Practice owners: 5 warning signs your Agreement with doctors needs updating
Medical practices commonly engage independent medical practitioners through service agreements, where doctors provide services to their patients and the practice supplies rooms, reception, billing infrastructure and administrative support. These structures are widely used across general practice and specialist settings.
Practice owners regularly come to us with questions not about whether they can engage independent practitioners, but whether their agreement and day-to-day operations actually support their intended model.
In recent years, payroll tax authorities, courts and regulators have increasingly examined the substance of medical practice arrangements. A number of payroll tax cases have highlighted that poorly drafted agreements, or agreements that do not reflect how the business actually operates, can expose healthcare businesses to significant financial risk.
More recently, the decision in Uber Australia Pty Ltd v Chief Commissioner of State Revenue reinforced the principle that regulators do not simply accept contractual labels. They examine the practical substance of the relationship and the way money and services actually flow through the arrangement.
Medical practices should not assume that long standing agreements remain appropriate in the current environment. For many clinics, a careful review of practitioner agreements is now part of stronger governance.
Below are five common warning signs that your agreement with doctors may require updating.
1. Your agreement was written before the recent payroll tax cases
Several medical practices are still relying on agreements drafted five, ten or even fifteen years ago. The law is continuously evolving and changing. State revenue authorities have undertaken targeted reviews of medical practices and courts have increasingly scrutinised the structuring of practitioner relationships, following Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue.
These developments do not mean independent practitioner arrangements are inappropriate. However, they do mean the agreement must properly reflect the legal and operational structure of the practice.
Warning signs often include agreements that:
have not been reviewed in the last two to three years,
do not reflect the lessons emerging from recent payroll tax decisions involving medical practices,
assume independence without addressing the practical structure of the relationship.
Where agreements predate these developments, it is common to see drafting that does not adequately address service fees, patient relationships, billing authority or the independence of the practitioner.
A periodic legal review or new practitioner services agreement helps ensure the documentation remains aligned with the current regulatory environment rather than relying on assumptions that may no longer be legally compliant.
2. The agreement does not reflect how the practice actually operates
One of the most common structural risks we see is when the services agreement describes a relationship that does not match the day-to-day reality of the practice.
Legally, the substance of the relationship overrules the wording of the contract. If the operational reality suggests an employment relationship, the agreement alone will rarely resolve that issue.
In medical practices this mismatch can arise in subtle ways.
Warning signs include situations where:
practitioners have fixed rosters similar to employees;
the practice exercises extensive control over clinical workflow or leave arrangements;
practitioners are unable to delegate services or operate their practice independently;
the flow of billing or payments does not match the structure described in the agreement.
These inconsistencies are rarely intentional. They usually emerge gradually as practices grow, new administrative processes are introduced, or additional compliance obligations develop.
However, when documentation and operational practice vary, regulators may characterise the arrangement differently from the way the clinic intended. This can create exposure in areas such as payroll tax, superannuation obligations or employment classification.
A well-structured agreement should therefore reflect the actual commercial and operational reality of the clinic rather than an idealised description of how the practice believes the relationship works.
3. The payment and billing arrangements are unclear
There is no single “correct” way for payments to flow within a practice. In some models, patients pay the practitioner directly. In others, the clinic collects patient fees on behalf of the practitioner and later distributes the practitioner’s share. Both approaches might work for you.
The critical issue is getting legal advice to ensure that the structure is clear and compliant, and then having an agreement that clearly documents how the financial arrangements operate in practice.
Common warning signs include agreements where:
the method for calculating service fees is not clearly explained;
the billing process for Medicare or private patients is not described in sufficient detail;
it is unclear who is collecting patient fees and in what capacity;
the treatment of incentive payments, grants or subsidies is not addressed;
the agreement does not reflect how money actually flows through the practice.
When these issues are ambiguous, uncertainty arises about the flow of funds and the role each party plays in the provision of which services. This can become relevant in areas such as payroll tax, Medicare compliance, and broader regulatory assessments of the practice structure.
Careful drafting ensures the agreement accurately reflects the intended structure of the practice and reduces the risk of incorrectly interpreted financial arrangements.
4. The agreement does not address key legal risks
Medical practices operate within a highly regulated environment. Practitioner agreements should therefore address a number of issues that extend beyond the commercial relationship between the clinic and the doctor.
Common governance issues include privacy obligations, medical records management and professional indemnity coverage. These matters are particularly important where multiple independent practitioners are operating within the same practice.
An agreement that fails to address these issues can create uncertainty about responsibilities and compliance obligations.
Warning signs may include agreements where:
ownership or control of medical records is unclear;
there is no requirement for practitioners to maintain appropriate professional indemnity insurance;
confidentiality obligations are limited or absent;
practice policies and regulatory compliance requirements are not referenced.
These provisions are not just administrative details. They help establish clear operational boundaries between the practitioner and the clinic while ensuring the practice maintains appropriate governance standards.
In a regulated sector such as healthcare, that clarity is essential.
5. The agreement was downloaded from the internet, created by generative AI or adapted from another practice
Many practice owners understandably look for efficient ways to implement documentation. It is not uncommon for agreements to be sourced from online templates, created by generative AI (like ChatGPT) or adapted from documents used by another clinic.
The difficulty is that practitioner agreements are highly dependent on the specific structure of the practice.
Even small differences in the way a clinic operates can significantly affect how the agreement should be drafted. These differences might include:
the billing model used by the clinic;
whether patient fees are collected through a central system;
how service fees are calculated and paid;
the level of administrative support provided by the practice;
the governance framework applied to practitioners operating within the clinic.
An agreement that works appropriately for one medical practice may be not suitable for yours.
Generic templates or those created by generative AI also rarely reflect recent legal developments affecting medical practices. As recent payroll tax decisions and regulatory reviews have shown, the detailed structure of practitioner arrangements matter.
For this reason, documentation used from another practice, generated by AI or downloaded online can create unintended risk if it does not properly reflect the clinic’s own operational model.
Why periodic agreement reviews matter
For most medical practices, practitioner agreements are foundational documents. They shape how the clinic operates, how revenue flows through the practice and how responsibilities are allocated between the practice and individual doctors.
Yet these agreements are often signed once and then left unchanged for many years while the practice itself evolves.
A periodic review allows practice owners to confirm that the documentation continues to reflect:
the operational reality of the clinic;
current regulatory expectations, and
the intended independent practitioner structure.
When the agreement, operational model and financial structure are aligned, practices are far better positioned to manage regulatory risks and maintain stable practitioner relationships.
To ensure your agreements reflect the current legal environment, You Legal has developed a structured Practitioner Services Agreement for Independent Medical Contractors designed specifically for medical practices operating independent practitioner models. Contact our team today to discuss how You Legal can support you and your practice.