This article is available in PDF format.

conomic pressures facing hospitals and anesthesiologists are leading to increased interest on the part of hospitals in employing, rather than contracting with, anesthesiologists. This article will review basic protections that anesthesiologists should consider when negotiating employment arrangements with hospitals. This topic will be addressed in greater depth at the ASA Conference on Practice Management to be held on January 25-27, 2008.

Negotiating protection in the event of termination of the relationship can be as important as negotiating the services to be provided and the compensation to be paid. An employment agreement is the blueprint for determining who has what rights upon termination of the agreement, so careful attention must be paid to the end of the relationship. Accordingly, anesthesiologists who are negotiating employment arrangements should consider including protections to ensure that they are not worse off at the end of the relationship than they are at its inception.

1. Duties and Work Schedules: The employment agreement should outline the anesthesiologist’s duties and approximate work hours. It also should identify who controls the actual scheduling of work hours and call. If the anesthesiologist is to have the day off after call, the agreement should say so. The compensation methodology is an important consideration in structuring work schedules (see Section 6).

The agreement also should be clear regarding administrative duties and whether they will be part of the work hours or in addition to the time spent on clinical duties.

2. Staffing for the Department: To ensure that the anticipated duties and work schedules are realistic, it can be important to require the hospital to provide adequate staffing for the department. Specifying the level of full staffing in the employment contract can promote agreement on how many anesthesiologists and nonphysician anesthetists (if any) are needed. That number should be revised if additional operating rooms are added or closed, if operating room hours are extended or cut back, or if new service lines are added.

If there will be a transition period until the department is fully staffed, the employment agreement should require the hospital to retain sufficient locum tenens or temporary anesthesiologists and nonphysician anesthetists to staff the department during the transition period.

3. Professional Liability Insurance: If anesthesiologists have claims-made coverage, a large cost they will incur to transition to hospital employment is the expense of purchasing tail policies to cover their activities prior to becoming hospital employees. They will want to determine if the hospital is willing to retain the existing professional liability coverage, so that tail coverage is not necessary, or whether the hospital is willing to pay for the tail coverage or to purchase prior acts coverage.

It also is important to understand the type of coverage that the hospital will provide during the course of employment. Is it claims-made or occurrence coverage? Will the insurance be provided by the hospital’s self-insurance fund or a commercial carrier? What is the history of the self-insurance fund or carrier in vigorously defending, as opposed to settling, claims? Is tail coverage required if the anesthesiologist should cease to be a hospital employee? If so, it is in the anesthesiologist’s interest for the hospital to cover the cost of tail coverage if the agreement expires or terminates.

Addressing the issue of professional liability insurance coverage upon termination is essential in order to provide maximum flexibility for an anesthesiologist who becomes a hospital employee. It will be harder for an anesthesiologist to terminate hospital employment if, in order to leave, the anesthesiologist is faced with a large payment for tail coverage.

4. Independent Medical Judgment: A hallmark of physician practice is the exercise of independent medical judgment and the physician’s ability to make decisions based upon the best interest of the patient. A requirement that a physician follow clinical protocols or practice in a manner controlled by nonphysicians may interfere with the physician’s exercise of independent medical judgment. Anesthesiologists should consider including specific language to preserve their ability to exercise independent medical judgment without fear of termination.

5. Protection for Billing: As an employee, the anesthesiologist will lose control over how services are coded and how claims are submitted. Even as an employee, the anesthesiologist will continue to bear responsibility for claims submitted in his/her name. The anesthesiologist thus will want to ensure that services are properly coded and that claims are prepared and submitted in accordance with the rules of each payer. If possible, the anesthesiologist will want to be indemnified by the hospital for any liability associated with claims that the hospital submits for the anesthesiologist’s services.

6. Compensation: The amount payable to the anesthesiologist and when the compensation is paid should be clear. Any amounts that are not included as base salary, such as sign-on bonuses, call pay and severance pay, should be clearly identified. Call pay can make working late afternoons, early evenings, weekends and holidays more tolerable. In particular, late afternoon/early evening call pay can provide an important incentive for a hospital to be efficient in scheduling cases.

If the agreement renews, it is important to include protections, such as automatic increases in compensation, so that the compensation remains consistent with fair market value. An anesthesiologist also may want to require that the hospital increase the anesthesiologist’s compensation to the same level it pays to any newly recruited anesthesiologist with similar qualifications, to avoid frustration if the hospital pays additional compensation, call pay or benefits to a new anesthesiologist.

7. Severance Pay: In the event that the agreement expires or the hospital terminates the contract, it is in the anesthesiologist’s interest to have some level of protection, such as a severance payment. Such a payment is particularly important if the hospital terminates without cause or elects not to renew an agreement (see next section).

8. Termination: In the context of anesthesiologists transitioning to hospital employment, the anesthesiologists will not want the hospital to be able to terminate the agreement without cause and to offer them a lower salary. They certainly will not want the hospital to be able to terminate the agreement without cause if their privileges are tied to the agreement and if a post-termination restrictive covenant will apply. The general rule is that the anesthesiologists should not be worse off when the agreement terminates than when they entered into the relationship.

Although termination without cause by the hospital is not in anesthesiologists’ interest, they may want to be able to terminate without cause if they find that the relationship is not working out as anticipated. It can be difficult to negotiate a unilateral termination provision, but this context may be one in which it is appropriate.

The grounds for termination for cause need to be very specific and appropriate, and there must be proper notice and an adequate opportunity to cure any claimed breach before the agreement can be terminated for cause. It is best for the procedural protections in the hospital medical staff bylaws to apply before an anesthesiologist can be terminated for cause, particularly if clinical privileges terminate upon termination of the agreement.

9. Outside Work: Is outside work permitted during vacation times when the anesthesiologist is not scheduled to provide services at the hospital? Is the anesthesiologist subject to a post-termination restrictive covenant? What is the scope of the noncompete? Will the anesthesiologist have to relocate? An onerous restrictive covenant can limit an anesthesiologist’s options if the transition to hospital employment is not smooth and if restrictive covenants are enforceable in the state.

10. Benefits: What benefits will the hospital provide and how much must the anesthesiologist contribute to those benefits? What retirement plan and employer contributions do the hospital offer? Can the anesthesiologists invest as much as hospital employees as they have been able to do as private practice physicians? Will the hospital offer any compensation to offset a reduced pension benefit? Will the benefits the anesthesiologists have so carefully negotiated be subject to unilateral change by the hospital without the anesthesiologists’ consent?

Hospitals often want to be able to change benefits without obtaining the permission of employees. In the context of a transition from private practice to hospital employment, it is important to understand if the hospital is reserving that right. Anesthesiologists may want to include such protections as a requirement that any change in benefits not result in increased cost to the anesthesiologists of more than a set percentage. They also may want to require advance written notice of any such change in benefits.

11. Vacation and Paid Time Off: It is important to understand not only how much paid leave is provided but how vacation or other paid time off is earned. Is it granted as of the beginning of the work year, or is it accrued on an earn-as-you-go basis? If it is accrued, the anesthesiologist may want to require a certain number of weeks awarded at the beginning of employment to avoid a long wait time before having any paid leave.

May the anesthesiologist carry over vacation? This point can be important if the hospital does not have enough staff and the anesthesiologist is required to forgo vacation to assist in covering the schedule.

Conclusion: Anesthesiologists negotiating employment agreements with hospitals will want to ensure that the agreements provide reasonable work schedules and fair market value compensation for the services performed. They also will want to preserve their flexibility to terminate without substantial costs or restrictions and to understand the consequences if either party elects to terminate the relationship or if the contract expires.