The Employed Nurse Practitioner
The majority of NPs are employed by others, rather than self-employed. The advantages of employment are:
A built-in collaborative agreement, in states where these are required
No struggles for reimbursement from third-party payers who may balk at paying NPs directly
What Rights Does an Employed NP Have?
At Will Employment
In most states, employment is “at will.” “At will” employment means the employment continues at the will of the parties. Unless an employee has a contract for a specified term of employment, an employee has no legal right to a job. An employer may end employment at any time. Likewise, an employee may end the employment at any time, barring a contract for a specified term. The only protections for an employee are those offered by the equal opportunity and disability laws; that is, an employee cannot be terminated solely on the basis of age, gender, race, or disability.
An NP who is employed but has no contract must negotiate terms of employment on a piecemeal basis, relying on the ability of the NP and the other party to reach agreement as issues arise. If an employer changes the pay scale or work responsibilities for the better, the NP benefits. If the employer reduces the pay scale or unreasonably increases responsibilities, the NP has no recourse but to keep working under the new conditions or to leave.
Employment by Contract
Many NPs seeking employment are being offered employment contracts. An employment contract is a written agreement under which the employee and employer agree on the terms and conditions of a working relationship.
Employment contracts can be complex and lengthy, and require careful analysis. Some of the issues often addressed in an employment contract are:
Scope of services to be performed
Compensation
Duration of employment
How the agreement can be altered or updated
Responsibility to maintain credentials
Terms of on-call responsibilities
Benefits
Time off and expenses for continuing education
Vacation time
Number of office hours per week
Restriction on competition
Bonuses
Reasons for termination
Assistance with continuing education
Some issues that often are not addressed but can be dealt with in an employment contract are:
Extent of support service to be offered the NP
Expectations regarding the number of patients seen per day
Expectations regarding nonclinical (administrative) work to be done by the NP
Listing of the NP on the door, in directories, and in advertisements
Use of the NP’s name when the office telephone is answered
On-call responsibilities and backup
Release to the NP of the NP’s quality performance as measured by health plan auditors
An employment agreement can include anything the parties wish to address. Often, agreements are written by attorneys for the practice and therefore are oriented to the needs of the employer.
Does an NP Need a Contract?
Many NPs practiced for many years without employment contracts. In the past, an employer called to offer a job, and the employer and employee then negotiated salary, benefits, and hours of employment. The arrangement was sealed with a handshake. Details were handled as issues arose, but NPs sometimes were unhappy with how the details were handled.
Contracts have certain advantages over the informal employment arrangement. First, contract negotiation forces parties to discuss issues. When the parties agree to terms, there is a document that records the agreement and can be referred to as necessary to
refresh memories about details of the agreement. In most cases, an employment agreement is protective to both employer and employee.
refresh memories about details of the agreement. In most cases, an employment agreement is protective to both employer and employee.
For an employee, a contract ensures some degree of job security. In most states, unless there is a written contract defining the duration of employment, employment is “at will.” This means that either party may terminate the employment without cause at any time. For example, a practice that hires an NP and then loses a lucrative patient care contract can terminate an NP who is employed “at will” with no severance pay, even though the NP is not at fault. “At will” employees are often surprised to learn that they have no legal rights to their jobs. An NP who has a contract, however, has an agreement for work during the duration of the contract, unless a clause in the contract states otherwise. An employer who wants to end the employment of the NP must wait until the contract terminates or attempt to settle the matter with the NP, possibly by offering severance terms.
For an employer, an employment agreement can afford protection against competition from an employee who leaves the practice and takes patients to another practice. An employer wants to avoid a situation where a departing NP who has built a patient following takes patients to the next NP position. An employer can restrict a departing NP from competing with a practice. The method of restricting competition is a “restrictive covenant” in an employment agreement.
A multitude of lifestyle-affecting and workstyle-affecting issues can arise among coworker healthcare providers. An employment contract can delineate the expectations of employer and employee before such problems arise. A contract also can specify problem-solving procedures.
Three Difficult Clauses
Three clauses commonly found in employment agreements offered by medical practices to NPs are especially difficult for NPs to interpret and can have profound effects on an NP’s life. These clauses address restrictive covenants, bonus formulas, and termination clauses. These clauses often bring NPs to attorneys for advice. Restrictive covenants require an NP to promise, up front, not to compete with an employer when the present employment ends. Bonus formulas specify conditions under which an employer rewards an NP for superior performance. Termination clauses specify that an employer may end the agreement, without cause, with 30 days’ notice.
