What is a Term Provision in your Anesthesia Contract

Understanding the Term Provision in your anesthesia contract is vitally important before you sign it. But what is it? And why is it important?
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Anesthesiologist Contract

Every contract, whether you are an anesthesiologist, CRNA, CAA or other type of provider (“Provider”), always contains something called a “term” provision. It may or may not be referred to using this terminology. To be valid, a contract must have a term. That is, a date on which it starts and a date on which it ends or by which it may be ended under the terms of the contract. The following are some general guidelines regarding term provisions in contracts:

Many Provider contracts list a specific date on which the contract starts but some only start once certain conditions are met. It is not unusual for Providers to satisfy certain requirements before they can commence working. This might include obtaining medical staff or allied privileges, obtaining a license or DEA registration, passing certain background checks, etc. Be aware the contract can be voided if these requirements are not satisfied by a certain date. Make sure you have enough time to complete the required tasks.

Most contracts are written so that they continue until something occurs to terminate the contract. This is what we call an “evergreen” contract. The contract will not expire. I prefer this type of language compared to a contract with a fixed term that expires because parties often forget the contract expires and continue to work without a signed contract. This can pose compliance and enforcement issues. Other times, the parties remember the contract is set to expire too late. The lack of time to negotiate can force a Provider to sign a new contract with unfavorable terms, rather than look for a new position. It can also leave a Provider unemployed and without job prospects. Where an expiring contract cannot be avoided, I always ask for notice at least 120 to 180 days prior to the contract expiration date. This way the parties can negotiate a new deal or the Provider can look for a new job. If this does not work, make sure you set a calendar reminder for yourself!

Once under contract, a Provider can be terminated in a variety of ways. The most common approach is to terminate “without cause”, most often on 90 days’ notice, although it can be a longer or shorter amount of time. It’s important to think about how much time you would require to interview and credential for a new position and whether you can afford to be unemployed for some period of time. A very short notice provision provides very little job security. An overly long notice provision can make it uncomfortable once notice is provided.

Another way that contracts can be terminated is “for cause.” This can include a variety of provisions such as loss of license, conviction of a felony, and termination from the hospital’s medical staff. It often also includes some more subjective grounds, such as conduct that affects the employer’s “reputation”, failure to show proper “harmony” with colleagues, or violation of a policy of the employer. I like to modify these provisions so it is harder to terminate the Provider without clear evidence of a an actual issue, and to make sure the Provider has opportunity to fix problems that might exist. Many employers are unwilling to modify the termination provisions at all, so Providers need to be careful that they understand the termination language as written.

Contracts can also be terminated through notice of non-renewal by providing a certain amount of notice (again, 90 days is most common). Often these provisions appear in contracts that also have termination without cause provisions, so they are largely ignored. When non-renewal is the only way a contract can be terminated (other than with cause), this can be a sneaky way to lock a Provider into a contract. If you miss the date on which notice can be provided, it may be an entire year or more before notice of non-renewal can be provided again. Such provisions should be avoided when possible.

Whether you are terminated “for cause,” “without cause” or “non-renewed” can impact other provisions of your anesthesia employment agreement. Often the need to repay salary advances and signing bonuses, the enforceability of non-competes and the responsibility to pay for a tail policy can be impacted based on the reason for termination. Consequently, it is important to understand how termination provisions may impact other parts of your contract.

It is not unusual to find a provision in your contract that allows an employer to tell you not to work once notice of termination has been provided. This is acceptable, but make sure that you are receiving your full compensation and benefits during any notice period.

Once you sign an agreement it may be considered effective even if you have not started work. If you try to terminate before you start working, you still need to follow the notice provisions of the agreement you signed.

Remember that a term provision is like any other provision in your contract. Failure to comply by either party is a breach of the anesthesia contract and can lead to an award of damages. Make sure you are aware of the notice provisions of your contract and follow the provisions carefully.

Author: Ericka Adler, J.D., LL.M. concentrates her practice in regulatory and transactional health care law. She represents individual providers, physician groups and other health care entities in satisfying their day-to-day legal health care needs. Ms. Adler devotes a large part of her practice to advising professionals and practices on their contracts and compensation arrangements, and in assisting her clients in the acquisition and sale of health care entities. She works with providers in matters relating to HIPAA, fraud and abuse, billing audits, government investigations, licensure matters and contract disputes.

Ericka Adler can be contacted at eadler@ralaw.com or 312-580-1602

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