Follow principles in 6 key areas to protect employed physicians

With the majority of physicians now employed by hospitals or health systems, fresh attention should be given to the challenges they face. 

As the COVID-19 pandemic commanded the world’s attention in 2020, some physicians might not have noticed that their profession had passed a notable milestone. That’s when, for the first time since the AMA began analyzing physician practice arrangements, the share of patient care physicians in private practices dipped below 50%. 

Regardless of whether the pandemic was a contributing factor, the percentage of physicians working for hospitals and health systems has recently been growing every year.

Given those trends, it’s more important than ever to understand the challenges that employment presents to the medical profession and what principles should undergird physician employment.

In 2022, the AMA House of Delegates updated the “AMA Principles for Physician Employment” to better help physicians and employers identify and address these challenges.

The principles, first adopted a decade earlier and outlined in full below, cover six key areas:

• Addressing conflicts of interest.
• Advocacy for patients and the profession.
• Contracting.
• Hospital-medical staff relations.
• Peer review and performance evaluations.
• Payment agreements.

The principles are not intended to cover all of the professional and ethical obligations of employed physicians—which are the same for every physician, regardless of employment status—but to address potentially problematic aspects of the employer-employee relationship and help ensure safe, high-quality and cost-effective patient care.

• A physician's paramount responsibility is to their patients. Additionally, given that an employed physician occupies a position of significant trust, they owe a duty of loyalty to their employer. This divided loyalty can create conflicts of interest, such as financial incentives to over- or undertreat patients, which employed physicians should strive to recognize and address.
• Employed physicians should be free to exercise their personal and professional judgment in voting, speaking and advocating on any manner regarding patient care interests, the profession, health care in the community and the independent exercise of medical judgment. Employed physicians should not be deemed in breach of their employment agreements, nor be retaliated against by their employers, for asserting these interests.
• Employed physicians also should enjoy academic freedom to pursue clinical research and other academic pursuits within the ethical principles of the medical profession and the guidelines of the organization.
• In any situation where the economic or other interests of the employer are in conflict with patient welfare, patient welfare must take priority.
• Physicians should always make treatment and referral decisions based on the best interests of their patients. Employers and the physicians they employ must assure that agreements or understandings (explicit or implicit) restricting, discouraging or encouraging particular treatment or referral options are disclosed to patients.
• No physician should be required or coerced to perform or assist in any nonemergent procedure that would be contrary to their religious beliefs or moral convictions; and
• No physician should be discriminated against in employment, promotion or the extension of staff or other privileges because they either performed or assisted in a lawful, nonemergent procedure or refused to do so on the grounds that it violates their religious beliefs or moral convictions.
• Assuming a title or position that may remove a physician from direct patient-physician relationships—such as medical director, vice president for medical affairs, etc.—does not override professional ethical obligations.
• Physicians whose actions serve to override the individual patient care decisions of other physicians are themselves engaged in the practice of medicine and are subject to professional ethical obligations and may be legally responsible for such decisions.
• Physicians who hold administrative leadership positions should use whatever administrative and governance mechanisms exist within the organization to foster policies that enhance the quality of patient care and the patient care experience.

Refer to the AMA Code of Medical Ethics for further guidance on conflicts of interest.

• Patient advocacy is a fundamental element of the patient-physician relationship that should not be altered by the health care system or setting in which physicians practice, or the methods by which they are compensated.
• Employed physicians should be free to engage in volunteer work outside of, and which does not interfere with, their duties as employees.

• Physicians should be free to enter into mutually satisfactory contractual arrangements, including employment, with hospitals, health care systems, medical groups, insurance plans and other entities as permitted by law and in accordance with the ethical principles of the medical profession.
• Physicians should never be coerced into employment with hospitals, health care systems, medical groups, insurance plans or any other entities. Employment agreements between physicians and their employers should be negotiated in good faith. Both parties are urged to obtain the advice of legal counsel experienced in physician employment matters when negotiating employment contracts.
• When a physician's compensation is related to the revenue he or she generates, or to similar factors, the employer should make clear to the physician the factors upon which compensation is based.
• Termination of an employment or contractual relationship between a physician and an entity employing that physician does not necessarily end the patient-physician relationship between the employed physician and persons under their care.
• When a physician's employment status is unilaterally terminated by an employer, the physician and their employer should notify the physician's patients that the physician will no longer be working with the employer and should provide them with the physician's new contact information.
• Patients should be given the choice to continue to be seen by the physician in their new practice setting or to be treated by another physician still working with the employer.
• Records for the physician's patients should be retained for as long as they are necessary for the care of the patients or for addressing legal issues faced by the physician; records should not be destroyed without notice to the former employee.
• Where physician possession of all medical records of their patients is not already required by state law, the employment agreement should specify that the physician is entitled to copies of patient charts and records upon a specific request in writing from any patient or when such records are necessary for the physician's defense in malpractice actions, administrative investigations or other proceedings against the physician.
• Physician employment agreements should contain provisions to protect a physician's right to due process before termination for cause. When such cause relates to quality, patient safety or any other matter that could trigger the initiation of disciplinary action by the medical staff, the physician should be afforded full due process under the medical staff bylaws, and the agreement should not be terminated before the governing body has acted on the recommendation of the medical staff.
• Physician employment agreements should specify whether or not termination of employment is grounds for automatic termination of hospital medical staff membership or clinical privileges. When such cause is nonclinical or not otherwise a concern of the medical staff, the physician should be afforded whatever due process is outlined in the employer's human resources policies and procedures.
• Physicians are encouraged to carefully consider the potential benefits and harms of entering into employment agreements containing without cause termination provisions. Employers should never terminate agreements without cause when the underlying reason for the termination relates to quality, patient safety or any other matter that could trigger the initiation of disciplinary action by the medical staff.
• Physicians are discouraged from entering into agreements that restrict the physician's right to practice medicine for a specified period of time or in a specified area upon termination of employment.
• Physician employment agreements should contain dispute resolution provisions. If the parties desire an alternative to going to court, such as arbitration, the contract should specify the manner in which disputes will be resolved.

