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What You Need to Know About Employment Agreements for the Healthcare Professional

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What You Need to Know About Employment Agreements for the Healthcare Professional

As more and more physicians and other healthcare practitioners enter the workforce, employers, whether they are hospitals, clinics or private practices, are updating their employment contracts to be more restrictive against practitioners. It is important when reviewing these contracts, not only to confirm that the terms of the offer are correctly included within the contract, but that practitioners will not be prevented from practicing within their field and/or within a reasonable area should their employment be terminated. In order to negotiate on their behalf, you need to understand the language utilized within the industry, including HIPAA, billing procedures, payment structures and restrictive covenants. This course will provide you with an overview of the key aspects, clauses and terms common to healthcare employment agreements. You’ll have a better understanding of whether the contract terms are reasonable in their scope, whether practitioners will have the ability to continue to provide services should they leave the employment and how to identify missing language that should be included in order to protect the practitioner.

Transcript

Stephanie Rodin - Hello and welcome to the course "What you need to know about employment agreements for the Healthcare Professional". My name is Stephanie Rodin and I'm the owner and founder of Rodin Legal PC, a law firm that works exclusively with healthcare practitioners. I help them with the business management of their practices, so that they can concentrate on the patient care.

Today, I'm going to be talking to you with respect to employment agreements and what the individual practitioner needs to know and understand prior to signing and joining a practice. Whenever a licensed professional looks for a practice to join, either after they have graduated residency or fellowship, or if they're going from practice to practice, there are many different issues, including financial and legal that they need to make sure that they are aware of. And it is always wise for them to speak to not just an attorney, also an accountant and or their financial advisor, while they are working on negotiating the contract. Once they can understand the different areas of the contract that can greatly affect them in moving forward in their career, they would then be able to sign the contract and move forward and join the practice.

Now, back in the day, these contracts used to just be handled by a mere handshake. That has changed over time for obvious reasons. Now, a lot of these contracts can be anywhere from five to 10 pages minimally, but generally, they are around 20 pages. And within these contracts, there are a number of different clauses that can be detriment to the individual practitioner. And that's what this course is going to go into. The purpose of the contract is to help them understand and by them, I mean physician or the dentist, the healthcare practitioner, it's to make them understand exactly what the expectations are of the job itself, of what they can rely on, what the employer is expecting of them. And what would happen if either an issue arose during the course of the agreement or they decided to terminate the agreement early or the practice decided to let them go prior to the expiration of the contract. Without understanding those terms of the contract, it can be very difficult for the practitioner to be able to continue their career in the way that they wanna be. And by that, I mean, whether they will be able to join another practice, whether they will be able to work in the area that they have studied in and the specialty, possibly even the geographical area. And we'll get into that more throughout this course. Okay, what does the contract actually consist of? Now, there are many areas that the contract has, but there are seven in crucial areas that I'm gonna go into more detail about during this course. And those areas are compensation, benefits, termination, restrictive covenants, future position with the practice, which would mean either a partnership or a shareholder, HIPAA and billing procedures. So let's start with compensation. Compensation can be paid out to the practitioner as an employee in three different ways. One is a straight salary per year, two, percentage based on production and three, percentage based on net collections.

So let's start with the straight salary. The straight salary is the easiest way, and basically it means that the physician would be receiving an annual compensation of let's say 250,000 for a contract year. Now, within the terms of the contract, it must be defined of exactly what that contract year is, is the contract year from January 1st to December 31st and therefore prorated during that year, should the contract start at some point after January 1st or is the contract year starting on the date that the contract commences with the physician and then ending the day before that same date the following year? So that regardless of when it starts during the calendar year, it would always be a contract year up until the other date. And the reason why this is important is so that the physician can understand the benefits, the PTO, malpractice, and other things of that nature, which we'll get into later. Now, this amount of having it as a straight salary per year also gives the physician the understanding that it is a guaranteed amount for that year. Now within the contract, especially if the contract is more than a one year, you would wanna have some type of increase or at the very minimum, a discussion with the practice about increasing that salary per year, if it's not already included within the con contract. Now when you're dealing with a percentage based on production or collection, it's completely different and there is no guarantee.

