Your Rights and Obligations as a Nurse Practitioner: Navigating Independent Contractor Agreements

In today’s healthcare environment, many nurse practitioners (NPs) are hired as independent contractors by group practices. While these arrangements are often presented as offering professional autonomy, the reality can sometimes blur the line between independent contracting and employment. This comprehensive guide explores your rights as an NP, explains IRS guidelines for independent contractors, and discusses the limits on how much control a group practice can exert over your work through an independent contractor agreement.

Understanding IRS Guidelines for Independent Contractor Agreements

The Internal Revenue Service (IRS) uses specific criteria to distinguish between independent contractors and employees. In essence, the IRS looks at how work is performed—not merely the label on your contract. Key considerations include:

• Behavioral Control: An independent contractor decides how, when, and where to work. If you have the freedom to set your own patient appointment schedules and clinical methods, you more closely align with an independent contractor’s role.

• Financial Control: An independent contractor is expected to invest in tools and resources and bears the risk of profit or loss. If you manage your own supplies and incur operational expenses, it supports your independent status.

• Type of Relationship: Contracts for independent contractors typically lack employee benefits like health insurance or retirement plans, and the relationship is often project-based or limited in duration. This contrasts with employee arrangements, which involve ongoing supervision and control over daily work activities.

Control Over Work: Quality Assurance vs. Micromanagement

Independent contractor agreements allow group practices to set certain standards without dictating the exact methods you use to achieve them. Consider this analogy:

The Plumber Example

Imagine hiring an independent contractor plumber to repair a bathroom. The practice (or building manager) can require that the repair work meets specific safety and durability standards—for example, using PVC pipes instead of copper or a particular type of tile to ensure long-lasting results. In this scenario, the focus is on achieving a quality outcome, not on micromanaging the plumber’s choice of tools or the detailed steps taken to complete the repair.

For NPs, this means that while a group practice can set clinical outcomes and quality benchmarks, it should not control the day-to-day processes such as:

• Billing Practices: Mandating a specific billing system.

• Electronic Health Records (EHR): Requiring the use of a particular EHR.

• Scheduling or Administrative Methods: Micromanaging how you organize patient care or handle administrative tasks.

When the practice imposes detailed methods rather than outcome-based standards, it risks classifying you more as an employee than an independent contractor—potentially violating IRS guidelines.

Mandatory Prescription Review: An Example of Overreach

Consider a situation where a group practice creates a policy requiring that any NP who wishes to prescribe medications—even those that are standard of care and legally permitted—must first have a review with a group practice employee. The rationale provided is that the group practice is attempting to avoid potential liability from adverse outcomes.

How This Policy Impacts Your Autonomy

• Quality vs. Undue Control: While quality assurance is vital, mandatory review of every prescription for drugs that are legally standard of care represents micromanagement. Instead of offering occasional guidance for complex cases, this policy forces you to obtain approval even for routine decisions, undermining your clinical independence.

• Implications for Independent Contractor Status: Such a policy indicates that the practice is exercising direct control over your clinical decisions—behavior more in line with an employer-employee relationship than that of an independent contractor. The IRS emphasizes that independent contractors must have the discretion to determine their own methods of work.

Core Service Provision and IRS Guidelines

Another important IRS guideline is that an independent contractor should not be providing the primary service that a company sells. In the context of healthcare:

• Primary Income Generation: If the core business of a group practice is providing clinical services, and the NPs as independent contractors are the main providers of these services, then the contractor is integral to the business’s revenue stream. This arrangement may suggest misclassification because it indicates that the NP’s work is not a peripheral service, but the main product the practice markets.

• Control and Consistency: Coupling this with policies that dictate specific billing practices, mandatory EHR systems, or required quality assurance meetings reinforces the perception that the NP is functioning as an employee rather than an independent professional. Such a scenario increases the risk of misclassification under IRS rules and could expose the practice to tax and legal liabilities.

Striking the Right Balance

Group practices do have the right to ensure that all clinical services meet certain quality and regulatory standards, but they must do so without compromising your independence. Here are some best practices for both parties:

• Establish Outcome-Based Requirements: The practice can and should require that all patient care meets established quality benchmarks and regulatory standards. This may include general guidelines on patient safety and treatment effectiveness.

• Allow Flexibility in Methods: Instead of dictating the exact tools, software, or processes you must use, group practices should allow you the freedom to choose your own billing systems, EHRs, and practice management methods—as long as overall quality and compliance are maintained.

• Limit Oversight to Advisory Roles: Quality assurance meetings and performance reviews should be designed as advisory sessions. They should focus on ensuring compliance with best practices rather than micromanaging individual clinical decisions like standard prescriptions.

• Avoid Policies That Target Core Services: If the NP’s core function—whether it’s patient care or prescribing medications—is subject to strict oversight that mimics an employee’s structure, it undermines the independent contractor model. This can be particularly problematic when the service provided is the primary revenue generator for the practice.

Conclusion

Understanding your rights and the limitations of control in an independent contractor agreement is critical. As an NP, you deserve the autonomy to manage your clinical practice while ensuring that patient care remains of the highest standard. Group practices are entitled to set outcomes, quality standards, and safety benchmarks, but they should not impose policies—such as mandatory prescription reviews or enforced use of specific administrative systems—that micromanage the methods you use to deliver care.

• Mandatory review policies for standard-of-care prescriptions and rigid requirements for billing and EHR systems can blur the lines between independent contracting and employment.

• IRS guidelines indicate that if the NP is providing the core services sold by the practice, and there is excessive control over how those services are delivered, the relationship may be misclassified.

By carefully reviewing your contract, understanding these distinctions, and seeking legal counsel when necessary, you can ensure that your professional autonomy is preserved while meeting quality and regulatory expectations.

This post is intended for informational purposes only and does not constitute legal advice. For guidance specific to your situation, consult a healthcare employment attorney or a tax professional.