Put It in Writing: Hiring a physician extender involves more than a handshake

Physician extenders, commonly referred to as mid-level providers or practitioners, often offer financial profitability for the practice as well as efficiency, improved quality of care, enhanced flexibility for physicians and greater patient satisfaction. When you hire an extender, it’s important to go beyond a handshake and clearly define the terms of the relationship in a contract. Below are some of the key issues that should be addressed in a mid-level provider’s employment agreement.

Contractor vs. Employee

Physician extenders can either be hired as independent contractors or as employees. In an employer-employee relationship, the employer generally has more control over the duties of the employee than over the duties performed by an independent contractor. While there are additional pros and cons to consider, nurse practitioners and physician assistants are more frequently hired as employees.

If the mid-level practitioner is hired as an independent contractor, you should include provisions that include the following concepts:

• The parties agree that the agreement is not intended to create an employer-employee relationship, partnership, joint venture or any other relationship between the parties, other than that of independent contractors.
• The extender will not be entitled to perks and other benefits that may otherwise be available to your employees (e.g., health insurance, pension, 401(k) plan).

Compensation

Prior to determining the proposed salary amount, you should estimate the amount of revenue the physician extender is expected to generate for your practice, along with the associated cost of employment. Remember, the associated cost of employment is not just the individual’s salary, but also the additional perks (e.g., healthcare insurance premiums, professional liability insurance premiums, continuing education expenses, licensure fees). In my experience, physicians generally aim to net a profit of 15 to 20 percent of the mid-level provider’s services.

If you are reluctant to employ an extender at a higher salary up front, you may want to consider tiering compensation based on length of service. The nurse practitioner, for example, would receive $X/month for the first six months, $X+/month for the second six months, $X++/month for the second year, and so on. Another option is to adjust compensation based on satisfactory performance for which a mechanism or framework for review should be established.

Restrictive Covenants

When a mid-level practitioner leaves your practice, some of your patients may follow the mid-level to his or her next place of employment. This risk is substantially less likely with a mid-level than with a physician, however, and can be minimized by including restrictive covenants. A non-competition clause, for example, prohibits a physician extender from practicing within a specified geographic area for a stated period of time. These clauses, which are governed by state law, are typically enforceable as long as they are reasonable in time and geographic scope. A non-solicitation clause prohibits a mid-level provider from soliciting your patients, employees and independent contractors, among others, to leave your practice. They may also prohibit the mid-level provider from soliciting your referral sources. You may also consider including a general restriction that prohibits the extender from interfering with or disrupting any of your professional, contractual or business relationships.

Termination

Although the termination clause is often found at the end of the agreement, it is one of the most important provisions for both parties. Generally, employment agreements provide a way for either party to terminate the contract “without cause” by providing the other party with X days prior written notice. However, you may consider including a clause that gives the practice the option to pay the mid-level provider his or her salary in lieu of providing advance notice.

In addition to termination “without cause,” employment agreements will almost always provide a series of grounds upon which the parties can terminate the contract “with cause.” Here is a list of some of the grounds for which a practice can terminate the contract “with cause”:

• Reasonable determination that the mid-level’s patient care services create a substantial likelihood of injury or damage to patient health or are below the standard of care in the community.
• For any material failure to comply with a professional standard (e.g., federal and state laws and regulations, state medical board rules).
• Conviction of, plea of guilty to or plea of no contest to any felony or any crime involving moral turpitude.
• Exclusion from participation in a federal health care program (e.g., Medicare, Medicaid).
• Suspension, termination or revocation of the licensure and certification required to perform the professional services.
• Performance of duties under the influence of alcohol or illegal drugs.
• Any material breach of the agreement.

Steven M. Harris, Esq., is a nationally recognized health care attorney and a member of the law firm McDonald Hopkins, LLC. Steve may be reached at sharris@mcdonaldhopkins.com.