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Contract Language Sinks Emergency Physician

February 16, 2011

A recent appellate decision handed down by the Eighth Circuit shows that the language in a contract trumps a physician’s expectancy of providing services in an emergency department. A .pdf of the court’s decision is here.

In a typical arrangement for providing emergency department services, a group enters into a contract with a hospital to provide the services. The group, in turn, then either hires physicians or contracts with physicians to staff the emergency department on its behalf. The terms of the contracts are important in determining the rights of both the group and the rights of the contracted physicians.

In one Arkansas town, the CEO of a hospital requested that the group staffing its emergency department remove one of the physicians from the schedule due to excessive patient complaints. The following month, the physician, Steven Schueller, was removed from the schedule. After his termination, Dr. Schueller sued the CEO and the board members of the hospital where he formerly worked, alleging that the defendants violated his due process rights and that they interfered with his reasonable expectation of continuing in his contractual relationship.

Dr. Schueller’s contract had a provision that allowed him to be terminated for “reasonable cause” which included

The request by [Drew Memorial] for the immediate removal of Independent Contractor from further service . . . .
The determination that the Independent Contractor shall be removed from emergency services at [Drew Memorial] is in the sole discretion of [Drew Memorial], and being a contractual matter, is not subject to the review procedures in the Medical Staff Bylaws.

In other words, by signing his contract, Dr. Schueller agreed that the hospital could request that he be immediately removed from providing emergency medical services at the hospital.

Because of the contract language to which Dr. Schueller agreed, his lawsuit failed. The appellate court held that the contract language showed that he had no reasonable expectation of continued employment with the hospital – which he was required to prove in order to assert a civil rights claim. Regarding Dr. Schueller’s contract interference claims, the appellate court noted that the law requires that a defendant engage in some “unauthorized conduct” that caused a third party to discontinue a contractual relationship with the plaintiff. Since Dr. Schueller agreed that the hosptial could request his immediate termination, the hospital’s conduct was not “unauthorized.”

I see such “hospital can request the removal” language in roughly 25% of the physician employment contracts I have reviewed. When present, the language is difficult to change since the group’s service agreement with the hospital usually requires that the group include such language in its contracts with physicians. Some consider a hospital dictating the terms of a group’s physician employment contracts as a “contract of adhesion.”

There are ways to soften the language such as requiring that the determination be made in in the hospital’s reasonable discretion or requiring that the hospital notify the physician of any events likely to lead to its request to remove the physician from the schedule.

The bottom line in agreeing to such language is to realize that you are not a secure in your contract as you think. With such language in your contract, your immediate termination could be one patient complaint away.

If you aren’t comfortable with such terms and the group cannot or will not change the terms, then don’t sign the contract. There are many other contracts out there that don’t contain such terms.

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