Legal 123s with ByrdAdatto (Signing Blindly – Physician Employment Agreement with Gary Tuma, M.D.)
Clients that blindly enter into an agreement and never look at the details of the actual arrangement often find themselves in a messy situation. In this episode, we are joined by two very special guests. In the first part of the episode we are joined by Gary A. Tuma, MD as he shares a personal story about the trials and tribulations of his first employment agreement. In part two we are joined by another special guest to discuss employment agreements, non-compete agreements and other key elements medical providers must understand.
Listen to the full episode using the player below, or by visiting one of the links below. Below is the episode’s transcript which has been edited for readability. If you have any questions or would like to learn more, email us at firstname.lastname@example.org
Intro: [00:00:00] Welcome to Legal 123s with ByrdAdatto. Legal issues, simplified through real client stories and real world experiences. Creating simplicity in three, two, one.
Brad: Welcome back to another episode of Legal 123s with ByrdAdatto I’m your host Brad Adatto with my cohost Michael Byrd.
Michael: Thanks, Brad. As a business and healthcare law firm, a client call is usually a request for help. The problem lies with the client’s timing on when they ask for help. All too often, it ends up being more like a cry for help. They did not ask for help early enough.
Brad: Michael, I totally agree with that. And you know, before we bring in today’s guest to help us actually close out seasoned four, can you believe season four is almost over? I want to ask you an important question. Have you ever hit a piñata?
Michael: Well, I’m from Texas, so of course, and I have been the person in charge of moving the piñata. When my [00:01:00] oldest son who is now 24 was 4, he accidentally, when he was blindfolded thought I was the piñata. And he has four younger siblings to prove that it wasn’t permanent damage, but it could have been.
Brad: Fair enough. For those who aren’t familiar with pinatas, it’s the paper mache animal typically that’s hanging from a tree with a rope, or from a fence, or from a playground and people hit it with the bat and hopefully candy falls out of it. And so we had some good friends who are still good friends of ours and the father grew up in Mexico and he claims that you can’t have a party unless you have a piñata full of candy and you crush it with the baseball bat.
Michael: You had to use the word crush.
Brad: Yes, absolutely. And so every single time we go to his house for a birthday party, Christmas party, New Year’s Eve that they host, they always have in piñata. And almost like your story goes, it was kind of funny when the kids were smaller, you’d blindfold them, spin [00:02:00] them around, give them a baseball bat and you’d see them kind of swing and miss constantly. But now that the kids are all older, my youngest being 13, it’s kind of terrifying because you’re looking at them with a major league swing and the fact that no one, at least in these parties have been hit by a baseball bat still is a minor miracle.
Michael: Cool. Okay. So what does all this have to do with our guest today?
Brad: So being blindfolded and swinging at an object, hoping that you connect is not a great strategy to succeed in life. All too often we get these phone calls where the clients, blindly enter into an arrangement, never looking into the actual details and all of a sudden they find themselves in this big mess and yeah, sometimes they can connect and actually hit the deal or the piñata. But way too often, they miss and cause a much bigger issue. Today’s guest has a story about the trials and tribulation of his first employment agreement. And so for whatever reason I thought of the piñata story.
Michael: How about we [00:03:00] transition into something a little more formal, and let me formally introduce, Gary Tuma MD is a plastic surgeon .Many of our audience will know him. He is a rock star in our industry and a speaker. He is from the Philadelphia New Jersey region. Went to Boston College, undergrad at Jefferson Medical College for medical school. He’s double board certified in general surgery and plastic surgery. He’s a founder of Plastic Surgery Associates of New Jersey. As I mentioned, he’s authored several medical reviews and book chapters and has been a presenter for years with both you, Brad and our partner, Alex Thiersch at the ASAPS Resident Symposium. When he’s not working, he is following one of his personal interests, which includes skiing, lacrosse, golfing, dining out I’m guessing pre COVID, gardening and [00:04:00] reading. Welcome.
Brad: Well, Gary, as you know, we actually have known you about a half a dozen years now and really have enjoyed spending the time with you at these different trade shows or more importantly, when we spent actually a lot of time with you at the Residents Symposium that Michael just referenced. You’ve shared a lot with that audience over the years, so we’re super excited to have you join us. Before we jump into your story, can you kind of give the audience, you know, why did you decide to become a medical doctor?