So let's start with the percentage based on production. This is based upon the direct services that are being provided by the practitioner during the course of the agreements. And what happens is, is that when the income is collected from the patient regarding that revenue stream for services, the practitioner will get a certain percentage of those services, so for instance, let's just say that the contract states that the physician will receive 45% of production directly related to services provided by a physician during the course of this agreement, minus any refunds, recruitments, or operating expenses of the practice. Now that's a fairly standard clause in these type of agreements, so let's break it down. So 45% is 45% of any revenue that is received by the practice for the services directly rendered by the practitioner during the course of the agreement minus refunds or recruitments. What this means is that if the practice has to refund any portion of that money directly to the patient, for any reason, or if they're being paid by insurance and they have to refund amounts of insurance, again, for any reasons, the physician will have that amount at 45% deducted from the amount that they receive.

Now, these refunds and recruitments may not be done at the same time that the physician is getting paid. So again, let's see it by example. Physician works on a patient in February of 2022, his or hers salary of the 45% is paid biweekly, every two weeks they get the correct 45%. In June of 2022, that patient received a refunds of the services that were provided in February that the physician had already been paid. So what would happen is, is at the time time of the refund, the practice would provide a report that shows the deduction of the amount of the refund and the physician's check for that payroll cycle will be deducted accordingly. Now, the practice may also want to deduct certain operating expenses. They may be the cost of healthcare. If they're paying on behalf of the physician, it may be the cost of malpractice insurance if they're paying it on behalf of the physician. If the physician is a dermatologist or plastic surgeon or any field that uses some type of third party device or materials, such as injectables, consumables, if it's a dentist, it may be implants. It could be lab fees. Those would be deducted as well at the percentage of what the physician or dentist is being paid. In order for the physician or dentist to understand their payment, this language to be very clear in the agreement so that they have a better understanding of what their payroll check is going to be at the time of payment, if they're being paid every two weeks or monthly or every week, depending upon the payroll practice of the practice itself.

Now, if it's a percentage based on collections, this is typically net collections, and this is very different than production. The big difference is when it's net collection, that means it's only when the practice gets paid. And this generally involves practices that accept more insurances than an out of network provider. Now, what do I mean by that? When it's only for insurances, there generally is a delay of 60 days, 90 days. It could even be longer of when the practice actually receives payment for the services being rendered by the physician as a result. And a lot of that may also be based upon when the practice bills and submits the claim to the insurance carrier for payment. So as a result, there would be a delay of when the practice receives revenue related to the services provided. And so the physician would not receive any money until that money is collected by the practice itself. Now, when it refers to net collection, there must be in the contract, a definition of what is net collections. And again, net collections would be similar to what is deducted on the production side. So it would be refunds, recruitments, possibly operating expenses, any type of outside materials, lab expenses, injectables, consumables, benefits, anything of the like, but the contract must specify this in order for the physician to understand how this works.

Now, when a physician or a dentist first starts, and it's payment on collections, there's gonna be a delay as I had just explained, so many times the contract will have what's called a draw placed into the contract so that the provider is receiving money while they're waiting for that money to come in from the practice. And what the practice will do is they will take that draw, the money received, and they will do a reconciliation on a monthly basis to make sure that the provider is receiving the amounts that they should. So let's discuss this, an example, same example that I just gave that the provider sees a patient in February, 2022, collection of those services are not done until May of 2022, but the physician would need to get paid beforehand. So for every day that the physician works an eight hour shift, the physician is paid a guaranteed payment of $500. When the collection comes in, they would true up how much of that 45% of net collections is equivalent to what the physician was paid the $500 a day. And that would be for any collections that come in as a result of the physician's services directly related for that time period. Now, by having this true up and having a draw and doing it by net collections, it makes the contract language a little bit more difficult. It can tend to be a little bit more confusing, and there's definitely more paperwork that is required in order for the practitioner to understand exactly what they're getting paid for and to make sure that they're getting paid directly. So there's more reports that are provided at the time of the payroll cycle, so that the physician themselves or the dentist can actually look to make sure that the payments they received for the draw and for the percentage once money starts coming in, is correct. And that the practice is paying them the correct number that they deserve based upon the contract terms. And this is why the language and the contract is so very important.

 Now, as I explained, there's a couple of ways for the compensation to get paid. They're all valuable. They all work depending upon the type of practice. And they're all legitimate in the sense that the physician can be paid in any one of those weights. The one thing to keep in mind is to make sure that the language and the contract accurately reflects the way that the physician is going to get paid for the services that they are rendering on behalf of the practice. If the language is unclear, ambiguous, or doesn't have anything to really explain, that's where more confusion comes in, that's where there tends to have more issues. And that's where there's possibility of lawsuits between the parties, because of the lack of understanding of payment.

Now, the second part of the contract that's very important are the benefits. And this is something that every practitioner is concerned over. So the main ones are professional liability insurance or malpractice insurance, a signing bonus, and paid business expenses. So let's go through all of them together. The professional liability insurance, sometimes referred to as PLI, more often referred to as malpractice insurance, is very important for the practitioner. Now, there are two types of insurances. There's an occurrence assurance as well as a claims made insurance. Now what's the difference between the two? And more often than not, the practitioner doesn't understand this. So it's very important that they do in order to understand their responsibility during the course of the agreement, but more importantly, after termination of the agreement.

Now with an occurrence based policy, that means that the policy covers at the time of the occurrence, the time that the treatment is rendered. So let's give an example, let's keep with the same example so that it it's very consistent. Practitioner provides services in February in 2022, in 2023, practitioner decides, they don't wanna be a part of this practice. They give their required notice of resignation, and then they leave. In 2024, the patient treated in 2022 sues the practitioner for alleged malpractice. And obviously the big question is whether they have coverage, 'cause you never want the practitioner to go without coverage.

Now with an occurrence based policy, there will always be coverage because the coverage was at the time the treatment was rendered, which was back in February, 2022. It is unrelated to when a claim may be brought against the practitioner. And for that purpose, an occurrence policy is generally more expensive. And generally employers don't wanna pay for this type of policy. Now, if it's a claims made policy, the claims made policy is exactly what it means. When the claim was made against the practitioner. So in using that example that I just gave, the claim was made it in 2024, if the practitioner did not buy, or the practice on the practitioner's behalf did not buy what's called tail coverage, then there is no coverage and the practitioner would be responsible for all out of pocket expenses for that lawsuit, including any settlement, verdict, legal fees, court costs and expenses, and you never want the practitioner to have this. So in the contract, it must specify the type of malpractice policy, whether it's an occurrence or a claims made. And if it's a claims made, there must be language that talks about tail coverage. Now tail coverage can be very expensive, depending upon the specialty of practitioner and depending upon the loss claims or what's called the prior lawsuits or claims against the practitioner at the time that the tail coverage is being purchased. And generally, tail coverage needs to be purchased within 30 days after termination from the practice, in a lump sum. Now, in my experience, I have had some clients that were responsible for tail coverage, because that was the policy of the practice. And the practitioner had to pay upwards of 50, 60, even $80,000 in order to maintain their malpractice policy coverage for the chance, if there is a malpractice action brought against them after they leave that practice. So it's very important that this language is in there.

Now, when I'm reviewing contracts on behalf of my clients, the goal is always to reduce any type of expenses that my client's going to need after termination, that they're gonna be responsible for. So ideally we would like to get the tail coverage paid by the employer. So this is always a conversation that you wanna have, not just with your client, but also with the opposing counsel, to make sure that everyone is on the same page and that you can reduce and negotiate this as much as possible for your client.

Now, another benefit that a number of employers provide is a signing bonus. Now a signing bonus is generally paid within the first 30 days after the commencement of the agreements in a lump sum, with taxes and withholdings taken out of it on behalf of your client or the practitioner. What you need to know about this language is there are many times where the employer will want the return of the signing bonus either in a lump sum or prorated, if the practitioner leaves prior to the initial term being completed. And that initial term can be one year, two years, three years, sometimes even five years. So it's very important that the language is clear on this. And it's very important that the practitioner understands this, that should they leave, they may need to pay back the signing bonus.

