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Negotiating a Hospital Employment Contract: Smart Tips for Anesthesia Providers
February 27, 2017
Although our experience tells us that anesthesiologists and anesthesia groups are less likely than other specialty groups to become hospital employees, it’s important to know what you could be facing should you find yourself in the situation of needing to negotiate an employment agreement. We highlight some of the takeaways from a presentation at the 2017 American Society of Anesthesiologists’ Conference on Practice Management by attorney Judith Jurin Semo.
Given the pace of change in healthcare—anesthesia included—and the challenges associated with negotiating an appropriate and reasonable stipend for your practice, the possibility always looms that if your anesthesia group can’t come to an agreement with your institution, of if your hospital system wants to employ all physicians, you will face hospital employment. The good news is that this doesn’t happen very often with anesthesia. Nevertheless, it remains a concern.
The number of hospital-employed physicians rose by 49 percent—46,000 physicians—during 2012-2015, a study published in September by the Physicians Advocacy Institute reports. The report doesn’t break down the data by specialty, but investment banking specialist Edgemont Capital Partners estimates in a recent article that half of anesthesiologists are currently employed by the medical centers and university hospitals where they work, 42 percent remain in private groups and the remaining eight percent are owned by one of four large national practice management companies.
Economic burdens on clinicians in the current high-pressure environment suggest that the transition to hospital employment among physicians is likely to persist. Our experience tells us that anesthesia may be an exception to this rule. However, if you find yourself in the position of needing to negotiate an employment agreement, it is important to be aware of the issues you’re likely to encounter. It’s also important to make sure you consult with your attorney, who can help you review the provisions and suggest modifications to create an agreement that balances your needs with those of your employer.
At the ASA Conference on Practice Management in January in Grapevine, Texas, attorney Judith Jurin Semo, JD, reviewed key questions anesthesiologists and anesthesia groups should consider in deciding whether to take the employment path and in negotiating a hospital employment agreement. Semo covered a wide range of topics in her presentation. We present a sampling of selected takeaways here based on Semo's copyrighted materials. (ABC does not claim copyright to the following summary of Semo’s presentation and all requests to use or reprint this summary must be directed to Semo, who has authorized publication of this summary.)
Duties and Obligations
What are your duties and obligations? If you’re working for a health system in Dallas, but the health system includes facilities 200-500 miles away, are you going to be required to work at these facilities? Even if you historically worked in the health system’s mothership hospital, you might no longer be assigned exclusively to that hospital as an employee. You need to negotiate where you will be required to work, and how far away you can be assigned. If you’re required to provide services at a distant location, who will pay for transportation and lodging? And to the extent that you have specialty training, are the assignments consistent with that training?
How often are you going to be on call? Anesthesiologists take call and are on site more often than other physicians, so you will want to negotiate protections on call frequency and number of call locations. Consider negotiating for a maximum number of calls each month and weekend calls per year.
Even if the hospital or health system is well intentioned, the anesthesia department often becomes short staffed. Ideally, you want some credit for off-site call hours and administrative hours, particularly if you will have an administrative role.
Beware of language that says you agree to provide services at the hospital or other healthcare facilities designated by the employer and then refers to Exhibit A, which says these duties can be subject to change from time to time by the employer. This indicates that, regardless of what the contract states, the employer can change the Exhibit at any time. This means your duties can be changed at any time and you could have no control over where you’re required to work and not be given any advance notice about it.
Try to negotiate for a maximum number of work hours per week. While you don’t want to nickel and dime your employer, if you don’t set a limit, the hospital has no incentive to retain locum tenens or hire additional physicians if it becomes short-staffed. Include administrative as well as clinical time in protections regarding weekly work hours. And try to make sure the agreement includes provisions that the hospital will increase anesthesia staffing if locations are added.
The agreement should clarify who controls scheduling as well. Will it be a member of the anesthesia department, a physician, a nonphysician administrator, the nursing supervisor or someone else? You need to know.
If you can’t negotiate protections regarding work hours, at least try to negotiate for late-day pay protection. For example, if you are working more than 10 hours daily, you should get compensated for the additional time. These work hours won’t resolve your work-life balance issues, but they might make you feel more appreciated. And if you have to take additional call, negotiate an agreement that compensates you for that as well.
Is outside work permitted? Most agreements don’t include these provisions, but they can be negotiated on occasion if you agree to request permission in advance or perform the work during vacations. If having this flexibility is important to you, you will want to understand the rules of the road—and how the revenue you generate will be treated. For example, if the employer bills for the anesthesia services you provide whether they’re provided at their institution or at another, this means that while you can work outside, your employer retains the revenue.
