Negotiating Your Employment Agreement: Physicians Practicing in an Evolving Healthcare System

Medical professionals entering the workforce today face a rapidly evolving, and continuously changing, healthcare landscape. Because of this, healthcare professionals, and especially physicians, must grapple with a unique set of challenges – fewer independent medical practices, rising compliance and administrative burdens, and reduced independence, among many others. Increased, and still increasing, consolidation has afforded hospitals and health systems greater bargaining power in the employment marketplace. Physicians preparing to enter into employment arrangements face one of the most important decisions of their professional lives – and a challenging set of legal, financial, and ethical considerations.

Employment agreements can have wide ranging consequences for, and long-term effects on, physicians: excessively-lengthy terms can hamper mobility, anti-competition covenants can restrict patient choice and access to care, and employer-control provisions can limit physician independence and medical judgment.

Yet physicians remain well positioned to capitalize on the changing marketplace, and by appropriately memorializing employment arrangements through employment agreements, they can dictate terms that may ultimately influence their long-term professional, and personal, satisfaction. Set forth below are three areas of physician employment agreements which can be expected to take on greater significance as healthcare systems continue to change, and which are therefore ripe for practitioner contemplation and input.

Restrictive Covenants

As healthcare continues to expand, so too does competition among healthcare employers. Employers regularly include in physicians’ employment contracts provisions restricting physicians’ rights to (i) practice medicine in designated geographic areas for certain periods of time following the conclusion of employment and (ii) solicit, among others, former patients. In New York, such non-competition provisions, though disfavored, are enforceable, and will be upheld if they are reasonable as to scope and duration, necessary to protect the legitimate interests of employers, not unreasonably burdensome to the employee, and not harmful to the public. It is often difficult to establish with definitiveness whether an existing restrictive covenant will be upheld, and it is generally inadvisable for a physician to flout a non-compete simply based on its potential unenforceability.

Restrictive covenants can conflict with the core physician beliefs of patient choice and access to care, and they can have unintended consequences on post-employment mobility. While physicians have long been familiar with their anti-competitive nature, and at-times draconian reach, non-competition provisions frequently remain un-negotiated in agreements. It is particularly important to anticipate the effects that these covenants will have at the outset of the employment relationship, rather than once the employment arrangement is established.

Healthcare M&A and Employment Agreement Assignability

With healthcare consolidation expected to continue, physicians should also closely note those provisions which address what happens in the event of medical practice and hospital mergers, acquisitions, or consolidations. Physicians should carefully review and negotiate provisions which dictate the impacts these changes in ownership structure can have on physicians’ contractual rights and obligations. A practitioner should, for example, ensure that his or her agreement is not cancellable upon a change in ownership structure, and that either the agreement’s terms will continue on as before the change of control or the physician will have the right to terminate his or her employment; any assignment of an employer’s rights or obligations to a successor employer should not abrogate the physician’s employment rights.

Physician Autonomy

A vital – and largely overlooked – topic that should be contemplated in any physician employment arrangement is one that goes to the core of what it means to be a physician – a physician’s retention of his or her right to exercise independent medical judgment in the care of patients. As consolidation continues, and large hospital systems gain more control over the delivery of care and the provision of services, physicians should seek to confirm their ability to maintain autonomy over the medical decision-making process.

Carefully drafted “professional independence” provisions should address the policies and procedures that apply when a physician’s judgment and decision-making process differ from standardized employer protocols, whether, and how, a physician may approach the provision of tests and procedures differently from established protocols, and how conflicts of interest in the decision-making process are to be handled. A boilerplate employment agreement may contain a catch-all requiring the physician to perform all duties required by, and under the general direction, supervision, and control of, the employer. In these scenarios, a physician should ensure that the employer’s ability to direct the physician’s duties will not interfere with the physician’s professional autonomy and judgment.

Despite a changing healthcare system, physicians remain uniquely positioned in the marketplace – and they should not be willing to accept one-sided, unfavorable employment arrangements. Practitioners should focus on shaping, rather than reacting to, the terms of their employment, and a consideration of the factors set forth above – among many other moving parts in the employment agreement context – will allow physicians a measure of control over their future. Carefully negotiated and drafted physician employment agreements can help physicians maintain adequate medical independence, and ensure that their professional and personal goals are met.

This article is intended for general informational purposes only and should not be considered legal advice or counsel, nor does it create an attorney-client relationship.