Category Archives: Employment Agreements

Fraud Alert Issued by OIG Puts Medical Directorships Under Suspicion

Make Sure Your Medical Directorship is Legal

HHS’s Office of Inspector General’s Fraud Alert issued in June of this year  puts an often-used tool for compensating physicians in the regulatory cross hairs. “Medical directorships,” or the payment of a physician for overseeing clinics or other medical services, will violate the Federal and state Anti-Kickback statutes if “even one purpose of the arrangement is to compensate a physician for his or her past or future referrals.”

Compensation arrangements between hospitals, physician groups and other medical providers that contemplate management or directorships by a physician should be carefully evaluated by competent counsel. OIG has said that it will be reviewing such arrangements with particular interest. If a violation is found, the result could include criminal, civil and regulatory fines, and exclusion from federal health care payment systems.

Some of the elements of an appropriate directorship or management position for a physician might include a written contract for at least a year with a salary that constitutes a fair market value for services actually provided. Such an agreement should be backed up by salary surveys or other documentation that the compensation is based on similar positions within the community.

By Matt Kinley,Esq., LLM, CHC




The ACA utilizes the idea of non-physician professionals to help bridge the gap presented by having insufficient physicians to handle patients.  It is hoped that utilizing these professionals will help increase communications with patients, particularly chronic patients who could avoid hospital stays by seeing a nurse practitioner for an office visit or even email communication with a knowledgeable professional  Finally, utilizing non-physicians should lower costs.

In California, this presents some major issues.  California carefully regulates the use of such professionals, particularly nurse practitioners.    Specialists need to  pay attention to creating the right environment for such professionals.  Standardized Procedures should be updated to conform to the needs of the practice.  The California Code of Regulations (Title 16, section 1472) requires physicians to have “standardized procedures” before permitting registered nurses to perform treatments and procedures.  The purpose of the standardized procedures is to establish policies and protocols for NPs so that they are able to perform their authorized duties.  It is particularly important to update these standardized procedures because your NP will most likely be characterized as your employee, which will expand the scope of your liability for her acts.

California Code of Regulations Title 16, section 1474 establishes specific guidelines for the standardized procedures and provides that each standardized procedure must:

v    Be in writing.

v    Specify which functions the nurse may perform and under what circumstances.

v    State specific requirements to be followed by the nurse in performing specific functions.

v    Specify experience, training, and education requirements for the performance of the procedure function.

v    Establish a method for initial and continuing evaluation of the competence of the registered nurse.

v    Provide for a method of maintaining a written record of who is authorized to perform standardized procedure functions.

v    Specify the scope of supervision required for performance of standardized procedure functions.

v    Set forth specialized circumstances under which the nurse is to immediately communicate with the patient’s physician concerning the patient’s condition.

v    State the limitations on settings.

v    Specify patient record keeping requirements.

v    Provide for a method of periodic review of the standardized procedure.


            (a)       Furnishing Scheduled Drugs

                        Of particular importance are the standardized procedures on Furnishing Scheduled Drugs.  California law requires that you specifically list “which drugs or devices may be furnished or ordered” and “under what circumstances.”  (Bus. & Prof. Code, § 2836.1(c)(1).)  We recommend to physicians that they review the “List of Scheduled Drugs” to ensure that it is consistent with the drugs that the NP may prescribe to patients.  

            (b)       Dispensing Hormonal Contraceptives

                        California law also has strict guidelines for a nurse’s dispensation of self-administered hormonal contraceptives.  In order to administer hormonal contraceptives, your practice must have standardized procedures developed in compliance with Business and Professions Code section 2725.2.  These standardized procedures must include, but are not limited to, the following:

v    Which nurse may dispense the hormonal contraceptive.

v    Minimum training requirements regarding educating patients on medical standards for ongoing women’s preventative health.

v    Competency in providing the appropriate prior examination of checking blood pressure, weight, and patient and family health history, including medications taken by the patient.

v    List of the contraceptives that may be dispensed or administered under specific circumstances.

v    Criteria and procedure for identification, documentation, and referral of patients with contraindications for hormonal contraceptives and patients in need of a follow-up visit to a physician and surgeon, nurse practitioner, certified nurse-midwife, or physician assistant.

v    The extent of physician and surgeon supervision requested.

3.         Ensure that Your Nurse Practitioner is “Clinically Competent”

           NPs  must be “clinically-competent” to treat a particular population.  Standardized procedures should establish a method for the continuing evaluation of the competence of your NP to perform the specified procedures.

Following these procedures will help you utilize nurse practitioners to help your patients.  You will also avoid accusations of failing to follow state law in guiding the NPs to perform as if they were an extension of your care.

BY:  Matt Kinley, Esq,

Physician Guidelines for Employment in Large Institutions

In this press release, the American Medical Association (AMA) adopts guidelines for
physicians considering employment with large institutions. AMA Guidelines are available here.

In addition to
the ethical issues described, California has strict legal requirements for
physicians considering a job and leaving their private practices such as:

Informing clients of the move

2.  How to
handle medical records

3. How to
handle accounts receivable

4  What
insurance to carry

5.  Control
in your new job over hours, appropriate care, medical records and billing.

Any physician
considering such an employment contract should get legal advice to discover
legal land mines and potential violations of law.

