Drafting and negotiating employment and service agreements is a critical responsibility for healthcare providers in Texas. Contracts set the foundation for professional relationships, define responsibilities, and can protect both parties from unexpected risks. Without careful attention, contract mistakes can result in lost revenue, noncompliance penalties, and even threatened licensure. Many providers seek guidance from healthcare attorneys in Dallas, TX, to avoid these potentially career-altering errors.
Small oversights in contract language or ignorance of recent legislative changes can have major consequences. A simple misunderstanding or missing clause could leave a physician unable to practice or facing expensive litigation. The stakes are too high for Texas healthcare professionals to overlook the crucial elements of their contracts.
Since employment terms and healthcare regulations evolve rapidly, staying informed about the main legal traps is necessary for every provider, group, and healthcare entrepreneur. Failure to do so may jeopardize not only business interests but also the ability to deliver consistent and compliant care.
Overlooking Stark Law Provisions
The Stark Law, which restricts physician referrals where there is a financial relationship unless an exception applies, is one of the most common compliance stumbling blocks for Texas providers. Federal enforcement is aggressive, and Texas physicians collectively paid $21.3 million in 2024 to settle violations.
Overlooking Stark Law details or failing to keep contracts in step with exemption requirements can cost providers dearly, as recent cases have shown. Texas practices should adopt robust compliance programs and conduct regular audits to avoid inadvertently violating these regulations.
Neglecting Non-Compete Agreement Nuances
Non-compete clauses are standard in physician contracts and are enforceable in Texas, but the law places strict parameters on their scope. As of September 1, 2025, these covenants cannot last longer than one year nor exceed a five-mile boundary from the practice’s main location. Many practices fail to update their templates or attempt to impose broader limitations, resulting in unenforceable agreements.
Both employers and physicians should periodically review their non-compete terms to ensure compliance. Understanding these legal limits is essential for all parties and can shield practices from ugly disputes when physicians transition to new opportunities.
Ignoring Malpractice Insurance Details
Malpractice insurance provisions are sometimes treated as a minor detail in contract negotiations, yet ambiguities or missing terms can leave providers without needed coverage at a critical moment. Both parties should agree in writing who pays for premiums, the exact coverage limits, and what happens at contract termination (especially regarding tail coverage). Without these specifics, physicians may find themselves exposed to lawsuits with no insurance support or face steep out-of-pocket costs to maintain coverage when changing employers.
Failing to Address Compensation Structures
Disputes over compensation are a leading cause of executive frustration and employment litigation. Contracts should lay out with precision the formula for salary, bonuses, and productivity-based pay. This clarity is especially valuable in group practices and hospital systems where multiple variables affect total pay.
A contract should also clarify how and when payments are made and specify what happens if the policy or formula changes mid-agreement. Employers and employees benefit from reviewing compensation structures in detail before signing to ensure alignment.
Overlooking Termination Clauses
Every healthcare contract must address how relationships may end, including required notice periods, valid grounds for termination with or without cause, and any financial or professional obligations triggered at parting. Omission or vague language in this section can set up both sides for protracted legal fights and unexpected liabilities, especially if a split is contentious. Clearly defined termination provisions encourage smoother transitions and uphold the interests of all parties.
Disregarding Compliance with State Regulations
Texas healthcare providers must consider not only federal regulations but also complex, evolving state standards. Each contract must reflect the current legal landscape, adjusting as Texas enacts new employment laws, insurance requirements, or telemedicine rules. Frequent reviews and updates are essential to protect the practice from unintentional regulatory breaches. Partnering with legal counsel familiar with healthcare law is a prudent strategy.
Not Specifying Duties and Responsibilities
When job duties, patient care expectations, or supervisory obligations are left vague, conflict is inevitable. Each contract should include a detailed schedule of responsibilities, call coverage, clinic hours, and administrative tasks. Getting these basics in writing up front eliminates confusion and misunderstandings that can threaten morale or patient safety. Both parties can refer to clear contractual language if questions arise.
Overlooking Dispute Resolution Mechanisms
Medical employers and providers benefit from including practical dispute-resolution options, such as mediation or arbitration, in contracts. These clauses set out the process before disagreements become personal or public, helping all involved avoid prolonged, expensive litigation. Establishing a pathway to resolve disputes efficiently preserves relationships and protects valuable reputations.
Final Thoughts
Avoiding these common contract mistakes is crucial for Texas healthcare providers to ensure legal compliance, protect their professional interests, and maintain strong practice relationships. Proactive contract drafting and regular review, informed by legal experts and authoritative resources, offer lasting security in a highly regulated environment.
