How Long Are Most Physician Contracts? | Physician Contract

How long are most physician contracts? It varies greatly, but somewhere between one to three years is an average initial length of a physician contract. However, the critical part is that nearly every physician contract, except for a J one agreement, can be terminated without-cause. This means either party can terminate the agreement with a certain amount of notice. Kind of the entry standard is between 60 to 90 days. So, even if a physician has, for example, a two-year contract. If it has a six-day without-cause termination clause, it’s a 60-day contract.

Average Physician Contract Length

There are also some considerations if the physician decides to terminate the agreement without-cause. One, are there any repayment responsibilities? Let’s say a physician has a three-year initial term and received a signing bonus, relocation assistance, and maybe student loan repayment. There usually would be some language that states that if they terminate the contract before the end of the initial term. They would owe some repayment on those bonuses. And usually, it’s prorated. It’s not an all-or-nothing thing. For instance, since we’re using a three-year term, they would say one-third forgives each year. So, if you had a $30,000 signing bonus, $10,000 on year one would be given, then $10,000 on year two. And then let’s say you left sometime between the second and third year. Then you would owe them back $10,000. Who pays for malpractice insurance? 

An Employment Agreement Term for Doctors

If the contract gets terminated without-cause, the restrictive covenants will apply. The initial term is not that important. Most contracts also have language that states that the agreement will automatically renew for one-year terms after the initial term expires. That’s pretty standard as well. Rarely would a contract end. It would always automatically renew. If the contract has a fixed term, it will not automatically renew. Then, usually, somewhere between 60 to 90 days before the end of the term, the parties would meet and then discuss whether they want to continue or not. Especially as a physician, continuity of care is important, and that’s why they have notice termination provisions in the contract so that a physician can’t one day state, Hey, I’m leaving.

Physician Employment Contracts

I won’t be in tomorrow. Suppose they have patients scheduled, or if they need to offload all of the patients, new providers. The physician must provide some notice to make that a smooth transition. And assure that the patients receive continuity of care. So, as far as how long a contract is, as I said before, one to three years. However, almost any physician can get out of the contract with a certain amount of notice. If you have any questions about a physician contract, maybe you’re entering into a new agreement, coming out of training, or perhaps you’re in a current agreement. You want us to take a look at the contract. We’re happy to do that.

Other Blogs of Interest

• Can you Pull out of a Signed Physician Contract? | Physician Contracts
• What is Considered Breach of a Physician Contract? | Physician Contracts
• Family Medicine Contract Negotiation Tips | Negotiate Physician Contracts

Can You Break a Physician Contract?

I daily deal with physicians with new employment agreements that need review. Or are on a current agreement that they need to analyze, usually due to wanting to terminate the agreement. Like the base level question, one frequent question is whether you can break a physician’s contract. I think defining a break is probably the most important part of that. So, can you break a physician’s contract? If we’re meaning, can I breach a contract, not following through on the terms of the contract? Sure, you can.

But then you would open yourself up to liability. You could get 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, recruitment fees for a new physician, lost revenue from you, and 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 this video, if we’re going to say, can I break a physician’s contract? I think the best way of handling that would be, can I terminate the contract? And certainly, yes, you can. At least every physician employment contract will have a termination section. And in that section, it will dictate the terms of how the physician can terminate the agreement.

Terminating the Agreement in Three Ways

There are usually three ways: One, by mutual agreement. If you and the employer agree, you can terminate the contract. And maybe you can work out how long the physician will stay. That does not happen very often, to be honest. The second way to terminate a contract is with-cause. And 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 normal things that the employer can terminate a physician for immediately, for-cause at their option. So, the physician loses the license and DEA registration. They’re uninsurable and on the OIG list, which is obvious.

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. The most important section is, can a physician break a contract? If we’re assuming break means terminate, there should be a without-cause termination section. That section will state that 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 give the employer notice as it’s written. And there’s also a notice section that says how you can provide effective notice. So, you’d write them a letter and then go through the notice section properly, usually certified mail, hand delivery, or email, which is not very often.

