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Avoiding Contract Signer’s Remorse – Physician Contract Basics

July 18, 2018

This is part one of a series on physician contracting issues.

Not a week goes by without a surgeon calling us to ask about giving up private practice and joining a hospital as an employed physician. For some surgeons, employment is the penalty for not paying attention to the nuances of running their practices. When it’s not too late, we can help turn the practice economics around. But in some cases, hospital employment is the best, and sometimes the only, way out.

If you find yourself in the latter group, make sure you ask about contract details, and get every promise, right, and responsibility in writing. In their rush to sign up, many physicians forget to ask about the details that matter.

In one instance, hospital management decided to move the X-ray unit out of the orthopaedic suite and onto the first floor of the medical building. The orthopaedists were on the 2nd and 3rd floor. So patients on crutches, boots, and scooters arrived, received an order and were told to go downstairs, where they waited and waited and eventually an hour or more later reappeared upstairs. You can imagine the scheduling nightmares that resulted. Because they were being paid on RVUs, the hits to physician productivity impacted the next contract negotiation. And, to the physicians’ surprise, the billing department began assigning the hospital credit for the imaging fee.

We have a dozen more examples like this one. Which is why my best advice to specialists considering hospital employment is: don’t say or sign anything without a clinically smart and capable lawyer’s advice. Here’s what our colleague Patricia Hofstra, attorney with Duane Morris, advises if you are assessing an employment agreement.

Physician Contract Basics

Contracts are based on an offer, acceptance of the offer and proper consideration. Consideration is the value exchanged between or among the parties to the contract.

In order for a contract to be valid, there must be a meeting of the minds. All parties to the contract must understand and mutually agree on the terms and conditions of the contract. No one should ever sign a contract that they have not read or that they do not understand. Well-educated parties to contracts, such as physicians and practice administrators, are presumed to understand the contracts that they sign. Consequently, the “I didn’t understand what I was signing” defense does not work well.

Because the parties must mutually agree on the terms and conditions of the contract, the terms and conditions need to be in the contract. Physicians and physician practices cannot rely on oral promises and representations that are not in the written contract. If you need and were promised a nurse practitioner, a physician assistant, or a scribe, make sure that the contract states that you will be provided with the staff that you need and were promised throughout the duration of the contract. If you require certain equipment, such as a particular type of laser, a dedicated X-ray, CT, or MRI, make sure that your contract provides you with that equipment.

The Takeaway: Read contracts carefully, make certain you understand the terms and conditions, get what you need and have been promised in writing, don’t rely on oral promises and representations or side deals, and have an exit plan in the event of a breach.

Coming soon in this series: non-competes; breach of contract remedies; indemnification language; contract termination provisions; and exit plans.