Guidelines for Laboratory Medicine Physician Contracts with
Laboratory Owners
Updated 2001-08-19 This is a checklist of items that you might consider in creating a contract. It is not intended to substitute for legal and accounting advice and it is not intended that each and every item be included in a contract. Resources The ideas in this outline are a compendium from various published articles and course notes. However, for a single reference, I highly recommend the College of American Pathologists Professional Relations Manual (see below). The monograph by Cooper et al is another good resource. This 50 page monograph deals with contracts between physician groups and hospitals, rather than between an individual pathologist and a hospital. It is directed to the US situation, but there are many good points applicable to Canada, both for hospital and regional government contracts. It is worthwhile reading if you need to negotiate a group contract. College of American Pathologists Professional Relations Manual. 11th Edition, 1999, available from the College of American Pathologists, 325 Waukegan Road, Northfield IL 60093-2750 www.cap.org Cooper RS, Wood JP, Mulligan JT and Eisenberg SA. Successful Hospital & Pathology Group Contracts: Key legal & Financial Considerations. Washington G2 Reports, Washington and Clinical Laboratory Management Association, Wayne, Pennsylvania, 1998. Available from CLMA (www.clma.org, Tel 610-995-9580)
General Principles A contract is applicable to salary situations as much as it is to independent contractor or fees situations. Be sure a vacancy exists or will exist and communicate with the incumbent or previous laboratory physician. Consult with other Laboratory Medicine physicians in the vicinity. Make sure you will be eligible for medical staff membership and that you will be acceptable to the medical staff. Assemble Medical Staff Bylaws, Job Description, previous contracts and applicable regulations (Laboratory Director for example). Prepare a list of items to be negotiated with the hospital administration and hire a lawyer to prepare a draft contract or agreement. Have your lawyer review the final contract before signing The best contracts never leave the desk drawer. In your negotiation, concentrate on the quality of the service to be provided, the quality of the facility and personnel, opportunities for education, teaching and research, and harmonious relations with the hospital staff and associated medical staff. Payment arrangements include annual fixed fees, salary, fee for service on an item by item basis or a combination of fixed annual fee and fee for service. In addition to payment, the nature of the arrangement can vary. When there is more than one Laboratory Medicine physician, there are a few possible arrangements: A single contract between the hospital and the "Chief," who then subcontracts with other Laboratory Medicine physicians. Multiple single contracts between each Laboratory Medicine physician and the hospital. This is the weakest negotiating position for the Laboratory Medicine physicians, as it divides the group. A contract between the hospital and the Laboratory Medicine physician group
The best time to develop and plan a strategy is before the negotiation begins. Decide on your best alternative to a negotiated settlement (BATNA). The Laboratory Medicine physician in the strongest position is the Laboratory Medicine physician who brings something unique to the table and is indispensable to the hospital. Possible methods by which a pathologist can become essential to the hospital include: Popularity with the medical staff Involvement in key hospital committees Ownership of a key technology skill Development of a profitable outreach venture
Know your hospital’s financial condition. Regularly review financial statement s of the hospital and the laboratory. Know your hospital administrator. Meet regularly with the administrator. Volunteer to solve problems and be helpful and forthcoming with suggestions. "If you are not part of the solution, you are part of the problem." Keep the administrator informed about the laboratory activities, strengths and successes. Be an active participant in medical staff affairs. Chair one or more committees if possible. Provide newsletters to the medical staff on essential service items. Use the telephone to contact clinical colleagues to deliver biopsy results, get needed clinical information and so on – never ask your office secretary to call for you; it is a lost opportunity to speak with a colleague and build a bridge. Know your hospital-based colleagues in Nuclear Medicine, Diagnostic Imaging and Anesthesia.
Contract Details
Introductory language Agreement between the physician and hospital. Whereas the hospital wants Laboratory Medicine services Whereas the physician is a specialist in Laboratory Medicine
Services to be provided Surgicals, Autopsies, etc Research, teaching Directorship or supervisory duties (see the Canadian Association of Pathologists statement) Services outside the scope of the contract - patient self-pay, family-requested autopsies, coroner's autopsies, etc. You may want to specifically identify these services as separately payable to you. Standards of service Performance appraisals Location of service Hours Medical staff membership; probationary period
Equipment, Facilities, Supplies, Maintenance, Personnel Usually the hospital is responsible for these The authority of the Laboratory Medicine physician to select and direct hospital staff can be stated here
Professional Fees or Remuneration The terms of engagement (salary, service contract or fee per service) are stated. Usually the amount is specified in an attached schedule that is updated more frequently than the body of the contract
Benefits (for salaried physicians) Retirement plan Insurance (liability, malpractice, other) Health, Extended health care (semi-private hospitalization), Dental, Eye, Long term disability, Accidental Death and Dismemberment, Travel, Expenses of Practice and Life insurance Paid sick leave Practice expenses (automobile, journals, associations, professional dues and licenses, pager, parking) Sabbatical Paid Vacation and study leave; Carry-over provision Leave of absence without pay policy and entitlement Budget for study leave expenses and books Paid replacements for vacation and study leave coverage (locum tenens), so that there is not a pile of slides or paper when you return Maternity / paternity leave
Information for Billing If the hospital is submitting bills to the insuring agency, it requires notice of services provided; If the Laboratory Medicine physician is billing, he or she will need information from the hospital. Sometimes the hospital will "offer" to prepare all bills. This will allow the hospital detailed knowledge of the Laboratory Medicine physician’s income and is best avoided.
