Insights from Ludi

How to Construct the Optimal Physician Contract

Posted by Gail Peace on Mar 14, 2017 1:48:31 PM

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Physician contracts should, in theory, be created using templates as a best practice. The reality is that physician contracts are like snowflakes: it’s difficult to find two that are alike. In practice, having too much variation in your physician contracts can be detrimental to the organization. High level of variation can lead to operational problems while trying to execute agreements.

Ludi has had the pleasure of reading close to 7,500 physician contracts in the last three years. From this experience comes a tip sheet on how to construct the optimal physician contract.

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Use Templates. Many organizations have template agreements for employment contracts, medical directorships, co-management deals, teaching, research or other professional service agreement. Templates are valuable because they drive consistency during the paperwork stages while also ensuring that a standard checklist of items are contained in the agreement. For example a template outline may always have the opening paragraph clearly define the overall services being fulfilled, Section 4 would spell out the compensation flows and the duties are always included in an appendix.

Following a template ensures all the necessary components are in place to fit within the safe harbor requirements -- There are seven safe harbors that must be met to have a compliant agreement. Use in-house counsel to prepare and enforce templates wherever the opportunity arises.

Clearly define the services to be provided. Not only should the services be commercially reasonable, they should be defined in such a way that the physician can realistically track work against those duties. For example, “be a good corporate steward” is very vague. A better duty would be “Participate as a medical leader in supporting various leadership initiatives to support increasing patient satisfaction and work to engage staff alongside the clinicians in these initiatives.” The duties should be grouped together in one section of the agreement or in the exhibit rather than peppered throughout the entire agreement should you later need to review duties and compare them to a time log.

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Compensation must be mathematically correct. To stay within the parameters of fair market value (FMV) guidelines in the agreement, compensation is always a component of time multiplied by an hourly rate. While some compensation estimates the number of hours for example, the hours always underlie the calculation. As a result, clearly spelling out the math that needs to take place is critical in the agreement. For example, the physician will be paid $200 per hour worked not to exceed 20 hours per month in this capacity. Stipends payments are very risky because it requires the organization to take action to ensure payments have been made correctly. Better to tie the work to a rate, and not have to do the true up once the payment has been made.

Clear direction on necessary reporting and timing of such reporting. The contract should clearly state that the physician has 30 days once the period closes to complete any necessary documentation related to administrative and/or patient care time. To take that one step further, the format for submission of a time log by the physician will make it for an easier submission process and can be tracked back to the timeline from the agreement. The format requested should make it easy for the physician to report the correct documentation. For example, do not use a standard time sheet format with sections prefilled that are not in fact part of the physician contract. Automation here will keep a trail and make it easier for the physician and all parties involved.


Topics: physician agreements, physician contracts, physician management