These are challenging times for California healthcare providers and medical practices who employ independent contractor agreements for physicians as part of their medical business strategy. The Internal Revenue Service (IRS) and the California Employment Development Department (EDD) have attacked the concept of independent contractor agreements for physicians and many practices and healthcare providers have been audited as a result.
Misclassification of an employee as an independent contractor is an extraordinarily expensive liability, and this is an even greater factor when the provider in question is a physician. Medical practices and healthcare providers need an experienced and proven medical practice and healthcare law firm who can provide sound counsel and advice including the conditions required to classify a physician as either an employee or an independent contractor.
There are absolutely conditions where a physician can serve as an independent contractor in California. The experienced employment contract attorneys at the Watkins Firm carefully craft Independent Contractor Agreements for physicians to provide all of the important ingredients of a typical employment contract while establishing the distance and specific reasoning for the justification of an independent contractor.
Both an employment contract for a physician and an Independent Contractor Agreement for physicians will include some basic elements such as:
There are however significant differences from there. For example, frequently physicians receive a fixed payment or base (not referred to as a salary in an independent contractor agreement) and an incentive for a percentage of the gross revenue generated above a specific target based upon the fixed payment or base. It is important for Watkins Firm attorneys to review the compensation arrangements in light of federal and California STARK and kickback laws.
Usually the term of Independent Contractor Agreements for physicians is a minimum of 1 year to satisfy STARK and kickback laws and either side may terminate the agreement (after appropriate notice) at any time. Termination for cause usually includes the loss of a medical license or federal DEA registration, a felony conviction or abuse or controlled substances, suspension or termination of hospital privileges or any violation of a material provision contained within the Independent Contract Agreements for physicians.
It is important to structure Independent Contractor Agreements for physicians much differently than an employment agreement to reduce the likelihood of misclassification allegations or audits. Most employment contracts for physicians provide an option for the physician to take an ownership position within the practice or healthcare business (if applicable). If the buy-in is a an important component of the proposed relationship it may be necessary to provide terms which would change the nature of the relationship between the parties or to provide much more detailed information on the terms of any buy-in deal.
The quality of your Independent Contractor Agreements will determine the protection you enjoy from the risk of misclassification of employees or other regulatory, tax or judicial liabilities which have become commonplace in California. San Diego medical practices and healthcare business owners must carefully establish relationships with carefully crafted Independent Contractor Agreements for physicians. This creates additional peace of mind and the foundation to rebuff any potential challenge by the IRS or EDD.
We invite you to review the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today. Our clients value the quality, substance and candor of our advice, and the cost-effective manner in which we serve them. Ask about our service to the San Diego medical practice and healthcare business community across more than four decades. If you are starting a new medical practice, adding a Management Services Organization or MSO, concerned about healthcare corporate governance and compliance or resolving a dispute we can and will help.
