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Impact of the COVID Pandemic on Physician Employment Agreements

Resumption of Elective Surgery and Invasive Procedures in In-Office Settings in New Jersey - Physician Employment Agreements

COVID-19 has had a dramatic impact on the health care system, causing a re-evaluation of the way physician care is delivered. During the pandemic, in-person office visits have been postponed or changed to telehealth visits, elective procedures have been canceled, and patients, concerned about contracting COVID, have delayed or postponed their regular visits.

Physician Employment Agreements

This decrease in non-COVID care being provided has caused many physician practices and health systems that employ physicians to need to furlough or terminate several of their physicians. Typical physician employment agreements, however, do not include “force majeure” provisions that would permit employers to furlough or terminate employed physicians without having to satisfy lengthy termination without cause notice provisions (during which time salaries would continue to be paid) or to make severance payments. Such employment agreements also do not typically contain for-cause termination provisions for pandemics or other dramatic decreases in the volume of patient services needed.

Impact of the COVID Pandemic

In order to address the potential for future COVID-19 spikes or new pandemics, physician practices and health systems that employ physicians should restructure compensation to be based primarily on wRVU amounts rather than a fixed salary. Although physician bonus or incentive payments are often structured on productivity or wRVU amounts, base compensation in many health systems continues to be based primarily on a fixed salary regardless of the physician’s productivity or volume of patient services provided. Restructuring compensation to be more wRVU-dependent lessens the financial risk to the employer if future COVID spikes or a new pandemic forces another slowdown in the delivery of health care services.

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