Employees v. Independent Contractors:
Question of Fact, Which Do You Qualify As?
Below please find an overview of employees v. independent contractors. The analysis is a little longer than I typically email out but its an important topic and worth considering...
Sometimes being corporate compliant may seem to be an insurmountable task, and it may be if your practice is not structured correctly from the ground up. One of the most important decisions you can make while growing your practice or when joining a practice is whether the physicians associated with your practice, or whether you will be associated with a practice, as an employee or an independent contractor.
To most, the crux of this decision is whether to fill out a W-2 form or a form 1099, which is typically decided by the practice's accountant as a result of tax considerations. However, what many physicians are unaware of is that whether an individual is an independent contractor or an employee is a question of fact.
According to the IRS, an individual is an independent contractor if the person (or practice) for whom the services are performed has the right to control or direct only the result of the work and not the means and methods of accomplishing the result. In the context of a medical practice, the following factors will be considered (but other factors may also be considered): (i) whose patients are being treated, (ii) who owns the equipment being used, (iii) whether the practice exercises any control or discretion over the physician or his work methods, (iv) whether the physician is free to provide similar services to others, (v) who determines scheduling, (vi) how the physician is compensated, and (vii) what, if any, benefits the physician receives from the practice.
A physician working at a practice on a part-time employment basis may, in fact, be an independent contractor if the following factors are present: (i) the physician brings his own equipment, (ii) the practice does not exercise any control or discretion over the part-time physician or his work methods, (iii) the part-time physician is free to provide similar services elsewhere, (iv) the part-time physician is paid only for services rendered, (v) the part-time physician does not receive any employee benefits from the practice, and (vi) the part-time physician controls his own schedule.
In sum, engaging physicians or being engaged by a practice under the incorrect employment arrangement has broad consequences for the practice's billing and corporate compliance issues in general, i.e., whether or not you comply with the Stark Law etc. As such, in order to greatly minimize the risk of exposure under federal and state law, it is critically important that you understand and review each arrangement in light of the IRS factors set forth above.
