A list of key provisions that are typically found in contracts between physicians and hospitals/groups are provided in Box 85-1. While a contract can never address every potential eventuality, it is meant to define the expectations and responsibilities of all parties, and as such, the explicit details should be fully understood by all signatories.
The requirements section of a contract describes the credentials that a physician must possess in order to work for the group or hospital and may include medical license, drug enforcement administration (DEA) membership, board certification, special training, academic appointment, medical staff membership, and privileges.
Some groups or hospitals may require a physician to have board certification or acquire it by a specific date. To be eligible for a position, the physician may need special training, such as a fellowship in research, emergency medical services, or administration. The physician generally must obtain and maintain medical staff membership and perhaps an academic appointment in order to be in compliance with the contract.
The physician represents and warrants that to carry out duties and responsibilities hereunder, they shall
Hold a currently valid and unlimited license to practice medicine in the State of…
Apply for, be awarded, and maintain in good standing membership on the staff with clinical privileges in emergency medicine, or have received and maintain temporary privileges, all in accordance with hospital policies.
Be board certified or board prepared in emergency medicine or have completed…
Status/Relationship of the Parties
The relationship of the parties may be that of independent contractor or employer/employee. Each arrangement has significant ramifications for both sides regarding compensation, benefits, responsibilities, internal revenue service (IRS) rules, and so forth. These differences must be clearly understood when entering a contractual relationship.
- Independent contractor: The independent contractor and its provided physician(s) shall perform all obligations imposed by this agreement as an independent contractor. Nothing in this agreement shall be construed to create the relationship of employer and employee between hospital/group and the independent contractor. The independent contractor shall not be entitled to receive employee benefits. The hospital/group shall not have or exercise any control or direction over the manner, means, and methods by which independent contractor shall perform work pursuant to this agreement. Independent contractor shall have the exclusive right and obligation to direct the manner, means, and methods used to provide service pursuant to this agreement. Independent contractors at all times
Shall not have authority to bind the hospital/group in any manner
Shall not hold themselves out as officers, agents, or employee of hospital/group
There may be an additional relationship or status beyond that of employee or independent contractor, such as partner, stockholder, or profit sharer. This enhanced status may take the form of an optional buy-in period and amount after meeting distinct criteria. It is imperative that if any additional relationship exists, the terms and conditions are unambiguous at the outset and clarified in the language of the contract. Some partnership agreements are expressed in vague terms, such as “After satisfactorily completing 2 years of employment, the physician may be offered shares in the partnership.” The terms are so ambiguous that both sides may in good faith have differing interpretations of “satisfactorily,” “may,” and “shares,” creating eventual disappointment, dissatisfaction, and hostility.
Professional Liability Insurance
Malpractice insurance is available in 2 forms: occurrence and claims-made, as fully described in Chapter 95. The contract may reflect the PLI components described in Table 85-2.
Table 85-2 Typical Components of PLI Contract Language Clause |Favorite Table|Download (.pdf)
Table 85-2 Typical Components of PLI Contract Language Clause
Type of insurance
“Claims-made” or occurrence
Amount per case, amount per year (typical 1 mil-3 mil)
Fraud, criminal acts, abusive behavior, etc
Duties of parties
Notification of claim or summons and complaint
Party with right to determine settlement of a case
Premium payment responsibility
Payment by group, hospital, or individual
Tail payment responsibility
Payment by group, hospital, or individual
- Physician shall maintain and keep in full force and effect throughout the term of this agreement professional liability insurance coverage in the minimum amounts of One Million/Three Million Dollars ($1,000,000/$3,000,000) or such other amount as may be specified by staff regulations. Physician shall provide a documentation of such insurance to the hospital/group.
Compensation and Benefits
Generally, the professional fees charged for care rendered by the practitioners are assigned to the group or hospital. This assignment allows the group or hospital to bill, collect, and pay in a consistent manner.
Compensation and benefits depend on the relationship of the parties, that is, employee versus independent contractor (discussed previously). Employees receive a salary and benefit package. An independent contractor receives hourly compensation inclusive of the cost of benefits. Theoretically, the independent contractor receives a higher hourly rate to compensate for the cost of benefits.
It is important to calculate the cash value of the benefits and other components when comparing an employee to an independent contractor relationship. Benefits specific to employee relationships may include insurance (liability, life, health, dental, unemployment, and disability), paid time off (vacation, personal days), continuing medical education (CME), license, dues and fees (professional membership, journals, hospital dues), and vesting in a pension plan. Many employee contracts define required minimum hours of work.
