How to construct a practice consulting agreement

Recently a client of mine received a proposed consulting agreement from an outside practice group.

Consulting agreements usually are structured for the provision of certain administrative and management services by a physician for a practice group, pursuant to an independent contractor arrangement. Consulting agreements are also used when a physician sells his practice and the purchaser wants to retain the selling physician on a consulting basis to assist with a transition.

My physician client's deal was the first kind. He was asked to assist a practice in developing expertise, providing staff training and education, and establishing treatment protocols. This physician, as well as any doctor, should consider the following terms when deciding whether to sign a consulting agreement: duties and responsibilities, restrictive covenants, fee and charges, indemnity and termination provisions.

This physician, as well as any doctor, should make sure the contract is extremely clear that the consultant is not treating patients, nor is the consultant getting paid specifically based on any patients the practice treats.

Physicians first should look to make sure that all duties are specifically spelled out in the contract, whether they be administrative and management services; analysis and advice regarding office procedures; patient relations and marketing; utilization review; evaluation of internal controls; or anything else. Medical services are typically not provided in these sorts of agreements.

A restrictive covenant or noncompete agreement might be included in your consulting agreement for the protection of the practice group you are consulting. You should carefully review proposed covenants that could prohibit you from practicing within a specified radius from the premises of the practice. Make sure that any restrictive covenants do not limit your ability to provide medical services to your patients or at any facilities or entities where you have medical staff privileges, or where you have previously provided services. Consulting agreements can also place mutual parameters for the restrictive use of certain documents or property.

Next, you should review the fees and charges spelled out in the contract. A consultant should get paid on a flat rate that is based on the clock or the calendar (by the hour, day, week, etc.), and not in any way that could be construed as providing patient care. That way, the consultant and the practice group avoid issues of fee-splitting or liability. If, as a consultant, you suggest a new set of protocols, the practice bills and collects from patients and others for any services related to those protocols. You get paid merely for suggesting them.

You might consider including the following provision in your consulting agreement to designate responsibility for billing to the practice group to which you are providing administrative and management services:

"Fees and Charges for Services. The Practice Group shall have sole authority to bill and collect for goods and services provided by Physician on behalf of the Practice Group, including but not limited to all services provided by Physician pursuant to this Agreement. All fees received in connection with such goods and services shall belong to the Practice Group."

In that sense, make sure you include language in your agreement which states that you are not an employee of the practice group. You should have a provision in the contract which specifically states that you have been retained only for the purposes set forth in the agreement, and your sole relation to the practice is that of an independent contractor. Neither you nor any physician or person retained by you should be considered to have employee status or be entitled to participate in any plans, arrangements or distributions by the practice group pertaining to any benefits for the practice group's employees.

You should retain the responsibility for reporting all income, Social Security and other taxes and contributions as required under federal, state or local law as a result of compensation received pursuant to your consulting agreement.

Make sure that you have insurance coverage for the services you are going to be providing to the practice group. To further limit your liability, you might also consider including an indemnification provision in your consulting agreement. Sample language may include the following:

"Indemnity. Practice Group agrees to indemnify and hold harmless Physician and Physician's officers, directors, shareholders, agents and employees against any and all liabilities, obligations, claims, demands, costs and expenses of every kind and nature, including attorneys' fees and litigation expenses, arising from or related to the performance of services by the Physician pursuant to the terms of this Agreement."

Finally, carefully review all termination provisions in the proposed consulting agreement to ensure that you have the ability to terminate the deal if necessary. The practice group most likely will include provisions whereby the consulting physician can be terminated for cause upon the occurrence of any triggering event, which may include a material breach of the contract, or the suspension or revocation of the physician's medical licensure.