Leaving a medical practice is never an easy decision, whether it is made voluntarily or not. A physician terminating a relationship with an employer may face emotionally charged conversations, difficult financial considerations and long-term legal consequences. As you plan your exit strategy, be aware of these issues and address them proactively with your employer. This can minimize hard feelings and surprises down the road for you, your former employer and your colleagues.
Explore this issue:March 2012
With the tighter financial medical market and pressures from managed care mounting, employers are less likely to tolerate a non-productive employee. Inter-office or personality conflicts may become intolerable for an unhappy or stressed physician. Physician turnover is becoming a more common occurrence, and if not handled properly, it can be disruptive for all parties involved.
The Employment Agreement
Ideally, physician separation matters are addressed preemptively when the physician enters the employer-employee relationship and executes an employment agreement. Thus, before contemplating a move, you should always start by reviewing the terms of your current employment agreement. A well-drafted employment agreement should specify the grounds for termination, both for cause (i.e., a specific set of reasons for immediate termination) and without cause (i.e., either party may terminate voluntarily, usually after providing notice). The agreement should also specify the parties’ rights and obligations following a termination, which will likely vary depending on the basis for termination.
Typically, an employer will provide malpractice insurance for its physicians during their term of employment. However, upon termination of employment, physicians may be responsible for the cost of “tail coverage,” insurance that is designed to protect the departing physician’s professional acts after leaving the employ of a practice with claims-made coverage. Because this coverage can be quite costly, a good employment agreement will often set forth terms determining whether the employer or employee-physician is responsible for the procurement and payment of tail coverage.
You should also review the employment agreement in order to determine the proper method to provide notice of termination, such as first class mail, overnight courier or hand delivery. Employment agreements will often include a clause titled “Notice” that outlines the proper delivery method.
Entering into a termination agreement, sometimes referred to as a separation agreement, with your employer may address and resolve many of the outstanding issues that are not otherwise addressed in the employment agreement. A termination agreement may avoid unnecessary problems down the road, including potentially acrimonious and costly litigation. The key elements of a termination agreement often include the following:
- The effective date of the separation, as well as what exactly is ending (e.g., employment, co-ownership, board membership, medical staff privileges);
- Payment terms and any buyout terms;
- If the physician is an owner of the practice, a requirement that he or she be removed from the board, any officer position and any retirement plan positions. Deferred compensation payments or severance pay may need to be calculated and distributed;
- The employer’s obligations, if any, to provide the departing physician’s fringe benefits and business expenses, including retirement plan contributions, health insurance, life insurance and medical dues;
- Explanation of any post-departure compensation, unused vacation days, bonuses or expenses due to the leaving physician;
- If previously addressed in the employment agreement, a reaffirmation of obligations regarding medical records, confidential information, non-competition and non-solicitation provisions. Otherwise, the termination agreement should define the physician’s competitive and solicitation activities post-termination;
- A non-competition provision that defines the geographic territory in which, and the time period during which, the departing physician cannot compete with the former employer. Courts will render these provisions unenforceable and invalid if improperly drafted or overly broad;
- Non-disparagement provisions, whereby each party agrees to refrain from making any disparaging or false statements regarding the other. Non-disclosure provisions, detailing what may be disclosed to third parties, are common as well;
- A separation agreement that addresses the return of company property, including office key, credit card, computer, cell phone and beeper. Patient records and charts should be returned to the practice. Typically, the departing physician will still be allowed reasonable access to patient records post-termination for certain authorized purposes, often at his or her personal expense. The termination agreement may also outline how patients will be notified about the changes in the practice and the circumstances of the physician’s departure. If a patient wishes to continue treatment with the departing physician, the medical practice must be ready to transition the patient; and
- Mutual releases, as well as any exclusions from the mutual releases, such as pre-termination date liabilities, medical malpractice claims resulting from the physician’s misconduct, or taxes, interests and penalties covering the pre-termination date.
Depending on the circumstances surrounding the termination and the employment agreement terms, you may be entitled to severance payments on the date of termination or for a period of time post-termination. You should determine whether severance is appropriate or whether you’re willing to forego severance payments in exchange for other benefits. Depending on the dollar amount and your career objectives, it may be worthwhile to sacrifice severance payments for a less onerous non-compete provision, for example.
Take the High Road
Because you never know when your path might cross those of former co-workers or employers, it is always sensible to remain discreet and level headed during this trying period. While it is natural to discuss an impending move with others, a prudent physician will avoid water cooler gossip. In the event conflicts arise, limit public disclosure of these disputes. Neither side wins the public relations battle, and often, both sides lose.