Understanding Your Physician Independent Contractor Agreement

With the exception of physicians that own private medical practices, every physician will, at some point, have to sign a physician contract. It doesn’t matter if you work as an employee of a hospital group or as a locum tenens physician in an urgent care center — contracts are to be expected.

Understanding that contract, prior to signing it, is crucial.

Today we’re breaking down the most important components of the independent contractor agreement. These differ from standard physician employment contracts, so it’s important to know what they should and shouldn’t involve.

Here is our complete guide to understanding your physician independent contractor agreement.

 

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Working as a Physician Independent Contractor

In simple terms, a physician independent contractor is a freelance doctor. Even though you may work for a hospital, private practice, or group practice, you are not an employee. You do not work for them; you work with them.

Thinking about taking a position as a locums physician?

Locum tenens physicians are also considered independent contractors. Whether the position is for two weeks or two years, locums physicians can expect to sign an independent contractor agreement.

Related: The Pros and Cons of Physician Locum Tenens

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Pros of Being an Independent Contractor

There are a variety of benefits to working as an independent contractor. Yet, like all positions, there are some cons as well.

The main pros of being an independent contractor include:

• The ability to practice medicine when and where you want
• The flexibility to enjoy a better work-life balance
• The ability to deduct a variety of business expenses at tax time
• The chance to choose exactly who you want to work with and avoid those you don’t

The cons of being an independent contractor include:

• Taxes are not withheld; you’ll need to pay income tax directly to the IRS
• You will not be eligible for employer-sponsored health insurance
• There is less stability than being an outright employee
• Medicare and Social Security will not be automatically deducted

Most independent contractors will agree that the pros far outweigh the cons.

In fact, some of those cons can even be positives, depending on how you look at them. For example, independent contractors don’t get health insurance through their employers.

That may seem like a drawback, but it can actually be a huge benefit.

Why?

Because it offers you the opportunity to choose any health insurance plan you want as opposed to having to use the one your employer offers.

Here’s the main distinction:

Employees receive W2s, have their taxes withheld, and receive benefits, such as paid vacation days and sick time.

Independent contractors receive 1099s, don’t have taxes withheld, and do not receive employment benefits. Independent contractors are self-employed.

For more differences between independent contractors and employees, read: Physician Contracts: Independent Contractor or Employee?

 

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What to Look For in Your Independent Contractor Agreement

Independent contractor agreements differ from employment contracts in a variety of ways.

These are the key elements and provisions to look for in your physician independent contractor agreement.

Job Description/Work Status

Every contract includes a job description and explains your work status.

If you think you are about to sign an independent contractor agreement, make sure it is labeled as such at the top of the contract. Otherwise, you could find yourself in an employment agreement that binds you to the hospital or health group for an extended period of time.

Your agreement should clearly state that you will be performing work as an independent contractor. It should not be titled or make references to “employment” in any way, other than to specify that you will NOT be considered an employee.

Start and End Dates

Your agreement should clearly state the start dates and end dates of the relationship. It should specify the date the agreement begins and the date at which it will end, regardless of how short or long a time period that may be.

A List of Your Responsibilities

All aspects of an independent contractor agreement are important, but the inclusion of your responsibilities is one of the most crucial parts.

Make sure this section of your written agreement details exactly what type of work you will perform. Anything and everything you are expected to do, from patient care to paperwork, should be included — nothing should be overlooked or omitted.

It should also include a list of any licenses and/or board certifications that state laws require. If ongoing medical education or CME is required in your specialty, those details must be included as well.

The agreement should also specify if you will work part-time, full-time, or on-call. It should also include whether you intend to work days only or if you will work weekends, nights, or holidays.

The contract should spell everything out. There shouldn’t be any confusion about the type of work you’ll do or when you’ll do it.

Terms Regarding Insurance Coverage

Physicians can expect independent contractor agreements to include complicated language regarding insurance coverage. And depending on the hospital or group, you may be responsible for paying for some of the required insurances.

Physicians must have professional liability insurance and malpractice insurance. But stating that in the agreement isn’t enough. It must also make it clear who will pay for the monthly or annual premiums.

Tail coverage is also an important factor. If a patient files a claim or lawsuit after your contract ends, your malpractice insurance will not be relevant, so you’ll need tail coverage. It is in the best interest of both the hospital and physician to have tail coverage, but who pays for it may vary.

In addition to defining what insurances are necessary and who will pay for them, your agreement should also make it clear which party will be responsible for obtaining them.

Compensation

Independent contractors can receive compensation in a variety of ways. Some may get paid hourly, and others may negotiate a lump-sum payment for a specified amount of work. The manner in which you will receive payment must be clear in the agreement.

The timing of payments is also important. Will you receive payment at the end of every month? Will you receive payment on a weekly basis? Make sure your agreement answers these questions.

Depending on the employer, the physician may also have to submit invoices. The employer will likely view you as a vendor, not an employee, and vendors have to submit invoices in order to receive payment.