Refer to the Annotated Model Physician-Group Practice Employment Agreement (PDF) and the Annotated Model Physician-Hospital Employment Agreement (PDF), both free to AMA members, for further guidance on physician employment contracts.

• Employed physicians should be members of the organized medical staffs of the hospitals or health systems with which they have contractual or financial arrangements, should be subject to the bylaws of those medical staffs and should conduct their professional activities according to the bylaws, standards, rules and regulations and policies adopted by those medical staffs.
• Regardless of the employment status of its individual members, the organized medical staff remains responsible for the provision of quality care and must work collectively to improve patient care and outcomes.
• Employed physicians who are members of the organized medical staff should be free to exercise their personal and professional judgment in voting, speaking and advocating on any matter regarding medical staff matters and should not be deemed in breach of their employment agreements, nor be retaliated against by their employers, for asserting these interests.
• Employers should seek the input of the medical staff prior to the initiation, renewal or termination of exclusive employment contracts.

• All physicians should promote and be subject to an effective program of peer review to monitor and evaluate the quality, appropriateness, medical necessity and efficiency of the patient care services provided within their practice settings.
• Peer review should follow established procedures that are identical for all physicians practicing within a given health care organization, regardless of their employment status.
• Peer review of employed physicians should be conducted independently of, and without interference from, any human resources activities of the employer.
• Physicians—not lay administrators—should be ultimately responsible for all peer review of medical services provided by employed physicians.
• Employed physicians should be accorded due-process protections, including a fair and objective hearing, in all peer-review proceedings. The fundamental aspects of a fair hearing are a listing of specific charges, adequate notice of the right to a hearing, the opportunity to be present and to rebut evidence, and the opportunity to present a defense.
• Due process protections should extend to any disciplinary action sought by the employer that relates to the employed physician's independent exercise of medical judgment.
• Employers should provide employed physicians with regular performance evaluations, which should be presented in writing and accompanied by an oral discussion with the employed physician.
• Physicians should be informed before the beginning of the evaluation period of the general criteria to be considered in their performance evaluations, for example: quality of medical services provided, nature and frequency of patient complaints, employee productivity, employee contribution to the administrative or operational activities of the employer, etc.
• Upon termination of employment with or without cause, an employed physician generally should not be required to resign their hospital medical staff membership or any of the clinical privileges held during the term of employment, unless an independent action of the medical staff calls for such action and the physician has been afforded full due process under the medical staff bylaws.

Automatic rescission of medical staff membership or clinical privileges following termination of an employment agreement is tolerable only if each of the following conditions is met:

• The agreement is for the provision of services on an exclusive basis.
• Prior to the termination of the exclusive contract, the medical staff holds a hearing, as defined by the medical staff and hospital, to permit interested parties to express their views on the matter, with the medical staff subsequently making a recommendation to the governing body as to whether the contract should be terminated, as outlined in AMA Policy H-225.985, “Medical Staff Review of Quality of Care Issues Prior to Exclusive Contract.”
• The agreement explicitly states that medical staff membership or clinical privileges must be resigned upon termination of the agreement.

Refer to the “AMA Principles for Incident-Based Peer Review and Disciplining at Health Care Organizations” for further guidance on peer review.

• Although they typically assign their billing privileges to their employers, employed physicians or their chosen representatives should be prospectively involved if the employer negotiates agreements for them for professional fees, capitation or global billing, or shared savings.
• Employed physicians should be informed about the actual payment amount allocated to the professional fee component of the total payment received by the contractual arrangement.
• Employed physicians have a responsibility to assure that bills issued for services they provide are accurate and should therefore retain the right to review billing claims as may be necessary to verify that such bills are correct.
• Employers should indemnify and defend, and save harmless, employed physicians with respect to any violation of law or regulation or breach of contract in connection with the employer's billing for physician services, which violation is not the fault of the employee.

At the 2023 AMA Annual Meeting, the House of Delegates adopted a resolution introduced by the AMA Organized Medical Staff Section to establish a formal definition of an “employed physician.”

Delegates adopted language defining an employed physician as “any physician who derives compensation, financial or otherwise, from a contractual relationship with a practice, hospital or other funding entity and has no direct controlling interest in the entity.”

Learn more with the AMA to understand physician employment contracts.