By Vanessa Orr

Most residents coming out of medical school have student loans to pay, and that financial burden may convince them to put off other expenses like hiring healthcare attorneys and practice consultants to advise them on their careers and assist them with employment contracts. This can be a huge mistake as the cost of hiring one of these professionals can save doctors money, time and possible legal trouble in the long run.

“New doctors need to set themselves up for success early on, so they don’t face issues later,” explained Kyla Murphy, AVP National Healthcare Practice, Risk Strategies, noting that most young medical professionals are not taught about business or insurance in medical training and are thirsty for knowledge on the subject.

“It can be easy to get caught up in the idea of making money and waiting until those loans are paid down, but it’s so important to hire experts to review contracts before signing anything,” she continued. “There can be a number of pitfalls that they wouldn’t recognize due to the lack of education in the areas of business and insurance.”

According to Tom Murphy, SVP National Healthcare Practice, Risk Strategies, even doctors who have been practicing for 25 years or more can be confused about certain contract terms.

“One of the biggest issues we’ve seen is with ‘tail coverage,’ which is the professional liability coverage that covers a practice when a doctor leaves a group or cancels a claims-made policy,” he explained. “The medical group may agree to provide insurance when they hire the doctor, but when that doctor leaves, the contract may specify that they have to purchase this coverage on their own, which will provide retroactive coverage for the time the physician was in the group or for the duration of the policy.”

Many residents don’t realize that this coverage costs roughly 200 percent of the doctor’s current premium; if the premium is $10,000, for example, the tail coverage will cost $20,000.

“Talk about sticker shock! This is a huge expense that the provider will be responsible for, and it’s one of the biggest things that young doctors miss when looking at contracts,” said Murphy.

While tail coverage may still be included in a contract, a healthcare attorney or practice consultant can advise clients on ways to minimize the effect or negotiate better terms.

“For example, a doctor may agree to be responsible for the tail, but ask the practice to agree to purchase the tail if the doctor stays for three years or more,” said Murphy. “It can be used as a negotiating tool, and at least the doctor is aware of their responsibilities if they leave the group.”

In addition to compensation and insurance issues, healthcare attorneys can also review partnership or ownership clauses, as well as noncompete wording that may limit a physician’s ability to practice once they leave the group.

Murphy adds that having this kind of professional advice is necessary, not only when reviewing employment contracts, but vendor contracts, lease contracts, and other contracts as well. In addition to healthcare attorneys and/or practice consultants, he also advises young doctors to hire a financial advisor and real estate experts as the practice grows.

“Sometimes you have to spend money to make money,” said Kyla Murphy. “And if you engage with an expert up front, you will more than make up for that expense down the road.”

For more information, contact Kyla Murphy at Kyla.murphy@risk-strategies.com or Tom Murphy at tmurphy@risk-strategies.com or call 800-966-2120.