Physician contract horror stories [PODCAST]

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“As a physicians’ attorney who focuses his practice on physician contract review, I have seen some truly horrendous results after physicians have signed agreements they did not understand. Here are just a few of the ‘war stories’ I have experienced.”

Dennis Hursh is a veteran attorney with over 40 years of experience in health law. He is founder, Physician Agreements Health Law, which offers a fixed fee review of physician employment agreements to protect physicians in one of the biggest transactions of their careers. He can also be reached on Facebook and LinkedIn.

He shares his story and discusses his KevinMD article, “Physician contract horror stories.”

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Transcript

Kevin Pho: Hi, and welcome to the show. Rate and review at KevinMD.com/rate. Subscribe at KevinMD.com/podcast. Today we welcome back to the show Dennis Hursh. He is a physician contract lawyer. He’s been on the show multiple times, giving fantastic, valuable advice about negotiating physician contracts. To look at his prior episodes, go to KevinMD.com/podcast. In the search bar in the upper right-hand corner, search for Dennis Hursh, and you can see a lot of his prior episodes. Now, for those who aren’t familiar, Dennis, just briefly share your story and journey to where you are today.

Dennis Hursh: Well, I started representing physicians when my firstborn child had some serious congenital heart defects, and we ended up spending about eight of the first 12 months of her life at Children’s Hospital in Philadelphia. One particular night, everything was failing. She was really going down fast, and even though it was a very busy NICU, the cardiology fellow and the intensive care fellow literally stayed by her bed all night long. I think the thing that got me started was that the cardiology fellow excused himself and apologized, because he said he had to get sustenance, and he ran downstairs. Just the idea that somebody felt they needed to apologize to me because they had to eat really hit a point.

Well, she came through, and she’s doing fine. I thanked them. I sent a letter to the hospital commending them. It just didn’t seem like enough for my child’s life. So, sort of right from that point, I began trying to represent physicians exclusively and trying to help them with the professional issues that they have. I really feel a debt to the profession, and I don’t think I’ll ever be able to repay it, but hopefully I can repay a little of it.

Kevin Pho: So you’ve been doing this for a while now, representing physicians and negotiating a lot of contracts with various entities. Now, as you reflect on your career, what has surprised you the most?

Dennis Hursh: I think there are so many, but I think one of the biggest things is that physicians really don’t have an idea of what they’re worth. Just yesterday, I was talking to somebody who’s been in practice for about six years and is switching jobs, and he was shocked when I commented on the letter that he ought to be paid for supervising mid-levels. He’d never heard of that. I also commented that you should be paid for excessive call, and again, that’s something they’ve never heard of. I see it all the time. Physicians go through all this training and all the things that they do for people, and they really don’t seem to have a sense of what they’re worth.

And they also are very gullible in some senses. Somebody hands them something and says, “This is our standard contract,” and they believe it, and they sign it. And then, years later, they’re talking to people who say, “Oh, I got that out of my contract,” and that’s when the light starts dawning. But I think it’s those two things: They just don’t realize what they’re worth, and they accept too much at face value on the contract.

Kevin Pho: So today we’re going to talk about one of your more recent articles, titled “Physician contract horror stories.” Now, how did this article come together?

Dennis Hursh: Actually, it was Halloween, and I started seeing horror stories, and I said, “Boy, I could tell a few horror stories.” Over the years, I’ve had a few that really were pretty horrific. I mentioned one where I was representing a physician who was joining a solo practitioner. There were a lot of issues in the contract. I sent a review letter, and they made some changes, but one of the things that wasn’t changed was that I asked that call would be equitably allocated. It came back with the same language, that the practice would assign call.

So I was talking to the attorney, and I could tell the attorney was a little uncomfortable. He was kind of hemming and hawing. I said, “Well, why can’t we make it equitable?” And he said, “Well, here’s the thing. My client has been doing call 24/7 for seven years now, so he really thinks that your client should do call 24/7 for a few years to even it out.” And he said, “I’m concerned that somebody might argue that that’s not equitable.” I said, “Yeah, I think somebody would.”

So, I mean, those are the kind of things where, if she had just signed that contract, she would have been in for a very rude surprise in her first week, when she was told, “You’re on call for the next couple of years.”

Kevin Pho: And if you didn’t bring that up, would your client have known that?

