Creating the Ideal Medical Director Contract Template
Medical Director Contracts Overview
Medical directors play a critical role in managing and overseeing critical healthcare operations of healthcare organizations. In addition to overseeing patient care, medical directors typically supervise other providers, manage facility regulatory compliance, lead improvements in healthcare delivery, provide active governance oversight, and ensure the quality of services provided by their healthcare organization .
Given this critical role, medical directors are frequently reviewed by healthcare regulators, including CMS, state licensing boards, and accreditors such as the Joint Commission, DNV GL, and others.
Healthcare organizations are therefore well-advised to maintain a strategy of consistent oversight and management of medical director contracts. In addition to procurement of services and up-front remuneration related issues, the contractual relationship with medical directors comes with a variety of compliance issues under federal and state law.
Components of a Medical Director Contract Template
To be enforceable, the medical director contract must detail the services to be provided and if the medical director is going to be available to the facility in person or not. The scope of services should include whether the medical director will be responsible for ensuring quality in the facility, providing presence for inspections, conducting periodic chart reviews, providing advice and consultation on specific issues, etc. Although the direct involvement of the medical director has been the most desired by the Centers for Medicare & Medicaid Services (CMS), it is not actually required in some states.
The contract with the medical director should provide for the compensation of the medical director. As stated earlier, the medical director cannot own more than 49% of the facility, so the facility is now free to negotiate the salary of the medical director without any ownership limitations. CMS is still focused on the medical director’s compensation and so they have outlined that the compensation is fair market value and based on realistic projections of the medical director’s time, skill and effort in performing the duties in the contract. Further, the Association for Medical Ethics (AME) provides its own guidance regarding the appropriate compensation for medical directors. AME advises that compensation for a medical director should not exceed the 75th or 90th percentile of national salary benchmarks, adjusted annually, plus bonuses that do not exceed the 90th percentile, as determined by an independent qualified expert. AME also advises that a medical director should not receive additional compensation for quality assessments or focused medical reviews. These AME guidelines are voluntary and not universally adopted, but if you were examining a physician’s compensation, the failure to follow AME guidelines could be a concern.
The contract must set out the term of the contract with the medical director. The medical staff bylaws should also reflect the medical director’s appointment. A medical director may be a member or a non-member of the medical staff. The medical director contract should also state the basis for termination of the contract. In addition, the contract should provide for the medical director’s supervision of the medical staff (if applicable) and administration of the medical staff rules and regulations. Finally, the medical director will need to have malpractice and other necessary coverage.
Legal Aspects of a Medical Director Contract
The contract should be reviewed to ensure compliance with applicable healthcare regulations, including federal Anti-Kickback laws, physician self-referral (Stark) laws, licensure issues and fraud and abuse. The legal implications of drafting a medical director agreement or contract addendum intersect with the realities of the subject matter and the laws governing the practice of medicine. To this end, a medical director contract template should state the parties have done the following things, and provide for termination if they are not done: (1) Confirm that the provider (or designated person) is a licensed medical professional in the state where services are rendered on the effective date of the agreement and (16) If applicable, confirm that the medical director has a valid and current license for the physician specialty in the state in which services are performed on the effective date of the agreement. If your template does not recognize licensure or certification requirements, it is likely to be rejected by the medical board or other regulatory body that reviews such agreements, and may be subject to challenge by outside parties who may examine whether the medical director meets state licensure requirements and who might raise allegations about money paid to the medical director in violation of licensing laws.
Structuring Compensation and Incentives
While the ways in which a medical director can be compensated are in many respects limitless, there are terms commonly included in a medical director contract to structure compensation and benefits. While none of these terms will be the basis of legal review or scrutiny, the medical director, his or her employer, and/or the facility should consider their terms in the negotiation of the medical director contract.
A medical director will often receive compensation per hour, per day, or through a monthly retainer arrangement. Depending on the volume of duties at the facility, any of these compensation arrangements may be appropriate. Consideration should be given to the availability of a substitute as well as the duties of the medical director in determining the nature of this compensation.
Medical directors should receive any and all benefits that other employees of the facility receive such as health insurance, retirement, long and short-term disability, malpractice insurance, sick pay, vacation, holidays, and Continuing Medical Education (CME) reimbursements. While it is always desirable to negotiate for more, it is necessary to know and understand the relative value of the following benefits that most employees receive before negotiating:
Health – the monthly premium will be in the range of approximately $450 – $500 for one person, and $750 – $900 for each additional person covered under the health insurance policy .
Retirement – retirement contributions by the employer in a Defined Benefit Plan will be in the range of 9.6 – 10% of your total salary. Defined Contribution Plans, also referred to as an increasingly common 401(k), require an "employer match," generally equal to 3% of salary. If the employer no longer offers a Defined Benefit Plan, this is a major change in the terms of employment and requires some concession from the medical director, such as a reduction in hours or expanded services generally.
Long and Short-Term Disability – in the event of disability, short and long-term disability payments are approximately 60% of the salary being paid as of the date of the disability.