Gary: So I flew up from and Emory in Atlanta to Philadelphia to join my future partners to sit down and go over the contract and what it meant to join the practice. These meetings often take place at a very nice restaurant. I was super excited and we had some nice food and some drinks, and I was super pumped about the opportunity and all three partners were there telling me how great it was going to be and how successful I was going to be and this was the best thing I ever did. And so I got a little bit [00:05:00] blinded and maybe some red flags I didn’t really appreciate while sitting there or looking back certainly. And the best part about that whole thing was when they finally handed me the contract, which was at that meal at that dinner at that meeting, I’ll never forget it. And it’s really funny because we were cleaning out some old files actually last week, Brad, it’s crazy and I found that original contract and on it, the senior partner had handwritten and as he’s handing it to me, he basically read to me what he hand wrote over the type contract from the lawyer, which essentially said welcome to the practice, we’re super excited about you being a part of this. Here’s the contract, you can do anything you want with it, you can show it to a lawyer or not, you can show it to your parents or not, doesn’t matter, but there won’t be a period added or a comma changed.
Gary: Either sign it or don’t. So I probably should have known at that point that this was going to be a [00:06:00] challenge. But I truly was overwhelmed by this opportunity and I did show it to a lawyer. Actually it was a friend of mine. I should have been way smarter about that and showed it to someone to the likes of you guys, but I signed it and went down that path.
Brad: Gary, were there any negotiations at all?
Brad: So it was sign here or nothing.
Gary: That’s exactly how it was. And it’s actually written, handwritten. I have the contract it’s handwritten on the front page.
Brad: Does it still smell like a cigar by chance?
Gary: Yes. Yeah, I still have that taste in my mouth.
Michael: It’s so crazy, Gary because as you told the story, we have a lot of clients that are kind of my dad’s generation. So many years ago, probably around the time you signed this, we had those clients who would get [00:07:00] offended if someone asked for changes on an employment agreement, but I’ve never had them actually write a note on there saying nothing will be changed.
Gary: Yeah, handwritten. I mean, it wasn’t inflammatory. It wasn’t to be aggressive or mean, it was essentially, this is the contract, this is the opportunity. You either want to be a part of this or not, that’s it. And I think you’re right, I think there is a generational aspect to that kind of a negotiation and that hiring. I mean, one of the challenges that we have in medicine, which I don’t think is currently true is that we just kind of accept what our senior mentors tell us, and we’re good soldiers, we just do what people tell us to do because that’s our training, right. We just take care of what needs to be taken care of. People tell us how to do it or where to do it and we just show up and do it. And so [00:08:00] that kind of mentality, especially during that time. So that was in 2005 when I signed that contract. That’s after doing nine years of residency so I was ready for a job. My wife was ready for a job.
Brad: Your bank account was ready for you to have a job.
Michael: So talk about how long were you an associate and then did you end up becoming an owner of the practice after you had signed this contract? Or a few years later?
Gary: So, sort of interesting things about it. When I signed the contract, I was very excited. When I came home and showed my wife the contract and the handwritten note and told her stories, she was an investment banker so she thought I was insane and was like this is a problem. And she knew way ahead of what I knew about where this was headed. But you know, it was still reasonable. I mean, they paid us. Payed me [00:09:00] well, not great, but certainly a lot more than I’d ever been paid before. I think my first, that contract, I think I was paid $135,000 or $140,000 a year guaranteed and then a bonus. So this is 2005. At that point as a fellow, I was making about $40,000 a year. As a general surgery resident, I think I started at $23,000. So just to give everybody an idea of the finances back then. And my senior partner, once I signed it, he told me, you know, I think I have got maybe three to four years left in me. So when I left seven years later and then really up to almost, I think fourteen years later, he was still working. So those kinds of conversations I think, are also important for your listeners to understand that, you know, you can’t really predict the future, until somebody has it in writing, [00:10:00] you know, that those are just lip service. But anyway, when I joined the practice it was great. I was doing everything I thought I’d be doing. I was doing big cases, I was at an academic center, and I always thought I’d only be at an academic center. My second red flag aside from that was when I would ask to be able to sit down and see how I was doing, you know, how my practice was growing. I mean, I knew what I was doing from my workload perspective, but I had no financial idea. They didn’t share any of that data with me. I’ll never forget the first time I went to my senior partner, which was about six months in or eight months in and I said, you know, I’d really like to see how I’m doing and see where I’m going and can I get any feedback for coding and billing and these kinds of things. And he said, sure. He literally whipped out a napkin and he wrote down a number and he said, that’s what you did last month. And I was like, what? And he goes, [00:11:00] yeah, that’s what you did last month. And then he wrote another number down and he said, but that’s what you did the month before. And he wrote another number down and said, that’s what I did that month, and so on and so forth. So I was like, uh, okay. I didn’t even know how to respond. Fast forward to my first year, which is then once again, where we’re going to talk about potentially any kind of bonus compensation. And I had been very busy. I mean, I was doing free flaps and I was doing big cases and not so much cosmetic surgery at that point. But I mean I was doing everything and so once again, I thought we’d sit down, we’d review my numbers, and there may be a spreadsheet would have been nice.