One of the Biggest Legal Mistakes a Doctor Can Make

If you verbally tell your boss, hey, I’m leaving. That won’t be adequate notice. So, if it’s 60 or 90 days, you give them 60 days’ notice. Wipe your hands off it. You’re gone. Now, there are some considerations. However, if you do break the agreement, terminate the agreement. In this case, if you’re a new physician and received a signing bonus or relocation. Usually, there’d be forgiveness in the first couple of years. If you leave before the initial term, you will have to pay back the signing bonus and relocation assistance. The second consideration is, will you have to pay for tail insurance? Most contracts, at least for the smaller physician-owned groups, will have a clause that states that if the physician terminates the agreement without-cause. They’ll be responsible for paying for tail insurance.

Legal Mistakes Physicians Make

If you don’t know what tail insurance is, I have some other videos that you can look at. The last consideration is all the restrictive covenants that will apply. If you terminate the contract without-cause, those restrictive covenants will apply. Restrictive covenants would be the non-competes. It is non-disparagement, like everything you can’t do after the contract ends. Just because you terminate an agreement doesn’t mean you don’t have either responsibilities or obligations once the agreement ends.

In summary, yes, a physician can break a contract. Still, I would suggest doing it properly, as it’s written in the termination section. And then, once you decide to terminate, you have to think about everything 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. This means that they got paid what was collected, but the contract stated that they would only get paid through the end of the termination date. With a regular 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. Physicians need to be cautious if they’re on a net-collections model. It states there’ll be a collection period after the contract terminates, so they don’t lose out on all that money. I mean, it’s sled towards the employer. It’s not fair, but many physicians don’t think about that when the contract is terminated.

What Should Be in a Physician Contract Termination Letter?

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 why I’m leaving all the things that have happened to me that 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. Suppose a physician believes that the employer is not following through on the terms of a contract. In that case, they should inform them in writing that the employer is in breach. Generally, most contracts will have a cure period, which will give the party a certain amount of time to fix whatever the problems are.

Medical Agreement Termination

So that would be the appropriate place to air the grievances. In the termination letter, there should only be two things. If the person terminates the agreement, it will likely be without-cause. 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 means either party can terminate the agreement with a certain amount of notice to the other party. 60, 90 days is the industry standard. Sometimes it can be as low as 30 and as high as 180, but 60 or 90 is the average amount. The physician in the termination letter should cite the contract’s specific section. 

I am giving you 90 days’ notice. My last date of employment should be on this date. And then, the physician must ensure that the termination letter follows what would be called a notices section. So, in any physician contract, there should be a section called either notice or notice. This states how the physician can give adequate notice. This means who and how you properly send some notice. And in that section, it will state that these are the ways to give proper notice. It could be certified mail, hand delivery, email, or fax. Most places do not allow emails or faxes. It’s either some registered certified letter through the post office. Almost all of them accept hand delivery in some way. Then, they will list where and to whom the termination letter needs to be sent.

Physician Employment Contract Letter to Terminate

If it’s a small physician-owned practice, then it will likely be the owner of the practice. And then, the address would be the address of the practice. Suppose it’s a large corporation, hospital, health network, or something. In that case, you’ll likely have to send a copy to the CEO or COO. And to whoever their general counsel is. 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 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 returned to them 30 days later and said, Dr. Smith, you did not give us proper notice. Therefore you owe us another 60, 90 days after you give us proper notice.

Physician Contract Review for Agreements

They did that because they were mad at the physician. They knew it would likely screw his next job opportunity and the start date. So, the physician must ensure that they’re following: one, what’s in the without-cause termination section, and two, what’s in the notices section of the contract. To summarize, the termination letter is not a place to list all of the physician’s problems. You thank them for your time. You tell them the termination section you rely on to terminate the contract. Then you’re going to send it to the place listed in the notices section. And that’s it. There’s absolutely no value in putting anything more than that.

What Are Different Types of Physician Contracts?

What are the different types of contracts physicians can sign? There are two: You have an independent contractor agreement, and then you have the employment agreement. So, what are the differences between the two? An employment agreement means an employer and the physician an employee. They are a W-2 employee, meaning tax deduction is out of whatever compensation they have. And then, the employment agreement will go through the general terms of the relationship. How long the contract lasts, how it’s terminated, the process of compensation, the liability insurance, restrictive covenants, non-compete, non-solicit, that type of thing. In an independent contractor agreement, you are not a W-2 employee. You’re a 1099 employee, meaning no tax deduction of whatever the physician received via compensation.

