Q Three years ago I hired an associate to work in my office. He had just graduated school, had no clients, and was new in town. I did not have a written employment agreement with him because I though I could trust him. Two weeks ago he opened his own office across the street from me and took half my practice with him. Is there some way that I can prevent this from happening in the future?
A You should always have a written employment agreement between your practice and your employees. Such an agreement can prevent misunderstandings by describing each party’s rights and obligations. A written agreement is also required as a safe harbor under the Stark self-referral and anti-kickback laws.
The following 10 provisions can serve as a framework when developing employment agreements. Proposed forms are included, but be sure the suggestions are reviewed by your attorney for compliance with the rules and regulations of your state.
1. Independent Judgement. Although Employee is an employee of Employer under the terms of this Agreement, Employee shall retain independent discretion and exercise independent judgement in the manner and means of providing services in regard to the diagnosis and treatment of patients treated. A doctor is a professional and needs to make independent decisions about the type of services being rendered to his or her patients. You may not insist that the doctor provide, or not provide, services that the doctor feels are inappropriate. You may, however, provide in the employment contract that the doctor be in compliance with credentialing standards of the HMOs to which the practice belongs.
2. Health-Care Programs. Employee hereby represents to Employer that Employee is not excluded from any federal or state health-care program for the provision of items or services payable by such a program, nor, to the best of his or her knowledge, is Employee under any investigation which could result in such exclusion.
You are not permitted to bill for services performed by a health-care professional who has been excluded from a health-care program. If you do bill for services provided by an excluded health-care professional, you must return the money and you will be liable for penalties. Although the above representation will not protect you entirely, it will show that you attempted to find out whether the provider was excluded. In any event, you should still conduct your own search of the relevant databases, such as Medi-Net or the Office of Inspector General sanctions list, in order to find out whether your potential employee has been excluded.
3. Billing. The Employer shall perform, or cause to have performed, billing and collection functions for all services provided by the Employee. The Employee hereby authorizes the Employer to accept, or refuse to accept, on Employee’s behalf, any assignment of insurance benefits from any patient receiving service from the Employee pursuant to this Agreement. At Employer’s request, Employee shall list and designate, with such insurance or third-party payor, the Employer’s address and designated officer as the sole address to which all payment(s) or payment voucher(s) for services performed by the Employee shall be mailed.This Agreement constitutes an assignment by the Employee to the Employer of all funds owing or collected for services rendered by the Employee pursuant to this Agreement (the “Receivables”), as long as such assignment is not in violation of any law or statute. The Employee shall take all reasonable steps necessary to assist in the billing and collection of funds due for services rendered by the Employee. All funds collected with respect to services provided pursuant to this Agreement shall be the exclusive property of the Employer.
It is very important to have the employee assign his or her right to payment to the practice. If there is no such assignment, the practice is not permitted to collect and deposit checks made payable to the employee. This could become problematic if the employee were to quit or be fired, as the practice would not be entitled to retain or endorse checks made payable to the employee.
4. Post-Termination Cooperation. For a period of six (6) years after termination of this Agreement, Employee shall cooperate fully and assist Employer in efforts to collect all accounts receivable for services performed by Employee while employed by Employer, including without limitation, transferring all funds actually paid or made payable to Employee with respect to such accounts receivable, and appearing in any court of law within which any cause of action is brought to seek enforcement of Employer’s right to collect on any and all such accounts.
Employee agrees to notify Employer, in writing, of a change of address of Employee’s business or residence during such six- (6-) year period, so Employer will be able to locate Employee to implement the terms of this Section. Employee shall receive his or her hourly rate for providing assistance under the terms of this Section and, in addition, Employer shall reimburse Employee for all reasonable costs and expenses incurred by Employee, as approved in advance in writing by Employer, relative to such assistance. The terms and conditions of this Section shall survive termination of this Agreement. Many times, a third-party payor may question services rendered to a particular patient by your employee after the employee is no longer employed by you. In order to receive payment, you must make the employee available. If the employee is no longer working for you, he or she may not want to be bothered. By having this provision in your contract, the employee is obligated to be available for third-party payor questioning.
5. Term. The term of employment under this Agreement (the “Employment Term”) shall be for the one-year period commencing the date hereof, unless earlier terminated under the terms hereof; provided, that Employee must complete and submit any credentialing application provided to Employee by Employer in order for this Agreement to become effective and for the Employment Term to commence. Unless terminated as provided for herein, this Agreement shall automatically renew on the anniversary date of this Agreement. In order to satisfy the Stark prohibition against self-referral laws and the anti-kickback laws, the employment agreement must be for a term of at least one year. If the doctor resigns or is fired, the doctor and the practice may not then re-enter into another employment agreement until the termination date of the original agreement.
6. Insurance. Unless otherwise provided, Employee, on his or her own behalf, shall at Employee’s own cost and expense, provide and keep in force a malpractice insurance policy or policies of standard form in the State of ____________, with limits of not less than one million dollars ($1,000,000.00) per occurrence and three million dollars ($3,000,000.00) in the aggregate. Certificates thereof shall be delivered to the Employer by the Employee upon the commencement date of this Agreement, together with evidence of the payment of the premiums thereon, and shall be placed with insurance companies authorized and licensed to issue such policies in the State of ____________.
