front.

In some cases, physician pay is based on how much money you generate for the group. Mr. Malloy said that when you're paid based on productivity, the contract should state that anything you have earned will be paid out to you if you leave because you generated that income.

Ms. Ziel also noted that if a doctor's compensation is tied to collections in the form of incentives, there should be language in the contract spelling out how the employer is expected manage your accounts receivable and collections. Industry standards are outlined in a cost survey published by the Medical Group Management Association (MGMA). To order the survey, call MGMA at 888-608-5602.

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