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THE TOP LINE Employment Agreements: The New “Inducement”? Author: Teresa Ford It might strike you as odd that I would use the dreaded word “inducement” in the title of a regular column whose primary goal is to educate you relative to legal behavior. But I promise you, I use the term “tongue in cheek.” What is quite serious is the phenomenon that I reference in the title—that of orthopaedic surgeons accepting direct employment with a hospital, hospital group or other health care system. It is a trend that seems to be sweeping the country. And while it certainly can seem appealing at first blush, it is like nearly every other business arrangement available to those of you in this specialty area: fraught with potential pitfalls. Why it is an Appealing Option Running an orthopaedic practice has turned into a very complicated business. From managing the multiple employees or consultants who are necessary to keep even a medium-sized practice running efficiently, to staying abreast of legal and administrative requirements that change with frustrating regularity, the physician-run orthopaedic practice can be a very complex and overwhelming undertaking. So who wouldn’t find a practice that seems to run itself enticing? The list of headaches that the employee orthopaedic surgeon need not endure is long and provides a persuasive argument for hitching your wagon to the hospital or hospital system that promises you a life of doing what you trained to do; namely, practice medicine. But like anything else in life, if it looks too good to be true, it likely is. What follows are some of the most common things of which physicians should take note when considering whether to enter into an employment agreement. And, of course, I am going to tell you to ensure that you have competent health care counsel walking with you through every step of the negotiating process. Term and Compensation The term of the proposed agreement is simply how long the parties agree that it will last. Consideration of the term in conjunction with compensation provisions is pivotal is because most of these agreements work the same way. For the first year or two the surgeon is guaranteed a fixed salary with no relation to (or impact by) Work RVUs or other measures of productivity; thereafter, however, your actual compensation may be based solely on the income generated by your Work RVUs. While at first this seems to make sense, the reality is that you are working just as hard for less money in many instances. If you are working in a new area of the country and do not have established patient relationships that you bring to the employment relationship, you are reliant upon the hospital or hospital system to effectively market and promote your practice. Sometimes this happens, sometimes it doesn’t. It is also critical for purposes of your evaluation of the compensation offer that you know about the demographics in your area as well as competing hospitals, ambulatory surgery centers and other potentially competitive entities that could impact your total income once you are no longer being paid a fixed salary. Ancillary Obligations It is the norm that employment contracts such as those I am discussing here require the physician to provide a number of ancillary services in order to earn his salary. Such services include functioning as a medical director, assisting with utilization review, evaluating vendors and vendor contracts, training of support staff and other administrative functions. These services are viewed by the hospital not only as a “value-add” but also as justification under the health care fraud and abuse laws for paying a fixed salary. While there is much that could be said about these obligations, the one critical thing to remember is that the proposed workload must be manageable. If you cannot perform all of the services that are required under the agreement, you could be found to be in breach of a material term of your employment agreement. Intellectual Property, Inventions and Outside Consulting and Design Work This is a major consideration for any physician who works with the medical device industry in any capacity and who is considering direct employment of the kind contemplated here. Express carveouts for the work you have already done, the work you are currently undertaking and any work you may undertake in the future are continued on page 51 50 ORTHOPAEDIC PRODUCT NEWS • September/October 2009
THE TOP LINE continued from page 50 critical. And while the hospital or hospital system may have legitimate rights to certain of your intellectual property that may be created as a result of your employment relationship, it is imperative that the lines for such ownership are very clearly drawn at the inception of the employment relationship. Another consideration is fees that are earned from doing outside consulting and design work. Those monies should belong to you, but the traditional physician employment agreement will almost always contain language that provides for those monies to belong to the hospital. The “Independence” Factor, or Lack Thereof I would be remiss if I did not at least touch on the psychological aspect of physician employment situations. If you come to an employment relationship after being a sole practitioner or a member of a multi-surgeon medical group whereun the control of the group rests with its surgeon members, you must consider how much autonomy you will forfeit if you accept employment such as that envisioned here. You will answer to hospital administration in a much more regimented way and certain aspects of your practice will be under a microscope like never before. If you are not the kind of personality who likes being micro-managed, this aspect of such an employment situation should be considered thoroughly before you make any commitment. It suffices to say that the “hassle-factor” of managing one’s own practice, from reimbursement issues, to disclosure requirements, to HIPAA, has increased dramatically since most of you left your residencies and fellowships and headed into the full-time unsupervised practice of medicine. Direct employment may be the answer if the circumstances are right; just make sure you ask all of the right questions before you sign on the dotted line! The Law Offices of Teresa Ford, PC (www.tfordlaw.com), located in Houston, Texas, specialize in healthcare and medical device issues. Areas of expertise include healthcare compliance program structuring and training, as well as advising individual physician clients. Founding partner Teresa Ford spent many years in the medical-legal arena, most recently as senior counsel for Sulzer Medica USA Inc. She can be reached at 832-251-9595 or tford@tfordlaw.com. Law Offices of Teresa Ford, PC Proud to serve the physician community in matters of health care compliance and business structuring 2500 Tanglewilde, Suite 318, Houston, Texas 77063 tel: 832.251.9595 • fax: 832.251.9599 email: tford@tfordlaw.com www.tfordlaw.com Not Certified by the Texas Board of Legal Specialization September/October 2009 • ORTHOPAEDIC PRODUCT NEWS 51
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Page 4: FROM THE EDITOR Dear Doctor, The pa
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Page 18 and 19: EXECUTIVE INTERVIEW Glen Kashuba Se
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Page 24 and 25: ARTICLE Physician Dispensing: A Cos
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Page 28: EDITORIAL Controlling Device Costs:
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Page 44 and 45: VIEWS ON THE NEWS In this feature,
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