Restrictive Covenants
A restrictive covenant is a promise not to compete. Specifically, a restrictive covenant is a clause that restricts an employee from practicing within a set number of miles from an employer’s business for a set period of time after the employee leaves the employer’s business.
Employers are insisting on restrictive covenants. An employer wants to avoid a situation where a departing NP who has built a patient following takes patients to the next NP position.
Restrictive covenants are legal in many states and enforceable as long as they are reasonable. If a former employee challenges the validity of a restrictive covenant by taking the matter to court, a judge will determine whether a restrictive covenant is reasonable. A judge will balance the needs of the employer against the harm to the employee. A judge will decide whether the geographic restriction and the time restriction are appropriate to accomplish the employer’s needs, but no more. Further, a judge will consider whether there is any potential injury to the public if a restrictive covenant is enforced.
A judge will analyze the past court decisions in the state and compare the facts of those cases with the current case. Such facts include: what size city or town the practice is in; the severity of the geographic and time restrictions in the clause; what the practice is like; the availability of other healthcare providers; and what the employment climate is like for healthcare providers.
Judges have found restrictive covenants unreasonable when the restraint is greater than necessary to protect the legitimate business interests of the employer. Judges also have found restrictive covenants unreasonable when the restraint is not greater than necessary to protect the business interests but when the employer’s need for protection is outweighed by the hardship to the employee. Occasionally, judges have found restrictive covenants to be unreasonable when there is neither excessive restraint nor excessive hardship, but there is a likely injury to the public. For example, a covenant restricting an oral surgeon from practicing in a particular city for 3 years after termination from a practice was found to be unreasonable. The restraint was greater than necessary. However, a covenant restricting a veterinarian from practicing in a different city for 3 years after termination was found to be reasonable. In that case, the restraint was not greater than necessary. In yet another case, a covenant restricting a physician from practicing in a rural town for 3 years after termination was found to be unreasonable. In that case, there was a potential injury to the public. The injury to the public was a potential shortage of physicians if one of the two town physicians could no longer practice there. The difference in outcome in these three cases can be reconciled only by comparing the factual details of the cases. A decision that one clause was reasonable while a seemingly identical clause was unreasonable was due to differences in profession, practice, city, availability of other providers, and many other factors.
When negotiating the terms of a restrictive covenant, an NP needs to consider the circumstances of the job offer, the severity of the restriction, the potential hardship imposed on the NP by the covenant, the availability of healthcare providers in the area, and the availability of other practice opportunities.
In agreeing to a restrictive covenant, an NP is giving up something of value; the ability to take any other NP job that is offered. However, an NP who refuses to sign
a reasonable restrictive covenant may be seen by an employer as someone who is looking to start a competing practice nearby. The best advice on restrictive covenants is to negotiate one the NP can live with, one that seems reasonable for all concerned under the particular circumstances of the practice and the NP. Exhibit 10-1 provides examples of more reasonable and less reasonable restrictive covenants.
a reasonable restrictive covenant may be seen by an employer as someone who is looking to start a competing practice nearby. The best advice on restrictive covenants is to negotiate one the NP can live with, one that seems reasonable for all concerned under the particular circumstances of the practice and the NP. Exhibit 10-1 provides examples of more reasonable and less reasonable restrictive covenants.
Bonus Formulas
Some employers offer NPs the opportunity for bonuses. The criteria for bonuses vary greatly. The two most important criteria for bonuses are that both employer and employee understand the formula and that it be consistent with good patient care.
The most common problem with bonus formulas is vague language. If a formula is vague, it is sure to be interpreted in different ways by different individuals. There could be disagreements and disappointments at distribution time.
Productivity-Based Formulas
Many formulas are based on the number of patient visits per year. This makes good business sense under a fee-for-service system of reimbursement. If a practice is at least half fee-for-service, patient visit-based formulas can be a reasonable choice. Tracking patient visits is uncomplicated and is not usually susceptible to vagueness. Generally, an NP who sees large numbers of patients is a productive employee who deserves a bonus.
EXHIBIT 10-1 Restrictive Covenants
Restrictive covenants are enforceable if they balance:
The employer’s need for protection
Hardship to the employee
Likelihood of injury to the public
Example 1: “Upon termination of employment for any reason, NP agrees not to practice in any location within 25 miles of any present or future office of this practice for a period of 5 years.”
