A contract is an agreement between two parties. To be legally binding, a contract must have an offer, acceptance, and what lawyers call “consideration.” When speaking about a medical contract, the “offer” is the salary and benefits that a hospital or contract management group sets forth on paper, the “acceptance” is the physician’s signature on the dotted line, and the “consideration” is the set of promises made by both parties: The hiring entity promises to pay money to the physician, and the physician promises to provide medical services on behalf of the hiring entity.
Unfortunately, medical contracts are never quite that simple. There are many more provisions to which both parties agree when they enter into a contract. All contracts have some common provisions. For example, a contract has to have a set term. For emergency medicine, the term is usually one year with the addition of what is called an “evergreen clause,” meaning that the contract automatically renews itself every year until it is terminated by one of the parties. Parties to emergency medicine agreements should be able to terminate a contract with a certain amount of advance written notice. This “out clause,” is generally 60-90 days.
All emergency medicine contracts should require that the hiring entity pay for the physician’s medical malpractice insurance. Absent lower statutory limits, the limits for the malpractice insurance should be a minimum of $1 million per incident. All emergency medicine contracts should also include some form of “tail insurance,” meaning that the hiring entity will provide the physician with continuing medical malpractice coverage even if a lawsuit is filed after the contract has terminated. Occasionally, a contract will require that the physician purchase his or her own tail insurance.
Employer-provided tail insurance is an industry standard in emergency medicine contracts. If the hiring entity does not provide tail insurance, I advise my clients not to sign.
Most contract language is highly variable. For example, many contracts offer signing bonuses and reimbursement for moving costs. Some do not. Most contracts reimburse the physician for CME-related expenses. Some do not. Physician compensation varies significantly based upon hospital setting, location, patient volumes, and other variables. Busier hospitals in more affluent areas generally pay more than lower volume hospitals in less affluent areas. Academic hospitals generally pay less than private.
Over the past few years, several alarming contract provisions have appeared more frequently in medical employment contracts. Below are some of those provisions and some reasons you may be concerned about agreeing to them.
Indemnification is a legal concept meaning that one party agrees to pay for all the costs and damages another party sustains. A medical malpractice insurance policy is a form of indemnification where the insurer agrees to pay for all the defense costs and any judgment rendered against a physician. Ten years ago, indemnification clauses were virtually nonexistent in physician employment contracts. Lately, they’re appearing in about 5% of the hospital/group contracts I have reviewed and in an even higher percentage of locum tenens agreements. Below is some particularly egregious language I paraphrased from a contract that I recently reviewed: