Hiring a physician is a significant decision for a medical practice, hospital, or healthcare organization. While compensation is often one of the first issues discussed during negotiations, a physician or nurse practitioner employment agreement addresses much more than salary.
Physician and nurse practitioner employment relationships exist at the intersection of employment law, healthcare regulation, reimbursement, medical staff requirements, and business operations. An agreement that leaves important issues unclear can lead to disputes over compensation, scheduling, termination, patient relationships, restrictive covenants, or malpractice coverage.
For physicians and nurse practitioners, careful contract review and negotiation can establish clear expectations before the physician or nurse practitioner begins practicing and help reduce legal and operational risk later.
Here are 10 terms physicians and nurse practitioners should carefully review when analyzing or negotiating an employment agreement.
1. Physician Compensation
Compensation is usually one of the most heavily negotiated provisions of a physician’s or nurse practitioner’s employment agreement.
Depending on the organization and specialty, compensation may include:
- Base salary
- Productivity-based compensation
- Work Relative Value Unit (wRVU) incentives
- Quality incentives
- Administrative or medical director compensation
- Signing bonuses
- Retention bonuses
- Call coverage compensation
The agreement should clearly define how compensation will be calculated, when incentives will be paid, and what happens to earned but unpaid compensation when employment ends.
Physician and nurse practitioner compensation also raises healthcare regulatory considerations that do not exist in many ordinary employment contracts.
The federal physician self-referral law, commonly known as the Stark Law, contains requirements governing certain financial relationships between physicians and entities to which they refer designated health services. CMS regulations address concepts including fair market value, commercial reasonableness, and whether compensation takes into account the volume or value of referrals or other business generated between the parties.
The federal Anti-Kickback Statute also applies to physician and nurse practitioner employment arrangements. The HHS Office of Inspector General notes that fair market value is an important consideration, but compensation being consistent with fair market value does not automatically eliminate Anti-Kickback Statute risk; the facts, circumstances, and intent behind an arrangement matter.
For that reason, physician and nurse practitioner compensation should be evaluated from both an employment and healthcare compliance perspective.
2. Duties and Scope of Employment
An employment agreement should clearly establish the duties that an employer expects from a physician or nurse practitioner.
The agreement should address, where applicable, the following subjects:
- Clinical responsibilities
- Office locations
- Hospital coverage
- Administrative duties
- Supervisory responsibilities
- Teaching or research obligations
- Medical director responsibilities
- Participation in administrative activities, such as serving on hospital committees
- Documentation and timeliness of completing medical record requirements
- Compliance with employer policies
- Productivity expectations
Defining responsibilities at the beginning of the relationship can reduce disagreements about whether certain duties fall within the physician’s or nurse practitioner’s employment obligations.
Providers should also consider how much flexibility they need to modify responsibilities or practice locations as organizational needs change.
3. Work Schedule and Call Coverage
Call responsibilities can become a major source of disagreement when they are not clearly addressed in the employment agreement.
The contract should consider questions such as:
- How many clinical hours are expected?
- Is there a minimum number of patient-contact hours?
- How frequently will the physician be on call?
- Will weekend and holiday coverage be required?
- Is call compensation included in the provider’s regular compensation?
- What happens if staffing changes significantly?
- Can call requirements increase or decrease without the provider’s input or agreement?
For hospitals and larger medical groups, employees should also consider how call obligations are determined based on coverage needs and the number of providers answering call.
The more clearly the expectations are established before employment begins, the less room there is for conflict later.
4. Term and Renewal
Physician and nurse practitioner employment agreements frequently establish an initial term of employment followed by renewal periods.
Employees should determine whether the agreement:
- Automatically renews
- Requires written notice for renewal
- Ends on a specified date
- Allows either party to elect not to renew
The renewal provision should also work together with the agreement’s termination provisions.
An agreement that automatically renews, for example, should clearly state how much notice either party must provide if it does not intend to continue the relationship.
5. Termination Provisions
Healthcare employers should pay particularly close attention to how a physician employment agreement may be terminated.
Most agreements distinguish between termination for cause and termination without cause.
Events that may constitute cause could include circumstances involving:
- Loss or restriction of a medical license
- Exclusion from Medicare or Medicaid
- Loss of required medical staff privileges
- Failure to maintain required professional credentials
- Material violation of employer policies
- Certain criminal conduct
- Fraud or dishonesty
- Material breach of the agreement and failure to cure
- Conduct affecting patient safety
The agreement should also identify whether the physician or nurse practitioner has an opportunity to cure certain breaches before termination.
For termination without cause, the parties typically establish a required notice period. The parties should consider how much notice is necessary to transition patient care and maintain continuity of operations.
The consequences of termination should also be addressed. For example, what happens to bonuses, benefits, outstanding collections, malpractice coverage, and restrictive covenants?
These questions are much easier to resolve in the contract than after the employment relationship has deteriorated.
6. Professional Liability Insurance and Tail Coverage
Malpractice insurance deserves its own section in a physician or nurse practitioner employment agreement.
The agreement should identify:
- Who provides malpractice insurance
- The required policy limits
- Whether coverage is occurrence-based or claims-made
- Who pays the premiums
- What happens when employment terminates
If the physician is covered under a claims-made policy, tail coverage can become particularly important because claims may arise after the physician has left the organization.
The employment agreement should clearly identify whether and under what circumstances the employer or physician is responsible for purchasing tail coverage when employment ends.
Because tail coverage can represent a substantial financial obligation, leaving this issue unresolved can create significant disputes at termination.
7. Restrictive Covenants and Non-Solicitation Terms
Physician and nurse practitioner employment agreements may contain restrictive provisions designed to protect the employer after the employment relationship ends.
These provisions can include:
- Non-compete agreements
- Patient non-solicitation provisions
- Employee non-solicitation provisions
- Confidentiality requirements
- Restrictions involving interfering with existing service agreements with healthcare providers or institutions
The enforceability of a non-compete agreement depends largely on State law and the particular language and circumstances of the restriction.
Federal policy surrounding non-competes has also changed in recent years. The FTC’s broad Noncompete Rule is currently not in effect and is not enforceable, following federal court litigation and the FTC’s later steps to dismiss its appeal. However, the FTC has continued to pursue certain non-compete arrangements through individual enforcement actions.
The geographic area, duration, activities restricted, legitimate business interests being protected, and applicable state law should all be considered when analyzing these provisions.
8. Benefits, Expenses, and Professional Development
Physician and nurse practitioner compensation is not limited to salary and productivity bonuses.
An employment agreement should also address benefits and professional expenses when applicable, including:
- Health insurance
- Retirement contributions
- Paid time off
- Continuing medical education
- CME expenses
- Professional society memberships
- Medical or nursing license fees
- DEA registration
- Board certification expenses
- Cell phone or technology allowances
- Relocation expenses
Physicians and nurse practitioners should also determine whether repayment obligations apply to certain benefits upon termination and, if so, under what circumstances.
For example, if an employer provides a substantial signing bonus or relocation payment and the physician leaves after only a few months, does the physician have to repay some or all of that amount?
If repayment is required, the agreement should clearly establish how the obligation is calculated.
9. Medical Records, Patients, and Confidential Information
Physicians and nurse practitioners may develop strong relationships with patients during their employment, but healthcare organizations also have obligations involving medical records, privacy, continuity of care, and business information.
Physician and nurse practitioner employment agreements should clearly address rights and responsibilities involving:
- Patient medical records
- Access to records after termination
- HIPAA-protected information
- Proprietary business information
- Patient lists
- Billing information
- Employer systems and technology
- Return of property following termination
The agreement may also need to address how patients are informed when a physician leaves the practice and how ongoing patient care will be transitioned.
These provisions often consider applicable privacy laws, professional obligations, medical-record requirements, and the organization’s policies.
10. Regulatory Compliance
A physician or nurse practitioner employment agreement should not be viewed as an ordinary employment contract with a medical job description attached.
Healthcare employment arrangements can implicate multiple regulatory frameworks.
Depending on the arrangement, the parties may need to consider:
- Stark Law
- Anti-Kickback Statute
- False Claims Act
- Medicare and Medicaid requirements
- Billing and coding compliance
- HIPAA and patient privacy
- Licensing requirements
- Medical staff bylaws
- Credentialing requirements
- Professional standards
The HHS Office of Inspector General specifically cautions physicians that financial relationships with hospitals and other healthcare organizations can create fraud-and-abuse concerns when compensation or other benefits are intended to influence referrals. The OIG recognizes that hospitals may compensate employed physicians for legitimate services, but financial relationships should be structured appropriately.
Prospective employees should consider these regulatory requirements before the agreement is signed rather than trying to correct a problematic compensation or employment structure later.
Why Physician and Nurse Practitioner Employment Agreements Require Careful Planning
The best time to resolve a potential employment dispute is before one exists.
A carefully drafted employment agreement gives both the healthcare organization and the physician or nurse practitioner a clear understanding of compensation, expectations, responsibilities, and what will happen if the relationship ends.
For healthcare employees, contract review should also extend beyond basic employment law.
A provision that appears reasonable from a traditional employment perspective may have additional implications under healthcare fraud-and-abuse laws, reimbursement requirements, medical staff rules, or professional licensing standards.
Analyzing and negotiating terms of a physician or nurse practitioner employment agreement is intended to establish clear expectations and is an important part of the ongoing employment relationship.
Physician and Nurse Practitioner Employment Agreement Counsel for Mississippi Healthcare Providers
Gilchrist Donnell advises healthcare providers throughout Mississippi and beyond on labor and employment issues unique to the healthcare industry. The firm’s labor and employment practice includes physician employment agreements, executive contracts, compensation arrangements, restrictive covenants, employment policies, workplace investigations, and employment disputes.
Because physician contracts often involve both traditional employment law and complex healthcare regulatory requirements, Gilchrist Donnell provides integrated guidance designed to address the full legal and operational picture.
Whether your prospective employer is hiring a new nurse practitioner or physician, revising an existing employment agreement, restructuring compensation, or preparing for an employee’s departure, careful legal review can help identify potential issues before they become disputes.
Contact Gilchrist Donnell to discuss physician and nurse practitioner employment agreements or other labor and employment matters affecting your healthcare organization.
This article is provided for general informational purposes only and does not constitute legal advice. The enforceability and regulatory implications of physician employment agreements depend on the specific facts, contract terms, and applicable law.