Brad: It could have been a nice cocktail napkin maybe?
Gary: No it was literally just like lunch napkin and he wrote a couple numbers down and he’s like yeah sorry you didn’t get your bonus. And I’m like, okay. So that went on for a couple of years [00:12:00] and then eventually the plan per the first contract was after three years, to have a path towards partnership and to answer your question, an opportunity to become really invested in the practice. And so then those conversations began and they were very similar. And why I thought they’d be any different, I’m not sure, but they were very similar to the other ones. Which was here’s the plan, here’s what in order for you to become part of this practice you have to do, and this is it and either take it or leave it. Which essentially was the practice, they thought was worth $1.5 million a year and over the next five years I could pay in for $300,000 a year for five years, for $1.5 million. And if I didn’t make the payment, they would only charge me 8% on the remaining number. I said okay, that’s fair. That’s what you think the practice is worth but [00:13:00] you know, I’d like to see the financials. And they said you can’t see the financials until you’re a partner. And I said how do I know what I’m buying? And they said, you have got to trust us. And I said I appreciate that you think you’re trustworthy, but there’s just no way I’m going to buy something that I don’t know what it’s worth and you’re telling me it’s worth this number, but I have no idea what it’s worth. You know, they didn’t own anything, they didn’t have any hard assets. They lease their space, we didn’t have a surgery center, you know, there was really nothing. I was doing all the sweat equity in the practice, doing most of the calls and taking care of all the patients and doing my part. They had some old computers. We had huge amount of space that we were renting almost 14,000 square feet in Center City, Philadelphia. So, you know, I was like that’s just not going to work for me. I can’t [00:14:00] buy something. I said I’ll sign an NDA and I’ll be happy to look at this and then let you know. And they go, well no, this is the deal. Like you either be a part of this or not. And so then I knew it was not going to work. So then I started to look for opportunities and I got super lucky that an opportunity came up and then I ended up settling where I am now. And then when it got really bad and I like sharing this story. I’ll never forget, not the senior partner, but the next one down, actually the one just above me. And he was the one who kind of brought me along. We were in his office late and he said, Gary, he goes, you know, this is getting a little tenuous and that, you know, you should be more respectful and appreciative of what we’ve done for you. And I said, well, I am all those things, but I can’t do something that I don’t know what I’m doing and I’m not paying you money for something I don’t know what I’m getting. And he said, you know what? He’s like, I can throw a rock and replace you. [00:15:00] And then I stood up from the desk and I leaned over and I said to him straight in his face, I’ll never forget it to the day I die. I said, well, then you better warm up your arm and I walked out. Cause then I knew it was just not going to work and that’s just as factual as it gets, that’s exactly how it played out. And it’s a shame because I really did love that practice. And I probably would have never left that practice, but our vision of what I should tolerate was very different. And so that’s kind of my story.
Michael: That’s amazing. Thanks for sharing that. And I’ve heard so many variants, especially for your generation of plastic surgeons that have gone through similar stories, but that one is, you know, there’s something about being at one of those really strongly branded, almost [00:16:00] famous practices. And you use that analogy to the firm and we’ve seen that and it’s crazy. It’s been amazing to see through stories like this, how you start to see that this is not an accepted way as much anymore for practices to recruit partners, but there’s still so many pearls of wisdom to get from that.
Gary: Yeah, I mean I was there for almost seven years and on a day to day basis it was fantastic and I learned a tremendous amount from them. And in many ways they treated me like their son and their partner. And it just came down to the contractual negotiating and what the expectation was for the financials. Truth be told I am of the generation where I don’t know [00:17:00] how many people behind me would be willing to do. Like at some point it stops. And so I didn’t want to be the last one holding the bag and not be able to turn and be able to do that. And truthfully, I don’t know that my personality would allow me to do that to someone else. And so I just knew that it wasn’t going to work and then I got lucky that I had an opportunity that enabled me to make a decision that turned out to be the best thing I ever did.
