Review disability clauses now, not later

Contract Language. By Steven M. Harris, amednews contributor. May 5, 2003.

CONTRACT LANGUAGE

A column examining the ins and outs of contract issues

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Whether you are just beginning your practice, are looking toward retirement in the near future or are anywhere in between, you should ask yourself what happens if you become disabled during the term of your employment.

To avoid a financial hardship, make sure that you compare your disability policy with your employment contract so that you are aware of your disability coverage and related limitations.

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If you experience a disabling condition, your employment contract usually gives your employer the ability to terminate your contract. Some employers will continue to pay the physician his or her full salary, or a specified portion of the salary, for anywhere from one to four months after the onset of a disability.

Employers also may provide group or other short-term or long-term disability insurance coverage.

It is imperative that you periodically review your disability insurance needs with your insurance adviser.

You should make sure that the disability provisions in your employment agreement match up with the underlying disability policy. Before you sign your employment agreement, ask for a copy of the applicable insurance policy so that you can review it in conjunction with the terms of your employment contract.

Define "disability"

Your employment agreement should specifically define what health condition will be considered a "disability." Make sure that this definition includes both physical and mental impairment. There also should be a procedure to select an independent physician to conduct an examination in the event you and your employer cannot reach an agreement as to whether you are disabled.

The following is a sample contract provision that defines "disability" and includes the independent examining physician procedure:

"'Disability' shall mean that, due to bodily injury, sickness, disease or other impairment [whether physical or mental], physician is unable [even with reasonable accommodation] to perform his or her substantial and material duties under his or her employment agreement. Determination of whether a disability exists, and, if so, the dates of such disability, shall be made by mutual agreement of the practice and the physician whose health is in question or by an independent physician selected by agreement between the practice and the physician whose health is in question.

"If the practice and the physician ... are unable to agree upon an examining physician, the physician whose health is in question and the practice shall each select an independent physician within 10 days after written request by the other, and the named physicians shall within 10 days thereafter select the examining independent physician. The opinion of the examining physician shall be binding. ... The practice shall assume the costs for the applicable disability determination."

Short-term disability payment

Your employment contract may include a reduced-compensation schedule upon the occurrence of a short-term disability. If your contract contains such a provision, it is important that you match up the corresponding coverage, if any, provided under your disability policy. The following is an example of a short-term reduced-compensation provision:

"Short-term disability. In the event that physician is not able to physically or mentally perform his or her professional services under this agreement, and such disability continues for more than one month, physician shall receive: 75% of the compensation physician would otherwise have received during the second month of such disability; 50% of the compensation physician would otherwise have received during the third month of such disability; and 25% of the compensation physician would otherwise have received during the fourth month of such disability. In the event the practice provides any type of short-term disability coverage, any payment received by physician from such coverage shall be credited against compensation the practice is required to make pursuant to this agreement."

Employee benefits provision

Your employment agreement should specifically identify all benefits you will receive and are entitled to during the course of your employment. The employee benefits provision usually directly follows the compensation provision and may provide group life, health, accident and disability insurance.

A contract may read:

"Physician shall be entitled to coverage under all group life, health, accident and disability insurance plans for which coverage is provided to the practice's employees, on all of the same terms and conditions. Physician shall be entitled to 100% of the compensation payable pursuant to this agreement until the event of disability. Upon meeting the eligibility requirements, such plan will provide for further benefits as outlined by plan documents."

While disability is not a subject that most physicians want to consider, it is important that you carefully review any applicable disability policies and coverage in conjunction with your employment agreement to ensure that you have adequate coverage in the event that you become disabled.

Specifically, you must consider how disability is defined; whether there is a provision for compensation during a short-term disability; and what employee benefits are provided and paid for by your employer during your disability.

Harris, a partner at McDonald Hopkins in Chicago, concentrates on health care law and has counseled physicians, physician networks and health care groups nationally. The author and publisher are not rendering professional advice and assume no liability in connection with its use. He can be reached at 312-280-0111, or by email (sharris@mcdonaldhopkins.com).