EP Contracts: Handshakes and Other Red Flags

Problems can be avoided if you ensure that 'what you hear in the pitch is matched in the contract.'

June 2005

By Jeanne Lenzer
ACEP News Contributing Writer

Before signing on the dotted line for a position as an emergency physician, graduating residents--as well as more senior physicians--should beware of warning signs during contract negotiations that experts caution can turn even a sought-after job into a nightmare.

One problem physicians often encounter is that the job seeker "is not comparing apples to apples," said American College of Emergency Physicians' President Robert E. Suter, D.O., MHA.

Pay rates can vary widely depending on whether the emergency physician's relationship is to the hospital or practice. Such relationships--employee, independent contractor, partner, or partner track--can affect the individual components of a pay-and-benefits package with variable impact on the overall value of the contract.

Each of these relationships needs to be clearly understood before trying to evaluate the relative value of the contract offered.

Employee? Partner? Contractor?

Is it better to be an independent contractor or a partner instead of an employee?

There is no right or wrong answer to that question, according to Joseph P. Wood, M.D., J.D., author of "Contract Issues for Emergency Physicians." It's necessary to match the individual physician's personality to the relationship, he said.

For the younger doctor who wants to try out a new location and doesn't want to be burdened with the intricacies of practice management, an employee relationship might be ideal, Dr. Wood suggested.

An independent contractor or partner position can be preferable for the emergency physician who wants more control over practice issues, and who is willing to be involved in committee meetings and cultivating relationships with hospital administrators and staff.

Key aspects of the various relationships include the following:

Tips for efficiently navigating EM Career Central include:

  • Employee: As an employee, the emergency physician may be hired directly by the hospital or by a group contracted with the hospital. The contract group can be a physician group or a contract management group run by physicians or nonphysicians. Employees have less control over practice management issues, said Dr. Wood, but they also have fewer responsibilities and have access to rights not accorded to independent contractors.

    Some employee rights include workers' and unemployment compensation; Family and Medical Leave Act and Americans With Disabilities Act protections; and various discrimination, union activity, and anti-retaliation protections. Employed physicians are better protected financially in malpractice suits because employers are legally responsible for the conduct of their employees, Dr. Wood said.

  • Independent contractor: As independent contractors, emergency physicians have the right to do the job any way they please, but face loss of the contract without job protections if the hospital is not satisfied with any aspect of the contract fulfillment.

    Tax savings vary with the aggressiveness of deductions pursued by the independent contractor, but average approximately $7,500 annually.

    Tax savings are offset, however, by the costs of full contributions to Social Security, health insurance premiums, malpractice insurance, retirement plan needs, and the time needed to function as an independent contractor.

    Responsibility for malpractice claims is greater because the independent contractor may be liable for all losses, including those exceeding the limits of the malpractice policy purchased, said Dr. Wood.

  • Partner: Partners can incur mutual liabilities not incurred with practice groups in which an emergency physician is an employee. In a simple partnership, partners are financially liable for any malpractice claims against their partners, whether or not they were involved in the claimed incident.

    Most democratic groups avoid these sorts of problems by creating partnerships in the form of ownership of shares in a corporate entity. Equal shareholder status can create a functional partnership in group decision-making and other areas important to the emergency physician, while reducing the legal and financial risks of a classic partnership, said Dr. Suter.

Search Firms

Search firms can offer several advantages and do not charge the applicant physician.

They can match a physician's needs and inclinations to appropriate positions. They can provide information about the going pay-and-benefits packages in the area of interest, they can conduct confidential job inquiries and networking, and they can answer questions about contract terminology and malpractice issues. They can also provide feedback about interviews and give tips for improving a physician's chances of success.

"Reputable recruiters don't just put warm bodies in place," said Robert C. Solomon, M.D., vice chair of the department of emergency medicine at Ohio Valley Medical Center in Wheeling, W.Va. "They want to make a good match, a good fit. They want to keep the hospital and the recruit happy. That's how they get new referrals and maintain their existing working relationships with hospitals."

On the downside, sought-after positions, particularly in academic centers, may not use recruiters, so those opportunities may escape the physician relying solely on a recruiter.

And, depending on the hospital, use of a recruiter may mean a somewhat lower initial salary or pay arrangement, because the hospital has to pay the recruiter's hefty fee, said Dr. Solomon.

Noncompete or Noninterference?

In the not-too-distant past, contracts would routinely include noncompete clauses that prohibited physicians from practicing within a certain geographic area for a defined period of time. For many emergency physicians, moving from one job to another meant "you'd have to call Allied Vans and move out of town," Dr. Suter said.

But progressive contracts now replace noncompete clauses with noninterference clauses.

In this way, doctors working with a group don't go behind the backs of the contract holders to undermine the contract, but they are also free to work at other emergency departments in the area, or to be hired by a new group that might win the contract at the contract holder's hospital.

Malpractice: Tail Coverage?

Hospitals or groups generally provide malpractice coverage for emergency physicians, and the policies are written either as "claims-made" or "occurrence" coverage.

Under claims-made policies, all claims filed during the period of employment are covered, if they occurred while the physician was practicing at that hospital under the same policy. Claims arising out of earlier employment at another hospital (or under a different policy) are not covered. Likewise, once a physician leaves the hospital or obtains a different policy, he or she is no longer covered for claims arising out of that period of employment and must buy "tail" coverage, said Dr. Wood. Tails can cost $15,000 to $40,000 as a one-time payment.

"Under no circumstances should an emergency physician sign a contract where they are responsible for tail coverage," said Thom Mayer, M.D., of Best Practices, a practice management group. "It's hard to leave a job if you find that you have a $25,000-$50,000 tail to pay."

Occurrence coverage includes the cost of a tail and means that any occurrence during that period of practice or employment is covered, regardless of when the claim is filed. But most hospitals don't offer the more expensive, occurrence-type policy, said Dr. Wood.

It's also important to know about the malpractice company itself, including its track record and rating. "EPs should look for large insurers rated A+ or A," Dr. Mayer said.

Handshakes and Other Red Flags

"Handshakes don't count," said Dr. Mayer, adding that many problems can be avoided if the applicant ensures that "what you hear in the pitch is matched in the contract."

Too many doctors bet on the "come-on line," he said. They're promised, " 'We'll make you a partner after 2 years,' but then 2 years come and go, and you're not a partner."

The problem of unfulfilled promises to make a recruit a partner is common, according to a number of doctors. That, coupled with a sense of unfairness or lack of "due process," appears to be the most common areas of conflict arising out of poorly constructed contracts, they said.

One way to ensure that the promises heard during the courtship period are met is to engage in "active listening," said Dr. Mayer.

"Reflect back what you hear," he suggested. "Say, 'My understanding is that I'll get a salary of X dollars and that at 6-month intervals, I'll receive a bonus based on Y.'

"Take notes, and then make sure it's in the contract."

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