Further, there are multiple additional remedies available, including common law indemnification (they can sue you, and/or the employee you supervise), if the employer is truly without fault. Those same common-law remedies are also available to the physician against the hospital … unless you have casually signed an indemnification agreement.

Indemnification clauses should absolutely be considered a “deal breaker” in any medical employment contract. If you see the words “indemnification,” “hold harmless,” or any similar phrases in a prospective employment contract, stop reading, throw the contract in the trash, and look elsewhere for a job. Indemnification clauses are that dangerous.

Reimbursement of Nondeductible Expenses

One of the ways in which employers can entice physicians to work for their organization is to provide the physicians with pre-tax reimbursement for business-related expenses.

For example, if a physician purchases a stethoscope, the physician provides the employer with the receipt for the stethoscope, the employer’s accountant reviews the expense to make sure that it is business-related, and then the employer reimburses the physician using pre-tax dollars so the physician does not pay taxes on that portion of the physician’s income.

With the high cost of licensing fees, board certification fees, professional organization memberships, CME, and other expenses, the tax savings from such an arrangement can easily add up to thousands of dollars. With the reimbursement agreement sometimes comes contract language such as the following: If any reimbursement made to EMPLOYEE is disallowed as a deductible expense of CORPORATION by the Internal Revenue Service or by any other federal or state agency, the EMPLOYEE shall reimburse CORPORATION 100% of the tax deficiency (including interest and penalties).

In other words, if the IRS rules that the employer or the employer’s accountant incorrectly determined that a physician’s business expense was deductible, the physician is responsible both for the taxes that should have been paid, but also for paying the interest and penalties related to the accountant’s bad decisions. Why should the physician be responsible for an accountant’s incompetence?

Duty to Supervise

As health care budgets tighten, some hospitals and groups employ mid-level providers as a means to maintain emergency department staffing levels. In most states, however, Medical Practice Acts, Nurse Practice Acts, and/or Physician Assistant Practice Acts require physicians to supervise the activities of those mid-level providers, leading to contract language such as the following:

Physician’s duties shall include, but not be limited to the following … adequately supervising any nurse practitioners, midwives, physician assistants and any other mid-level practitioners assigned to Physician by Employer.