Can You Break a Physician Contract?
So, can you break a physician contract? Every day, I deal with physicians who are either having new employment agreements that need to be reviewed or they’re on a current agreement that they need to analyze, usually due to wanting to terminate the agreement. One fairly frequent question, and it’s kind of like the base level question, is whether you can break a physician contract. Well, I think defining break is probably the most important part of that. So, can you break a physician contract? If breaking means breaching the contract, not following through on the terms of the contract? Sure, you can.
How to Terminate Physician Employment Agreements
But then you would open yourself up to liability. You could be sued and litigation could begin. If there’s an arbitration clause, then it could go to arbitration. The employer could come after you for damages, for recruitment fees for a new physician, lost revenue from you leaving extra admin fees if there’s no physician to support. Can you breach a contract? You can, but it’s certainly not a good idea. For the purpose of this video, If we’re gonna say, can I break a physician contract? I think the best way of handling that would be, can I terminate the contract? And certainly, yeah, you can. Every contract, at least every physician employment contract will have a section called termination. And in that section, it will dictate the terms of how the physician can terminate the agreement.
There are usually three ways: First, by mutual agreement. Meaning, if you and the employer can come to some kind of an agreement, then the check can be terminated and then maybe you can work out how long the physician will stay. That does not happen very often, to be honest. The second way the contract can be terminated is with cause. It goes both ways. For the most part, most of these employment contracts are highly slanted towards the employer, as far as what they can fire the physician for. And honestly, most contracts are completely silent on what the physician can do if the employer breaches the contract. Some normally think that the employer can terminate a physician immediately for cause at their option. So, the physician loses the license, DEA registration, they’re running shareable, they’re on the OIG list, those types of like obvious, right?
Chelle Law will provide physician contract review to identify the areas that could be improved and to assist you in negotiating the best contract possible. Other blogs of interest include:
- What Should be in a Physician Contract Termination Letter?
- What to do When Your Physician Contract Is Not Renewed?
Breach of Physician Contracts
Like you can’t practice as a doctor, so you can’t fulfill the terms of the contract. The employer can fire the physician immediately for that. Now, the most important section is, can a physician break a contract? If we’re assuming break means terminate, there should be a section that’s called without cause termination. In that section, it will state normally either party can terminate the agreement with a certain amount of notice to the other. I’d say, the industry-standard amounts are between 60 to 90 days. So you would just give the employer notice as it’s written. And there’s also a notice section that says how you can give effective notice. So you’d write them a letter and then note go through the notice section properly, usually, certified mail, hand delivery, and not very often, email.
If you just verbally tell your boss, Hey, I’m leaving. That won’t be effective notice. So, if it’s 60 or 90 days, you give them 60 days’ notice. Now, there are some considerations. However, if you do break the agreement, terminate the agreement, in this case, if you’re kind of a new physician and you were given a signing bonus or relocation, usually there’d be some kind of forgiveness in the first couple years. Meaning, if you leave before the initial term, you would have to pay back some kind of amount of the signing bonus and relocation assistance. The second consideration is, are you gonna have to pay for tail insurance? Most contracts, at least for the smaller physician to own groups, will have some kind of clause that states, if the physician terminates the agreement without cause, they’ll be responsible to pay for tail.
Legal Mistakes Physicians Make
If you don’t know what tail insurance is, I have some other videos that kind of discuss that you can look at. The last consideration is all of the restrictive covenants that will apply if you terminate the contract without cause. Those restrictive covenants are going to apply. Restrictive covenants would be the non-compete nons. It is non-disparagement like all the things you can’t do after the contract ends. Just because you terminate an agreement doesn’t mean that you don’t have either responsibilities or obligations once the agreement ends. In summary, yes, a physician can obviously break a contract, but I would suggest doing it properly, how it’s written in the termination section. And then once you decide to terminate, you got to think about all the kind things that you’ll be responsible for. One more thing that just came to mind, the contract will also state the payment responsibilities after the contract ends.
I just had something like this come up yesterday. They were on a net collections compensation structure. Meaning, only paid what was collected, but the contract stated that they would only be paid through the end of the date of termination. With a normal 90-day accounts receivable cycle and getting reimbursed for claims, the physician missed out on essentially 90 days of collection. If you think of it this way, they almost worked for free for the last two or three months, which nobody wants to do. Moving forward, physicians absolutely need to be certain that if they’re on a net collections model, it states that there’ll be some kind of collection period after the contract terminates. So that they don’t lose out on all that money. I mean, it’s absolutely sled towards the employer.
Physician Contract Review
It’s not fair, but a lot of physicians simply don’t think about that when the contract is terminated. Hopefully this is helpful. If you’re a physician, and you have a question about your current contract or maybe a new employment agreement, I’m happy to take a look at it. Take care.
Termination Letter Considerations
What should be in the termination letter when a physician decides to leave a position? I find that many physicians feel like the termination letter would be a good place to air their grievances. These are all the reasons why I’m leaving all the things that have happened to me, which I don’t appreciate. These are the things that led to me deciding to terminate the agreement. The termination letter is not the place to do that. If a physician believes that the employer is not following through, on the terms of a contract, they should let them know in writing that the employer is in breach and generally, most contracts will have what’s called a cure period, which will then give the party a certain amount of time to fix whatever the problems are.
So that would be the appropriate place to air the grievances, so to speak. In the termination letter, there should only be two things: If the person is terminating the agreement, it will likely be without cause. So that means, nothing has happened that can give either party the ability to terminate the agreement immediately. Nearly every physician contract has without cause termination and that just means, either party can terminate the agreement with a certain amount of notice to the other party. 60, 90 days is kind of the industry standard. Sometimes can be as low as 30, as high as 180, but 60 or 90 is kind of the normal amount. And the physician in the termination letter should just cite the specific section of the contract, which says, I am giving you 90 days’ notice; my last date of employment should be on this date. And then, the physician needs to make certain that the termination letter follows what would be called a notices section.
In any physician contract, there should be a section called either notice or notices, something like that, that states how the physician can give effective notice, meaning who and how do you properly send notice to. And in that section, it will state, these are the ways that you can give proper notice. It could be certified mail, hand delivery, email, fax overnight. Most places do not allow email or faxes. It’s registered certified letter through the post office. Almost all of them accept hand delivery in some way. And then they will list where and to whom the termination letter needs to be sent.
If it’s a small physician-owned practice, then it will likely be the owner of the practice. And then the address would simply be the address of the practice. If it’s a large corporation, hospital, health network, or something like that, then it’s likely you’ll have to send a copy to the CEO or COO, in addition to whoever their general counsel is as well. I’ve had a couple of situations where I’ve had someone contact me after the fact that they failed to give proper notice. They just either told their boss or sent an email and the employer sat on it for 30 days. They didn’t say anything to the physician. And then, they came back to them 30 days later and they said, Dr. Smith, you did not give us proper notice. Therefore, you owe us another 60, 90 days after you give us proper notice.
They did that because they were mad that the physician was leaving. They knew it would likely screw with his next job opportunity and the start date. So, it is highly important that the physician makes certain that they’re following, one, what’s in the without cause termination section and then two, what’s in the notices provision section of the contract as well. To summarize, the termination letter is not a place to list all the problems that the physician had. You thank them for your time. You tell them the termination section that you’re relying upon to terminate the contract and then you’re going to send it to the place that’s listed in the notices section. And that’s it. There’s absolutely no value in putting anything more than that.
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