A growing number of physicians are pursuing part-time work to accommodate lifestyle demands and personal desires. According to a 2010 survey conducted by Cejka Search and the American Medical Group Management Association, 21% of physicians in the United States are working part time, compared with only 13% in 2005. Among those part-time physicians, the fastest growing categories are men approaching retirement and women in the early to middle stages of their careers. Senior physicians who are tired of a full-time patient load and frequent call responsibilities are increasingly opting for part-time employment as a transition into retirement. Physicians with young children are seeking part-time employment to be more active in child rearing. Physicians who are retained by a group practice or hospital on a part-time basis should be cognizant of the following areas of the physician’s employment or independent contractor agreement: independent contractor or employee status, compensation, benefits, professional liability (malpractice) insurance, call responsibilities, and restrictive covenants.
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Explore This IssueDecember 2011
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Independent Contractor versus Employee
Often, physicians assume that just because they are working part time, they are therefore independent contractors. That is an inaccurate assumption. The amount of time a physician works is not the deciding factor as to whether someone is an employee or an independent contractor of the group practice or hospital. Whether a physician is an employee or an independent contractor is a distinction with real consequences for tax purposes and protections under federal and state labor and employment laws. Generally, labor and employment laws provide protections for employees, but these protections do not extend to independent contractors. With regard to taxes, if a physician is an employee, the employer must withhold income, Social Security, and Medicare taxes, and pay unemployment tax on wages paid to the physician. Conversely, if a physician is an independent contractor, the practice or hospital will not withhold or pay taxes on payments to the physician, but rather the individual physician will be responsible for making such payments to the IRS and state tax authorities. Thus, it is imperative that the contract clearly indicate whether the physician is an employee or an independent contractor and the corresponding responsibilities of the parties.
Compensation and Benefits
Partial compensation for part-time work is logical, but determining a fair and competitive compensation package is not always straightforward when it comes to part-time employees. There are four general models that practices and hospitals use to determine compensation for part-time physicians. First, the physician may be paid a percentage of a full-time physician’s salary, based on the number of hours worked. Second, the physician may be paid a percentage of collected professional fees rendered by the physician. Third, the physician may receive a per diem rate. Fourth, the physician’s compensation may be based on the revenue the physician generates minus the physician’s share of the overhead expenses. However, determining the part-time worker’s share of the overhead expenses can be tricky since the physician is not benefitting from the overhead on a full-time basis. One way to determine a part-time worker’s share of the overhead expenses is to allocate the overhead based on the physician’s share of the schedule. For example, if a rheumatology practice employs five rheumatologists and a sixth rheumatologist is hired half time, the new part-time rheumatologist would be responsible for one-eleventh of the overhead costs (with each of the other full-time rheumatologists responsible for two-elevenths of the overhead expenses). As with full-time physicians, there is a plethora of ways to formulate a part-time physician’s compensation, and the method used should be explicitly outlined in the physician’s employment or independent contractor agreement.
Benefit plans and arrangements (such as health, dental, retirement plan, disability coverage, life insurance, etc.) are frequently provided to employees and infrequently provided to independent contractors. Whether a physician who is working part time will receive benefits will vary from employer to employer. A threshold issue, however, is whether a part-time worker is even eligible to receive certain benefits. Many health, dental, and visions plans require employees to work a minimum of 30 hours a week on a regular basis, thus excluding part-time employees who work fewer hours. For retirement and pension plans, employees typically must work a minimum of 1,000 hours to be eligible to participate. Even if a physician’s employment agreement provides that the physician may receive benefits from the employer, the agreement may also provide that such a provision is subject to the terms and conditions of the particular benefit plans or arrangements.
Professional Liability (Malpractice) Insurance
While some practices or hospitals pay for a part-time physician’s malpractice insurance costs, many shift some or all of these costs to the physician. Many insurance providers offer malpractice insurance plans for physicians practicing part time, with reduced premiums and reduced coverage. When negotiating a compensation package, payment for malpractice insurance should be considered. A physician must also be aware of what is excluded from coverage. For example, if Dr. A works part time with ABC Medical Group and part time with XYZ Medical Group, and ABC Medical Group provides malpractice coverage for Dr. A, it cannot be assumed that such coverage will cover Dr. A’s work with XYZ Medical Group. Dr. A may need a separate policy for work performed through XYZ Medical Group.
Sharing in the responsibility for call coverage becomes an issue regarding physicians working a reduced schedule. Full-time physicians accept the fact that they will be responsible for some call coverage. However, this is not the sentiment shared by many part-time physicians and becomes an area of significant negotiation in the employment or independent contractor agreement. Some part-time physicians are willing to take reduced call coverage commensurate with their reduced amount of time in the office. For instance, in the example described above with the six rheumatologists, the half-time rheumatologist may take call one in every eleven nights and weekends, while the five full-time rheumatologists take call two in every eleven nights and weekends. Alternatively, if a practice has sufficient call coverage with its full-time physicians, the practice may permit the part-time physician to forego call responsibility. However, in that case, the practice may reduce the physician’s compensation to account for the lack of call coverage.
Although a physician may only be employed on a part-time basis, the employer may nevertheless want to protect its patient base by including restrictive covenants like noncompetition and nonsolicitation clauses in the physician’s employment agreement. A part-time physician must be careful that the restrictive covenants do not jeopardize his or her other career objectives. For example, in the example described above with Dr. A working part time for both ABC Medical Group and XYZ Medical Group, a noncompetition clause in Dr. A’s employment agreement with ABC Medical Group could prohibit Dr. A from working at another practice, including XYZ Medical Group.
Retaining part-time physicians is an increasingly attractive option for private practices—and part-time work is an increasingly attractive option for physicians. The items described above are just a few of the provisions that are unique to the part-time physician relationship that should be reflected in the physician’s employment or independent contractor agreement.
Steven M. Harris, Esq., is a nationally recognized healthcare attorney and a member of the law firm McDonald Hopkins, LLC. Contact him at [email protected].