By Bert Black |
A recent blog post on the Schaefer Halleen website briefly discussed why it’s important for doctors to work with legal counsel when negotiating their contracts. This post digs into some of the details of physician contracts. It covers contract law fundamentals and basic provisions that appear in most physician contracts. Subsequent posts will cover:
- The promises doctors are typically asked to make when they enter into a contract, and the kinds of benefits and compensation they typically receive in return
- Provisions governing termination and severance pay
- Malpractice insurance, non-compete and non-solicitation provisions, and confidentiality and intellectual property rights
- Other provisions, such as legal rights and remedies if disagreements arise
Contract Law for Minnesota Physicians
For purposes of our discussion here, a contract is simply an exchange of promises that can be enforced in court if one party breaks its promise. The focus here will be on contracts between an employee-doctor and an employer that’s a medical practice, clinic, hospital, or other entity that provides medical services (a dialysis or medical imaging facility, for example). A subsequent blog will briefly touch on some contracts that may involve three rather than two parties. Independent contractor agreements, which generally provide less security and fewer rights for a doctor than a traditional employment contract, won’t be covered. Nor will partnership or shareholder arrangements, under which a doctor has an ownership interest in the practice where he or she works.
Most contracts begin with commonsense basics: the identities of the parties, the effective date, the start date and duration or “term,” and a short statement of background information, usually in the form of “whereas” clauses and a “therefore” clause. For example, “whereas Physician is duly licensed and certified in thoracic surgery, whereas Hospital seeks to retain Physician to perform such surgeries on its patients, the Parties therefore agree as follows.” The nuts and bolts of the contract will then be stated.
Sometimes contracts will use “start date” (when the doctor is supposed to begin working for the employer) and “effective date” (the date the agreement is reached and becomes enforceable) interchangeably, but the two are not equivalent, and mixing them up can cause problems. Strictly interpreted, a contract signed by both parties on June 1, 2020, but which specifies a September 1, 2020 effective date, would mean there was nothing to enforce until September. If a doctor relied on this contract and moved to a new city in August expecting to start work in September, he or she might be in for an ugly surprise if the employer said “forget about it” before September. So it’s better to say effective on the date fully executed, with a later start date.
Some contracts have no explicit term. The relationship is then either implicitly or explicitly “at will,” meaning the employer can terminate whenever it wants to, and for whatever reason (with important exceptions such as discrimination). Often, an initial physician contract will say that it’s for one, two, or three years, often with a provision for automatic renewal at the end of the term if neither party gives notice – commonly 30, 60, or 90 days, and sometimes up to 180 days. But, as discussed in a subsequent blog that will discuss termination, what seems like a deal for a year or more can often be cut short on relatively short notice. So the apparent promise of employment for a few years can be more ephemeral than real. Severance provisions (also to be discussed in a subsequent blog) can address this issue, but they’re not typical in physician contracts.
Once again, it’s important for a doctor to work closely with Minneapolis attorney for physicians to obtain the most advantageous contract provisions.