Look out for these land mines in hospital employment contracts

Timothy M. Smith , Contributing News Writer

As ever more physicians choose employment by a hospital or a hospital-owned practice over private practice, those doctors are facing a multitude of new professional challenges. Among them: the need to understand a new kind of employment contract. 

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“In my experience, almost all doctors in hospital contract negotiations—but particularly those who are just coming out of residency—focus on the money to the exclusion of a lot of other really big issues,” said Elizabeth A. Snelson, president of Legal Counsel for the Medical Staff PLLC, which specializes in working with medical staffs, medical societies and medical staff professionals. “I want physicians to appreciate how much those other issues can be make or break to their personal and professional goals.” 

Snelson is the author of the AMA Physicians’ Guide to Hospital Employment Contracts (PDF), which provides expert guidance to physicians contemplating, entering into or working under employment contracts with hospitals or related entities. The guide is free to AMA members.

A typical hospital employment contract could run to dozens of pages and include 70 or more provisions. Following are four things physicians may encounter in their contracts that Snelson said should give them pause before signing.

“Leaving spaces blank is like buying a product you haven't even seen,” Snelson said. “If you sign a document that's got information to be added later, your ability to negotiate that term is pretty much over. It is now enforceable.”

Snelson suspects the reason blank spaces persist in hospital contacts is that there is too much trust in employment relationships, as well as too little understanding among physicians of how contracts work. Many doctors assume that as long as they discussed the terms of their employment with the hospital, the contract doesn’t need to lay out specifics.

“No! If the promises the hospital made are not in the document you signed, they don't exist,” she said.

Many employment contracts have a clause that says the hospital can assign the contract to a different entity. This is problematic because most physicians do not suspect that they could be traded like professional athletes after they worked so hard to find the right employer.

“It means all your due diligence is out the window,” she said. “You could end up an employee of an entity that you wouldn't be caught dead working for.”

This may be seemingly ordinary boilerplate in contracts, but it can be a real problem for physicians, Snelson said.

“Let’s say you're a neurosurgeon and another duty might be delivering babies,” Snelson said. “This provision makes the contract open-ended on one of the most important questions: What are you going to be doing here?

These can be depicted in a variety of ways, including as nondisclosure agreements. Essentially, nondisparagement clauses mean: You shall not say anything negative about the hospital.

“They are problematic for so many reasons,” Snelson said. “They’ve been used to fire employees who spoke up about shortages of personal protective equipment during the COVID-19 pandemic, and they could even be used to say you can't do peer review.”

Snelson noted that physicians should never try to implement her advice on their own. They should always hire a lawyer, and not just any lawyer.

“Don’t go to the guy who's running the dopey ads during the baseball game,” she said. “Employment law is tricky, and representing physicians complicates it even further because physicians are so highly regulated for things that other employees are not. Go to an employment lawyer who knows about physician employment by hospitals.”

The AMA has assembled a variety of resources to help physicians flourish in the employment setting. That includes developing the Annotated Model Physician-Group Practice Employment Agreement (PDF) and featuring experts’ perspective on collective bargaining for physicians.

At the 2023 AMA Annual Meeting, the House of Delegates adopted policy backing efforts to ban many physician noncompete provisions.