Analysis: Accomplishes employer’s need for protection, but may be broader than necessary to accomplish employer’s need and may put excessive hardship on employee to find alternative work 25 miles away.
Example 2: “Upon termination of employment for any reason, NP agrees not to practice in any location within one mile of the Jones Road office of this practice for a period of 1 year.”
Analysis: Not a hardship on employee but may not accomplish employer’s need for protection, as patients may be willing to travel one mile to see the NP.
Source: Reprinted with permission from Buppert, C. (1997). Employment agreements: Clauses that can change an NP’s life. Nurse Practitioner, 22(8), 108-119. © 1997, Springhouse Corporation.
Bonus formulas based on numbers of patient visits make less sense when reimbursement to the practice is capitated. Under a capitated system of reimbursement, a practice is paid a set fee per patient per month, regardless of the number of patient visits. Under capitated reimbursement, the ultimate goal is not a high number of visits from each patient but good patient care in as few visits as possible. Under capitated reimbursement, bonuses should be given to those providers who demonstrate highquality care as evidenced by some documented quality measurement tool. Numbers of patient visits should not be relevant when a practice’s patients are capitated. Employers have to be careful not to give providers bonuses for withholding care. Aside from the moral and ethical problems involved, there are federal laws that prohibit healthcare providers from profiting by delivering inadequate or inappropriate care.
Many practices have a mix of fee arrangements with patients and payers. Employer and employee should plan for such mixes when devising a bonus formula. A bonus formula should fit the practice’s payer mix.
Quality-Based Bonuses
When more than half of the patients are covered by some form of managed-care plan, NP performance can be rewarded on the basis of meeting or exceeding quality standards set by the health plan. For example, bonuses could be awarded when the percentage of patients who have met health maintenance criteria—such as childhood immunizations or mammograms for women over 50—exceeds 80%. Or bonuses could be awarded if emergency department visits declined in the past year.
While performance measures are more difficult to track than patient visits, they are more suited to managed care. Some health plans supply performance data to practices, and these data could be used to determine bonuses.
To track this kind of performance data and apportion bonuses based on performance, patients and primary care providers will have to be paired. NPs will need to have their own panels of patients and be designated as primary care provider for that panel. Or NP-physician teams will have to work together and share bonuses.
Profit-Based Formulas
Some employers share profits with NPs. This can be satisfying to both employer and employee as long as the method for determining profits is clear.
NPs should be aware that there are accounting methods that can maximize or minimize profits and that profit is a word that has modifiers, such as gross and net, that can mean the difference between a bonus and no bonus. NPs who agree to profitbased formulas should negotiate for the right to audit financial records. NPs, also, should negotiate for a process by which a dispute about profits could be resolved.
Patient Satisfaction-Based Formulas
Bonus formulas are one of the most controversial aspects of provider relationships. Many practices are struggling with this issue. One approach being taken by
employers is to implement a bonus formula with the understanding that it will be altered and improved upon from year to year.
employers is to implement a bonus formula with the understanding that it will be altered and improved upon from year to year.
See Exhibit 10-2 for some examples of bonus formulas that have been offered to NPs.
Termination without Cause
Typically, the “Termination” section of an employment agreement will list events that are a basis for termination of the employee “with cause.” These events often include conviction of a felony, loss of license, loss of hospital privileges, and gross negligence that compromises patient safety.
In addition to termination-with-cause provisions, some employment agreements include a “termination-without-cause” clause, which states that employer can terminate employee at any time, without cause, with 30 days notice (see examples in Exhibit 10-3).
A termination-without-cause clause effectively defeats the purpose of a contract for an employee. An employee who can be terminated at any time for any reason or for no reason not only has no job security but also will think twice about pressing for performance of any of the other provisions in the employment agreement. For example, an NP may believe that a bonus was due, while the employer may believe that no bonus was due. If the NP protests too much, an employer can simply terminate the NP. If, on the other hand, an NP can be terminated only “for cause,” the NP will feel freer to be assertive about the other provisions of the contract.
There are reasons to agree to a “termination-without-cause” clause, however. If an NP cannot commit to a full year’s employment, it may be best to agree to the “withoutcause” clause. Most employers will not agree to delete a “without-cause” clause unless the employee also gives up the right to leave with just 30 days notice.