Insurance against liability The hospital indemnifies the Laboratory Medicine physician against errors of hospital staff and actions arising out of the Laboratory Medicine physician’s role as Laboratory Director. This indemnity should extend beyond the contract, for actions arising after you retire or leave the hospital, based on events that occurred while you were on contract or an employee. The Laboratory Medicine physician is required to carry professional malpractice insurance Have the CMPA review your proposed contract
Insurance against health insurance adjustments The hospital insures the Laboratory Medicine physician against clawback of amounts paid, either through errors of billing or changes of insurer policy
Extra-departmental activities; Education activities This section might specify responsibility to teach, do research, etc. Alternatively, this section might state that the Laboratory Medicine physician is allowed to engage in teaching, research, etc.
Outside Activities Usually, all outside activities at the date of the contract are allowed and the Laboratory Medicine physician is entitled to keep all remuneration arising from these activities Any expansion of the activities may require approval by the hospital board; take care here to avoid language that invites challenges to the independent contractor status of the physician.
Independence of Practice If you are not an employee, this is a very important area to "get right" in order to preserve your status for tax purposes and to allow a non-employee RRSP. The College of American Pathologists document mentioned under References is a good resource for wording and concepts that are too detailed to be included here. Some hospitals offer contracts that limit the Laboratory Medicine physician to a consultant, while the medical technologist lab administrator has full control over the laboratoy. Some hospitals may seek direct control over pathology services through substitution of the contract for the usual hospital credentialling process for medical staff privileges. Responses include: Control over Laboratory Medicine physicians undercuts the Laboratory Medicine physician as an independent contractor, risking liability for the hospital. This liability may extend to income tax and malpractice liability (master-servant relationship). Ask the hospital to indemnify the Laboratory Medicine physician if the tax department finds the degree of hospital control makes the Laboratory Medicine physician an employee for tax purposes.
Expansion of Service by the Hospital The hospital may want to contract with other entities to provide laboratory services. For example, a hospital and private laboratory may enter a joint venture together. The pathologist's hospital contract should include a clause that deals with this possibility, including: CMPA liability insurance of the pathologist (will you be covered if services are provided to US patients for example) Contract re-opener if the responsibility or workload increases Minimum fees or other protection if the pathologist is required to contract with the second entity. For example, if the hospital wants the pathologists to contract with the second entity, the pathologists need some protection from unfavourable terms in the contract with the second entity.
Practice by other laboratory medicine physicians Usually seeks to limit the access of other Laboratory Medicine physicians to the hospital without approval of the incumbent. In practice, this clause is without power. If the relationship is such that the hospital is soliciting outside services, termination of the incumbent is likely.
Access to Books and Records The Laboratory Medicine physician may wish access to the Hospital’s records to verify billing in the Laboratory Medicine physician’s name The hospital may want access to records to verify services provided
Term, Renewal and Termination A 5-year contract term is only as good as the notice period for termination. One-year notice from the hospital to the Laboratory Medicine physician or one year remuneration in lieu of notice is a good benchmark for new contracts. If you have been on staff for many years, one month severance or notice per year of service is a good benchmark (e.g. 16 years service equates to 16 months notice or severance payment in lieu of notice). Notice from the Laboratory Medicine physician to the hospital is often three months, or less if it is an employee situation. There should be a process for review of the Laboratory Director’s stewardship. This should be at 3 to 5 year intervals and be organized and conducted by the Medical Advisory Committee or equivalent. Most Provinces have a legislated process for termination of hospital privileges with protections for the Laboratory Medicine physician. In addition, the Laboratory Medicine physician may wish to specify a process for resolution of disputes (see paragraph following). It is best to have hospital privileges continue in force if the contract for service is terminated. The hospital privileges will lapse at the next renewal. This avoids a black spot on the Laboratory Medicine physician’s record for privilege termination in midterm. Death in service provision
Illness and Disability The conditions under which the hospital can terminate the contract in the event of illness or disability should be stated Provisions for continuation of payment should coincide with the elimination period of long term disability insurance held by the Laboratory Medicine physician.
Dispute resolution Review by a committee with medical and hospital board representation is useful. This committee is sometimes known as "Joint Conference Committee." A Laboratory Director will want representation rights before the Joint Conference Committee or MAC or Board if any of his or her Department members is under review or seeks review of the Director’s stewardship. The final decision should be by arbitration; the hospital may seek to have the final word by stating that the hospital board’s decision is binding, but this is clearly one-sided.
Amendments Assignment and Succession It is important to allow the contract to continue in force if the Hospital Corporation is merged or otherwise changes governance.
Confidentiality Applicable laws (e.g., the contract conforms to the laws of Ontario). Signature and certification |
