Put It in Writing! Structuring Employment Agreements for Nonphysician Providers — Part IV

According to a recent survey by the Medical Group Management Assoc. (MGMA), 77.3{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} of respondents employ non-physician providers (NPPs).
The increasing utilization of these providers is in itself a testimonial to their success in providing cost effective health care services. This fourth article in our series on non-physician providers is intended to offer some financial and operational guidance in structuring employment arrangements for NPPs.

 

Written Agreement

First and foremost, as with any physician-employment arrangement, you need to put it in writing. We recommend drafting the key financial and operational issues and then having a health care attorney review and prepare the final document for execution.

Conditions of Employment

The agreement should spell out that the NPP is employed in the capacity for which they are licensed, i.e., nurse practitioner, certified nurse midwife, etc. It should also specify work schedule, minimum hours per week, and that the employee works exclusively for the employer, except as otherwise permitted. Call scheduling and rounding rotation should be included as well as required professional credentials, licensing, certification and hospital privileges.

Term of Employment

The initial term of employment for a new health care provider is usually one year to provide each party with an “out” in the event the arrangement does not work for any reason. Subsequent renewal or extension from year-to-year may be automatic or at the mutual agreement of both parties.

Compensation

This section usually specifies the initial base salary and the frequency of payments. It also may specify the nature of raises, additional compensation or bonuses, and the circumstances under which these may be paid. If there is an incentive compensation arrangement there may be a reference to an appended schedule that goes into more detail. We will cover compensation in more detail in the July issue of The Healthcare News.

Benefits

This is where the extent and terms of coverage for health, disability, life and dental insurance, retirement plan participation and other typical employee benefits are enumerated.

Medical Malpractice Insurance

The employer normally provides coverage for medical malpractice claims. This coverage should be specified with some provision relating to who is responsible for ‘tail’ coverage on claims made policies.

Employment Expenses

Most agreements state that the employer will pay all reasonable and necessary business expenses to enable the NPP to perform his or her duties. This section may also be used to specifically identify certain expenses such as continuing medical education (CME), licenses, cell phone/pager, and annual dollar limitations on such expenses.

Paid Leave of Absence

Vacation, holidays, CME, personal, and sick leave allowances are spelled out. These are generally proportionate to the normal work week as defined by the employer. That is, if an NPP is on a 32-hour (versus 40 hours) work schedule, a week of vacation may be limited to four paid days, instead of five, or 32 hours instead of 40. It is not uncommon for health care employers to combine all the above into one paid leave of absence category and to restrict carryover of unused time to subsequent years.

Nondisclosure and Property Rights

Attorneys will include provisions to protect the employer’s confidentiality of information and ownership of trade names, patents, copyrights, and other intellectual property.

Restrictive Covenants

Most attorneys and health care consultants will advise having some provision in the employment agreement to restrict the NPP, upon termination, from soliciting patients of the practice or setting up practice in close proximity and soliciting employees of the practice. This may extend from one to several years after termination of employment. State laws and court case law may affect the ability to enforce these as written or to even include these as a condition of employment so it is particularly important to have a health care attorney advise you on this as well as the remedies available to you.

Termination

This provision is very important and needs to be very carefully written. At a minimum, it should contain (a) those acts or conditions that would trigger termination of employment; (b) the definitions of termination “with cause” and “without cause”; (c) any provisions to cure or remedy conditions resulting in termination; (d) minimum advanced notice required; and, (e) any compensation or other consideration due. Here again, state or federal laws or court decisions may limit what may be included.

Disability

This may be included under the termination clause and usually specifies the definition and allowed duration of disability before termination of employment is triggered.

Other Provisions

The above provisions are the most common dealing with financial and operational issues. Attorneys will add other provisions addressing governing law, dispute resolution, severability, communications and notices, amendments, and those of other legal importance.
Although an oral agreement may be enforceable, a well written and executed employment agreement documents both employee and employer expectations for future reference.

James B. Calnan, CPA, is partner-in-charge of the Health Care Services Division of Meyers Brothers Kalicka, P.C., Holyoke, MA Certified Public Accountants and Business Consultants; (413) 567-6101.