Submitted by Matthew L. Kinley

Prohibition of Corporate Practice of Medicine. How Do Physicians Stay Compliant?

California law prevents the practice of medicine by anyone but a person licensed to practice medicine.

With the increasing integration of healthcare, new systems need to be created to make sure that physicians continue to fulfill their duties.

A licensed physician must:

* Make all decisions regarding the care of patients.

* Decide the diagnostic tests which are appropriate for a particular condition.

* Determine the need for referrals to, or consultation with, another physician or specialist.

* Responsibility for the ultimate overall care of the patient, including treatment options available to the patient.

* Determine how many patients a physician must see in a given period of time or how many hours a physician must work.

* Keep accurate records of a patient and to make sure such records are private.

* Bill appropriately for all services rendered.

Under many models of integrated care, including ACOs and IPAs, physicians give up considerable control over many of these required functions. For instance, physicians are usually required under such contracts to assign all rights to bill medicare and medicaid, as well as private payers.

Under the law, however, the physician, not his or her group, is responsible for the accuracy of these bills.

A good lawyer is needed if you are entering into a contract with any healthcare provider. The lawyer should assure that the healthcare professional keeps his/her rights under the new legal framework.

Written by Matthew L. Kinley

Employment Contracts with Hospitals Pose Risks and Benefits to Physicians

As trends suggest that more and more physicians will be employed by corporate entities such as foundations and other payors, physicians and other health care professionals facing employment agreements should consider reviewing those agreements carefully with counsel before signing on the dotted lines.

All sorts of terms that appear benign may become more important as time goes by.

For instance, most employment agreements have sections on length of the employment.  If a physician is giving up a practice for such employment, the long term consequences of the agreement must be considered.  While in most cases termination because of inadequate care is remote, termination because the organization makes major policy changes is very possible in the current medical environment.

Clauses such as arbitration clauses should also be carefully considered as an arbitration can be a very expensive way to resolve disputes.

Other issues such as usual customary care, assignment of billing, and the cost of liability insurance should all be carefully considered. Karen Cheung recently explored the issues involved in these contracts in a recent post at the Fierce Healthcare blog.    She references an article in American Medical News by attorney Steven Harris about the traps of hospital employment agreements.

Also, the American Medical Association site offers useful tips before signing such agreements, read here for their tips.

Before signing any contract, most people make a quick decision about whether it is valuable to have legal counsel.  There are some contracts that, in most cases, do not justify hiring an attorney, such as purchasing a car or contracts for purchases under $5,000. Before signing an employment contract in healthcare, however, it should be considered that:

 1.  Most attorneys these days will agree to a flat fee for review of a basic contract, which is often what these employment contracts are.  For instance, Tredway, Lumsdaine & Doyle, LLP, will agree to a flat fee for both reviewing and negotiating the contract on your behalf.
2.  Attorneys can be sued for bad advice.  If the agreement does not work out like it should, a call to the lawyer that gave you the opinion may give you some relief.
3.  Such a review (and the resulting discussion that takes place in the course of the review) takes the surprise out of the process.  Hear exactly what you are getting into from experienced counsel.
4.  Any qualified attorney can spot areas where changes may be requested and the contract can be rewritten in your favor.

Before changing the way you practice and work for a corporate entity, a physician should have the agreement carefully vetted before proceeding.  Make sure you know what you are getting into before you sign.

Written by Matthew L. Kinley.

Employment Agreements and Compensation for Physicians

With the recent changes in healthcare laws, more physicians are becoming employees of hospitals, medical groups, or affiliate organizations rather than setting up their own practices.

There are a number of considerations and pitfalls that should be taken into account when structuring your employment agreement. The most important consideration for most physicians is physician compensation. A physician should make sure that he or she is checking for fair market value (base salary and productivity bonus) in employment contracts with hospitals, as hospitals are bound by law. The legal limits are imposed by Stark law, 42 U.S.C. §1395nn and the IRS rules for tax-exempt hospitals. See this wiki link for more information on Stark law.

Common compensation methodologies in physician employment agreements should include fixed salary, base salary with productivity bonus or compensation based solely on productivity. Newer physicians to the area generally select a fixed salary for either each year of the contract or for the first year or two followed by fixed adjustments in subsequent years.

Many agreements contain lower base salary combined with a productivity bonus based on either of the following:

1) percentage of collections,

2) percentage of net revenue, or

3) physician work relative value units as established by the Centers for Medicare and Medicaid Services.

The total compensation is generally capped either by a certain dollar amount or by a percentage of base salary, that should be adjusted upward annually by the increase in consumer price index. Physicians should pay close attention to how a bonus is calculated and paid. Legal issues with productivity bonuses or compensation and referrals are triggered by Stark law and the Anti-Kickback statute.

If Stark applies, all compensation arrangements with physicians must be structured to fit the exception to Stark. This is why it is important for an attorney to be involved with the process. Stark law prohibits referrals by physicians who have a financial relationship to the entity receiving referrals if a hospital-employed physician provides “designated health services” under Stark, which are reimbursed under Medicare or Medicaid, unless an exception applies. Other important terms to consider include contract termination, emergency room call compensation, non-competition and non-solicitation provisions, participation in a hospital’s managed care contracts, professional liability insurance, and indemnification.

Written by Pamela Tahim