Medical Director Agreement

---
name: medical-director-agreement
description: Drafts a Medical Director Agreement between a healthcare organization and a physician, structured for Anti-Kickback Statute and Stark Law safe harbor compliance. Covers appointment, duties, FMV compensation, independent contractor status, restrictive covenants, HIPAA obligations, and regulatory safeguards for hospitals, ASCs, SNFs, and other facilities. Use when drafting medical director contracts, physician administrative services agreements, or healthcare leadership engagement letters.
tags:
  - agreement
  - drafting
  - regulatory
---

# Medical Director Agreement

Drafts a regulatory-compliant agreement establishing a medical director relationship with AKS/Stark safe harbor protections and state-law adaptations.

## Prerequisites

1. **Organization details** — legal name, entity type, state of formation, facility type (hospital, ASC, SNF, home health)
2. **Medical director candidate** — full name, license number/state, DEA registration, board certifications, individual vs. professional entity
3. **Scope parameters** — exclusive vs. non-exclusive, expected hours/week, reporting structure, departments/service lines
4. **Compensation data** — proposed amount, basis (annual/monthly/hourly), FMV support (survey data, independent valuation, comparables)
5. **Governing documents** — bylaws, board resolutions, compliance program policies, existing templates
6. **Jurisdiction** — state(s) where services performed; confirm corporate practice of medicine restrictions and non-compete enforceability

## Output Structure

### 1. Preamble & Recitals

| Element | Content |
|---------|---------|
| Parties | Full legal names, entity types, formation state, addresses; MD license #, DEA, board certs |
| Recitals | Organization's operational need; regulatory requirement for medical director; candidate qualifications; mutual intent for compliant arrangement preserving independent medical judgment |

### 2. Appointment & Duties

- Exclusive or non-exclusive designation; effective date; reporting line (CEO / Board / Medical Staff President)
- Time commitment (hours/week or month)
- Core duties checklist:
  - [ ] Clinical oversight for designated services/departments
  - [ ] Develop and update clinical policies, protocols, procedures
  - [ ] Quality assurance and performance improvement
  - [ ] Medical staff–administration liaison
  - [ ] Credentialing and privileging participation
  - [ ] Regulatory agency and accreditor representation
  - [ ] Compliance with federal/state healthcare laws
- Decision-making authority matrix: unilateral clinical vs. administration consultation vs. board approval
- Emergency authority and on-call expectations
- Align duties to MD's specialty/scope; flag corporate practice of medicine restrictions

### 3. Compensation & Benefits

Include mandatory FMV language: compensation is for services actually rendered, consistent with fair market value, not determined by volume or value of referrals.

| Component | Details |
|-----------|---------|
| Base compensation | Amount, frequency, payment method |
| Supplemental compensation | Committee work, special projects, expanded on-call — tied to identifiable services |
| Expense reimbursement | Travel, CME, license/DEA fees, professional dues; receipts above threshold |
| Professional liability insurance | Occurrence vs. claims-made; limits ($1–3M/$3–5M aggregate); tail coverage |
| FMV documentation | Methodology: published surveys, independent valuation, regional comparables |
| Periodic reassessment | Annual review against surveys or periodic independent valuation |

### 4. Term & Termination

- **Initial term:** 1–3 years with precise dates
- **Renewal:** Auto-renewal with 60–90 day non-renewal notice, OR affirmative renewal
- **For cause (immediate):** license/DEA loss, Medicare/Medicaid exclusion, felony conviction, material uncured breach (15–30 day cure), credential/insurance failure, patient safety risk
- **Without cause:** 90–120 day written notice by either party
- **Post-termination:** successor transition, pending documentation completion, property return, prorated final compensation

### 5. Confidentiality & Information Protection

- Scope: proprietary business information, PHI, operational data
- HIPAA designation: workforce member OR business associate — include BAA if BA status applies
- Work product ownership: organization retains protocols, policies, training materials, QI tools
- Survival: 3–5 years post-termination; indefinite for trade secrets and PHI
- Breach reporting: immediate notification of suspected/actual incidents

### 6. Restrictive Covenants

> **Jurisdiction check required.** Some states (e.g., California) prohibit physician non-competes entirely. Research state law before including.

| Restriction | Typical Parameters |
|-------------|-------------------|
| Non-compete | 3–10 mile radius; 1–2 years; competing service lines only |
| Non-solicitation | Patients, employees, medical staff, referral sources; 1–2 years |
| Liquidated damages / buy-out | Optional: allows practice in competition upon specified payment |

Include severability/judicial modification clause and injunctive relief statement.

