May 21, 2019

Compliance 101: Employment Agreements for Healthcare Providers

By Erica Pero


It’s time for a refresher in drafting a compliant employment agreement for a healthcare professional. Here are five things to include:

Assignment of Billing Rights.
If you’re going to bill third party insurance for services provided by the healthcare professional through your practice, make sure that your employee assigns his/her right to bill insurance payors to your practice. This way you have legal permission to bill on his/her behalf.

No Excluded Providers.
Make sure your employee warrants that he/she is not an “Excluded Provider” (someone prohibited from billing for Medicare services) and that they must tell you if they become an Excluded Provider during the course of employment. (Check the OIG website before making a job offer to confirm that they’re telling you the truth!) There are stiff penalties for employing an excluded provider and it’s easy to avoid doing so!

Reasonable Non-Compete.
Most states only enforce reasonable non-compete provisions, meaning that if you draft an unreasonable non-compete, a court will either revise it or throw it out completely (yikes!). Don’t overreach! Instead, limit competition only to the extent that you protect your legitimate business interests. If your practice draws the majority of patients from within a five mile radius of your office, don’t prohibit the employee from finding employment within 15 miles of your practice!

Clear Compensation Calculation.
Make sure that both you and the employee understand the compensation calculation, and then stick to it. The books should match what the Employment Agreement says. If you’re unsure, ask a CPA to audit your payroll.

Malpractice Insurance Coverage.
It’s helpful to state who is paying for malpractice insurance coverage in the following instances: (1) tail coverage for employee’s previous job, (2) coverage for employee’s current role at your company, and (3) tail coverage once he/she no longer works for you.

A properly drafted Employment Agreement is helpful in avoiding inadvertent fraud and provides a framework for success. If you have further questions, contact a health law attorney.

Erica Pero, an attorney with Pero Law, focuses her practice on health law. She helps healthcare professionals navigate the complexities of running a business in today’s healthcare industry. Pero Law is a lean law firm committed to excellent customer service and exceptional legal representation.