Dennis Hursh: No. No, I don’t think so. I mean, it said “assign,” because for everybody, call is generally assigned by the practice. So that wasn’t a provision that struck her as being something that needed to be addressed. But yeah, I suspect she wouldn’t have lasted there long, but she would have had a very unpleasant couple of months until she got her resignation in and found a new position.

That was one thing. Another thing I’ve seen repeatedly is horror stories on restrictive covenants. Physicians tend not to look at those, or they say, “Oh, they’ll never enforce it.” And actually, in a lot of states, it can be enforced. But the more important thing that people don’t realize is that if I said to you, “Hey, Kevin, you’ve got a lawsuit now. It might cost you $100,000, but you will win,” I very much doubt you’d say, “Yeah, I want to jump into that.” Well, that’s kind of what you’re presenting to employers. If you go in with a restrictive covenant that a court wouldn’t enforce, you’re basically telling them, “Hey, pay your attorney a lot of money, and eventually you’ll be the winner in court, and it’ll be fine.” Virtually any employer is going to say, “No, thanks. I’ll hire somebody who doesn’t have a lawsuit attached.”

I had a true story: a very senior physician, well known in the medical society, and he was a specialist. So if he rolled into town, he would have had a lot more referrals a lot quicker than virtually anybody else coming into that situation. He had signed a 65-mile restrictive covenant. He was looking at a hospital that was 63 miles away from his prior employer. Now, the general counsel of the new hospital and I were on the phone, and we both agreed the old employer would be crazy to take that to court, because it would certainly lose, and then every restrictive covenant with all its physicians would be in doubt. So there was literally no doubt that a court would not enforce that restrictive covenant. About a week later, I got a call from the general counsel, who said, “We decided to hire somebody else, because we’re comfortable we’d win, but we just don’t want to tangle with this other health system.”

So I think a lot of times people look at it and say, “That’s so crazy, it’ll never be enforced.” And they’re failing to consider that the market will enforce it, even though maybe a court wouldn’t. So I think that’s one of the second-worst horror stories I’ve seen. And another thing that trips up physicians is tail coverage.

Kevin Pho: Yeah, before getting into that, let me ask a question about restrictive covenants. Is there a reasonable restrictive covenant that physicians should accept? Should it be a certain mileage? Because short of getting it completely removed, what is a reasonable restrictive covenant to accept?

Dennis Hursh: Well, I think it depends on your specialty, and it depends on the area. In Manhattan, I usually get about two blocks east and west and maybe five blocks north and south. If you’re in rural Montana and people are driving 30 miles for their groceries, then obviously a much bigger restrictive covenant is appropriate. I usually go for my standard one, which is 5 miles. I think even in a city, 5 miles is enough that patients will have other choices, so you’re not saying, “Well, I’m the only game in town.”

And again, it depends on the area. It also depends on the specialty. If you’re a subspecialist, then probably a restrictive covenant is bigger. A pediatric cardiologist specializing in electrophysiology is probably going to have a bigger restrictive covenant, and appropriately, than, say, a pediatrician or a cardiologist. So there are a lot of factors. Kind of my standard is one year, the lesser of one year or the time you worked for the employer, and 5 miles. And again, with lots of exceptions.

Kevin Pho: Now, how hard should physicians fight to limit restrictive covenants? Because, like you said, employers can sometimes just hire someone else who may not have such stringent criteria for that. How hard should they fight for those limitations?

Dennis Hursh: I think very hard. Another thing: We talked about physicians not knowing their worth. Physicians compete their whole career. I mean, to get where you are today, you’ve done a whole lot of competition. You must be a competitive person, or frankly, you wouldn’t have succeeded at where you are, and I don’t think you’re unique in that. So they’re very competitive, but physicians tend to forget that once a job offer has been made, they want you. They may have had five or six CVs, but for whatever reason, they want you. So it’s very reasonable to try and fight a restrictive covenant, and I think it’s very important.

People starting out either say, “Well, I figure I’ll be here my whole career,” or they just say, “Hey, it’s a job, and I’ll take it.” And that’s the thing. The problem is, you’ve been there three years, and now you have a nice practice. Maybe, if you’re a specialist, you’ve got a lot of referral sources referring to you. If you’re primary care, you’ve got your own patient panel, and people are coming to see you. At that point, it’s really tough if your restrictive covenant means you move out of town. And again, coming out of medical school, maybe you’re single with no family. It starts to become very significant if you have kids in school, and your choice is now, “I’m either going to commute 50 miles every day, or I’m going to move my kids out of school and start over with a new practice.” So I think it’s very much worth fighting over.

