26 Practical Dermatology April 2005

ny practice staff expansion signifies a period of excite-ment and optimism. Both the employer and thenewly employed recognize it as a great opportunity.Yet the notion of contract negotiation can cast apall over this otherwise exciting time.

The decision to bring on a professional level care provider, suchas a Physician Assistant or Nurse Practitioner, depends onnumerous factors specific to each individual practice.

Furthermore, the choice of either a PA or NP also depends onthe needs and desires of the specific practice. These are pointsfor another article. The focus here is on negotiating a contractonce these decisions are made. My experience negotiating myown contracts and counseling colleagues on their contracts hashelped me identify key points that both PAs and the physicianswho hire them must consider. The bulk of these recommenda-tions apply to NPs, as well, but note that specifics may vary.

Negotiating a contract can be a pleasant, mutually beneficial experiencewhen both sides focus on long-term satisfaction and shared success.

By Abby Jocobson, PA-CExton,PA

AA

Know the GoalIn essence, a contract is a form of protection for both par-ties. To some extent, this has led many to equate contract-ing with “looking out for number one.” In practice, con-

tract negotiation need not be so cynical or combative. The con-tract can and should be a much more useful document that laysthe foundation and provides a guide for the long-term relation-ship between the employer and the employee. Ultimate goals ofnegotiation are to devise a contract that will retain the employ-ee for as long as possible, benefit and enhance the practice, andkeep both parties satisfied.

Have a Lawyer Review EverythingEmployers handle contract writing through their attor-neys, but many times the employee does not similarlyseek counsel prior to signing on the dotted line. Never

sign something you don’t fully understand. If necessary, askthat legalese be broken down into plain English. Bottom line:If you can’t understand the language, then opposing counselcan probably interpret it in a way that doesn’t benefit you.

Look at Contracts with a Pessimistic Eye

Although I believe contract negotiation should be a pos-itive, mutually beneficial, educational experience, I dobelieve parties need to consider the future with some

degree of pessimism. Of course you want the working relation-ship to develop fabulously, but you must consider what willhappen if it does not.

A PA or NP should consider, for example, what might hap-pen if the practice is sold to someone whose personality doesnot match your own. Your contract may be your sole protec-tion in such an instance. Occasionally employers grow weary orskeptical of employees who demand detailed contracts. In suchcases, the PA or NP should point out that he/she is consideringall possible scenarios, such as sale (no matter how remote) inorder to ensure adequate protection.

At the same time, the employer must think about what willhappen if the PA or NP simply doesn’t “click” with the practice.Maybe patients just won’t respond to the new hire, or maybeyour practice styles simply won’t gel. Is it better to force anunhappy or under-used employee to struggle through the con-tract period or to have an amicable exit strategy in place?

Designate DutiesDuring the contract negotiations, establish the duties,responsibilities, and work hours of the employee. Willthe PA or NP share call duties? Will he or she offer off-

site consults? Are there restrictions on the employee “moon-lighting” elsewhere?

Few contracts would allow and few PAs would expect to

assist at another dermatology office. But some PAs might wishto offer per diem services at the local ER, for example. If thismight become an issue, it’s best to address it at the outset.

Clarify CompensationEmployee compensation accounts for a significantportion of negotiations. The contract must specify allthe agreed-upon points of salary, bonuses, and bene-

fits. Most professional-level medical personnel are paid a salaryrather than an hourly rate. Most get bonuses, as well. Bonusesmay be based either on billings or collections, the selection ofwhich could result in significant differences in the final bonuspaid. This is one critical point that the contract must specify.

Additionally, determine when bonuses will be paid. A fairpayout schedule will reflect the physician’s bonus or profit-tak-ing schedule. In other words, if the physician or physicians takebonuses on a quarterly basis, so should the PA. One-time, end-of-year payouts deprive the employee of opportunities to investincome and earn interest.

Negotiate from the Professional Level

Key contract points, such as compensation and bene-fits for a PA or NP, should resemble those for otherprofessional-level medical employees, including previ-

ous partners or moonlighting/part-time physicians. At the veryleast, mid-level providers’ benefits should reflect those of theoffice manager. A professional-level medical provider shouldnot get the same sick days and vacation benefits as the recep-tionist. Yes, the contracted care provider is an employee, but heor she is a professional medical employee.