So let's give an example. Provider joins a practice and receives a $15,000 signing bonus within 30 days at the time of commencing employment, the contract is for two years, the language will state that should practitioner leave prior to the completion of the initial term of two years, practitioner will have to pay back a prorated amount of the unworked months within 30 days after termination. So how would that work? You would take the 15,000, divide by 24 months, to find out how much it would be per month. And if your client left with eight months left of the contract, then he would, or she would owe eight times the amount per month. And again, it's important for the practitioner to know this, because this will be a responsibility for them at the time of termination, which we will also get into later.

Now, what other benefits would you like your client have during the course of their employment with the practice? Now, this can range anywhere from the standard ones of health insurance coverage, dental and vision coverage, life insurance, 401k citing bonus is obviously a benefits. Maybe there moving expenses. If the client is moving across the country for a position, they may wanna have those moving expenses covered, something else that you would wanna talk to the practice about. You also want to make sure that there's language in there with respect to their license to practice their DEA. So their ability to prescribe medication, they're continuing education, possibly professional organizations, and all of these are out of pocket expenses that can really add up each contract year on behalf of your client.

So you wanna make sure that they're the language in the contract that covers these type of business expenses, or to at least have a conversation with both your client and the opposing counsel, to see whether these expenses can be covered. And for what amount. There are many times where the contract will say that the expenses are covered, but the practice will only provide a maximum allowance of $3,000 per contract year to cover those expenses. And your client may be reimbursed once they show proof of payments. And that proof of payment is received by the practice or the practice may pay for it directly by themselves. And that language new needs to be clear so that everyone understands exactly what happens with respect to those business expenses. So overall, when you're looking at the contract as it relates to benefits, the goal is try to get as much benefits as you can on behalf of the practitioner. And that would include, as I indicated earlier, the malpractice, signing bonus payment of license fees, or any out of pocket fees that your client may have in order to maintain their license to practice, as well as moving expenses, health insurance, disability, life insurance, 401k. These are all questions that you wanna make sure are answered within the confines of the contract.

Now, the next section of the contract that's very important is termination. Now, obviously when a practitioner is looking to join a practice, they're not thinking of leaving the practice when they haven't already started. There are many times where they're not really paying attention to the language, and they're not as concerned about it because they're very excited to be joining the practice. However, it is very important that they do understand, and that this section is very clear because should something go wrong and they're terminated either with or without cause, they need to understand what their rights are as it relates to termination. So let's go through it. Termination without cause is basically that the practice or the physician practitioner, can terminate this the contract for any reason or no reason at all, by providing a certain number of days notice in writing.

So for instance, the contract may state that this contract may be terminated without cause by either party, by providing 90 days written notice to the other party. Now, what that means is that once that 90 day notice is provided to the other party, so if it's your client that wants to terminate without cause, they provide written notice to the employer and then they are working for the next 90 days for the employer until their end date. Now, there are many times where an employer may decide, thank you for giving us the 90 days notice, but we no longer want you to service our patients, and we are accepting your resignation effective immediately. Please leave. So now the practitioner gave their required 90 day notice, but now they are no longer working for that 90 days. And the practice has every right to do this. However, a contract should have language that indicates what happens in that circumstance that the practice terminates the physician at the time that they receive their notice of resignation. Is the practice liable to pay for that 90 day time period as if the physician was employed or are they allowed to stop paying them their salary? And how does this all work? And again, the contract language is very important on this. And let's discuss this via an example.

So I had a client who had joined a practice, decided to leave after a number of years to join another practice. They provided their required 90 day notice. And the employer ended up making that notice effective immediately. Actually I think it was within two weeks, and then the practitioner was no longer working and they were waiting a good over two months before they can start at the new job because they had to provide the 90 day notice that they couldn't start the new job until that notice period had ended. The prior employer refused to pay the practitioner the salary during that notice period, even though she provided the correct amount of time and the employer decided on their own to terminate it immediately, there was nothing in the contract that indicated that the employer would not cover the compensation during that notice period, should they decide to terminate the physician immediately after receiving resignation. And as a result, the practice owed the practitioner the amount of money during that notice period. And as a result, they settled with the practitioner and the practitioner was provided a lump sum of money. So this language is very important for the practitioner. so that they understand what their rights are, should that scenario happen. Now, another way that a practitioner may be terminated from an employer is with cause, and with cause generally includes information or reasons that go directly to the ability to practice providing services, whether it's for medicine, dentistry or any other healthcare field, and what are some of those reasons, those reasons include loss of a license, loss of their DEA ability to prescribe medication. They can no longer be covered under malpractice. They've committed a crime, they are abusing drugs or alcohol use. Those are some of the, of main ones.