How will your performance be measured? Subjective performance standards that are in the eye of the beholder and, therefore, susceptible to breach, are commonplace. You need to know the consequences. Are you subject to immediate termination? Can your compensation be reduced?
Be cautious of language that says you won’t engage in any personal or professional conduct that affects the image or standing of the employer. This means that anything, such as a single use of profanity, can be deemed to have resulted in an adverse consequence. Try to negotiate for stronger language, e.g., “is reasonably likely to adversely affect the image or standing of the employer,” and request provisions for “notice and cure”—a specified period during which you can take corrective action.
Negotiate for protection against immediate termination if the hospital thinks you have breached provisions regarding its image or standing. An example would be 30 days to take corrective action.
How much are you going to be paid? Is there a sign-on bonus, and are you going to be able to keep that bonus? How long do you have to stay? Is there compensation for call, and is there severance pay if you can be terminated without cause or for cause?
If the compensation looks too good to be true, be cautious. For example, if the agreement states that you will be compensated for call or late afternoons, and also states that those rates are subject to change, those rates can be reduced or eliminated. Semo knows of an anesthesiologist to whom this happened two months after joining the hospital. More protective language would state that the employer can change the rates, but that those rates cannot be reduced below a specific level.
Be careful of an agreement in which you are subject to reduced compensation based on claims of inappropriate productivity. If you’re doing administrative work, for example, you’re not going to generate as many clinical units as some of your colleagues. Regulatory considerations and financial pressures are leading some hospitals to reduce compensation based on productivity. As an anesthesiologist, you don’t control the units you generate; the hospital controls the operating room schedule.
Also beware of whether the hospital states it reserves the right to adjust compensation based on fair market value considerations. You want protection that the hospital will agree to commission a fair market study if it claims compensation is too high.
How long is the agreement? Consider negotiating for a cost of living adjustment. Or, if for whatever reason, the hospital compensates new hires at a higher rate, negotiate a protection that the existing anesthesia providers will earn at least that of the new physicians. These provisions are not easy to obtain, but they are worth trying for.
Hospitals often offer a good package at the beginning, but then change the package over time. Hospitals are under financial pressure, so beware of attempts to change the compensation methodology. Also beware of potential attempts by the hospital to replace existing anesthesiologists with new physicians at lower rates.
Be careful of language indicating that your patient care efficiency and productivity must be consistent with that of your peers in the department. These factors are not always within your control. Your productivity and efficiency will vary greatly depending on where you are assigned; for example, the ambulatory surgery center and cardiac intensive care are two vastly different environments. You will also not produce as many clinical units if you have administrative as well as clinical duties.
Termination: A Balancing Act
What are the circumstances for termination? What is the process? Will there be severance pay? Building leverage for when and how the agreement can be terminated—protecting your professional future—is as important as the provisions regarding the work you will be doing and how you will be compensated.
If the employment arrangement is attractive to you, then you will probably want to avoid an agreement that allows termination without cause; if the agreement ends, so do its protections.
But if the right to terminate without cause is in the agreement, is the right mutual? If you are satisfied with the arrangement, you don’t want your employer to have the ability to terminate the agreement too quickly. On the other hand, if you’re unhappy with the arrangement, having the flexibility to terminate can work in your favor.
If you have any questions about whether the arrangement will work out, you will probably want to negotiate for termination without cause on reasonable (e.g., 90-day) notice. However, beware of an agreement that says either party can terminate without cause, and that in the event of termination without cause, the employer can require you to cease performing and cease being paid for services during the notice period.
Also, negotiate protections in the agreement regarding “for cause” termination. Ideally, these protections should provide notice and cure. The more subjective the potential grounds for termination specified in the contract, the more important the need for protection with provisions regarding notice and cure. For example, an agreement that says the employer may terminate at any time for any cause that includes material breach of any provision of the agreement could expose you to termination for something as small as failing to sign an anesthesia record.
In general, beware of contradictory provisions in the employment agreement. Sometimes provisions are added at different times and these provisions can be inconsistent. The employment agreement must be viewed as a whole, not read provision by provision; all of the provisions should tie together.
Hospital employment is a pathway anesthesiologists are less likely to pursue than some of the other specialties, but it is a possibility. Many issues can be confronted preemptively in the employment agreement, and the extent to which these issues are resolved can also help determine whether to sign at all. Remember to consult with your attorney before signing any agreement. Your attorney can work with you to create an agreement that balances your needs with those of your employer. However, keep in mind that an attorney may be able to draft a more balanced agreement, but that does not mean that the employer hospital will accept the revisions.
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