Make sure your agreement states exactly when you should submit invoices, how to submit them, and to whom they should be submitted.

Details Regarding Termination

Understanding how your agreement may come to an end is just as important as knowing your obligations while you’re under contract.

Like employment contracts, independent contractor agreements can be terminated. The termination provision in your agreement is one you need to pay close attention to.

There are two main ways that an employer can terminate your agreement:

With cause  

Termination with cause means that the employer needs to have a justified reason for letting you go. It could be on the basis of misconduct or the need for disciplinary action. It could be because you lost your license or lost your hospital privileges.

There has to be a legal reason to fire you, and the agreement should list those reasons.

Without Cause

Termination without cause means that your agreement can be terminated for any reason or no reason at all. You can be the best physician in your field, but if the hospital or health group wants to let you go, they can.

If your agreement specifies “without cause” termination, here’s what to look out for:

Make sure your agreement includes a termination period. There is often a notice period (two weeks in advance, one month in advance, etc.) that both parties have to abide by before terminating the agreement. This is put in place to protect both the contractor and the employer.

In some cases, your agreement may automatically renew at a given point in time. As an independent contractor, you have the right to work when and where you want, so keep an eye out for mention of automatic renewal in your agreement.

Otherwise, you could find yourself in a position where you have to continue working even when you don’t want to.

Other Obligations

Your agreement is likely to include other obligations that you must abide by as well.

For example, you will be responsible for paying Medicare and Social Security taxes.

Like employees, independent contractors must also abide by confidentiality agreements. Make sure you understand that you know how you are expected to handle confidential information and trade secrets.

Never sign a contractor agreement unless you fully understand all of your obligations.

Restrictions

Restrictive covenants are common in all employment contracts and agreements. Two of the most common restrictions are non-solicitation and non-competition clauses.

A non-compete clause prevents physicians from working with or for competing hospitals or health groups. It often prevents you from engaging in the practice of medicine within a certain radius and for a certain period of time after the contract has ended.

A non-solicitation clause prohibits physicians from recruiting patients or other employees to work in another hospital or practice.

Both of these clauses are common in both contractor agreements and physician contracts. The non-compete clause, however, may or may not be enforceable, depending on the state in which you live and work.

For a further breakdown of restrictive covenants and what you can expect, read: Restrictive Covenants in Physician Contracts: What They Mean for You.

 

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Common Terms You Can Expect to See In Your Agreement

Independent contractor agreements and employee contracts often contain complex legal language.

Here are a few terms you can expect to see in your agreement.

Indemnification

This is where one party agrees to pay for all of the costs and damages that the other party sustains. Medical malpractice insurance is an example of this.

Severability

This means that even if some provisions in your agreement are unenforceable, the other terms will still apply.

Governing law

All contracts and agreements are bound by governing law, meaning that they are enforceable under the jurisdiction and laws of a particular state.

Intellectual property

This refers to any copyrights, trademarks, or patents that you may acquire while under contract or agreement. In some cases, physicians retain their own intellectual property rights. In some cases, employers may own the rights.

Arbitration

This means that both parties can agree to settle contract disputes through mediation services without having to go to court.

What Are Anti-Kickback Laws?

There’s one other important thing to understand about independent contractor agreements:

You must ensure that your compensation reflects fair market value.

Why?

Because of anti-kickback prohibitions and the Stark law.

The Stark law is a healthcare fraud and abuse law that prevents physicians from having “financial relationships” with other healthcare providers. It prohibits physicians from referring patients to specialists if the physician stands to financially benefit from the referral.

If you enter into an agreement where you’ll earn more than the fair market value for your medical services, it could appear that you’re in violation of the Stark law. On the other hand, if the hiring employer pays you less than fair market value, they could be in violation.

Be sure that your compensation is on par with what similar physicians are earning for similar work in your specialty and in your state. If it isn’t, a regulator could argue that you are in violation of anti-kickback regulations, and your agreement could be deemed illegal.

Also, be aware that your contract may last for a minimum of one year to comply with anti-kickback and Stark laws.

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Hire a Contract Review Specialist

Independent contractor agreements, like employment contracts, can be complex and full of confusing legal terms.

The best way to protect yourself from entering into an unfavorable contract is to have a contract review specialist look the entire agreement over for you.

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Physician employment contracts and independent contractor agreements differ in a variety of ways. While much of the language may be the same, there are some specific things that you’ll need to make sure are included and aren’t included.

From compensation to termination provisions to insurance terms, independent contractor agreements must include all of the details pertinent to your work, your responsibilities, and your legal obligations.

As a self-employed physician, it is up to you alone to ensure that you’re signing an agreement that’s fair to both you and the employer.

Take the necessary precaution before you sign an independent contractor agreement by contacting Physicians Thrive now. That is the absolute best way to protect your own interests and career.

For more information, see our contract review information resources. It is recommended that you speak to a contract review specialist to ensure your unique needs are covered.

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