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The changing practice of medicine: Employment contracts and medical liability

Originally published September 2012

Physicians will likely have heard of or, in some cases, may be practising medicine through arrangements such as employment or contracts for service. If the American experience is any indication, an increasing number of doctors are considering or trying different practice arrangements. In fact, the 2012 edition of the American Hospital Association's Hospital Statistics reported that physician employment by hospitals rose by 32% since 2000.1

Within Canada, the range of new practice arrangements is quite broad, and some models are still taking shape. While these new practice arrangements can benefit physicians in a number of ways, doctors need to be familiar with the medico-legal aspects of these arrangements. A sound understanding and careful consideration of the options will help physicians make informed choices about employment, contracts, and medical liability protection.

Practice arrangements

Historically, physicians delivering care in private practices may or may not have had privileges to provide care in a hospital in their jurisdiction. When physicians did deliver care in hospitals, they normally did so under a privileges-based model that granted rights to the physicians to perform specific acts and recognized the independent nature of the doctor. Provincial and territorial legislation and regulations require specified procedures for renewing, restricting, and terminating privileges. These procedures are normally set out in regional health authority or hospital bylaws. In most cases, medical advisory committees review the applications and recommend appointment and reappointment.

The privileges-based model is also supported by civil case law which clarifies the processes that should be in place to ensure a physician's entitlement to certain rights when a hospital seeks to restrict, revoke, or fail to renew the physician's privileges. All provinces and territories have statutory appeal processes for physicians who are denied or who lose their privileges.

While the privileges model has been successful, there are other means through which physicians and hospitals can arrange for the delivery of medical services. For example, some physicians and hospitals are opting to enter into employment or contractual arrangements. There are a variety of such arrangements, including employment contracts (similar to those for other professional staff such as nurses) and service agreements (in which the doctor provides medical services as an independent contractor).

There are benefits and drawbacks to employment or contractual arrangements as well as the privileges-based system, and these depend on the specifics of the arrangement. Physicians may be attracted by a predictable income, a fixed caseload, less administration, and the attraction of work-life balance. For example, the results of the 2010 National Physician Survey2 found that nearly 38% of all responding physicians plan to reduce weekly work hours (excluding on call) in the next 2 years. Moreover, a balance between personal and professional life was identified as the most important factor for a satisfying practice by 51% of physician trainees. The survey also found that more than one quarter of current medical students would prefer a blended payment model.

Regardless of their personal situation, it is important for physicians to be aware of the procedural safeguards associated with the privileges model, and guarantees in hospital bylaws. These privileges do not necessarily extend to other arrangements such as employment contracts. The CMPA generally advises physicians engaged as employees or under contractual arrangements to ensure any proposed written agreement contains the same procedural protections that are guaranteed under the privileges model. 

Contractual arrangements can pose additional medico-legal risks for doctors that should be considered before such arrangements are finalized. For example, physicians should generally avoid indemnification clauses in their contracts that could lead them to be held legally responsible for the actions of the other party in the contract. Members are encouraged to review the CMPA's document, Medico-legal issues to consider with individual contracts. In addition, the CMPA suggests physicians review individual contractual agreements with their personal legal counsel.

Prior to entering into employment or contractual arrangements, physicians should also be clear on specific elements such as the job description, call schedule, outside activities, and contract termination.3 These elements, and others, will likely be points for negotiation between the doctor and the healthcare organization. For example, the job description  could outline specific types of care to be provided (e.g. internal medicine) and specific patient care hours. In terms of outside activities, specific conditions on items such as moonlighting, volunteer clinical work, or research should be included. Again, physicians are encouraged to review specific conditions with their personal legal counsel. 

Physicians must be attentive to their rights when an employment or contractual arrangement is renewed or ends. For example, to what extent is the doctor involved in updates or renewals to the agreement? Under what circumstances can the physician end the employment or contractual relationship? What are the consequences of termination of employment? Can the physician access hospital records if he or she leaves or is terminated? These are important questions with answers that may vary according to individual arrangements and can greatly impact physician work life and medical practice.4

The CMPA is encouraged by the latest development toward a model in which physicians are appointed to the medical staff at the health authority or hospital level. While there may be implementation risks associated with this approach, the appointment model includes many protections for physicians found within the privileges model. It also provides physicians and health authorities or hospitals many of the advantages offered through an employment or contractual arrangement. This emerging approach applies the processes normally used to grant or renew privileges to help resolve physician performance-related issues.

Liability protection

An effective medical liability system is an important part of any quality healthcare system. This assures both healthcare professionals (including physicians) and their patients that their interests and access to due process will be protected. Most Canadian physicians, including those delivering care in hospitals, obtain their liability protection from the CMPA. Hospitals and hospital employees are typically covered by the hospital's insurance arrangements.

As hospitals and physicians adopt employment and contractual arrangements, there may be an interest in considering what is known as enterprise liability protection. This model involves the hospital, health authority, or other healthcare organization assuming responsibility for providing liability protection for all individuals (even physicians) delivering care within that organization — whether as employees, independent contractors, or through other arrangements. The CMPA does not support the enterprise liability model in Canada and members should carefully examine the implications associated with enterprise liability protection. There should be no assumption that the interests of the institution and the physician will necessarily align. In addition, enterprise liability protection is limited to legal actions against the healthcare professional. For CMPA members, protection and assistance extends to a range of medico-legal circumstances, including College or hospital complaints.

As the healthcare environment adapts to fiscal and human resources constraints, physicians may be asked to consider practice arrangements that differ from the traditional privilege-based model. The CMPA encourages members to carefully review these arrangements, to consult with personal legal counsel, and to explore all dimensions and implications of such arrangements.

Further information about new practice arrangements and liability protection can be found in the CMPA's 2011 policy paper entitled, Changing physician-hospital relationships: Managing the medico-legal implications of change.

Members are encouraged to review the CMPA's document, Medico-legal issues to consider with individual contracts. In addition, the CMPA suggests physicians review individual contractual agreements with their personal legal counsel.


  1. Physician Insurers Association of America, "Hospital statistics show increase in physician employment," PIAA Newsbriefs, January 13, 2012.
  2. The College of Family Physicians of Canada, Canadian Medical Association, The Royal College of Physicians and Surgeons of Canada. 2010 National Physician Survey.
  3. Stagg Elliott, Victoria, "Seven land mines of hospital employment contracts," 2011. Retrieved on July 31 2012 from
  4. Lorrel, Amy Lynn, "Hospital employment pits work rules against physician rights," 2012. Retrieved on July 31 2012 from

DISCLAIMER: The information contained in this learning material is for general educational purposes only and is not intended to provide specific professional medical or legal advice, nor to constitute a "standard of care" for Canadian healthcare professionals. The use of CMPA learning resources is subject to the foregoing as well as the CMPA's Terms of Use.