Physicians Being an Independent Contractor

The physician will be responsible for paying their taxes quarterly at the end of the year. Another big difference is for most independent contractor agreements. The physician will be responsible for all of the ancillary costs associated with the practice: 

• Medical license
• DEA registration
• Professional associations
• Privileging and credentialing
• Malpractice insurance
• Whether they have to pay tail insurance

Those things are generally the cost of the independent contractor, not the person they’re working for. Sometimes, the employer utilizing the independent contractor will pay for certain things. Still, I guess another key point is that an independent contractor will also rarely get benefits. Health, vision, dental, disability, life insurance, and retirement are unavailable. So,  why would someone, if given the choice of being an employee or an independent contractor, choose to be an independent contractor? 

Employment Agreement From the Practice

The entire point of an independent contractor agreement is that it’s easy to get into and out of. And theoretically, the independent contractor should be able to make their schedule work when they want, that type of thing. However, that doesn’t honestly happen very often. An independent contractor, if they’re smart, they’ll create an LLC. Then they’ll have any money paid and set up a bank account. They can expense all of those things I talked about previously. I find that most employers who, I don’t know if force is the right word, only offer the independent contractor agreement option. Maybe they’re not solely doing that, but they’re doing it often to avoid paying employment tax to the physician. 

Honestly, an independent contractor agreement for a physician does not have many benefits. A long notice is a requirement to terminate the agreement if it still includes restrictive covenants.

Physician Employment Contract Depending on Specialties

As I said, they don’t get paid benefits or other licensing. Let us take anesthesiologists and dermatologists. Those are specialties that frequently use an independent contractor. Some radiologists as well, but primary care, peds, cardiology, that type of thing, are almost always going to be employees. And then, if you are working for a hospital or healthcare network, 100% of the time, you’ll be an employee rather than an independent contractor. Maybe you’re working at a hospital, but you’re working for a group contracted with the hospital to provide services. I guess that’s possible where you’d be an independent contractor, but it doesn’t happen often. So, the two types of physician contracts are independent contractor agreements and physician contracts of employment.

Can a Physician Contract Be Terminated Early? | Physician Contracts Termination

Can a physician’s contract be terminated early? The short answer is yes. You can terminate the Agreement early in 99% of physicians’ contracts. Let’s kind of hit the basics of how that happens. In any contract, there will be a term’ length.’ The employment agreement lasts one year, two, or three. Anything beyond that is rare. Also, I increasingly find physician contracts are what we call evergreen. Meaning there’s no fixed term. They continue until they get terminated by one of the parties. The only way a contract could be terminated early will be if there is a fixed term. Let’s use an example as a physician signing an employment agreement, which states the term of the agreement is two years.

Where Can You See How a Physician Contract Can Be Terminated?

And then, in almost any contract, there will be a renewal clause that states after the initial term, the contract will automatically renew for one year, and it’s standard. Suppose a physician wanted to terminate the contract before the two-year term. They would have to follow the terms in the contract under the termination section. The termination section will state all the ways to terminate a contract. Suppose it was a two-year term and has an automatic renewal clause. In that case, there’ll be a language that states that the physician or the employer, if they intend not to renew the agreement. They must give notice to the other party. 

That way, if they give notice, the two-year contract ends, and that’s it. I wouldn’t consider that early, that would be the initial term that ends, and parties go their separate ways. There’s also an ability to terminate a contract early through mutual agreement. Maybe there’s a problem between the employer and the physician. There are some cultural class clashes, personality conflicts, whatever. And they just say you know what, it’s not working out. Let’s move our ways. Then they could agree. Alright, here, let’s end the contract and move on.

The Most Common Way to Terminate a Medical Contract Early

Another way to terminate a contract early, the most common way, is without-cause termination. That means that either party can terminate the physician’s contract for any reason, with a certain amount of notice to the other party. The standard amount for a without-cause termination notice is usually 60 to 90 days. For several reasons, anything above that should be a red flag or a concern for a physician. Let’s say a contract has 180 days’ notice to terminate the contract without-cause. 