Then there are some that are a little bit more subjective and by subjective, I mean that the language indicates that it's at the sole discretion of the employer, of whether they can terminate with cause. And those may be that the practitioner has violated the office policies of the employer or the practitioner is not providing care to the standards of the employer, or perhaps it's something along the lines of, the practitioner is behaving in a way that puts the patient, or other office staff at risk. Now it's subjective in the sense of what's considered a violation of the policy and what policy would that be, or how is the practitioner behaving that puts other people at risk. And so for those subjective reasons, you would wanna have information that indicates that the practitioner would receive a written notice describing the behavior, allowing the practitioner to cure that behavior within a certain time period. And should that time period expire and the behavior has not been cured, then the practice can terminate.

Now, the reason you would want this in the contract is so one, the practitioner is put on notice, so that they are aware of what their supposed behavior is. They now have a time period that they can curate should they wanna continue in the practice or maybe they realize, huh, I'm actually behaving this way because I realize I'm very unhappy here and I really wanna go somewhere else. So now they can start looking, understanding that the practice is looking to terminate them. And so no matter how you look at it, it's a positive on behalf of the practitioner because it was them time to figure out what they wanna do and for them to act accordingly.

So overall, when you're dealing with termination, you want the language to be very clear when it comes to with or without cause. So that should that occurrence happen during the course of the agreement for the practitioner, that they will understand what their rights are, what they need to do to resign from their position, what the employer is allowed to do, and whether the employer would be in breach if they didn't give them enough notice, if they fired them with cause without providing the cure period as stated in the contract and what rights the practitioner has as a result.

Now, the next area, and probably one of the most important areas of the contract is with respect to restrictive covenants. Now there are four different covenants and I'm the gonna go into detail with examples for each one. The first is the non-compete. The second is non-solicitation. The third is non-disclosure and the fourth is non interference. So let's go through them. The non-compete, so the non-compete is a restriction that prevents the practitioner from providing services within a certain time period after termination, within a certain geographical area. Now in New York, there is a test to see where the restriction is reasonable and it's used in order to determine it.

And it's a three prong test. And so the test is one that there must be a valid business reason to have the restriction. This is the easiest prong to be met because an employer can always say, we don't want the practitioner are practicing too close because patients will go, we'll lose revenue and we'll be in competition directly with the employer. That's enough of a business interest. The second scope is that it's reasonable in its scope. Now this generally means the time period, as well as the geographical restriction. Now, depending upon where the restriction is, if you are in an urban area or a suburban area, will depend on the reasonableness and we'll get into that in a little bit. And then the third prong is that it must not prevent the employee being able to earn a living as a result of the restriction. So basically the practitioner has to be in a position to be able to still find a job, even if the restriction is there. And that's very important on behalf of your client. So let's talk about this and let's do this more through examples, 'cause that's gonna be the easiest way to understand this. When you have the non-compete, you wanna make sure that the time period that it lasts after termination does not exceed two years on average, it's generally one year.

However, there are some in employers because of the length of the original initial term of the contract. So let's say the initial term is three years. They wanna try to get the non-compete to be three years and that could be considered unreasonable. So whether it's one or two years is generally within a reasonable time period. And remember, that's only from the official date of termination and for that time period thereafter, now, what's more troubling is the actual geographical restriction. So again, let's discuss this because it's very important and you wanna make sure that the language is easy to understand and you wanna make sure that it doesn't prevent your client from providing services after termination. So let's say that you are in a city, your client is providing services within city. We'll use Manhattan 'cause that's the easiest. Because of the dense of Manhattan or any city, the restriction is generally very small. Now you could use a mile, but generally you use blocks, especially in Manhattan. So it could be 20 blocks north and south and three or four avenues east to west. And again, you wanna make sure that it's clear within the contract.