The contract usually specifies compensation increases and their timing. The compensation increase may take the form of salary raise, bonus/incentive, or hourly rate increase. Ideally, increases are based on objective performance evaluations. The increase may also be tied to the financial performance of the group or department.
Profit sharing and incentives can be powerful motivating tools. Both employee and independent contractor relationships may be structured to incorporate bonuses, incentives, and profit sharing. The amount and timing of the disbursement should be clearly defined in the contract and based on objective and measurable criteria such as productivity, quality, and contributions to the emergency department (ED). These incentives may be tied to an annual or biannual evaluation.
The payment clause describes the timing and method by which the physician will be paid and should be unambiguous.
- Compensation shall be payable to the physician monthly, in arrears, on or before the 14th day of the month following the month in which service is rendered by the physician.
Physician Duties and Responsibilities
The practitioner duties and responsibilities will vary according to the institution, its requirements, and the associated job description and may include
- Clinical duties related to the ED, such as minimum or maximum number of hours per month, requirement to complete bridging orders to admit patients, on-call schedule for backup, teaching of residents, students, or nurses, examination of employees, and so on.
- Personal obligations, such as initially attaining and then continuous maintenance of board certification, malpractice insurance, medical staff membership, Medicaid and Medicare participation, and so on.
- Administrative duties outside of the ED, such as committee participation, EMS involvement, report completion, performance improvement involvement, complaint management, research commitment, and so on.
Each of these duties and responsibilities should be clearly delineated in a contract, as these duties may be tied to a bonus and incentive system or may stand alone as a requirement for employment. In today's changing healthcare environment, the duties and responsibilities may require regular review and updating.
- When scheduled for service, the physician will provide emergency medical treatment to patients in the department, such service to include
The evaluation of the medical needs of all patients presenting themselves to the department for medical care.
The generation and maintenance of medical records in form and content consistent with policies and procedures of the hospital, established from time to time, for all patients treated in the department.
Responding to in-house emergencies, defined as respiratory or cardiac arrest, provided that in the physician's sole discretion, the acuity of the patients in the ED allows physician to attend to the in-house emergency, without compromising the care of the patients currently in the ED.
Hospital Duties and Responsibilities
The hospital has responsibilities to the physicians for the provision of certain personnel, equipment, and services. The contract may specifically describe the type and number of personnel, including clerical, nursing staff, and administrative staff. Equipment, supplies, maintenance, fixtures, and utilities are generally the responsibility of the hospital. The contract may designate meeting and office space. The hospital also has the responsibility for insurance of the premises.
- The hospital shall provide and maintain for the physician suitable office space, equipment, supplies, and utilities as shall be necessary for the proper functioning of the ED.
- The hospital shall, at its own expense, furnish usual and customary mail service, laundry service, gas, water, and electricity for light and power and telephone, as may be required for the proper operation and conduct of the ED.
- The hospital shall provide, at its own expense, staff including technicians, clerks, registrars, nursing personnel, and other employees, as are required for the efficient and proper operation of the department. All salaries, benefits, and other obligations attributable to such employees shall be paid by the hospital in accordance with its usual personnel policies.
Group Duties and Responsibilities
The group has certain responsibilities when contracting with individual physicians, including the operations of the group scheduling, certain performance improvement processes, fulfillment of the hospital contract, and financial management of the group (payroll, taxes, bonus/incentive, dividend disbursement).
Bylaws, Policies, and Procedures
The contracting physician should be provided with all pertinent bylaws and policies and procedures of the group and hospital before the contract is signed. Ideally, these documents should be incorporated by reference into the contract. There may be hospital, group, medical staff, and department policies and procedures. The physician will be held to these standards and should review and understand them.
- Physician hereby agrees to follow established procedures to ensure the consistency, quality, and appropriateness of all emergency services. Further, physician agrees to abide by all standards as set forth by Hospital policies and procedures, medical staff bylaws, The Joint Commission, the Centers for Medicare and Medicaid Services, EMTALA guidelines, and so on.
Indemnification clauses create a contractual obligation to reimburse one party for financial losses caused by the acts of another party. An indemnification clause might obligate a physician to reimburse the hospital for its costs associated with defending a malpractice case that was eventually determined to be the fault of the physician only. Another example might include paying the hospital's EMTALA fine, if the physician was found to be primarily at fault. One must be circumspect when reviewing and signing an indemnification clause, as it is uncommon for a professional liability insurer to pay for the associated losses. When present in a contract, an indemnification clause should be mutual.
