Job Offers
Look before you leap

Before accepting a new practice offer, read the contract carefully, and make sure it reflects all the promises that were made.

By Berkeley Rice
Senior Editor

The grass might well be greener in the next pasture, but don't jump to there until you check it out carefully first. Just ask internist/pulmonologist Christopher John, who learned his lesson the hard way in Marshall, TX.

After moving to the US from Canada, John had settled in Brownwood, TX, about 170 miles southwest of Dallas, and built a profitable practice. In 1995, a recruiter for Marshall Regional Medical Center, a 139-bed hospital, approached him. In phone calls and a series of meetings, MRMC's top officials urged him to move his practice to Marshall, a bigger city about 300 miles east, near the Louisiana border.

According to John, MRMC's in-house recruiter, Diana Taylor, repeatedly assured him that Marshall greatly needed a pulmonologist, since none practiced in the area. Because three FPs and one internist were about to retire, she told him, he'd have no trouble finding new patients. Taylor also promised that the hospital would help him arrange call coverage, a key concern of John's.

Promises were made; a contract was signed

"They painted a very rosy picture," says John, "and they convinced me that my skills were really needed there." After a final visit to Marshall, John accepted the hospital's offer. In addition to financial incentives and the promise of office space, the contract contained a disclaimer clause stating that it superseded "all prior contemporaneous discussions, representations, correspondence and agreements." Without consulting a lawyer or paying much attention to the disclaimer, John read the contract quickly, suggested a few minor changes, and signed it in December 1995.

John moved to Marshall with his wife and children in early 1996 and opened his practice in the hospital's clinic building. He soon realized, however, that he'd made a serious mistake. "It was like cracking an egg," he recalls, "and finding that it smells a bit off." He was seeing far fewer patients than he'd seen in Brownwood, and he wasn't practicing his subspecialty nearly as much as he'd been led to expect. In fact, John claims that the hospital bought its own cardiopulmonary equipment and competed with him for patients.

One of John's problems in Marshall was call coverage, despite repeated attempts to arrange it. The internists whom the hospital had promised would share call with him proved "elusive," he says, or simply refused. As a result, he was on call nearly continuously for most of his time in Marshall. He complained to hospital officials about coverage, but says he received no help.

Meanwhile, John's new practice turned out to be less than half as profitable as the one he'd given up. One reason, he claims, was that the other local internists, who saw him as competition, didn't refer to him, even though he was the only pulmonologist in town.

The biggest problem for John was the demographics of the Marshall area. During his recruitment, MRMC's Taylor had described the hospital as the only one in the county, with a mostly rural service area population of 75,000 to 85,000, including 25,000 in Marshall itself. The hospital claimed a "draw rate" of 85 percent of the service area population.

Years later, however, during the preparation for his trial, John learned that a study of the same service area—commissioned by MRMC and received eight months before they recruited him—showed that only 27.4 percent of the people surveyed said they would seek medical help in Marshall rather than neighboring towns. And about five months before recruiting him, the hospital had also completed a separate telephone survey showing that only 17 percent of the service area's population received health care in Marshall. As John eventually discovered, most of the county's residents get their medical care either in Longview, TX, a much larger city about 25 miles west, or in Shreveport, LA, a major city about 40 miles east that offers a choice of several large hospitals.

The disclaimer becomes a key issue in court

In 1997, John sued MRMC, charging it with fraudulent inducement, misrepresentation, breach of contract, and other allegations, all of which the hospital denied. Otis Carroll, MRMC's attorney, insists that John's practice in Marshall actually did "quite well," and that his financial expectations were "unrealistic." As for John's call coverage problems, Carroll says they were "largely due to his own personality difficulties with the other doctors in town."

The case went to trial in August 1999. When the jury was unable to reach a decision, the trial judge issued a directed verdict for the hospital, ruling that the contract's disclaimer essentially barred John's claims.

In November 2002, however, the appellate court overruled that decision and reinstated the case, which is still pending but hasn't yet been scheduled for retrial. According to the appellate judges, the contract's disclaimer clause was essentially legal "boilerplate" that wasn't negotiated and didn't specifically refer to the hospital's previous assurances to John. The judges also took into consideration the fact that an attorney hadn't represented John during the contract negotiations.

John has since moved to Little Rock, AR, where his new practice is as profitable as the one in Brownwood had been. Looking back, he says he was too trusting in his dealings with MRMC. "If you're considering moving your practice to another town," he says now, "you've got to go into the negotiations with a skeptical attitude. You can't just rely on the hospital administrators or whoever's recruiting you, because they're motivated by their own agenda, not yours. You should listen carefully to what they say, but don't necessarily believe it. You've still got to do your own research about the need for your specialty in the area, and the amount of competition."

Due diligence before relocating

"The real message from Dr. John's case isn't a legal one; it's the importance of evaluating the local market," says David Scroggins, a practice management consultant with Clayton L. Scroggins & Associates in Cincinnati. "Of course, most busy doctors would probably make the same mistake Dr. John did. They'd spend a quick weekend in the new town and only talk with the hospital administration, without taking the necessary time—at least a week—to really explore the local medical community. An attorney may be helpful in negotiating a contract, but he can't protect you if you don't do your own research on the market."

To measure the demand for your specialty, Scroggins suggests asking the hospital for a printout of the number of procedures they do using the CPT and ICD-9-CM codes for the ones you're most interested in. "That data will show you how many patients are presenting with each diagnosis," he explains, "and which doctors are doing those procedures. They'll be your competitors, and you might want to interview them.

"You should also ask the hospital for a list of doctors who would be your most likely source of referrals, because the success of your practice will depend on them. Pay them a visit, and ask if you'll be able to count on them for referrals if you come to town. Even if you're primarily a subspecialist like Dr. John, you may discover that the general internists in town see you as a commercial threat, not a welcome addition to the medical community."

If a reputable recruiting firm has approached you, it should be able to provide some information about the demographics and the needs of the local medical market. Ask the recruiter or the hospital's administrator for a list of all the physicians in the community, not just those on the hospital's staff. Also ask if the hospital has a recent "needs assessment plan" that details the supply and demand for each specialty. But keep in mind that the recruiting firm's primary obligation is to its client—the hospital or group that's trying to recruit you.

You might also ask the recruiter or the hospital what the average patient wait times are for appointments and procedures in your specialty. If neither of them knows, ask the physicians themselves when you visit the town. This will give you another measure of the demand for your services.

Berkeley Rice. Job offers: Look before you leap.

Medical Economics

Dec. 5, 2003;80:66.