By David J. Lowe, Esq.
Many physicians have made a fundamental change in their medical practices over the past several years: leaving traditional private practice to become employees of large health care networks. For most, the decision to become an “employee” is fraught with doubt and uncertainty.
Greater job and income security is offered by the large networks, but in exchange for a surrender of the physician’s independence. Decisions that were once made solely by the physician will be made by persons unfamiliar with the history and daily operation of the practice, and many of these people will not even be physicians. The physician also faces the prospect of having his or her practice scrutinized by others, where previously the physician was accountable to no one but patients.
Physicians who have become employees certainly have had to make adjustments in their thinking and the way they operate their practices. However, the physician’s loss of decision-making control is generally not as great as many had initially feared. In fact, a great deal of decision-making control can be maintained by taking certain actions both before and after becoming an employee.
The physician who becomes an employee will generally find very little, if any, change in his or her control over patient-care decisions. Because the physician is the one who is licensed to practice medicine, ultimate responsibility for patient-care decisions rests with him or her. In fact, it would be a violation of the law, as well as medical ethics, for a physician to cede control over such decisions to an organization or any other non-licensed person.
Most physician employment contracts contain clauses recognizing the right of the physician to exercise independent medical judgment, and disclaiming any requirement on the part of the physician to take any action that he or she believes to be contrary to appropriate medical practice and the best interest of the patient. Therefore, in this critical area of patient care, the physician’s control is relatively unchanged from the private practice to the network or employment context.
Physicians may, however, find certain subtle changes in areas related to patient-care decisions. For example, the employer is likely to require the physician to maintain medical staff privileges at one or more hospitals that are part of the employer’s network. The employer may also reserve the right to approve the physician’s joining the medical staff of any non-network hospital.
In addition, the physician is likely to find that his or her referral patterns will be closely scrutinized by the employer. In cases where referrals have been made to non-network providers, the physician may be asked to justify those referrals.
The fraud and abuse laws prohibit the employer from requiring the physician to refer patients to network providers. Also, most employment contracts specifically state that the physician will not be required to make any such referrals. However, there may be subtle pressures to utilize affiliated hospitals, facilities, and medical practices when possible and consistent with both good medical practice and the patient’s choice.
When it comes to business-related decisions for the practice, the employer will assert a greater degree of scrutiny and control. In general, the employer will seek to run the physician’s practice as efficiently and as profitably as possible.
In many cases, the employer will work with the physician to establish a plan or a budget for the practice with revenue targets and expense limits. If the physician is able to meet the plan or stay within budget limits, the employer is likely to give the physician more freedom to make business-related decisions.
To the extent that the physician is not meeting the plan, the employer will bring more scrutiny to the practice and will tend to make more of the decisions that seem necessary to achieve its economic goals.
In this context, maintaining control over where the practice is located is often very important to the physician. In most cases, the employer will initially permit the physician to continue practicing in his or her current location. If the practice flourishes, there will be very little incentive for the employer to move the practice.
However, if the employer believes that it can grow the practice better or achieve significant rental and other overhead savings in another location, it is more likely to propose a move. Many physicians have clauses in their employment contracts requiring the employer to obtain the physician’s consent to a re-location. At the very least, the physician should have significant input, at an early stage, into the decision.
Changes in office personnel are another important area of decision making for physicians. In private practice, physicians have total control over who their employees, associates, and partners are. In the network setting, the employer has ultimate control over personnel decisions. However, in most cases, the network will give the physician substantial authority and input, within reasonable parameters, to make personnel decisions.
Of particular importance here is the hiring of other physicians. Many physicians have clauses in their employment contracts requiring the employer to obtain their approval before assigning any new physicians to work in the office.
Other business-related areas where the physician’s decision-making control will change relate to the day-to-day needs of the office. Most physician-employees will no longer be able to order and purchase whatever equipment and supplies they believe are necessary; instead they will have to obtain the approvals required by the particular organization. This may include the approval of a centralized network administrator or the physician’s office manager. In the latter case, there could be tension, since the person who previously took direction from the physician now has authority over certain matters.
As a rule, the physician will benefit enormously if he or she becomes familiar with the network’s procedures for decision-making and develops good working relationships with the personnel who are involved. An early effort to develop strong lines of communication should result in the physician’s having significant influence, if not de facto control, over many business decisions for the practice.
One area where an employee-physician will have very little control is the ability to “moonlight.” Most physicians will be prohibited by the terms of their contracts from performing health care services for anyone other than their employer. Therefore, the physician will generally be unable to seek additional income by providing professional services without the consent of the employer.
Because all organizations are different, physicians who want to maintain the maximum amount of decision-making control in the employment setting should choose their employer carefully. Some organizations have a heavy-handed administrative style, while others are more sensitive to the needs and concerns of physicians. The latter type is more likely to give physicians greater latitude in decision making.
Physicians should also seek to address those areas where they want to maintain decision-making control, such as practice location and personnel, with specific language in the employment contract. Finally, physicians should be assured that even in the employment context, they will have final authority over the most important decisions: those of patient treatment and care.
David J. Lowe, Esq., is a Director with the law firm of Cohen & Grigsby, P.C. Mr. Lowe practices in the area of health care law.