Michael: Awesome. Gary, our theme this season for the Legal 123s with ByrdAdatto is when should I ask for help? You may have heard us mention that at the beginning. What advice do you have for our audience, from the lessons learned from your story and on when they should ask for help?
Gary: Yeah right away. I’ve had the pleasure meeting you guys and talking to you guys and having you guys out at the symposium, it’s a little shameless plug for that, but you know, I think that we don’t do enough in our society [00:18:00] to educate young doctors about the next steps. We’re so good at training doctors to become doctors but we don’t take the time and effort to expose them to the challenges that some of these people will be small business owners and some of these people will be employees and what that means and how that’s all going to, you know, they just think they’re going to go and make a nice living, which most of us do. But they don’t think about those other things so they’re not exposed to it. The things that you guys are doing with this podcast and the symposium that we do to really introduce them at an early stage in their career I think it’s hugely beneficial. And so asking for help early, asking your mentors, talking to people outside of medicine, business owners, practice managers, lawyers, investment people, insurance people, and all those people will give you knowledge that you can then use to help try to protect yourself and then try to set yourself up for success. [00:19:00] And so I don’t think it’s too early to ask for help ever really. I mean, that’s true probably in anything.
Brad: That’s awesome. Well Gary, we are again super grateful that you chose to spend some time with us today. I know our audience is going to love this episode but we’re going to say goodbye. We’re going to go to commercial and on the other side of this, Michael and I are actually going to kind of break down some of our legal thoughts on this. But again, thanks again for joining us.
Gary: It’s been a real pleasure guys, and it’s always a pleasure to see you. And hopefully we’ll share a cigar and a drink someday.
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Brad: Welcome back to Legal 123s with ByrdAdatto. I’m your host, Brad Adatto with my cohost Michael Byrd. Now, Michael, this season’s theme is when should I ask for help? So for the second half of this show, we are joined by our friend Bala Mohan to help us break down today’s story, Michael, please introduce a Bala.
Michael: Bala is our colleague from India. She’s married to her husband, Raja has a daughter, Mira and a child on the way we don’t, or I don’t know the name yet. I don’t know if it’s been revealed, but we will look forward to knowing that. She is in our Dallas office, she went to school at Anna University in India. She has a master’s in entrepreneurial biotechnology from [00:21:00] Case Western Reserve University and law school at University of Maryland. And just a treasured part of our firm. Welcome, Bala.
Bala: Michael and Brad, it’s my pleasure to be here. I’m excited and thank you for having me.
Brad: Bala, most people when they’re reviewing their employment agreement, they only really examine the compensation. That’s a section that is kind of stare at because that’s the thing like hey, how much money is going to my bank account? That’s all I care about. But you know, we like to look at it from other factors. So what are some of the things that a medical provider should review?
Bala: Yeah, that is so true. While I can understand why, you know, compensation is a very important piece to any employment agreement or arrangement, as you said, there definitely are some other key business terms and conditions you want to review and understand. And a high level one being protective covenants, you know, such as [00:22:00] non-competes and non-solicitation clauses specifically, what are the restrictions as it relates to providing your professional services once you do leave the practice. Second I would say would be the termination language. You definitely want to understand how you can get out of the contract. I want to highlight three important pieces that are generally tied to termination that you want to understand. One being notice. What is the required notice of termination? Typically somewhere between 30 to 90 days is generally considered standard. So if you see something like 120 days or 180 days or six months, you definitely want to pause and think about it, if that’ll work for you. Especially because once you’ve given your notice of termination, that’s an awkward time for both parties. Second important piece tied to termination language that you want to understand is what happens to the compensation [00:23:00] specifically incentive compensation. Will that be paid full? Will you forfeit a certain amount once the contract terminates? And also want to understand when that bill will be paid is especially important when you know you have accounts receivables that is yet to come to you. And the third piece typically tied with termination would be we want to think about and understand what the malpractice insurance language says specifically in relation to tail insurance and who will be responsible for its expenses. I also want to say next, in addition to protective covenants and termination, I want to highlight that you want to have your contract in writing. Definitely have a written contract because this in essence will help you and the practice ensure your expectations out of your contractual relationship are basically in alignment or in other words, having expectations in writing will assist in mitigating unmet [00:24:00] expectations. So the takeaway here is you want to detail out your expectations in writing in the contract. And finally, the fifth important piece I’d say is patients. The ultimate question here is to any medical providers basically going to be, how are you going to be busy at that practice? You want to understand how you’ll get your cases. What type of cases can you or will you be working on? And in general, at a high level, what are your on-call coverage expectations? These are just some of a few things that you want to think about specifically. Also, as it relates to patients, when a patient walks into the practice, how will they be assigned to you? Will it be first up or mainly directed to the senior surgeon? So you can see, there are a number of things at play here but you definitely want to understand how you’ll be busy at that practice. So in conclusion, at a high level, I’d say the big five things to consider in addition to compensation would be your protective covenants, your termination, you want to detail out your expectations in writing and understand how you’ll [00:25:00] be busy at that practice.
