Avoid These 8 Common Legal Mistakes Before Signing Physician Agreements

Avoid These 8 Common Legal Mistakes Before Signing Physician Agreements

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Medical school teaches you a lot of science and clinical skills, but it doesn’t prepare you for the “streets” of legal documentation when you sign your physician contract.

Even sophisticated physicians can make mistakes in signing physician employment or independent contractor agreements. Whether the physician is reviewing a physician employment agreement, consulting contract, independent contractor arrangement, medical director agreement, letter of intent, or other agreement, legal documents present a trap for an unwary.

Badly written agreements can come home to roost. That can mean awful disputes, demand letters written by rapacious attorneys, or even litigation. Isn’t it worth the investment to have peace of mind around the contracts you sign?

Here are 8 tips to help you navigate the major legal pitfalls you’re likely to encounter on the road to signing your physician agreement.

Mistake # 1: Underestimating your compliance obligations.

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Fraud and abuse considerations apply to physician contracts. Unless you understand your potential exposure under federal Stark and anti-kickback laws, and state self-referral and fee-splitting rules, you could be signing your way toward criminal penalties as well as civil liability. Don’t sign a physician agreement unless you’ve had your attorney vet the regulatory compliance issues.

Mistake #2: Forgetting to ensure you have audit rights.

If you’re signing a physician employment agreement with a hospital, nursing home, addiction center, or other clinical care facility, or with another physician who is billing and collecting on your behalf, make sure you have audit rights. You should have the right to review the books and records to be sure you are getting the compensation to which you’re entitled under the contract.

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Mistake # 3: Neglecting to check for unilateral provisions.

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When the other side drafts the agreement, they will tend to make many commitments one-sided or unilateral. Make sure your attorney checks to be sure provisions work both ways. Insist on bilateral provisions. Among the important provisions are those governing confidentiality and indemnification.

Mistake # 4: Failing to limit your liability.

There are least two critical clauses in your physician employment agreement and other physician contracts that can broaden or narrow your potential liability exposure. The first deals with implied warranties: make sure your physician contract includes language that limits your implied warranties. The second is a limitation on liability itself. Your attorney can craft and negotiate language limit the scope of your exposure; don’t want to deal with unlimited liability.

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Mistake # 5: Not checking for restrictive covenants.

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Many states, including California, look unfavorably upon clauses that limit your employment options upon termination of the physician agreement. The other side’s lawyers will sometimes ignore these legal rules and put in language anyway, that is intended to deter you from doing what’s legal and in your best interest. Watch out for these restrictive covenants. Your attorney review should zero in on these offensive and potentially illegal physician contract provisions.

Mistake # 6: Not reviewing rights related to the medical records.

As a physician, you should have the right to review medical records, reports, written information, and other documents related to patient care. Better yet, when contemplating a contract with a non-physician enterprise such as, for example, a medical spa, you may legally be required to own the medical records. As well, a physician cannot abandon his or her patients; a wise physician should make post-termination communications with patients a part of the agreement. Understand who has what rights with respect to medical record retention once the agreement terminates.

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Mistake # 7: Not caring about governing law and venue.

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Whose law controls interpretation of the contract—yours or theirs? Most physician agreements specify which state’s laws apply to interpretation of the contract. This can be critical if, for example, the other party’s state laws are more favorable to them. And as for venue, if you’re not careful, you might have to deal with any dispute in a faraway state. Understand what the physician agreement spells out with respect to the choice of law and venue.

Mistake #8: Failing to carefully read termination provisions.

One of our clients was recruited away to a far-off state to be medical director of a promising new clinic. Two weeks after he had moved his wife and young children, the clinic terminated the agreement. Mistake? The physician had failed to review—and have his attorney negotiated—the “for cause” and “without cause” provisions of the employment contract. Your physician contract attorney should review and negotiate termination provisions so they give you the opportunity to end the deal when convenient to you, and not pull the rug out from under you without appropriate notice and compensation.

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Before you sign on the line, have your Legal Counsel review and negotiate your physician agreement.

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