- Physician agrees to indemnify and hold Hospital, its directors, agents, and employees harmless against any and all loss, damage, liability, and expense, including court costs, with respect to this agreement, directly resulting from or arising out of the dishonest, fraudulent, negligent, or criminal acts of the physician, including but not limited to any act or error of omission, misconduct, EMTALA violations, malpractice judgments, hostile workplace infractions…
Contracts may be for 1 year or several and may contain an “evergreen clause,” which allows automatic continual renewal unless one party gives notice or requests renegotiation within a predetermined time frame. Typically the time frame for notification of renegotiation or termination occurs between 60 and 180 days prior to the end of the current contract. An evergreen clause may be advantageous for any party that does not want to undertake a regular and sometimes extended contract renegotiation. If terms require reconsideration, the discussions generally occur during this window.
- Group (hospital) hereby contracts with physician. Unless terminated in accordance with Section (Termination Section), this agreement shall remain in full force and effect for a term of 3 years commencing on (date). Unless either party shall give written notice of intent not to renew this agreement to the other party at least ninety (90) days prior to the termination date of this agreement, this agreement shall automatically be renewed for (number) year(s) on the terms and conditions set forth herein.
Many contracts contain a “no cause” termination clause that entitles the hospital or group to terminate the physician without cause within a certain time frame, usually 90 days. This clause is commonly reciprocal. Since the inclusion of a “no-cause” termination clause may allow a party to arbitrarily terminate the relationship, the physician should assess how frequently and in what circumstances this clause has been invoked in the past.
All contracts should contain language that the contract can be terminated “for (reasonable) cause.” For the hospital or group, the cause may be impairment, loss of license, professional misconduct, disability, and so on. For the physician, the cause may be breach of contract, nonpayment of monies, or change in the working conditions.
- Either party may terminate this agreement, for any reason or for no reason whatsoever, upon 90 days written notice. Notwithstanding the foregoing, this agreement shall terminate as follows:
If physician becomes disqualified to practice the specialty of emergency medicine in (state), hospital/group may terminate this agreement immediately upon notice to physician.
If physician loses staff/clinical privileges at the hospital, hospital/group may terminate this agreement immediately upon notice to physician.
If physician fails to comply in any material respect with the terms of this agreement and such failure continues for 30 days after written notice thereof to physician, hospital/group may terminate this agreement immediately upon notice to physician.
If hospital/group fails to comply in any material respect with the terms of this agreement and such failure continues for 30 days after written notice thereof to hospital/group, physician may terminate this agreement immediately upon notice to hospital/group.
Failure of Performance—Breach
In the termination example language (C and D) there is reference to both failure of performance (breach) and cure. Breach in this example is material, or serious and significant. If departmental policy required physicians to dress neatly and conservatively with a white coat and a tie and a physician wore a “loud” tie, this would not be a material breach. On the other hand, a physician who refused to complete medical records may be in material breach of the contract.
Note in the example language that a 30-day “cure” period or opportunity to resolve the material breach without immediate termination is available. In certain circumstances, if the issue leading to notice of termination is addressed, this clause allows a continuation of what may be an otherwise mutually beneficial contractual relationship.
A mechanism for dispute resolution should be established in the contract. Without a specific dispute resolution process, unresolved issues may involve the court system with its attendant consumption of time and resources. Options include mediation, arbitration, grievance procedures, and specific dispute resolution policies. The mechanism should specify the process, cost, timing, and method of resolution.
Restrictive covenants are common in emergency physician contracts. The enforceability of these covenants varies greatly from state to state and even within states. Certain jurisdictions allow only limited restrictive covenants. There are 4 basic types of restrictive covenants: tortious interference, outside practice, hiring restriction, and noncompete (Table 85-3).
Table 85-3 Types of Restrictive Covenants Typically Found in Emergency Medicine Contracts |Favorite Table|Download (.pdf)
Table 85-3 Types of Restrictive Covenants Typically Found in Emergency Medicine Contracts
Intends to Prevent
Intentional interference with contractual relationship
Practice that competes with primary facility or obligations
One party from hiring valuable employee of other party
Physician from providing certain services after contract termination
Tortious interference is a legally actionable, intentional interference with a contractual relationship. For example, a physician (tortfeasor) under contract with a group may not interfere with the group's contract with the hospital to obtain the contract for him/herself. Further, the tortfeasor may not disrupt the ability of the group to perform its contractual obligations. This restrictive covenant is common in business relationships and, while it may to some degree reduce marketplace competition, it has the effect of stabilizing a work situation. If tortious interference is proven, punitive damages may be awarded. The most typical examples are
Interference with a contract: An individual wrongfully comes between 2 parties in an existing contract.