Malpractice – if the facility is paying this premium for the medical director, it can be considered additional taxable income to the medical director.
Sick Pay and Vacation – likewise with sick pay and vacation, if the facility is directly paying for this, it is considered taxable income to the medical director.
Holidays – if the medical director is required to work during a holiday, consideration should be given to additional payment for the duties performed on that holiday.
Continuing Medical Education (CME) – if the facility reimburses the medical director for CME’s, these amounts should be indicated in the medical director contract, as tax-free reimbursements.
These benefit items are not considered taxable income when paid out directly to the medical director.
Term and Condition Negotiation
Negotiating terms and conditions within a medical director contract is not the most exciting part of practicing medicine, but it is nonetheless important. It’s your opportunity to ensure that you are getting everything you need within your new role. These situations are always unique and there might be some flexibility in the template that could provide both parties with some added benefit. It’s just important to make sure that everyone is on the same page.
Timing of the Negotiation
Don’t wait until all of the medical director contracts are drafted before reviewing them. This mistake can lead to the opportunity to negotiate being missed. Any discussions should begin as soon as possible. Many organizations will find an appropriate candidate for medical director and will then start writing medical director contracts. That is your opportunity to get involved. This is also true for those who are being considered to become medical directors.
Levels of Negotiation
There will be a limit to what negotiating can accomplish. In many instances, the organization has already determined exactly what the contract will include and the only spots for negotiation will involve the benefits. The best approach is to determine which items you feel are essential from the contract and focus on those. For example:
- Duration/time commitments
- Base salary
- Productivity additions.
We’ve covered these elements in detail elsewhere here so it’s worth checking our blog for additional information on these important elements.
Limitations and Final Drafts
The organization or hospital will generally be open to negotiating key components of the position, but will expect the final version of the contract to be the same terms that were written out in the draft. There are always components that can be negotiated (and those elements will be discussed below), but the final version should be as similar as possible to the draft that was sent to you for review.
You need to determine whether you like key components of the contract enough to agree to them before the negotiation process even begins. Here are the most common items that are likely limited for change in any medical director contract:
It’s important to know your priorities in advance so that you can push for every available opportunity during the negotiation process to obtain the package you want.
Signing the Medical Director Contract
If you’re happy with the final agreement, sign it as soon as possible. If you’re not happy with it, then the contract negotiation is basically done. You can obtain assistance with your medical director contract if you would like, but there is no guarantee that you’ll have any success modifying it.
Obtain Assistance with Your Medical Director Contract
The best opportunity to negotiate for the perfect medical director contract template is during the initial draft discussion. The goal of this meeting is to determine how your role will fit into the organization. Every facet of the organization and each medical director contract between other organizations are unique. That means your contract will have its own unique possibilities and limitations.
Working from a basic template is rarely difficult, especially with the help of basic changes to your initial draft, and having great medical director contracts and a good understanding of what the terms of the contract are meant to accomplish will allow you to obtain exactly what you need. Working closely with an experienced attorney is the best way to ensure that your contract contains all of the most important elements.
Example Medical Director Contract Template
Following is a sample medical director contract template. As with any other physician employment agreement, it makes sense to list the name of the parties, effective date and term of the contract. The definition of the "medical director services" is an important point to clarify up front because it establishes the scope of work. The contract should also discuss fee for service arrangements and how they interact with the medical director services.
Sample Medical Director Services Contract Template
Med. Dir. Name (hereafter "Medical Director"), on the one hand, and Corp. Name (hereafter "Company") on the other hand, hereby agree as follows:
1. Medical Director shall perform the following services:
• Provide general administrative oversight of the Company’s medical affairs
• Provide management oversight for Medical Staff, Physician Assistants and Nurse Practitioners
• Provide clinical oversight for clinical staff
• Oversee implementation, enforcement and/or revision of medical policies of the Company
• Oversee quality assurance/quality improvement efforts of medical records, Physician Assistants, Nurse Practitioners, and Physician Consultants
• Lead Physician Consultants, Physician Assistants and Nurse Practitioners in continuing medical education efforts to enhance practice standards
• Work with the lead Physician Consultant to refer patients to specialty consultants for diagnosis and treatment
• Establish and maintain relationships with physicians and physicians’ staff
• Oversee educational efforts for patients, physician practices and the general public
• Exercise supervisory control over non-physician clinicians and employees who assist Medical Director in the performance of Medical Director’s duties, as reasonably necessary
• Provide patient care as a physician
2 . Medical Director Services shall commence on _______________, 20XX, and shall continue until _______________, 20XX (hereafter "Term"). Either party may terminate this Agreement, on thirty (30) days notice, if the Medical Director has material difficulty in performing his duties or if Company believes that Medical Director has failed to comply with the policies of the Company or with requirements of any accreditation agency.
3. Company shall pay Medical Director $____________ per month for all Medical Director Services pursuant to paragraph 1 above. Company shall also pay as additional compensation, the costs of continuing education for Medical Director up to a maximum of $_________ per year.