Brad: That’s awesome. Thank you. And you know, Michael in Gary’s story he mentioned when he was offered a chance to buy in to become an owner they wouldn’t share the books and records. Can you explain to our audience, is that normal? What does that mean?
Michael: Yeah. And so here’s a little context. So there are a couple of stages when you’re an employed physician. The first stage of course, is when you get that first contract and in Gary’s instance, the one that he could either sign or not sign and in about half the time in those initial contracts, they even talk about future partnership. And so what we always say is at a minimum, you need to have some form of a conversation at that stage to understand what that looks like. Just so you know if your goal is to be there for life, like in Gary’s case that you have some understanding of what that even means. [00:26:00] But you probably realistically are not going to get at that stage, the financials. Then you get to the stage where Gary was, which is they’re saying, okay it is time, you are going to be an owner and we’re asking you to pay some amount to become an owner. And Gary’s absolutely right. You should always be allowed to review the financials before you buy in. And frankly, if that that’s not allowed it would be unwise to sign it because you don’t know what it is that you’re buying, if you don’t have any of the underlying information.
Brad: Yeah, absolutely. It makes sense. And Bala I want to come back to you. You know, often when we’re sitting here visiting with a potential person trying to contract, they tell us all these certain terms and conditions that are really important to them. If those terms and conditions aren’t in the contract, do they still exist? [00:27:00]
Bala: Well I feel bad being the bearer of bad news. Unfortunately, no. If it does not exist in writing in the agreement, the reality is that just does not exist. It’s like the four corners test that you may have heard of, if it’s not within the four corners of your paper, it just does not exist. And if you come to think of it, no competent court can really enforce any term if it is not pen down in writing. So with that being said, you definitely want to make sure that you detail out your expectations in writing because unfortunately if it’s not in writing, it’s just not there.
Brad: That’s so true. All right, Michael, what are some of your takeaways about when you should ask for help?
Michael: Well, I want to hit the pause button on our lawyer talk for a moment and understand that the bigger and more important reason that you have a contract is for the setting of expectations. So what Bala said is 100% true. If it’s not in the contract, [00:28:00] it’s not, you don’t have it. From a human relationship perspective there is value to things that are outside of the contract because what we’re trying to protect against is unmet expectations. And so when we talk about when should I ask for help at the beginning, it’s getting that guidance even for things that aren’t in the contract to know what to talk about so you can figure out where there is alignment and not alignment, both with you as a physician in your own goals and the practice and their goals to see if this, if there’s some bumps in the road, down the line, and to figure out if this lines up with your risk tolerance. And so kind of going back to the piñata talk it’s really measuring things out before that blindfold goes on and you start swinging the bat or in my case, really being a little more agile when I’m [00:29:00] moving that penny all around for the four year old, he made the wrong connection.
Brad: Well Michael, that’s a wrap on season four and our theme of when I should ask for help. To our loyal listeners who are used to seeing us every Wednesday pop-up, we are going to take a break and we will be back with you for the release of season five on July 7th, when we preview what we’re going to talk about as our new theme for season five on the Legal 123s with ByrdAdatto.
Outro: Thanks again for joining us today. And remember, if you liked this episode, please subscribe. Make sure to give us a five-star rating and share with your friends. You can also sign up for the ByrdAdatto newsletter by going to our website at byrdadatto.com. ByrdAdatto is providing this podcast as a public service. This podcast is for educational purposes only. This podcast does not constitute legal advice, nor does it establish an attorney-client relationship. Reference to any specific product or entity does not constitute an endorsement or recommendation by ByrdAdatto. The views expressed by guests are their own and their appearance on the program does not imply an endorsement of them or any entity they represent. Please consult with an attorney on your legal issues. [00:30:00]