EXHIBIT 10-2 Examples of Bonus Formulas from NPs’ Contracts
Up to 15% of base salary: 5% if practice is profitable, 5% based on meeting a threshold of patient visits, and 5% based on patient satisfaction, staff satisfaction, and citizenship.
The product of “collected billings” multiplied by “total employee billings” divided by “total practice billings,” with a cap.
A figure determined by a committee, based on meeting criteria for (1) financial performance; (2) quality of medical services determined by outcomes, medical appropriateness, and extent of health promotion services provided; and (3) level of patient satisfaction.
Source: Reprinted with permission from Buppert, C. (1997). Employment agreements: Clauses that can change an NP’s life. Nurse Practitioner, 22(8), 108-119. © 1997, Springhouse Corporation.
EXHIBIT 10-3 Examples of Termination Clauses
A Termination-with-Cause Clause
The employer may terminate this agreement at the sole discretion of the employer, by written notice to the NP upon the occurrence of any of the following:
The NP dies or becomes disabled….
The NP loses his or her professional license….
The NP is limited or restricted by any governmental authority having jurisdiction over the NP to the extent that the NP cannot render the required professional services….
A Termination-without-Cause Clause [Not Recommended for NPs] The employer may terminate this agreement at any time, for any reason, after thirty (30) days notice to NP.
Source: Reprinted with permission from Buppert, C. (1997). Employment agreements: Clauses that can change an NP’s life. Nurse Practitioner, 22(8), 108-119. © 1997, Springhouse Corporation.
How to Negotiate a Reasonable Agreement
Preparing To Negotiate
NPs who have worked for years without contracts are being offered contracts. NPs who are working without contracts, who foresee an offer in the future, and who want to negotiate a satisfying contract will lay the groundwork a year ahead.
First, an NP should be able to state clearly what he or she has contributed to the practice in the past year and have data to prove it. Specifically, have at hand the total number of patient visits and the dollars billed and received as a result of those visits. If an NP does administrative work, he or she should make a list of administrative projects and determine the dollar worth of the projects to the practice. Contrast the revenues brought in by the NP with the NP’s expenses to the practice, including salary, benefits, and continuing education. If there are patient satisfaction surveys or quality-of-care data that support the NP, have those data at hand. While new NPs will not have the option of collecting data in preparation for negotiating first contracts, they should find out everything they can about the practice with which they plan to negotiate. Once employed, new NPs should begin to collect data for future contract negotiations.
First, an NP needs to make the following assessments about his or her speed and comfort level:
How many patients can I see per hour, day, month, and year?
How much physician consultation time will I need: a 10-minute consultation on every patient, a 5-minute consultation once a day, or a 5-minute consultation once a year?
Second, an NP should gather basic information on how the practice gets its revenues. Know which insurers pay for NP services and how much. If the payer mix is likely to change in the coming year, be ready to explain how the NP’s value to the practice will continue to increase in the coming year. Propose ways in which the practice can increase its efficiency and revenues in the coming year, and offer to help implement plans. An NP embarking on a salary negotiation needs to gather the following data from the employer:
What is the most frequently billed CPT code for the practice? What amount does the practice bill and receive, on average, for that CPT code?
What percentage of practice income goes to cover practice expenses? If the employer will not reveal that information, ask how many providers share practice overhead expenses. A solo practitioner pays 43% of income for office expenses, whereas a practice of 10 to 24 doctors pays 23.5% for office expenses. Determine the appropriate rate to deduct for practice expenses.
What is the collection rate for the practice? Remember, 90% is good.
Third, decide which terms of employment are essential and which can be given up. An NP should ask for everything the NP wants but be ready to back down on nonessential terms.
Fourth, anticipate any drawbacks that an employer might raise in negotiations and prepare to defend or minimize those drawbacks.
Negotiating
Generally, it is best to negotiate individually rather than as a member of a group. For a variety of reasons, some NPs will be more valuable than others to an employer. A more valuable NP should get better offers. On the other hand, some employers have a standard NP offer and will not deviate for the individual NP. In that case, NPs need to negotiate as a group.
Whether negotiating individually or as a group, read a proposed contract carefully, note areas that are confusing, and get clarification. Remember that everything is negotiable. While a contract may look intimidating, it was typed on a word processor and can be changed.
Seek legal counsel to review a proposed contract.
Getting Help: What To Look for in a Lawyer
Stay updated, free articles. Join our Telegram channel
Full access? Get Clinical Tree