Interference with business: An individual makes false claims against a party to disrupt the relationship.
Many contracts restrict a physician from working in a competing practice or hospital while under contract with the current hospital/group. The argument for this type of restriction is that a practitioner should not be permitted to participate in a practice directly competitive with the ED, that is, nearby urgent care center or practicing in both hospitals of a 2-hospital town. The argument against an outside practice restriction is that patients do not seek out an individual emergency physician and, therefore, this restriction is immaterial.
- During the term of this agreement, physician shall not practice emergency medicine within a “_” mile radius of hospital without written consent of hospital.
In an academic setting, this clause may attempt to prevent a member of the faculty from conflicts of commitment. The restricted activities may include activities such as consulting, providing expert testimony, and moonlighting. The clause is commonly worded as follows: “The physician may not engage in teaching, consulting, or practice of his or her specialty outside the Hospital.” The Association of American Medical Colleges defines conflict of commitment as
“The term conflict of commitment relates to an individual faculty member's distribution of effort between obligations to one's academic appointment (normally “full-time” in teaching, research, and/or patient care) and one's commitment to “outside” activities. … A conflict of commitment arises when these [outside] or professionally removed activities (eg, outside teaching or business) come to interfere with the paramount obligations to students, colleagues, and the primary missions of the academic institution by which one is appointed and salaried.”6
Hiring restrictions prevent the hospital from hiring physicians working with the current group after termination of the contract. From the point of view of the group and its members, including a hiring restriction may prevent a hospital from terminating the contract with the group and “cherry-picking” (keeping select) physicians. The following example will demonstrate the value of a hiring restriction for members of a group.
A hospital with the only ED in the region terminates the agreement. Several emergency physicians and their families who have been committed to the area and the hospital may now have to move to seek employment.
Noncompete (Covenant Not to Compete)
Many contracts restrict terminated physicians from working at a hospital (or within a set distance from the hospital) for a set time period. In emergency medicine, as elsewhere, noncompete language is hotly debated.
The arguments for noncompete language relate to the legitimate business interests of the hiring entity and include
- Hiring of the terminated employee may give the competitor a competitive advantage.
- A group or hospital may spend significant sums of money to recruit and relocate the physician to its locale.
- The restriction may protect a group from unscrupulous behavior of a competing group, hospital, or individual physician by limiting that entity's ability bring the current contract to an end and “cherry-pick” individual practitioners.
The arguments against noncompete language include
- Unduly restrictive noncompete language may limit a practitioner's ability to earn a living.
- Restrictions may be against “public policy” by limiting the region's access to emergency physicians.
The language in the contract may state that the physician agrees not to provide services to other hospitals within a specific radius for a specific time period.
- Physician covenants and agrees that he will not, for a period of 1 year after termination of this agreement, whether by expiration of the term or by earlier termination in accordance with the termination section of this agreement, directly or indirectly engage in, solicit or perform any work for the hospital or any affiliate thereof, or engage in the practice of medicine within 5 miles of hospital. This restrictive covenant survives the termination of this agreement.
Many other boilerplate clauses may be seen in contractual relationships between physicians and hospitals or groups. The following definitions include typical examples of some of these other clauses.
Define the terms that will be used subsequently in a contract.
- Agreement: The term “agreement” shall mean this emergency service agreement and any amendment(s) hereto as may be from time to time adopted as hereinafter provided.
- Department: The term “department” shall mean the ED of the hospital, including, without limitation, the emergency treatment area and the administrative offices for the department.
- Modification: Describes the method by which the agreement may be modified or amended and generally requires the mutual written agreement of both parties.
- Maintenance of records: By federal mandate, certain books, documents, and records must be maintained and accessible for review for a minimum period of time, often 4 to 7 years. This type of clause in a contract stipulates each party's responsibility to comply with these mandates.
- Obligations to comply with laws: This “catch-all” clause obligates the parties to comply with “all” applicable federal, state, and local statutes. (See sections “Indemnification” and “Bylaws, Policies, and Procedures.”)
- Notice: Designates to whom and the method by which formal notices and demands permitted in the contract may be delivered.
- Assignment: Defines the degree to which the parties may transfer the responsibilities described in the contract to another nondesignated party.
- Entire agreement: Defines the executed agreement to be the understanding of the parties and usually includes a statement that the present agreement supersedes previous representations and agreements.
- Severability: A legal concept used in a contract to allow the remainder of the agreement to remain enforceable if any provision within it is declared invalid, illegal, or unenforceable.
- Addenda: Any and all additions, appendices, or addenda should be referenced in the body of the contract, understood, and present at the time of signature.