Understand the Costs and Benefits of Benefits

Other negotiable “benefits” offered to the PA or NP include vacation time, CME leave, CME reim-

bursement, licensure fees, health insurance, profession-al dues reimbursement, disability insurance, and retirementcontributions. CME leave and reimbursement of CME feescontribute directly to the employee’s professional develop-ment and thus represent an investment in the practice.Additionally, physicians should note that licensure and pro-fessional membership fees tend to be relatively inexpensive forPAs compared to physicians. Some physicians hesitate toabsorb these expenses because they anticipate a much highercost. Employees should make sure that reluctant employersknow the real costs.

Again, health and disability insurance and retirement ben-efits should reflect the level and type of coverage provided toother professional medical staff and are generally more com-prehensive than those offered to front-desk employees.

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Read the Employee ManualSome elements of the contract (even some benefits)may reference general office policies. Contracts ofteninclude lingo such as “per the office policy manual” or

“see employee handbook.” Additionally, specific issues notaddressed in the contract will likely defer to the specificationsof the general office policy.

Before finalizing the contract, the employer should provideand the potential employee should carefully review a copy ofthe office policy manual. Any areas of concern or disagreementmust be addressed prior to contract signing.

Rethink Restrictive CovenantsRestrictive covenants aimed at preventing theemployee from “taking patients” with them to a newpractice have become relatively common. Typically,

the clause bars the PA or NP from moving to a practice withina certain distance of the contracting practice—this may be fiveto seven miles in urban settings and up to 10 miles or more inrural settings—for a certain period of time (up to two years insome cases). The covenant should allow the employee to prac-tice in another area of medicine (such as ER medicine) regard-less of the location. This allowance is both wise and fair, sincea PA may determine after a period of time that dermatology isnot the right fit for them. It’s better for him or her, the prac-tice, and the patients they serve for this individual to move onand find their niche than be unhappy in their day-to-day work.

Both sides should understand if and how the restrictivecovenant affects a terminated employee. Additionally, considerpermitting a buyout of the restrictive covenant for the PA orNP. Although the restrictive covenant confers protection to thepractice, I urge physicians to avoid using the clause simply tokeep a PA at the practice. If the covenant is really the only thingkeeping the employee at the practice, it doesn’t bode well.Other factors, such as job satisfaction, should keep the PA inplace. If the relationship isn’t working, the practice isn’t theright fit, or the PA feels he or she is better equipped for a dif-ferent practice focus (maybe more cosmetic), it’s probably bet-ter to let him or her go amicably.

Another negotiable point is the validity of the restrictivecovenant in the event the employee is fired without cause.Some contracts cancel the restriction in such cases.

Permit Positive PartingsAs just noted, partings aren’t always negative. Allparties should have this frame of mind through-out the negotiation and even the employment

period. Sometimes there just isn’t a good “fit.” Perhaps practicestyles or bedside manners simply don’t jibe. Sometimes patientsdon’t respond to the PA, or the PA determines that dermatol-

ogy isn’t the best field for them. A contract that allows for ami-cable separations in such scenarios will spare a great deal ofgrief, anxiety, and money for both parties.

Address Malpractice InsuranceContract negotiations should include discussionsof who will pay the PA’s malpractice premium.Practices should agree to pay these costs. At first

blush, dermatologists assume the costs will be significant andtherefore are reluctant to take them on. However, malpracticepremiums can be significantly lower for PAs compared to der-matologists. Also, determine whether the coverage will beoccurrence or “claims made,” the former being more compre-hensive and conferring better protection. For a fee, some insur-ers permit the covered individual to extend coverage of the“claims made” plan at the end of the term.

Understand the TermsDoes the contract automatically renew? Howlong is the contracted term? If the term is greaterthan one year, opportunities for annual salary

renegotiation should be available. New employees in particularmay want to include in the contract established review periods,which makes sense for both parties. They provide an opportu-nity to either confirm that everything is flowing smoothly orpresent an opportunity to address developing concerns.

