Contract Enforcement Lawyers Serving Physicians and Other Healthcare Professionals

Can a Physician Legally Be Employed?

healthcare-employment-agreementsThe law regarding employment of physicians is widely misunderstood by health care practitioners and medical groups, and by many attorneys, as well.  Many people believe that a physician can be employed to provide medical care in a hospital or clinic, or even by a private "boutique" type of business such as a weight-loss center, physical therapy practice, or spa. However, such employments are illegal under many states' laws prohibiting the “corporate practice of medicine.”  In addition, state and federal laws prohibit many types of business ventures and investments by physicians under anti-kickback statutes and health care financing regulations.

The Corporate Practice of Medicine is Generally Prohibited

One of the most significant hurdles to the employment of a physician is the statutory prohibition against corporate practice of medicine.  In California and many other states, not even private hospitals can legally employ physicians to provide medical care.  Most states have laws dating back a century or more, allowing physicians to practice in groups only as an unincorporated partnership or as a professional medical corporation whose shareholders and directors must exclusively (or by majority) be physicians.  These laws were intended to protect the public from quackery, profit-motivated care and to maintain the confidential and the special nature of the physician-patient relationship.  However, in the modern era they may be anachronistic, preventing desirable methods of operating in a competitive and highly-regulated medical marketplace.

A few exceptions to these laws may be found, such as one in California allowing community clinics to employ physicians if they meet certain strict requirements related to their non-profit status.  Recently, many states' laws have expanded to allow other kinds of physician practice organizations to be formed, such as limited liability companies (LLCs) or limited liability partnerships (LLPs), but even these new types of entities are subject to the rule that they must be owned and/or controlled by licensed physicians.  Independent contractual arrangements whereby a hospital, a hospital district, or a managed care organization (MCO) provides compensation to physicians, often as an incentive to bring them into the community where the needs of the population are being under-served, may also be structured in such a way as to avoid violating the corporate practice laws.  Exceptions also exist in the law to allow HMOs and other MCOs to employ physicians under certain types of corporate structures.

Physicians Contracting with Professional Corporations Must Protect Their Rights

Assuming that an employment arrangement meets these complex legal requirements, a physician entering into either an employment contract or an independent contract must exercise caution.  Issues which are not considered important when the employment begins often prove to be the source of frustration and litigation later on, particularly when new physicians are brought into the practice, changes occur in the marketplace, or the relationship ends.  Many physicians and medical groups use contracts borrowed from others, sometimes even from non-medical employments, assuming that the basic provisions are suitable for their purposes.  Believing that they are saving time and money by not consulting a health lawyer before signing such documents, people often find later that the costs of resolving legal problems resulting from the use of these borrowed contracts far outstrip the costs of advance planning.  Some of the issues which a physician should consider, and which may be specifically addressed in an employment or independent contract arrangement, include:

  • Whether the parties are free to terminate the contract at any time without cause, and if so, whether any such termination must be in good faith;
  • Whether the contract may be terminated by the employer for cause; and, if so, what rights the physician has to oppose such a termination;
  • Whether the group will conduct peer review activities, and the potential ramifications of any such activity on the physician s reputation and right to practice;
  • Whether the group will enter into third-party payor contracts which involve peer review, also raising significant issues of the physician's professional rights;
  • Who maintains control over access to patient records, both during the employment and after the contractual arrangement has ended;
  • Whether the physician has the right to pursue other practice opportunities, activities or investments during the employment;
  • Professional liability issues, including liability for the negligence or malfeasance of the other party to the contract; and
  • Effect of non-compete clauses, trade secrets provisions and other aspects of property rights with respect to patient relationships.

Of course, this list is not exhaustive; there are numerous other issues which may need to be addressed before a contract is signed, or which may arise during or after the period of the employment.  Physicians who fail to anticipate problems and protect their rights may risk substantial economic and professional injury.

How Our San Francisco Bay Area California Healthcare Contract Dispute Lawyers Can Help

At the Law Firm of Marvin Firestone, MD•JD, & Associates, LLP, our San Francisco, Bay Area, California lawyers create employment contracts and independent contractor agreements on behalf of medical groups and health care practitioners.  We also review proposed contracts, draft appropriate modifications or additional provisions, and provide legal opinions which may be relied upon by our client in determining whether or not to proceed with a contract that has been proposed.  In circumstances where a dispute or legal problem has already arisen with respect to an employment or independent contract, we offer representation and counsel to aid in reaching a negotiated settlement or dispute resolution, or, when necessary, in protecting the client's rights through litigation.

Contact Our Law Firm Today to Schedule a Free Consultation

Fill out our online form or call 1-800-LAW-MDJD (1-800-529-6353) to schedule a free phone consultation with a healthcare agreement attorney to discuss your options. We serve clients throughout California from convenient locations in San Mateo, San Jose, San Francisco, Oakland, Redding, Sacramento, Los Angeles, and San Diego, and surrounding communities.

Authored by Marvin Firestone


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The Law Firm of Marvin Firestone, MD•JD, & Associates, LLP
1700 S. El Camino Real, Suite 204
San Mateo, CA 94402
P: (650) 212-4900
F: (650) 212-4905
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