Breach of Contracts by a Physician
Hello, My name is Robert Chelle with Chelle Law, and my firm assists physicians with employment contract issues. Today, I thought I’d do a little more casual video where I discuss a specific topic. 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?
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.
