Physician Contracting Tips for CMOs and Doctors

Having a CMO involved in physician contracting can be an advantage, particularly in a dyad environment that includes the CMO and the CEO or the CFO.

Chief medical officers should be involved in physician contracting to help guide physicians and set expectations for physicians relative to a health system's or hospital's culture, the CMO of Davis Health System says.

With most physicians now employed by healthcare organizations rather than practicing independently, physician contracting has become a key area of interest for CMOs and other healthcare leaders. Physician contracts are structured to reward doctors for productivity, incentivize quality and safety measures, or combinations of these approaches.

Familiarity with physician contracting is crucial for CMOs, says Catherine "Mindy" Chua, DO, CMO of Elkins, West Virginia-based Davis Health System.

"Part of my job is to talk with physicians about culture and what we expect of them relative to our culture. So, knowing what is in the contracts and what the expectations are can be helpful to guide physicians," she says. "For example, if a physician says they want to work part-time to achieve a better work-life balance, I know how that would affect them financially, how that would affect the health system financially, and how that would affect their patients."

Having a CMO involved in physician contracting can be an advantage, particularly in a dyad environment that includes the CMO and the CEO or the CFO, Chua says.

"The CMO can guide the quality metrics that would enhance the performance of the entire health system and the way that doctors interact with patients. Whereas, the CEO or CFO drives the financial piece of physician contracts," she says. "Together, the dyad players can make a physician contract that is useful for the organization and helpful for the doctors in attaining a favorable work-life balance. Physician contracts also need to be designed to benefit the people you are serving, which are the patients."

At Davis Health System, physician contracts are designed 100% with work RVUs, which is a metric used to measure the work physicians do.

The primary elements of the health system's physician contracts include relatively standard legal terminology as well as how physicians enter into the contract and can exit the contract, Chua says. "From my perspective, the core elements are hours expected to work, call schedule, expectations for productivity, number of hours face-to-face with patients, and salary."

She says one of her goals is to introduce quality and safety metrics into physician contracting at Davis Health System. "Work RVUs do not take into account quality, safety, service, operating cost, and operating margin. If you can build those elements into the physician contract so that you have a situation where the physician is not just being paid for productivity, you can have a contract that is beneficial all the way around."

There are payment models that can guide healthcare organizations to include quality and safety metrics in physician contracts, Chua says.

"For example, you can look at the Merit-based Incentive Payment System (MIPS) requirements for different services such as surgery, ophthalmology, or family practice to see what the Centers for Medicare & Medicaid Services is rating us on in terms of quality and safety," she says. "If you can capture that information, you can give a physician a base salary then increase compensation based on their ability to meet the quality and safety metrics of their specialty."

The MIPS requirements can form the basis for structuring physician contracts to account for quality and safety, Chua says.

"You can take information from MIPS, then go to the chief of a service line and tell them, 'These are the quality metrics that are meaningful to CMS, which of these metrics are meaningful to you and your patients?' Based on that conversation, you can build an incentive package," she says.

There are several pitfalls to avoid in physician contracting, Chua says.

• Make sure there is an exit clause in the contract that does not have to be for cause.
   
• Many states are moving away from noncompete clauses in physician contracts.
   
• If you are using 100% work RVU contracting, you want to be very specific in that language.
   
• There are instances where you should not be too specific in contract language. For example, if a physician is contracted to work four 10-hour days per week, but they decide they want to work five 8-hour days per week, you would have to go back and amend the contract.
   
• You should be careful with start dates because there can be delays such as licensing that can affect a start date. Being flexible on start dates can avoid more paperwork.

The physician perspective

For doctors, there are several best practices for entering into physician contracts, says Steven Furr, MD, president of the American Academy of Family Physicians and a practicing family physician in Jackson, Alabama.

"The No. 1 best practice is doing a contract far enough ahead of time. Residents often wait too late in the process because there are many steps that you need to go through," he says. "You should have advisors to help you with physician contracting. It is helpful to have a healthcare attorney who can review a contract and see whether there are issues that you need to address that you may not be aware of. It is also helpful to have a tax accountant to look at contracts to see whether there are any tax considerations."

When they look at a contract, most doctors look at the salary, but a contract is much more than compensation, Furr says. "There are many nuances such as malpractice insurance, getting paid for membership dues, and continuing medical education reimbursement."

Doctors should be wary of restrictive covenants such as noncompete clauses, he says. "Doctors need to address exclusive covenants upfront. They must decide whether working at an organization is so attractive that they are willing to live with a restrictive covenant. Otherwise, they must consider walking away from the opportunity. Some contracts say a doctor cannot practice within a certain area if they choose to leave an organization. Those arrangements can be restrictive, and sometimes the designated geographical areas can be extremely large, which means a doctor would have to leave the area to continue practicing medicine."

There is a shortage of primary care physicians, and with restrictive covenants, if a doctor wants to leave a practice, they are also leaving their patients behind, Furr says. "You are disrupting patient care. For us as family medicine doctors, it is all about the physician-patient relationship, and restrictive covenants by their nature can disrupt those relationships."