Physicians entering employment agreements with hospitals aren’t thinking about the end – but they should be. Failure to negotiate payback provisions as well as restrictive covenants in an employment agreement can have severe financial impacts at separation. Consider the following scenario.
Situation: A physician enters into an employment contract with a hospital that provides the physician with a nice sign-on bonus and salary. The physician’s salary is based on certain productivity, which the physician feels could easily be met based on current metrics. However, six months after the physician starts working, the hospital makes an internal decision that it is no longer interested in supporting physician’s specialty and reduces support and marketing of the specialty. As a result, the physician cannot meet the productivity requirement to maintain the salary. The physician feels there is no choice but to quit the job and gives the sixty days required notice of termination. Under the contract terms, the physician must now also pay back to the hospital the sign-on bonus as well as other money due to the decrease in productivity.
Issues: The obvious issue is repayment of a significant amount of money. The contract may also include a restrictive covenant which limits the geographic location in which the physician can get new employment. Nearly 70% of all United States physicians are employed by a hospital or other corporate entity. Physicians engaging with a hospital sometimes do not feel it is appropriate to ask questions or negotiate the terms of the agreement. However, for obvious reasons, the hospital agreement can be stacked against the physician without you knowing it.
Solution: Hire a lawyer at the beginning to negotiate terms on your behalf. No one wants to think about a job not working out, but it is your attorney’s job to think about that for you. Termination provisions in the physician employment contract can be one-sided. The time to address the issue is before the contract is even signed. There are many options for addressing termination provisions and the effect of any termination on an employment contract. It is not a one-size-fits-all.
ABOUT MAGGIE DICOSTANZO
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Maggie DiCostanzo is a principal attorney in Offit Kurman’s Healthcare practice group. For nearly 20 years she has focused her legal practice by representing physicians, hospitals, post-acute care facilities, and other healthcare professionals, delivering health law advice and counseling as well as representation in regulatory, general liability, and professional liability matters. She is also a registered patent attorney with the U.S. Patent & Trademark Office, and drafts licensing agreements and other intellectual property-related documents. Ms. DiCostanzo also assists lawyers in Offit Kurman’s other practice groups, including Business Law and Transactions, to address discreet healthcare issues.
ABOUT OFFIT KURMAN
Offit Kurman, one of the fastest-growing, full-service law firms in the United States, serves dynamic businesses, individuals and families. With 17 offices and nearly 250 lawyers who counsel clients across more than 30 areas of practice, Offit Kurman helps maximize and protect business value and personal wealth by providing innovative and entrepreneurial counsel that focuses on clients’ business objectives, interests and goals. The firm is distinguished by the quality, breadth and global reach of its legal services and a unique operational structure that encourages a culture of collaboration. For more information, visit www.offitkurman.com.
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