Tips on negotiating an employment contract for part-time practice
■ A column examining the ins and outs of contract issues
Increasing numbers of physicians are pursuing part-time work to cater to lifestyle demands and personal desires.
Twenty-one percent of U.S. physicians are working part time, compared with 13% in 2005, according to a 2010 survey by Cejka Search and the American Medical Group Management Assn.
But even though the work isn’t taking up as many hours, physicians need to approach their part-time employment contracts as they would a full-time deal. Physicians retained by a group practice or hospital on a part-time basis should be cognizant of certain areas of the physician’s employment or independent contractor agreement: independent contractor or employee status, compensation, benefits, professional liability insurance, call responsibilities and restrictive covenants.
Physicians often assume they are independent contractors just because they work part time, but that’s not necessarily true. The amount of time a physician works is not the deciding factor as to whether someone is an employee or an independent contractor of the group practice or hospital.
Whether a physician is an employee or an independent contractor is a distinction with real consequences for tax purposes and protections under federal and state labor and employment laws. The protections that labor and employment laws provide to employees do not extend to independent contractors.
If a physician is an employee, the employer must withhold income, Social Security and Medicare taxes and pay unemployment tax on wages paid to the physician. Conversely, if a physician is an independent contractor, the practice or hospital will not withhold or pay taxes on payments to the physician, but rather the individual physician is responsible for making such payments to the Internal Revenue Service and state tax authorities. Thus, it is imperative that the contract clearly indicate whether the physician is an employee or an independent contractor and the corresponding responsibilities of the parties.
What’s a fair rate of pay?
Partial compensation for part-time work is logical, but determining a fair and competitive compensation package is not always as straightforward when it comes to part-timers.
There are four general models that practices and hospitals use to determine compensation for part-time physicians:
- The physician may be paid a percentage of a full-time physician’s salary based on the number of hours worked.
- The doctor may be paid a percentage of collected professional fees rendered by the physician.
- The physician may receive a per diem rate.
- The doctor’s compensation may be based on the revenue the physician generates minus his or her share of overhead expenses.
Determining the part-time worker’s share of overhead expenses can be tricky, however, because the physician is not benefiting from the overhead on a full-time basis. One way to determine a part-time worker’s share of overhead expenses is to allocate the overhead based on the physician’s share of the schedule.
For example, if a rheumatology practice employs five rheumatologists and a sixth rheumatologist is hired half-time, the new part-time rheumatologist would be responsible for 1/11th of the overhead costs (with each of the other full-time rheumatologists responsible for 2/11ths of the overhead expenses). Part-time compensation should be outlined explicitly in the physician’s employment or independent contractor agreement.
Benefit plans and arrangements (such as health, dental, vision, retirement, pension, disability coverage, life insurance, etc.) are frequently provided to employees and infrequently provided to independent contractors. Whether a part-time physician will receive benefits will vary from employer to employer. A threshold issue, however, is whether a part-time worker is even eligible to receive certain benefits. Many health, dental and vision plans require employees to work a minimum of 30 hours a week on a regular basis, thus excluding part-time employees who work fewer hours.
For retirement and pension plans, employees typically must work a minimum of 1,000 hours to be eligible to participate. Even if a physician’s employment agreement provides that the physician may receive benefits from the employer, the agreement may provide that such a provision is subject to the terms and conditions of the particular benefit plans or arrangements.
What about liability insurance?
Although some practices or hospitals pay for a part-time physician’s liability insurance costs, many shift some or all of these costs to the physician. Many insurance providers offer liability insurance plans for physicians practicing part time, with reduced premiums and coverage. When negotiating a compensation package, payment for liability insurance should be considered.
A physician must be aware of what is excluded from coverage. For example, if Dr. A works part time for ABC Medical Group and part time for XYZ Medical Group, and ABC Medical Group provides coverage for Dr. A, it cannot be assumed that such liability insurance will cover Dr. A’s work with XYZ Medical Group. Dr. A may need a separate policy for work performed through XYZ Medical Group.
Sharing in the responsibility for call coverage becomes an issue when it comes to physicians working reduced schedules. Full-time physicians know they will be responsible for some call coverage. However, this is not the sentiment shared by many part-time physicians, and it becomes an area of significant negotiation in the employment or independent contractor agreement.
Some part-time physicians are willing to take reduced call coverage commensurate with their reduced amount of time in the office. In the example described above with the six rheumatologists, the half-time rheumatologist may take call one in every 11 nights and weekends, while the five full-time rheumatologists take call two in every 11 nights and weekends. Alternatively, if a practice has sufficient call coverage with its full-time physicians, it may permit the part-time physician to forgo call responsibility. The practice, however, may reduce the physician’s compensation.
Although a physician may be employed only part time, the employer may want to protect its patient base by including restrictive covenants such as noncompetition and nonsolicitation clauses in the physician’s employment agreement. A part-time physician must be careful that restrictive covenants do not jeopardize his or her other career objectives. In the example of Dr. A working part time for both ABC Medical Group and XYZ Medical Group, a noncompetition clause in Dr. A’s employment agreement with ABC Medical Group could prohibit Dr. A from working at another practice, including XYZ Medical Group.
Retaining part-time physicians is increasingly attractive for private practices and hospitals, and part-time work is increasingly attractive for physicians. These situations show just a few of the provisions that affect the part-time physician relationship and should be reflected in the physician’s employment or independent contractor agreement.