CPRP Offer Negotiation and Contracts Questions and Answers — Questions and Answers
Question 1: A highly-qualified physician candidate agrees to the primary compensation terms but expresses strong opposition to the 15-mile, two-year non-compete clause in the proposed contract. What is the most appropriate initial action for the recruitment professional?
- Immediately reject the candidate's request, stating the clause is a non-negotiable organizational policy.
- Advise the candidate to seek their own legal counsel to review the clause's enforceability.
- Consult with legal counsel and organizational leadership to understand the rationale and potential flexibility of the clause. (Correct answer)
- Offer the candidate a higher signing bonus to compensate for their acceptance of the clause.
Correct answer: Consult with legal counsel and organizational leadership to understand the rationale and potential flexibility of the clause.
The recruitment professional's primary role in negotiations is to act as a facilitator between the candidate and the organization. Before providing a definitive response, the recruiter must first understand the organization's position, the legal necessity of the clause, and what, if any, flexibility exists. This allows them to manage the negotiation effectively and transparently.
Question 2: What is the primary purpose of including a 'severability clause' in a physician employment agreement?
- To ensure that if one part of the contract is deemed legally unenforceable, the remainder of the contract remains valid and in effect. (Correct answer)
- To outline the specific conditions and notice period required for either party to terminate the agreement without cause.
- To specify that the physician is responsible for the cost of 'tail coverage' for their malpractice insurance upon departure.
- To establish a formal process for resolving disputes through mediation or arbitration before pursuing litigation.
Correct answer: To ensure that if one part of the contract is deemed legally unenforceable, the remainder of the contract remains valid and in effect.
A severability clause is a standard legal provision that protects the agreement as a whole. It states that if a court finds a specific section or clause to be illegal or unenforceable (a common issue with non-compete clauses, for example), that part will be 'severed,' but the rest of the contract will remain legally binding.
Question 3: A medical group is presenting several compensation plan options to a new physician. Which of the following models places the most direct and immediate financial risk on the physician if patient volumes are lower than projected?
- A two-year guaranteed salary with a quality-based annual bonus.
- A compensation model based purely on a percentage of the physician's net collections. (Correct answer)
- A base salary plus a productivity bonus based on Work RVUs (wRVUs) generated.
- An income guarantee model where the organization covers any shortfall relative to a target income for the first year.
Correct answer: A compensation model based purely on a percentage of the physician's net collections.
A model based purely on a percentage of net collections directly ties the physician's entire income to the revenue they generate. If patient volumes are low, collections will be low, and their income will suffer immediately. The other models all include a salary floor (guaranteed salary, base salary, or income guarantee) that mitigates the physician's downside financial risk.
Question 4: When negotiating medical malpractice insurance, what is the most significant practical consequence for a physician whose employment agreement includes a 'claims-made' policy?
- The physician has permanent coverage for any incident that occurred during their employment, regardless of when a claim is filed.
- The annual premiums for this type of policy are typically much higher for the employer than an 'occurrence' policy.
- The policy can be easily transferred to a new employer in a different state without any changes.
- Upon termination of employment, the physician or employer must purchase an extended reporting endorsement ('tail coverage') to remain protected from future claims. (Correct answer)
Correct answer: Upon termination of employment, the physician or employer must purchase an extended reporting endorsement ('tail coverage') to remain protected from future claims.
A 'claims-made' policy only covers claims that are made while the policy is active. To protect against claims that may arise from incidents that occurred during the employment period but are filed after the physician has left, an extended reporting endorsement, commonly known as 'tail coverage,' must be purchased. The negotiation over who pays for this expensive tail coverage is a critical part of the contract process.
Question 5: A hospital provides a monthly stipend to a resident physician, conditioned on the resident joining the hospital's staff after completing training. To ensure the arrangement complies with the Stark Law physician recruitment exception, which of the following is a critical requirement?
- The stipend payments must not begin until the final year of the resident's training program.
- The total amount paid must be documented in a signed agreement before any payments are made and must not be contingent on the volume or value of anticipated referrals. (Correct answer)
- The agreement must contain a clause requiring the resident to refer patients to the hospital during their training period.
- The stipend must be structured as a loan that is 100% forgivable on the physician's first day of employment.
Correct answer: The total amount paid must be documented in a signed agreement before any payments are made and must not be contingent on the volume or value of anticipated referrals.
Federal regulations, including the Stark Law and Anti-Kickback Statute, require that such financial arrangements be formalized in a signed, written agreement before payments commence. A key element of compliance is that the benefit (the stipend) must not be determined in a way that takes into account the volume or value of referrals the resident may make to the hospital in the future.
Question 6: After a successful site visit, what is the most effective and efficient next step in the offer process before investing time and legal fees in drafting a full employment agreement?
- Schedule a follow-up call to verbally discuss the general compensation range and benefits package.
- Send the candidate the organization's standard 25-page employment contract for their initial review.
- Present a formal, written Offer Letter or Term Sheet that outlines the key business terms for the candidate's review and signature. (Correct answer)
- Arrange a dinner meeting between the candidate and the hospital CEO to finalize the offer details in person.
Correct answer: Present a formal, written Offer Letter or Term Sheet that outlines the key business terms for the candidate's review and signature.
Using a written Offer Letter or Term Sheet is the standard best practice. It memorializes the key, material terms of the offer (e.g., compensation, bonus, start date, call schedule, malpractice, restrictive covenants) and ensures both parties agree on the major points before proceeding. This avoids misunderstandings and saves significant legal expense by not drafting a full contract until the foundational business deal is accepted.
CPRP Offer Negotiation and Contracts Questions and Answers
A highly-qualified physician candidate agrees to the primary compensation terms but expresses strong opposition to the 15-mile, two-year non-compete clause in the proposed contract.
What is the most appropriate initial action for the recruitment professional?