Now I had a client who was joining a practice in Grammarcy and then decided that she didn't wanna continue that practice in providing services. And she found a practice on the upper west side. Now within the terms of the contract, it had said the 20 blocks north and south and the three to four avenues east and west, but it also had a satellite office in Hackensack, New Jersey and Hackensack, New Jersey, for those of you who don't know, is very close to the upper west side of Manhattan and there is a five mile radius from Hackensack. Now the client was never working in Hackensack, had no interest in Hackensack, didn't even have a New Jersey license, but she decided to keep it in because she didn't care about it despite our discussions regarding it. So when she decided to leave and she found what she thought to be the best practice for her to join afterwards, which was on the upper west side, she wast allowed to take it because of that five mile radius from Hackensack, New Jersey. Now, if that was removed from the contract, there would not have been any issue because the other 20 block radius was nowhere near the upper west side, as it was in lower Manhattan.

So how would you have prevented that from happening? Especially if the practice didn't want to remove it. So there are many times in the contract where there will be language in the non-compete that states the non-compete will last for one year post termination and will be for any practice location existing at the time of termination. And it will be a one mile radius from each practice location at that time. Now, when the client first joins, let's say for example, that there's only one practice and the client is with this employer for five years, during those five years because of the services being provided by your client, as well as other physicians in the practice, the employer has now opened up three different locations, but your client is only working at one location for that entire five years. So the clause that indicates that the non-compete will apply to all practice locations at the time of termination seems a little unfair if your client had no connection with those other offices. And even if the non-compete is one mile from each of those offices, it can severely deter and be a detriment for your client to be able to find a job after termination, because it's now extended the geographical restriction for that client. So you wanna make sure that the language is clear, that it should really be based upon the practice locations of where the client working at, at the time of termination or for one year prior to termination or where the client has provided the majority of their services for one year prior to termination. This will restrict the area of the geographical restriction. It will also have help the client understand exactly where they will be able to look for a job once they leave or once they're terminated. And it will decrease the area.

Now, when you're dealing with healthcare systems such as NYU, Northwell, any of the major ones in New Jersey, you know, it really doesn't matter what they are. A lot of times the hospital systems will directly list that if the contract is terminated by either party, whether fore cause or without cause, the physician cannot work for any competitor of that hospital and then will list the hospitals that they cannot work at. Sometimes it's every single competitor and depending upon the type of services that your client provides, in other words, if they are a surgeon and they cannot perform services anywhere but a hospital setting and they're now precluded from any hospital, you really wanna look at that language in order to protect the client and the client needs to understand this before they sign.

Now, there are ways around this. So perhaps they can't be a direct employer of a competitor of the hospital system, but they may still be allowed to have privileges if they are employed by a private practice who provide services within a hospital, but they're not employed by the hospital. And again, this is where the language becomes very specific. Now, just to throw some other examples. I had a client who was joining a practice up in Poughkeepsie and the non-compete listed the two counties surrounding Poughkeepsie. And I'm forgetting the names of the counties, but they were each over 600 square miles and my client was moving and buying a house and putting kids in school and starting a new life up there. Now, if she had signed the contract with that restriction and something happened, she would've had to move significantly, to a completely different area of New York state in order to continue to provide services and in order to on a living, obviously unreasonable. Through negotiation, we were able to reduce that to 15 miles from the actual practice location that she was working at, which is much better. And this is where the language comes into play. And this is where you can see the reasonableness versus the unreasonableness.

Now, many times the employer is going to stick to their guns when it comes to this, but you have to make sure that the client understands or that the client understands exactly what it is that this is and what will happen should they decide to resign or should they be terminated from their employment. Now, when you're working with a client who's out in the suburbs, things are more distant apart from each other than in a city, and so those radius' or that geographical restriction tends to be a lot larger than it would be in the city. And again, this is something that you wanna discuss with your client to sure. Now, non-solicitation. So the non-solicitation is that once the practitioner leaves the practice, they cannot solicit directly or indirectly, any patients a of the practice by any ways, in order to provide services to that patient or to influence the patient from no longer going to their employer for services. Now directly basically covers direct communication through phone calls, text messages, emails, the practitioner won't be able to send any type of correspondence that goes directly to a patient of record of their employer. Now, this generally is not just after, but also during, you can't dissuade a patient from continuing care with the employer at any point in time. And again, there's generally that restriction of one to two years.

