Hiring a new physician into a practice can be an expensive and risky proposition but for most practices it is a necessary endeavor.  Aside from the actual costs of recruiting and negotiating a contract with the new physician, there are associated increases in overhead, and perhaps most importantly, the risk of damaging valuable practice goodwill in the community if you happen to make the wrong choice.  Here are a few important legal and business considerations to think about before hiring a new physician:

1.         Are you sure you need a new physician?  Physician extenders – nurse practitioners and physician assistants – often cost less than hiring a physician and can, depending on their state licensure rules, handle much of what a physician can do in the office.  Moreover, extenders don’t typically expect to become owners and may be willing to work on an hourly as-needed basis.  Consider first whether an extender might be enough.

2.         How much can you afford to pay a new physician?  Fundamentally the decision to hire is a mathematical equation:  how much in salary, benefits and overhead will it cost you and do you have the patient volume to support the new physician.

3.         What type of physician is the right fit for your practice? Is there a potential niche for a physician with a particular subspecialty or skills set?

4.         Do you expect to offer the opportunity for the new physician to become an owner in the practice?  While it’s never a good idea to guarantee co-ownership in your physician employment agreement, be prepared for candidates to ask about the opportunity and what it might entail. You don’t necessarily have to know or give all of the details, but it’s a good idea to have a sense of when co-ownership might be offered, what criteria will go into the decision to offer it and what kind of buy-in might be required.

5.         Will you impose a non-competition covenant on the new physician?  Restrictive covenants are very common in physician employment agreements but overly-aggressive restrictions can send the wrong message and scare good candidates away.   Ideally restrictive covenants should be narrowly tailored to protect the practice.

This week the Office of Inspector General published an interesting Advisory Opinion (AO 12-22) dealing with a cardiology co-management agreement between a hospital and a private cardiology group practice.

Under the arrangement, the hospital would compensate the physicians for certain management, oversight, strategic planning and medical direction services in connection with the hospital’s four catheterization labs.

The Compensation payable to the physicians would consist of a fixed guaranteed amount and potential performance bonuses based on achieving specific patient satisfaction, quality and cost-saving targets.

Based on a number of safeguards within the arrangement, including that the bonus criteria were developed by a committee including providers outside the cardiology group and that the group’s performance and compensation would be reviewed by an independent consultant, the OIG stated that it would not impose sanctions on the requesting parties.

Although the Advisory Opinion is fact specific, as one of the first opinions dealing with co-management arrangements, it offers providers significant insight into how the OIG is likely to view these types of arrangements going forward.