Physician Contracts - Leaving Your Practice

Kyle Claussen

Physician turnover has unfortunately become more common in medicine. With a health system that is increasingly subjected to tighter budgets and other financial constraints, physicians are pressured to quickly prove their worth, or move on.

This has created a system where physicians are often working for a various employers over the span of their careers, and leaving a practice can sometimes be an unsettling and stressful process.

Maybe you are looking to relocate closer to family or maybe it is just time for you to move on from a financial perspective, regardless, you need to be proactive. Here are a few keys to successfully preparing and completing your practice termination.

Employment Agreement

After the initial contract proceedings, when you first signed on to practice with an organization, you may have not thought much about the terms of your contract. If you plan to leave your practice or your termination may be on the horizon, a great way to prepare is by taking a closer look at the terms of the employer agreement you signed.

This agreement addresses the grounds for termination, which includes both “for cause” and “without cause” terms. For cause means that there is a specific set of reasons for your termination while without cause means that either you or your employer may terminate employment voluntarily.

The employment agreement delineates the expectations of both yourself and your employer following termination and these expectations can vary depending on why your employment ended. Here are some important contractual items that may arise at the end of your employment:

Non-compete Clause

The non-compete can be a crucial part of determining your transition from one place of employment to another. The enforcement of non-competes can become highly dependent on whether the termination was voluntary or for cause and in which state you practice. Consulting with a licensed attorney is the best course of action to find out whether your new practice opportunities are constrained by a non-compete.

Severance Pay

Employers may offer severance packages upon termination that include pay and sometimes health benefits for a short period of time.  A physician will often have to decide between receiving severance pay and other benefits, such as malpractice tail coverage. One way you can ease, or even eliminate, a non-compete agreement is to leverage this pay. This is especially useful if you already have a new practice location in mind but it is within your non-compete radius.

Malpractice Tail

If you had a successful contract negotiation at the beginning of your employment then most likely your employer is covering your malpractice tail insurance. However, once you end your employment, it is possible that you may have to purchase your own malpractice tail insurance to protect yourself from liability to previous patients.

This insurance coverage is known as tail coverage and is very important if the malpractice insurance coverage offered by your former employer is a “claims-made” policy. If you have “occurrence” coverage, then you will not need to purchase tail coverage. You can read more about coverage types here.

Bonus Compensation & Benefits

Your compensation model may not be as straight forward as a simple annual salary. If a substantial part of your compensation is earned from production and you have earned a bonus payment, then you should be entitled to receive this payment upon completion of your employment. This can be dependent on your initial contract, so have your contract reviewed if you believe you may encounter this situation.

Also, you should be aware of your right to transfer or maintain health benefits and retirement accounts. If you do not look into methods of maintaining these benefits from practice to practice then you might end up experiencing a financial loss.

Medical Records

There are state, federal and contractual limits on your use of patients’ medical records and how you handle them upon termination of your employment. Typically, your employer will be deemed the owner of medical records for your patients, but in some cases, your contract states that you are the owner. In this case, you need to make sure they are either properly transferred or inventoried so you are not subject to penalties or charges of theft.

Termination Agreement

A termination agreement can come into play to address any issues that were not explicitly addressed within the employment agreement. This agreement can be helpful in resolving issues up front and avoiding a lengthy litigation process. The termination agreement will include the effective date of separation, the amount of severance pay or bonus pay owed to you and the benefits that are to continue to be provided to you, the physician.

If you have decided that it might be time to move on from your practice, or your employment has been terminated, then you need to seek legal counsel and consider what kind of effects your contract terms might have on your exit. Contact Resolve today to have your contract reviewed and ensure that you have everything in order for transitioning to your new practice.