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Hospital Physician Employment Agreements on the Rise: Factors You Should Consider

above-the-bar-logo-no12.jpgFAQ: I am a physician practicing in a cardiology group. The local hospital recently approached our group to discuss buying our practice. What factors should we consider before deciding if we should join the hospital?

Our office is seeing a rising trend in physician employment agreements with hospitals. Given the various economic and regulatory factors, more and more hospitals are buying out physician practices and employing the physicians. This trend is important to note because it is effecting physician compensation in all areas. In the past, it was a given that you would be compensated more if you joined a private practice specialty group than a hospital or a health system. However, hospitals are now matching or exceeding private practice compensation. Our laws firm has helped many doctors review and negotiate their employment contracts with hospitals as well as private practices. Our attorneys can help you obtain the best possible agreement to fit your career goals.

A few examples of this rising trend were evidenced in a survey conducted by the Medical Group Management Association (MGMA) last year which showed the following:

  • multi specialty groups offered a starting median salary of $300,000 in allergy/immunology and hematology-oncology whereas hospitals were offering $330,000
  • family practice physicians were compensated $150,000 in private practices whereas family practice physicians employed by hospitals were being paid $162,000.
  • the median starting salary of orthopedic surgeons in a private practice was $325,000 while hospitals were starting them at $425,000.

In fact, according to a report released this year by the Center for Studying Health System’s Change (HSC), physician employment in hospitals has grown since 2007. The number of hospital employed physicians has grown by 30% while private practice physicians has decreased by 20%. In 2009, 65% of established doctors and 49% of new physicians worked in hospital owned practices. A study conducted by HSC showed that more hospitals are looking at physician employment as an alignment strategy and as a way to increase their profits.

This trend of physicians joining hospital owned practices is occurring due to several reasons. Given the uncertainty with the implementation and timing of the Health Care Reform Act, reimbursements rates have dropped in many areas and nobody knows where they will end up in the future. Many practices are also incurring increased overhead costs which have also been eating away at physician income. Many physicians today also do not want to work long hours nor do they want the administrative hassle of managing a practice. In fact, many physicians completing their residencies and fellowships have huge loans to pay off and want a fixed, steady income. To this end, many hospitals are offering loan assistance to these physicians in mostly every specialty for signing on with them.

If you or your groups are considering employment at a hospital, make sure you ask for a hospital physician employment agreement. Do not hesitate to let the hospital know that you need time for your attorney to review the contract. The hospital might tell you that other physicians have received the same contract and signed it. Even then, it is imperative that you have your own attorney review it looking out for your best interests. Although hospitals may offer attractive compensation packages, you also need to evaluate your future compensation. Make sure you know how your future compensation as well as how bonuses will be determined.

Your hospital physician employment agreement will probably contain a restrictive covenant not to compete. If you have been living and practicing in the area for years, make sure your attorney strikes out this clause. In the event your employment with the hospital does not work out, you should leave open the possibility of re-opening your private practice.

With new economic and regulatory factors affecting physician employment, it is crucial that you have a hospital physician employment agreement and that you evaluate it with the future in mind. If you are considering joining a hospital or a private practice, call our Physician Employment attorneys at Villanueva & Sanchala at (800) 893-9645 to help you evaluate and negotiate the best possible employment agreement for your needs.

Disclaimer: 

Thank you for visiting our Blog. This blog provides general information and thoughts about various employment law issues primarily in the New York Tri-State area and occasionally in other areas. You are welcome to read the posts. However, do not construe any content on this blog as legal advice or the creation of an attorney-client relationship. Again, we provide the content only for informational purposes. You should not make decisions based information on our blog since the application of the law depends on the facts and each situation may be different. In addition, the law in most jurisdictions is different and changes constantly and we make no representations that any information on our blog has been updated. The Blog should not be used as a substitute for competent legal advice from an experienced employment law attorney in your state or jurisdiction.