Kevin Pho: All right, you talk about another horror story: Who pays for tail coverage?

Dennis Hursh: Yeah, a lot of physicians get trapped in this. But the one that really struck me was, and she’s actually a friend of mine, she moved from California to Philadelphia. Her husband got a great job in Philadelphia, and she got a really nice position there. So obviously, there were no concerns about a restrictive covenant or anything like that. And literally on her last day of work, the practice manager came up to her and said, “Oh, by the way, you’re responsible for tail coverage. I’ll hook you up with the broker.” So she talked to the broker, and it was many thousands of dollars in tail coverage. Now, luckily, she and her husband had saved up money. They thought that was going toward a down payment on the house in Philadelphia. In fact, it ended up going to tail coverage, and they actually had to borrow from, I think, his parents or her parents, I forget, to pay that tail coverage. So it can be a huge issue.

Hers was like a lot of contracts that said, “We’ll provide coverage during the term of this agreement.” And people look at that and say, “Great, you’re providing coverage.” The problem is, the day after the agreement terminates, if you have claims-made insurance, you’re no longer covered. So it’s something that absolutely needs to be addressed, and I think it’s very much worth fighting for. When I started out, in private practice, a lot of employed physicians wouldn’t get it, but I’d always tell them, “If you hang in there, the partners always have their tail paid.” And in about the last three or four years, I’ve been reviewing shareholder agreements where even departing shareholders are now responsible for their tail.

So it’s something that you really have to look out for, and it’s a big dollar amount. It’s not something that you’ll just handle out of your last paycheck. It’s going to be a lot of money if you get stuck with it, and it could actually trap you in that position. I’ve had people come up to me and say, “Look, I looked at it, and in my specialty, the tail coverage I just had quoted was $83,000. I can’t afford that. I’m not going to move. I don’t like it here, but I can’t afford that $83,000.” And it’s going to get worse the longer you’re there. So it can literally trap you in a job that you hate.

Kevin Pho: One of the prevailing themes that you mentioned is that physicians often don’t know what they’re worth. What kind of questions could they ask themselves to better assess their value?

Dennis Hursh: Well, I think the biggest one is, “Why are they offering me this job?” Because you really do have to come back and say, “I’ve competed all my life, and there are a lot of other people who are also clinically superbly qualified.” But there’s a reason they wanted you. Maybe you just hit it off better in the interview. For whatever reason, they want you, and you need to go with that. You’re no longer competing. They want you.

So I think you just do things like look at MGMA, Medical Group Management Association, benchmarks. There’s got to be a good reason why you’re being paid less than median. Because, I mean, if you’re the only game in town, why are they paying you less than median? I was actually in a very heated negotiation once. It’s probably unfortunate, but I asked the other side, “If you think this guy isn’t a median-quality physician, why are you even hiring him?” So I think that’s the biggest thing. There are benchmarks out there. It’s not a question of, “Boy, that’s a whole lot more money than I’m making now, so it must be a good deal.” There are lots of benchmarks out there that you can compare it to.

Kevin Pho: We’re talking to Dennis Hursh. He’s a physician contract lawyer. We’re talking about his more recent KevinMD article, “Physician contract horror stories.” Dennis, what are some of your take-home messages that we can learn from these horror stories?

Dennis Hursh: Well, I’m biased because I review physician employment agreements, but I really think that it’s something you should have an attorney who’s experienced in physician employment agreements review. A lot of these things were not obvious. I mean, a 65-mile restrictive covenant wasn’t, but the call coverage was not at all obvious. Somebody who hasn’t reviewed a lot of the agreements would have looked at that as a very innocuous provision. And the same with the tail coverage; it’s not necessarily obvious on the face of the agreement. So you may need somebody who says, “Hey, this isn’t clear. We need clarification.” I really do think it’s a huge investment for you to move into a new position. I think you ought to spend a little money and have a competent physician’s attorney review the agreement.

Kevin Pho: Dennis, thank you so much for coming back on the show and sharing your time and insight.

Dennis Hursh: Great. It was my pleasure.

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