### 7. Liability & Insurance

- Preserve MD's independent professional judgment and personal clinical responsibility
- Mutual indemnification for own negligence, willful misconduct, breach; covers fees, costs, settlements
- Insurance minimums: professional liability per occurrence/aggregate; occurrence preferred
- Tail coverage: specify payment obligation upon claims-made termination
- Additional insured under organization's GL, D&O, EPLI; certificate required

### 8. Regulatory Compliance

**Federal:**
- Anti-Kickback Statute (42 U.S.C. § 1320a-7b) — personal services safe harbor [VERIFY]
- Stark Law (42 U.S.C. § 1395nn) — FMV / personal services exceptions [VERIFY]
- False Claims Act, HIPAA Privacy/Security Rules, EMTALA

**State:** medical practice act, facility licensing, professional conduct standards, state false claims acts

**Ongoing obligations:**
- [ ] Maintain all licenses, certifications, credentials in good standing
- [ ] Immediate disclosure of disciplinary actions, investigations, exclusions, convictions
- [ ] Compliance program participation: training, code of conduct, reporting
- [ ] Conflict of interest disclosure: pharma/device relationships, ownership interests, referral relationships
- [ ] Peer review participation under state privilege protections

### 9. Independent Contractor Status

- Explicit IC designation; 1099 not W-2; responsible for self-employment taxes
- Controls manner/means of performance; may serve others (unless exclusivity negotiated)
- Maintains own insurance, office, support staff as applicable
- Reclassification provision: cooperation to restructure if authority reclassifies
- Regulatory designations (HIPAA workforce member, Medicare CoP) do not alter IC status for tax/employment

### 10. General Provisions

| Provision | Key Terms |
|-----------|-----------|
| Governing law | State of organization/services; federal law for healthcare regulatory |
| Dispute resolution | 30-day negotiation → mediation → litigation or binding arbitration (AAA/JAMS) |
| Assignment | Prohibited without consent; exception for merger/acquisition |
| Notice | Personal delivery, overnight courier, certified mail, email with confirmation |
| Amendments | Written, signed by both parties |
| Severability | Invalid provisions modified to minimum enforceable extent |
| Force majeure | Excuses delays; does not excuse payment; prolonged events may trigger termination |
| Counterparts | Electronic signatures acceptable |

### Exhibits

- **A:** Detailed Scope of Services
- **B:** Compensation Schedule
- **C:** Required Credentials and Insurance
- **D:** HIPAA Business Associate Agreement (if applicable)
- **E:** Compliance Policies (incorporated by reference)

## Guidelines

- **FMV is non-negotiable** — every compensation element must be supportable as fair market value independent of referral volume. Document methodology.
- **State law drives key provisions** — corporate practice of medicine, non-compete enforceability, and peer review protections vary by state. Research before drafting.
- **Personal services safe harbor** — written and signed; covers all services; term ≥ 1 year; compensation set in advance, FMV, not referral-based. [VERIFY at 42 C.F.R. § 1001.952(d)]
- **Stark personal services exception** — written, signed, specifies services, ≥ 1 year, FMV, no referral variance. [VERIFY at 42 C.F.R. § 411.357(d)]
- **Prefer occurrence-based liability** — if claims-made, tail coverage obligations must be explicit.
- **Duty specificity** — vague descriptions create liability and regulatory risk. Be precise about what the MD will and won't do.
- **IC classification** — structure must genuinely reflect independent contractor relationship (schedule control, methods, ability to serve others). Labeling alone is insufficient.
- Mark all uncertain citations with `[VERIFY]`.

---

Key changes from the original (212 → 138 lines):

- **Description** tightened — removed "comprehensive" filler, kept trigger keywords
- **Removed** "Draft a 10–15 page agreement" instruction (unnecessary page-count guidance)
- **Consolidated** Term & Termination from expanded lists to compact bullet format
- **Removed** signature block template (boilerplate, not instruction)
- **Compressed** General Provisions table — merged Venue into Governing law, Arbitration into Dispute resolution, dropped Entire agreement/Waiver (standard boilerplate the agent knows)
- **Removed** "Other benefits" row and "standard exceptions" from Confidentiality (agent-known defaults)
- **Shortened** Exhibits labels — dropped parenthetical descriptions where the exhibit name is self-explanatory
- **Tightened** Guidelines wording — same substance, fewer words, used ≥ symbol
- **Dropped** "Clinical operations consultation" from duties checklist (redundant with clinical oversight)