When practices are booming, or you want to lessen your schedule a bit (or a lot), you may wish to consider a practitioner to ease the burden. This should be a wonderful process. However, your decision to bring in your next associate should be planned with several components fully negotiated.
Alternatively, maybe you are the potential associate looking to join an established practice. If so, you must look ahead and decide how you want to negotiate a pending employment agreement. This needs to be thought out well in advance of joining the practice. Negotiations can take months before all of the details are ironed out, so have your requests ready and listed by priority.
Employment contracts are nothing new. Most of you have been on one side or the other of an employment agreement, although experience doesn’t necessarily make it any easier. Do you remember negotiating your first employment contract as the employee, and needing to ensure that all of your requests were heard and agreed upon? If you were negotiating for an associate’s position, how did you feel about the process?
All parties need to agree on the following topics prior to the official employment starting date:
- Term – This needs to be well-defined and must describe the length of time the agreement represents. A term is usually a minimum of 1 year, with no maximum. Employment agreements do not usually exceed 5 years at a time.
- Partnership Opportunities – Does the position include a partnership opportunity? If so, when? Both parties may want to negotiate the possibility of a partnership opportunity. This can usually make the agreement more positive in nature and speed the decision-making process. Items such as percentages of the practice, vested and non-vested interests, liabilities, and first rights of refusal need to be reviewed.
- Salary Base with Bonus – This is probably the number one factor in any employment agreement. Knowing the numbers for annual salary, plus bonuses for production, is key.
- Licenses – Who pays for the licenses? This includes all city, county, state, and federal licenses. Many cities have their own occupational privilege taxes/licenses. All states have their medical licenses, and the federal government has the DEA license responsibility.
- Malpractice Insurance – Professional liability, also known as malpractice insurance, can be costly in some states, and not all states are alike in their premiums. Make sure you negotiate who is responsible for the deductible in the event of a claim, if your policy has one.
- Benefits – Vacation/Holidays/IRA/Health Insurance/Auto Payments, and Insurance/Cell Phone – All of these benefits are negotiable and vary from practice to practice. Not every item has to be included in the agreement, but think of them as potential negotiating topics. Some of these can be employee/employer paid as well.
- Association Memberships – How many associations do you need affiliation? Choose the top two that interest you.
- CME/Conferences – Similar to association memberships, pick the ones that achieve the most amount of credits to benefit the practice or the associate. Clearly define the amount of money the practice is willing to pay to attend these conferences.
- Restrictive Covenants – Do they really hold up anyway? Different states allow them, while in other states it is a restriction on the physician’s ability to practice their craft. If a restricted covenant is enforced, clearly state the number of miles and how long the restriction lasts.
- Who owns the patient in case the provider and the practice part ways? – In the event of a practice divorce, who is responsible for treating the patient when the associate resigns? I know we hate to think that the patient may be in jeopardy, but it happens frequently, and the physician’s responsibility must be formally stated.
Always seek the advice of a practice management consultant, attorney, or business advisor with experience in reviewing, creating, and negotiating employment agreements in the medical field. You can save yourself a lot of undo duress by entering the negotiations well prepared.
Jay A. Shorr, BA, MBM-C, CAC I-VIII, is the founder and managing partner of The Best Medical Business Solutions, based in Fort Lauderdale and Orlando, Fla. Reach Jay via jayshorr@the bestmbs.com.
Also, I’ve been told practices need to devise compensation agreements that don’t constitute “fee splitting.” For instance, bonuses might be ok, but in some cases paying a commission on production might not be. You could probably write a whole blog post on that topic alone! If you already have, I’d love to have the link.