Now, the indirect concept is hiring someone on the practitioner's behalf, to do exactly what the practitioner is not allowed to do. In other words, to communicate with an existing patient of the practice. Now, what the practitioner can do is they can advertise or market their services to the public as a whole, that may reach the actual patients, so long as it's not directed solely to those patients of the practice. So they can update their social media. They can update their Google, they can have a website, they can join a website of another practice. All of that is fine, so long as it's to the public as a whole. Now the non interference is very similar with the exception that it is to third parties. So these are business associates of the practice. They could be employees, independent contractors, referral sources, labs, any third party business or third party individual that the practice relies on in order to conduct and provide their services to the patients. So the non interference runs the same way as the non-solicitation, that the practitioner when they leave, cannot influence or interfere in the business relationship of any third party, that the practice has.

So for an example, you cannot say to a third party or to a prior employee, who's still working for your prior employer. You can't say to them, listen, I'm at this new job. I think you'd really like it there. And I think you should apply and we should continue working together. Obviously you can't do that. Now, does this mean that an employee can't apply for a position where you happen to work or where the practitioner happens to work after termination? Of course not, so long as they weren't influenced to do it by the practitioner themselves. Now, the non-solicitation and the non interference are more difficult to prove because the employer would have to show actual proof that the prior practitioner of their practice physically spoke to or reached out to a patient or a third party in order to get them to stop care or to stop working with them. Now, if there is proof and the practice can find it, then they can obviously go after the practitioner for a breach of the non-solicitation or the non interference.

Now the last part of the restrictive covenant is nondisclosure. And this is typically about confidentiality. Now this isn't about HIPAA, which I'm gonna talk to you in a second about, this is about information, about how the practice works that's not of public record, so this can be their marketing schemes, their fee schedule, salaries, the way that they can do up to their business. Anything about how they practice that is not public, that's not public to the general public, or is not really part of industry standard. You cannot as a practitioner, take that information and use it for your own benefit in any way, or disclose it to a third party to use for their benefit in any way. So let's see an example of this. I was working with a client who had an employee who decided that they can open up their own practice because they saw the way that the employer ran the practice, their marketing, their advertising, and they figured they can do the same thing. And they left the practice, opened up their own practice and did exactly the same thing. They used the same type of marketing, the same type of advertising, the same fee structure, even hired the same type of individuals to provide the same type of services. To no surprise, the employer ended up suing for breach of the nondisclosure clause that was in the agreement that this prior employee had signed. And the employer won because it was shown that the employee used this confidential information for their own benefit to start their own practice and disclosed it to other parties. So this is something that is in every agreement that the practitioner and must need to understand and to know that they cannot do once they leave the practice or at any time during the employment that they have with the employer. Now, overall, just to recap, restrictive covenants are very important and can be very detrimental to the practitioner after they leave the practice, if they're not explained and written correctly.

So remember that you have the non-compete, you wanna make sure that it is reasonable in its duration, which is one to two years. And it's reasonable in its geographical restriction, depending upon if it's in a city, depending if it's in a suburb or if the employee practitioner works for our hospital system. The non-solicitation and non interference is with respect to patients, referral sources, employees, third party business associates. You wanna make sure that the practitioner understands that they cannot interfere or solicit the patient or the third parties in any way during or after termination in order to prevent their employer from having the revenue from the patients or the associations with the third parties. And the nondisclosure is just about the confidentiality of the practice and to make sure that the practitioner does not disclose it to any third parties or use it for their own benefit in any way.

Now, sometimes the contract will have language with respect to future growth. And there are many practitioners that join practices because they wanna become a partner or a shareholder or a member, depending upon the type of entity that the employer may be after committing to a certain number of years, now, as a whole, this language is not gonna be that specific as to what the buy in cost may be, how it works, whether they become class a or class B members, what their rights will be as a shareholder should they join. That will all be in a subsequent agreement if the parties agree to go into partnership type of role or shareholder or member, and the details will be in that, which will end up being the priority over this employment agreement. And the employment agreement will most likely become null and void, but what's in this employment agreement about it is indicating how many years that the practitioner will have to be employed before that there can be any discussions with respect to partnership and that the parties will enter into good faith discussions about it at that particular time. And if there is an agreement, a separate agreement will take precedence over this agreement. It is very rare that an employer will put in any specific information about this.

