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*Before the development of a contract between a physician and a contract group (or hospital), it must first be determined whether the physician will be treated as an employee or as an independent contractor (IC). This distinction is critical to establish several aspects of the contractual relationship. These 2 classifications differ dramatically in the treatment of taxes and benefits. Regardless of the physician's classification, the total amount of money available for compensation and benefits is generally the same after deduction for professional liability insurance and group overhead (Table 87-1). Additionally, emergency physician clinical and professional responsibilities are generally the same regardless of the classification.1

Table 87-1 Comparing Employee and IC Salary and Benefits (Figures Rounded)

Emergency physician compensation is commonly based on an hourly rate. Over the years this hourly payment has been found to be an easy method of calculating payment because of the disparity of hours that various physicians work. The traditional US employee setting comprises a 40-hour workweek over 52 weeks (less vacation, sick days, etc). Therefore, a traditional employee works and is paid for 2080 hours. Emergency physicians may choose to work more or fewer hours, and as such, payment calculations based on a traditional workweek are not applicable. Treating individual emergency physicians (with varying hours) the same creates further complexity when calculating the value of benefits and business expenses, such as those for continuing medical education, travel, and automobile expenses.

The differences between employees and ICs are most clearly evident when addressing taxes and benefits (Table 87-2). Independent contractors are permitted greater individual flexibility with business deductions than are employees. ICs may develop individualized benefit plans that include pension and various types of insurance. An employee will generally be confined to the precise benefit plan to which other members of the group are entitled. The restrictions of a group plan may or may not be advantageous to an individual employee. On the positive side, an employee can often take advantage of premium reductions offered with group benefit plans, and the discounted group rates available to an employee may not be available to an IC.

Table 87-2 Tax and Benefit Treatment of Employees and Independent Contractors

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