Define Termination ProceduresThere are basically two types of termination: “foror with cause” and “without cause.” The contractshould clearly define what comprises each type of

termination and provide provisions for each. “For cause” termination may result from loss of licensure or

Medicare or Malpractice eligibility on the part of the PA or NP.The contract should very specifically detail the processes fortermination, including the amount of notice the employee willreceive. Additionally, the contract should identify the effect oftermination on bonuses, compensation, and benefits. Whatwill happen to unused benefits? How will the employee berefunded money spent on malpractice premiums, CME, etc.?

Similarly, there must be clear policies regarding terminationwithout cause. These situations arise when the employee is dis-missed through no fault of his/her own (perhaps patientshaven’t taken to the PA or there’s a personality clash with thephysicians). Typically, required notice ranges anywhere fromone to three months. Again, issues such as reimbursement andcompensation must be addressed. Remember that collectionscome in up to 90 days or more after provision of service, so thisbears consideration when negotiating the terms.

In some cases it may be possible and preferable for the

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employee to continue providing care until the effective termina-tion date. However, it’s wise to include a provision allowing thephysician to prevent the employee working from the time ofnotice to the effective termination date. The employee wouldstill receive notice per the contract specifications and wouldreceive pay through the termination date but simply would notbe on the premises providing services during that period.

Policies for resignation also deserve attention. The employ-ee should be permitted to resign without cause with definednotice. Such action will have consequences, which must also benegotiated and detailed.

Anticipate DisputesDisputes are bound to develop, even within thebest professional relationships or with the most

well-thought and executed contracts in place. Therefore, the con-tract should describe the handling of disputes. The contractshould specify whether disputes will be handled through arbitra-tion or in court. There are pros and cons to each. At the mostbasic level, arbitration tends to be more expedient and less cost-ly, but rulings are usually binding. Court hearings can be longerand more costly, but the parties have the opportunity to appeal.

An important but sometimes overlooked element is the pay-ment of legal fees. The fairest scenarios are those where each

party pays its own lawyer fees or the non-prevailing (losing)party pays fees for both sides. Some contracts assign responsi-bility for all lawyer fees to one party—usually the employee—regardless of the outcome. Beware of such provisions.

Ensure Access to RecordsIn the event that a suit is filed sometime after theemployee leaves the practice, that employee legal-ly has access to the practice’s medical records

relating to the plaintiff. But obtaining these records through sub-poena can be time-consuming and costly. Therefore, many con-tracts now include and the American Academy of PhysicianAssistants recommends provisions that automatically grant theemployed medical professional access to records in the event asuit is brought.

Mutual Success and SatisfactionWith a good contract, both parties feel protected. Best and

worst outcomes are clearly defined, and a framework exists tohandle just about any scenario that may arise. Rather thanapproach contract negotiation with anxiety, both parties shouldbring to the process the same qualities they will bring to theirlong-term professional relationship: respect, trust, optimism,and cooperation.

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Tips for the PA• Have a lawyer review everythingand distill all legalese into plainEnglish. Never guess the meaningof the words.• Look at the contract with a pes-simistic eye. You want everything towork out long-term, but are youcovered if things don’t? Considerworst possible scenarios.• If anything is defined “per theemployee (or office procedure)manual,” obtain and carefullyreview a copy prior to signing thecontract.• Parting isn’t always negative. Besure the contract allows for amica-ble departures.• Be sure all duties are clearly out-lined, including call, consults, etc.• Negotiate for coverage of CME,malpractice, licensure, and profes-sional membership dues/fees. Besure the physician understands therelatively low cost of these.

• Understand contract terms. Iflonger than one year, schedulemore frequent salary negotiations.• Seek a provision for resignationwithout cause with defined notice.

Tips for the Physician• Look at the contract with a pes-simistic eye. You want everything towork out long-term, but are you

covered if things don’t? Considerworst possible scenarios.

• Compensation, benefits, andperks should reflect those offered toother professional level medicalemployees. Don’t give professionalmedical staff the same vacation timeand sick days as the receptionist.

• If anything is defined “per theemployee (or office procedure)manual,” be sure the employee getsa copy prior to signing the contract.

• Parting isn’t always negative. Besure the contract allows for amica-ble departures if things just don’twork out.

• CME, malpractice, licensure, andprofessional membership dues/feesmay be much lower than youexpect. Consider covering these.

• Don’t use a restrictive covenantjust to keep an unhappy PA at yourpractice. The employee should stayfor other, more important reasons.

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