Physician Employment

INTRODUCTION

Physicians are increasingly entering into employment and other contractual relationships with hospitals, group practices, and other health care delivery systems. They seek employment for a variety of reasons, ranging from stagnant reimbursement rates coupled with the rising costs of private practice, to the desire for a better work-life balance, to the simple desire to practice medicine rather than to run a business. Likewise, hospitals and health systems employ physicians for a variety or reasons.  Hospitals may employ specialists to further develop service lines (e.g., cardiology, cancer care), and they may employ primary care physicians to capture referrals and admissions.  Health system reform efforts, particularly the rise of accountable care organizations, also may drive physician employment.Employment and contractual relationships can benefit physicians and their patients, but such arrangements also can present unique challenges to physicians' ethical, professional, and financial interests.  For example, a physician's divided loyalty between his/her patients (owes paramount responsibility) and his/her employer (owes a legal duty of loyalty, including fiduciary responsibility) can create conflicts of interest, such as financial incentives to over or under treat patients, which the employed physician must consistently strive to recognize and address.

Below are resources to assist physicians who are employed or are considering employment. 

NEW PHYSICIAN EMPLOYMENT TOOL

  • HCMS Work Relative Value Unit (RVU) Calculator - HCMS has developed a work RVU calculator to help physicians determine their work RVUs. The calculator includes 40 different specialties based upon the top 50 codes for their particular specialty. Plus, if a particular code is not listed within the top 50 codes additional codes can be added to help determine work productivity based upon the work RVU. 

GROUP PRACTICE EMPLOYMENT

  • Annotated Model Physician-Group Practice Employment Agreement American Medical Association (AMA) Members Only - Designed to assist both physician-employees who are entering into employment contracts and physician groups that employ physicians; provides a thorough description of basic contract terms typically found in such agreements, as well as in-depth explanations of the significance of such provisions and language that benefit the physician employee; offers important examples of language that may be problematic to the physician employee. Manual for AMA members only. 

HOSPITAL EMPLOYMENT

NEGOTIATING EMPLOYMENT AGREEMENTS, COMPENSATION, AND BENEFITS

Employed Physicians' Benefit Concerns:

  • 2014 AMA Report on U.S. Physicians' Financial Preparedness: Segment focus on Employed Physicians. In May 2014, AMA Insurance launched a national survey to better understand the prevailing attitudes and behavior of U.S. physicians in relation to their personal financial preparedness. 

Topics include: 

  • Retirement planning and savings 
  • Financial concerns 
  • Personal financial acumen
  • Use of professional financial advisors
  • Family finances
  • Disability
  • Other types of insurance protection.

Summary:

  • The Report shows that employed physicians - comprising 59 percent of all American physicians and have their own set of personal financial challenges, in part due to their employment status. 42% consider themselves "behind where they'd like to be" in saving for retirement and 44% report they have less than $500,000 saved for retirement. Funding long-term care expenses has emerged as a top concern for employed physicians, second only to having enough savings to retire. 
  • 2014 AMA Report on U.S. Physicians' Financial Preparedness: Segment focus on Employed Physicians

 

TYPES OF COMPENSATION MODELS/METHODS
  • Fixed Compensation
  • Fixed Compensation with bonus
  • Productivity Compensation
    • Compensation based on a percentage collected from the services rendered. Cons of the method is payer mix, contract rates, effectiveness of the billing and collection departments.
    • Compensation based on a percentage of profits less expenses. Cons of the method is the physician does not have control over expenses. In addition, the contract needs to clearly identify expenses that will contributed to the physician and it also needs to specify income.
    • Compensation based on work relative value unit (wRVUs). Work RVUs are developed by published by Centers of Medicare and Medicaid Services. Cons wRVUs can slightly change every year and sometimes Medicare does not assign wRVUs to codes that Medicare doesn't reimburse for. This is the method often implemented by Hospitals and institutional employers.
     
  • TMA - Negotiate a Physician Salary with Eyes Wide Open
  • List of Attorneys that can offer Expert Legal Advice
  • HCMS has created a Contract Analysis Tip Sheet to help guide physicians in reviewing their agreements.

 

COMPENSATION DATA 

  • Medscape - Physician compensation by specialty   
  • Becker's Hospital Review - Physician compensation by specialty  
  • Bureau of Labor Statistics - 2016 May


RESTRICTIVE COVENANTS

A restrictive covenant is a contractual provision between a physician and his/her employer which prevents the physician from practicing in a specified geographic area for a period of time if the physician's employment terminates.  Restrictive covenants (also called covenants not to compete) are primarily protective mechanisms used by employers to shield their patient bases and referral sources from competition.  The covenant also serves to protect the employer's investment in a physician-employee (i.e., recruiting costs, moving expenses, opportunity costs) by encouraging the physician to remain with the employer.  Restrictive covenants can benefit physicians as well.  If a physician is employed by a group where all of the physicians' contracts contain covenants, none of the physicians can compete directly with the group upon leaving.


RULES FOR NONPROFITS


TOOLS AND RESOURCES  

Harris County Medical Society 

  • Expert Legal Advice
  • Contract Analysis Tip Sheet   
  • HCMS Work Relative Value Unit (RVU) Calculator  - HCMS has developed a work RVU calculator to help physicians determine their work RVUs (some employment compensation contracts are based upon work RVUs). The calculator includes 40 different specialties based upon the top 50 codes for their particular specialty. Plus, if a particular code is not listed within the top 50 codes additional codes can be added to help determine work productivity based upon the work RVU.   

Texas Medical Association  


American Medical Association  

Physician News    

Physician Practice 

Additional Helpful Links  

TEXAS MEDICAL ASSOCIATION (TMA) 

AMERICAN MEDICAL ASSOCIATION (AMA)