Draft clinician employment agreements

Clinicians are employed by the PC, not the MSO. Their employment agreements set compensation, malpractice coverage, duties, and restrictive covenants, and the last of those is governed by state law that changed materially in 2025 and 2026.

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Prerequisites

• The PC formed and able to employ
• State employment tax registrations complete
• Malpractice coverage arranged
• Counsel confirmation of current noncompete law in the state

In CPOM states, only the PC may employ clinicians to practice. An MSO that employs physicians to deliver care is the prohibition itself. This is not a technicality to work around with a secondment or a staffing arrangement.

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Compensation models

The edge to watch is compensation tied to ancillary services the clinician orders. Paying a clinician based on their own personal services is generally workable. Paying them based on the imaging, labs, or therapy they refer to is where Stark and AKS exposure concentrates. See Stark and anti-kickback.

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Part-time roles, stipends, and clinicians who do not see patients

A recurring question: should a monthly stipend for, say, twenty hours a month be written into the employment agreement? Yes, as compensation for identifiable services, with the hours and duties stated, not as an unexplained fixed sum. The word “stipend” carries no legal meaning. To payroll it is wages (26 U.S.C. § 3401). To a fraud-and-abuse reviewer it is remuneration that must be for services actually rendered at fair market value. The Stark employment exception requires “identifiable services” and compensation that is “commercially reasonable even if no referrals were made” (42 C.F.R. § 411.357(c)), and OIG’s compliance guidance uses as its cautionary example a physician paid “a monthly stipend of $500” who “performs no specific service for the stipend.”² For a clinician who does not see patients the agreement has to do three things the standard clinical template does not:

1. Name the services. Clinical oversight, protocol approval, supervision of named practitioners with the state-required chart-review percentage, peer review, payer and board liaison, ACCESS medical director. Attach the list.
2. State the time and price it as time. A base for a stated minimum and an hourly rate above it, benchmarked to an administrative-compensation survey, with the benchmark kept on file. Require monthly time logs.
3. Put it in the right entity. Anything that oversees care is a PC engagement. An MSO paying a physician to direct the PC’s clinical work is the MSO controlling clinical judgment; the Medical Board of California lists “a physician acting as ‘medical director’ when the physician does not own the practice” among its prohibited structures.³

Whether such a role is a W-2 employee or a 1099 contractor turns on the common-law control test, and the choice sets the safe harbor, the tax form, and (for a part-time physician doing purely administrative work, whose FLSA professional exemption is not clear-cut) the wage-and-hour analysis. The full treatment, including the contractor-side safe harbors and the dollar cap on the Stark limited-remuneration exception, is in Draft a medical director agreement.

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Malpractice coverage

The provision clinicians read first and administrators most often get wrong. Tail coverage (an extended reporting endorsement) covers claims made after a claims-made policy ends for incidents that occurred while it was in force. It can cost a substantial multiple of the annual premium. The agreement must state who pays for tail, and under what circumstances:

• The employer pays on termination without cause
• The clinician pays on voluntary resignation
• Split, or waived after a vesting period
• Some agreements have the employer pay in all cases

Unaddressed tail is a common and expensive dispute. A departing clinician facing a five-figure tail bill they didn’t expect is a clinician who becomes adversarial, and if that clinician is your friendly owner, the dispute is over the entity holding your payer contracts. Address it explicitly.

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Restrictive covenants, the law moved

The federal picture: the FTC’s Non-Compete Rule was vacated in 2024, the FTC dropped its appeals on September 5, 2025, and the rule was formally removed from 16 C.F.R. Part 910 effective February 12, 2026. Noncompete regulation is now primarily a state matter, with the FTC pursuing case-by-case enforcement.¹ State law is moving fast and in one direction: Alternatives that generally survive where noncompetes don’t:

• Non-solicitation of patients and employees, reasonably limited
• Confidentiality and trade secret protection
• Notice periods: a genuine period of required notice is often more valuable than an unenforceable noncompete
• Repayment of signing bonuses or relocation on early departure, where lawful

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Steps

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Verify it worked

• The PC is the employer on every clinician agreement
• Compensation benchmarked and documented
• Nothing varies with referral volume or value
• Malpractice coverage specified, with tail responsibility stated
• Restrictive covenants checked against current state law
• State-specific variants used for multi-state groups
• Termination for license loss or exclusion is immediate
• The friendly owner’s agreement cross-references the transfer restriction
• Annual review calendared

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Common failure modes

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Sources

1. FTC, Federal Trade Commission Files to Accede to Vacatur of Non-Compete Clause Rule (Sept. 5, 2025); removal of 16 C.F.R. pt. 910 effective Feb. 12, 2026, Federal Register. State status summarized from Katz Banks Kumin, Noncompete Agreements: What’s the Status of Laws Restricting Them Nationwide? (March 2026). Verify current state law before drafting.
2. 42 C.F.R. § 411.357(c); HHS OIG, General Compliance Program Guidance (Nov. 2023); 26 U.S.C. § 3401.
3. Medical Board of California, Practice Information: Corporate Practice of Medicine. Checked August 2026.