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Ten Physician Employment Pearls – Lexology

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The following are some pearls of wisdom pertaining to physician employment agreements.

  1. If an employment agreement requires that financial calculations are to be done according to Generally Accepted Accounting Principles (GAAP), that means that the accrual, versus cash, method of accounting will be employed, resulting in revenue becoming revenue when it is billed, and not when it is collected.
  2. Owners and employees may not be paid a bonus for the x-rays or labs that they order, but they may share the profits from such services on an equal or a set percentage basis, as well as on the basis of which physician is the busiest , but not based on the value or volume of the services each physician orders.

  3. Similarly, owners and employees may not be paid a bonus for the physical therapy or drugs that they order, unless the physical therapy or drugs are billed appropriately “incident to” the physician’s services.

  4. Work Relative Value Units (wRVUs) are a Medicare concept. That means that if Medicare does not pay for a particular service, there is no wRVU for that service. Accordingly, doctors who are being paid on the basis of wRVUs who provide services that are not reimbursed by Medicare must develop a compensation formula for such services.

  5. Health insurance coverage often starts on the first day of the month after an employee starts work. Therefore, it is a good idea for an employee to start work on the last day of a month.

  6. When an employer pays for the cost of disability insurance, disability benefits will be taxable to the disabled physician; however, if the physician pays for the disability policy, disability payments will not be taxable to the physician.

  7. Most pension plans today have a defined contribution, as opposed to a defined benefit. Although the burden on a particular employer to fund a defined benefit plan can be substantial and difficult to predict, physicians participating in a defined benefit plan can put more money away on a tax-deferred basis than they can in a defined contribution plan. Therefore, groups with very high earning physicians may be attracted to a defined benefit plan.

  8. Although most malpractice policies do not have deductibles, malpractice policies can have deductibles, resulting in lower premiums. Nevertheless, if a malpractice policy has a deductible, a physician’s employment agreement should clarify who is responsible to pay the deductible, the employee or the employer.

  9. Even without a contractual prohibition on a physician soliciting patients to follow the physician to a new employer, generally, physician-employees are prohibited from such solicitation until they leave employment. However, with or without a contractual non-solicitation prohibition, physicians are likely allowed to solicit patients who are in an acute medical episode to coordinate a smooth continuation of care.

  10. When one party “indemnifies” another party, that means that the indemnifying party is not only responsible for the damages he, she or it causes, but also responsible for the other party’s attorneys’ fees in regard to incurring or recovering those damages.

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