The question whether a doctor of medicine renders services in an employment relationship is difficult to resolve. Where a doctor performs medical services for an industrial firm, in addition to a private practice, there may or may not be an employment relationship. In other cases, the circumstances under which a doctor enters into a work agreement with a hospital or medical group may raise a question as to the validity of an alleged employer-employee relationship.

Doctors of medicine engaged in their own practices were first covered under Social Security effective with taxable years ending on and after December 31, 1965. Many doctors have private practices exclusively. Some doctors do not have private practices, but devote their full time to performing medical services for others, such as government organizations, industrial employers, etc. In such instances, the doctors usually render the services in an employment relationship and the services are covered on the same basis as other employment.

Under certain circumstances, doctors who perform part-time services may be subject to control and supervision to the degree necessary to establish an employer-employee relationship. The doctor is an employee if:

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  the doctor integrates his or her services into the operating organization of the employer;

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  the doctor performs services of a substantial nature for the employer on a regular and continuing basis;

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  the doctor is subject to the employer’s supervision and control to the extent necessary to comply with its general policies and procedures; and

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  the doctor has the same rights and privileges that the employer generally extends to its employees.

In addition to their private practices, many doctors of medicine enter into arrangements with industrial firms to examine and treat the firm's employees on a part-time basis. These doctors are independent contractors if:

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  the firm is interested in obtaining medical service rather than the personal service of the doctor, and an employment relationship is not contemplated under the terms of the agreement between the parties;

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  the doctor accepts the firm as an additional client in the doctor's private practice;

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  the doctor can leave the firm's premises during work hours if an emergency arises in his or her private practice;

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  the doctor can send a substitute to perform the services in his or her absence;

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  the doctor cannot terminate the relationship on short notice; and

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  the parties to the agreement did not contemplate direct supervision and control over the services.

There are situations in this category in which an employer-employee relationship clearly exists. For example, a doctor with a well-established practice will often engage the full-time services of an assistant. The assistant has just completed medical training, has no practice, and is interested in learning the techniques of the other doctor to benefit from the other doctor's experience and skill. In this type of situation, there is usually no doubt that the services of the assistant are supervised and controlled.

As indicated above, however, some situations require complete development to determine whether a valid employment relationship exists. This is true, for example, where the result may affect the application of the retirement test. Guidelines for developing facts in two common situations in which doctors perform services for other doctors are described in paragraphs F and H in this section.

In this type of case, there are two issues to resolve.

1. 1. 

   First, establish that the doctor is completely divorced from ownership and is in control over the business operation.

2. 2. 

   Second, it must be clear that, in the performance of service, the doctor is subject to direction and control.

To determine if the doctor has separated from ownership and control of the business consider the following:

Information furnished on Form SSA-7160 (Employment Relationship Questionnaire) is not sufficient to determine the existence of an employer-employee relationship exists. You must question the parties further to establish whether a legitimate employer-employee arrangement exists. Consider these factors:

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  the doctor must maintain regular office hours and be available for emergency calls;

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  the partnership assigns patients to the doctor;

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  the partnership handles the billing;

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  all fees belong to the partnership and the partnership determines those fees;

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  the doctor must comply with instructions and accept supervision in his or her work performance;

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  the doctor's pay appears to be reasonable in view of the change in the doctor's status. Obtain a full explanation when the doctor spends less time in the office as an employee compared to the hours when he or she was a partner, but the doctor's income remains about the same; and

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  either party may terminate the relationship at any time without liability.

The typical situation is one where a doctor who was in private practice alleges, at or near retirement, that he or she entered into an employment agreement with an associate, usually less experienced than the doctor, who was previously the doctor’s employee. An employer-employee relationship may exist in this type of case. However, apply the relevant development guidelines in G in this section, since it is unusual for a highly skilled and experienced person to submit to sufficient direction and control from such associate to constitute an employment relationship.

Beginning in the 1960's, states permitted doctors to form corporations to provide medical services. In most states, only those corporate employees who are licensed to practice medicine may provide medical advice or treatment.

Doctors may seek incorporation because of the considerable income tax advantages enjoyed by a corporation in setting up a pension fund for its employees. In this respect, a partnership or individual proprietorship is at a disadvantage since the cost of a pension fund set up by the partners or individual proprietors may not be deducted from the gross income of the enterprise as a business expense. However, in a corporation, the individual who is part owner (i.e., of the shares of the corporation) may at the same time be an employee. These corporations are usually called professional associations.