Anatomy Of Locum Tenens Contracts: A Physician’s Guide To Understanding Contractual Provisions

Locum tenens means “to hold the place of, to substitute for” and locum tenens contracts are a common form of agreement for physicians who provide temporary medical services in place of full-time physicians.

Now, during the COVID-19 pandemic, increased demand puts physicians in a better position to negotiate their locum tenens contracts. However, too many practitioners sign them without fully understanding their implications. This is a mistake. A well-drafted locum tenens contract (a) protects the physician’s interests beyond compensation, (b) anticipates and addresses disputes, and (c) limits risks.

How locum tenens works

Physicians provide locum tenens services through third-party placement agencies or directly to health care facilities. Placement agencies recruit and directly contract with physicians to meet the temporary staffing needs of health care facilities they represent. Although these agencies market themselves as advocates for physicians, their primary loyalty is to the clients that pay their fees – the facilities they represent. This is why physicians should hire an attorney well-versed in drafting and negotiating locum tenens agreements.

What physicians need to know

Locum tenens contracts vary between agencies and facilities. Some use a blanket master services agreement. For most agencies, this is signed before placing physicians. It is supplemented by written locum tenens assignments (e.g., work orders, statements of work, or confirmations), which specify the facility’s location, dates of engagement, compensation, and possible modifications to the master services agreement.

Term

A basic but still important provision in any locum tenens agreement is its term – i.e., how long it remains in effect. An “evergreen clause” automatically renews the term for successive periods of time. Evergreen provisions have several advantages and disadvantages for physicians.

Termination

Termination provisions allow either party to end the contract. These provisions can differ considerably according to whether termination is “without cause” or “for cause” or “for good reason.”

“Without cause” means one party can terminate the agreement and/or assignment, for no reason, usually following a specified period of written notice. The main issue here is what amount of notice is best for you.

“For cause” means the health care facility can terminate you either immediately or after a cure period of time if the issue triggering a default under the contract is not adequately addressed during a “cure period.” The traditional laundry list of “for cause” events includes valid reasons for immediate termination. However, they also often include reasons like “failure to perform Physician’s duties to the reasonable satisfaction of Hospital,” and for these “curable breaches,” it is important that the physician insists on notice and an opportunity to cure.

How the termination is characterized is important because the consequences of each type can differ greatly. These consequences are not always easy to spot because they are usually found in other sections of the agreement and obscured by legalese.

Restrictive covenants

Restrictive covenants prohibit the physician from competing within a fixed geographic area, certain facilities, or both, for a period of time. They are governed by state law, and state laws vary greatly. Many residents and fellows are under the misconception that non-competes are unenforceable. New York and New Jersey, among many other states, enforce non-competes when the restrictions are reasonable. In determining reasonableness, courts look to: the scope (the types of services), the duration (the length of time), and the geographic limitations.

Malpractice insurance

Medical malpractice insurance is a standard provision, but which party provides the coverage, the policy type, its term, the policy limits, tail coverage, and other important aspects vary wildly.

The two main types are “occurrence” and “claims-made” policies. Occurrence policies cover the physician for incidents that occur when the policy is in effect, regardless of when the claim is made, while claims-made policies cover the physician if the policy is in effect when the claim is made. Accordingly, if the claims-made policy is not renewed, the physician is exposed to a gap in coverage. To avoid this, physicians should ensure that their agreements include an extended reporting endorsement, commonly referred to as “tail” coverage.

Compensation and reimbursed expenses

Pay for locum tenens positions is usually on a per diem (daily or shift) or hourly basis, and the amounts are driven by market forces.

There are several provisions physicians should consider incorporating, like rate premiums such as shift differential, holiday, on-call, or “call back pay” and escalators. Understand reimbursed expenses, including insurance, licensing, credentialing, and privileging fees, as well as reimbursement for travel and housing. When expenses like housing are not needed, consider negotiating an increased rate as the facility will not have to pay this expense.

“Boilerplate” provisions

These seemingly innocuous clauses are usually found at the end of the agreement, and they have significant practical and legal implications.

An “entire agreement” or “merger” clause, states that the written contract is the complete expression of the parties’ agreement. Do not expect any statement that is not included in the written contract to be enforceable.

The “choice of law” and “forum selection” clauses impact the outcome of a contract dispute, as well as the amount and type of relief. Substantive and procedural law varies between jurisdictions and court systems. Usually, both the governing law and the forum are in the same jurisdiction, although they can be different (e.g., the governing law could be the home office of the hospital group while the venue is the home office of the agency). Many physicians find that they agreed to litigate their dispute far from both their home and place of work.

A “force majeure” clause should shield physicians against liability from their failure to perform if the inability to perform is caused by a specified event beyond the reasonable control of the physician.

Conclusion

Understand that agencies and hospitals hire sophisticated counsel to draft their locum tenens contracts to protect their interests. Physicians should retain their own attorneys to safeguard and uphold theirs.

This article is for informational purposes only. It is not legal advice. For guidance on your specific circumstances, call or write. We are happy to help.

Jack A. Gordon and Andrew E. Sarti are attorneys, Kent, Beatty, & Gordon, LLP.

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