Okay, let's talk a little bit about HIPAA. HIPAA, which stands for health insurance portability and accountability act. As everyone knows, HIPAA protects PHI, which is protected health information. If you work in a medical practice or a dental practice or any type of healthcare practice, there is an automatic PHI because you are dealing with patients and patient's information and medical or dental diagnosis. Now it is important that the contract has language indicating that practice is HIPAA compliant, and that they have information about records, who is in control and ownership of records and what rights the practitioner has to those records during and after employment. Now, typically, the practitioner's not gonna have rights to take any of the records. Those records belong to the employer as they are patients of the practice. They're not patients of the individual employees or the individual practitioners. So what type of language do you wanna have in there? There should be language that indicates that the practitioner upon termination will have reasonable access to records post termination if there is a claim against them, either by a prior patient or by the state, if they have recertification needs because of their boards, if there is a government audit or investigation by a third party, which could be an insurance carrier, they need to have access. And so generally, there will be language in the agreement that indicates that there's access for the practitioner for these records, for those type of purposes or for other legal purposes pursuant to federal state and city laws.

Now, this is important because the practitioner needs to know that should they need those records, they will be able to get those records from the practice. Now, just to be clear, although most practitioners understand what HIPAA is, HIPAA controls the information, as I said before, of the protective health information. Now that includes patient's names, addresses, emails, telephone numbers, medical diagnosis, their photo, their image, it also controls license plate numbers. It could also be chart numbers. So everything, when it relates to a healthcare practice is considered PHI. Now, as I said before, practitioners pretty much know this, but they need to understand their rights when it comes to records and getting that after termination. Now, the last part of this is with respect to billing. Now, billing is generally always done by the practice themselves. What the contract may state is that the practitioner will need to enter the codes or the coding in order for the practice to bill. Now, if the practitioner is entering the coding, they can be held liable if they enter wrong coding, the practice bills for that coding and the insurance companies come back to say, we need to have a return of certain money in patients because on review of the records that coding was incorrect and you were paid incorrectly. Now you wanted to be clear in the contract who is responsible for the coding. Who's responsible for submitting the claims and who will indemnify each other as a result. And you wanna speak to your client about this because if the client doesn't know coding or is unaware of the codes, and these are the CPT codes for certain procedures, then they may be at a higher risk for liability should they end up coding wrong. And the practice is doesn't review the notes and just takes the coding from the practitioner directly. So it's very important to have this conversation with the practitioner to make sure that they understand and to make sure that there isn't an issue because then the language may need to get changed accordingly. The language will also state more often than not, that anything received for the services provided the practitioner during the course of the agreement belongs solely to the employer, whether the funds are provided to the practitioner directly. So sometimes a patient may pay the practitioner as opposed to the front desk. Maybe an insurance check is in the name of the practitioner as opposed to the employer, any money that is received as a result of the services belong to the employer. Again, this is something that needs to be discussed with the practitioner so that they understand, so that there won't be an issue of the possible maybe even unintentional embezzlement of money, because they were unaware of how it works.

So again, the language is very important now to sum up, having a written agreement is very important on behalf of the practitioner for them to understand their rights when it comes to these contracts and their employment, what they can and cannot do, how their services will be used, how the payment works, what their benefits are, how they will get paid for their services and what will happen after termination. And when you put them all together, that's what makes these contracts a good solid, 10 to 20 pages. Now reviewing these with the practitioner is important so that they understand. And there are many times, especially even in my experience, that after reviewing these contracts and having the discussion with the clients and negotiating with the opposing council, the clients sometimes do decide to walk away because the terms are too risky and the employer's not willing to change things and they can only, and by they, I mean the practitioner, can only make this determination if they understand the terms of the contract. And that's why it's very important.

I thank you all for listening and for taking the time to learn about this, again, my name is Stephanie Rodin of Rodin Legal PC. Feel free to email me with any questions that you may have at [email protected] I'm always happy to help. And I hope that everyone thought this was useful and informative. Thank you.


Presenter(s)

Stephanie Rodin
Founder
Rodin Legal, P.C.

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