All such policies of insurance shall provide for written notice to Employer of cancellation or any other action. Employee shall pay, or cause to be paid, all premiums for such insurance at least thirty (30) days before such premiums become due, shall furnish to Employer satisfactory proof of the timely making of such payments, shall deliver all renewal policies to Employer at least fourteen (14) days before the expiration date of each expiring policy. and shall cause such policy to require the insurer to give notice to Employer, addressed to Employer at its address in the preamble hereof (or at such other address Employer designates), of termination of any such policy thirty (30) days before such termination is to be effective. In the event that the policy requires a “tail,” Employee shall be responsible for payment of said “tail.” You want to be certain that your employee maintains malpractice insurance at all times. This provision ensures that the employee must provide you with proof of the insurance. It will be up to you to make sure that the employee provides you with proof of continuing coverage. You may want to program your computer to advise you when payments of malpractice insurance premiums are due. If the practice is paying the insurance premiums on behalf of its employees, this paragraph is not an issue, but you will still want your employee to obtain “tail” insurance.
7. Patient Records. Employee shall maintain adequate and complete records with regard to services rendered to patients. Upon the termination of Employee’s employment hereunder, all patient files, records and charts shall remain with Employer, and Employee shall have no right to retain such materials it being agreed to by the Employee that the patient records, charts and files are all the property of the Employer.
Nothing contained herein shall be construed to prevent any patient from requesting transfer of his or her records to Employee upon the termination of this Agreement, and such materials or photocopies thereof shall be delivered to Employee upon the written request of the subject patient, and the request shall be honored promptly upon the payment to Employer by Employee of all reasonable costs, if any, for reproduction and mailing of any such materials. Employer will send invoices to all patients for any services rendered by Employee prior to termination of his or her employment hereunder, and Employer will have the right to collect the full amounts thereof for its own account. Notwithstanding the foregoing, Employee shall be permitted access to the records in the event of litigation when Employee is a party thereto. This section provides that the patient’s records remain with your practice unless the patient specifically asks that the records be transferred to your employee.
8. Patient Accounts. All patients shall be and remain the patients of Employer, provided that Employee shall exercise independent responsibility for the care and treatment of such individuals to the extent professional services are rendered pursuant to this Agreement. In the event any patient is deemed by operation of law or otherwise to be patient of Employee, Employee shall and hereby does (i) irrevocably assign all accounts receivable from the treatment of such individuals to Employer, and (ii) irrevocably appoints Employer as the agent and true and lawful attorney-in-fact, with full power of assignment and substitution where legally permissible, to bill patients on Employee’s behalf; to collect accounts receivable from all payors; and to take possession of and endorse in Employee’s name, all notes, drafts or instruments received by way of payment for such services (except where prohibited by law or regulation).
Employee agrees that each patient account has a reasonable value to Employer of five thousand dollars ($5,000.00), and for each record, or any portion thereof, which Employee attempts to obtain and/or actually does obtain in contravention of this Section, the sum of five thousand dollars ($5,000.00) shall be paid to Employer as liquidated damages. The referenced sum shall be due and payable immediately upon the date of the violation of this Section, with such sum to bear interest at the maximum allowable legal rate from the due date to the actual date of payment in full. Although your employee provides services to your patients, the employee is not permitted to take patient records at will; the records belong to your practice. In the event that the employee takes the patient’s records (without the patient’s written consent), the employee is breaching patient confidentiality and is stealing property from the practice. Since it is difficult to establish the extent of damage to your practice, the amount of $5,000 per patient record is earmarked as the amount the practice is damaged by removal of each record.
9. Restrictions. The Employee agrees that during the entire term of this agreement and for a period of two (2) years after his or her employment is terminated, or after Employee resigns, no matter the reason for the termination or the resignation (the “Restricted Period”), Employee will not: (i) practice from an office located within a ten- (10-) mile radius of the Office if a rural area; within a five- (5-) mile radius if a suburban area and within a one-half (Þ-) mile radius if an urban area (the “Restricted Area”) from Employer’s Office(s); (ii) obtain admitting privileges, or obtain a staff position for the practice of medicine at any of the hospitals at which Employer then has such position or privileges; (iii) solicit, directly or indirectly, for treatment by Employee, or by any other doctor or physical therapist other than those employed by or who are shareholders of Employer, any persons who were patients of Employer during the Employment Term; or (iv) solicit, divert, take away, interfere with, or attempt to induce any employee, agent or referral source of Employer to leave Employer’s employ or to terminate or otherwise alter any relationship with Employer in order to participate in any business competitive with Employer.
The Employee agrees that he or she will not, either directly or indirectly, become an owner, employee, investor, shareholder, or in any other manner affiliate with any office providing health care services within the Restricted Area. It is very important that you check with your attorney concerning your state’s position with respect to “non-compete” clauses. These types of clauses are not favored by the courts. In some states, they are invalid. The above clause provides for non-competition by your employee and also prevents your employee from interfering with employment agreements between your practice and other employees. It also prohibits your employee from meddling into other types of relationships that your practice may have with third parties.
1 0. Injunctive Relief. The parties further agree that in the event of the breach of any provision of this Agreement, Employer shall be entitled to a permanent injunction or similar court order enjoining the Employee from acting in a fashion contrary to, and that pending such determination the Employee shall accede to a temporary restraining order, without prejudice to any other rights that the Employer may have, all at Employee’s expense.
This paragraph permits you to go to court and get an order from the court temporarily preventing your employee from violating the employment agreement until the matter is heard in court.
Because this article is being presented to you by an attorney, it would not be complete without a legal disclaimer. This column is provided subject to and governed expressly by the terms of this disclaimer. This column is provided for educational purposes only. The accuracy or timeliness of the information presented herein is not warranted. The information presented herein is not intended to be advice as to a specific fact pattern with which you may be presented. Accordingly, please note that the information contained herein is not being presented as legal advice with respect to any matter and that no attorney-client relationship is hereby established.