Insights from Ludi

Creating an Optimal Medical Directorship Contract

Posted by Michelle Harmon on Apr 12, 2017 9:02:51 AM

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Hospitals need physician partnerships in nonclinical settings and activities. Many hospitals often choose physician arrangements known as “medical directorships." These arrangements designate a physician leader to be responsible for a number of activities related to the delivery of medical care and clinical services. The "activities" typically include things like cost management, utilization review, quality assurance, and medical protocol development. Medical directorships are a popular partnership vehicle to assist the hospital in necessary clinical administrative leadership. They also align their physicians as partners for smart and intuitive direction. Read on to learn what should (and shouldn't) exist in an optimal medical directorship contract.

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Not only are these partnerships crucial for patient care, they also have intense regulatory insight. Hospitals cannot simply hand physicians money (known as Stark Law). There are specific guidelines that occur with how a contract is created and carried out between the physician and the hospital.

Duties are the specific actions that the physician will carry out within the medical directorship contract. The duties you include on a contract are very important as they need to be both measurable and actionable. Hospitals need to stay away from mission-based or vision-based duties that cannot be measured and are unenforceable. A few examples of duties that are difficult or even impossible to measure include:

  • Drive operational and cultural change
  • Build credibility and trust with physicians and administration
  • Party planning and gift wrapping (while measurable, probably not what a hospital needs a physician leader to be doing with their billible time)

Another common pitfall is having too many duties attached to any medical directorship. When a physician has to track and record too many types of activities it becomes inefficient and once again, unenforceable.   A third avoidable pitfall is when a duty is nonspecific or worse, “open-ended." These tend to serve as a “dumping ground” when the physician logs his or her hours, but doesn’t have any idea what duty to attach her time to.

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Enforcement of documentation and “due dates” for physicians submitting their administrative time logs can be all over the place. We've seen anywhere from 5 days after the month to 90 days after the month to no due date at all. The lack of organization usually creates a scenario that has the physician turning in stacks of time logs at one time that account for a multi-month time period. This creates chaos within a hospital’s administrative team trying to mind compliance and payment issues.

Payment for the medical directorship must be commensurate with the directorship functions and duties. Because of the various factors that go into paying and keeping track of a medical director's activity, we witness “complicated math” that makes the monthly or bi-monthly payment extremely difficult. Factors like different hourly rates for different duties or monthly and annual maximums that do not equate or tie together in the same contract can cause many problems without automation or the right software in place.


Medical directorships demand more and more from physician leaders with increasing pressure to be visible in both internal and external roles and activities for their hospital partners. The contractual arrangement must be fair for both parties, adhere to tight regulatory requirements, serve its actual intent versus a hidden agenda for referral compensation and be easily adjudicated from both the physician and hospital teams.

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Topics: physician contracts, physician compliance, physician duties, medical directorships