Well, if it’s that high of a notice period, then usually that means the employer has had a hard time retaining people. So, they’ve put in a giant notice period to dissuade people from leaving. Another reason that’s bad for a physician is that the relationship changes between the physician and the employer once notice is given. 

Physician Employment Contract

You’re no longer in the long-term plans. You’re not rowing the boat together. There can be an awkward relationship after the physician gives notice. It just changes. And the longer the physician must stay with the employer under those circumstances, the worse it is for the physician. So, without-cause termination, ideally, it would be a shorter period. There must be some notice required, once again, for a couple of reasons. As a physician, there is always continuity of care concerns. If a party could just come up and say, hey, you’re fired, don’t come back tomorrow. A plan must be in place if a physician leaves an employer to transition those patients to another provider. Or to refer them to other physicians in the area. It’s specialty-dependent as well.

How to Terminate Medical Agreements

Maybe in primary care, it’s not that urgent of an issue to move the patients onto someone else. But let’s say it’s in psychiatry. You have some very delicate patients. They need medications or bridge scripts where someone can take over their care. That notice period gives both parties, the physician and the employer, time to arrange the transition to others. That’s why without-cause termination is there in the first place for a physician. 

That’s how to terminate a contract early. So yes, it absolutely can be terminated early. Suppose no language allows the physician to terminate the contract without-cause, and they must stay for a fixed term. In that case, once again, that’s an enormous red flag. In those situations, usually, it’s because the employers had a tough time retaining physicians. And no physician wants to be in a situation where they hate going into their job.

Contract Review Law for Physicians

They don’t feel safe practicing. It’s just a bad environment, and I get stuck for a period without being able to get out of it. The only situation that requires a kind of a fixed term without either party being able to terminate the agreement without-cause is under a J-1 waiver employment agreement. Which must be three years, and in that situation, it usually can only be terminated for-cause, which means that either party breached the agreement. That’s the only situation where a fixed term makes sense, and there’s no without-cause termination.

Can You Terminate a Physician Contract Without Notice? | Physician Contracts Termination

Can a physician terminate an agreement without notice? In my mind, that just simply means can they leave a job without any amount of notice and then move on without repercussions? The answer is that you can go without notice. Still, there will be legal implications, and you are opening yourself up to liability for a few reasons. 

The first reason is that there will be a termination without-cause clause in almost any physician employment agreement. Sometimes it’s called for no good reason. And in that scenario, the physician contract will state that either party can terminate the agreement with a certain amount of notice to the other party. So, terminated physician contracts don’t need a reason, no one has breached the physician contract, or maybe nothing is wrong.

It’s just the physician who wants to move on. Or maybe the employer is laying off the physician due to lack of volume or something like that. The physician contract will state either party can terminate the physician contract for any reason. However, they must provide a certain amount of notice, as stated in the physician employment physician contracts. Most of the time, it’s either 60 or 90 days. That’s the standard. In that scenario, let’s say the physician wants to leave. 

They would, in writing, provide notice to the practice that says, under the physician contract, I’m giving you 60 days’ notice. My last day of providing care will be X date. And then you move on with your employment. Now, just because the physician contract was terminated without-cause doesn’t mean there aren’t some problems for you or at least issues that you need to deal with when it’s over with

Things to Consider in Terminating a Physician Employment Contract Agreement

Some things that will follow when you terminate a physician’s contract without-cause, or at least usually follow, there will be a restrictive covenant. And that is either a non-compete or non-solicit in the physician’s agreement. In terminating an employment agreement without-cause, they will still apply. And so, you need to consider, alright, what are the restrictions on my practice after I leave the employer? Many employers will have repayment obligations for bonuses they’ve paid out. 

If you start employment, then you leave within a year or two. The employer will prorate that bonus based on how long you’ve been there since you started. Let’s say you were given a $30,000 signing bonus and your initial term was three years. Then the employer may say that one-third of that $30,000 is forgiven yearly. So, if you were to leave between years two and three, you’d owe them back $10,000 at the end of the physician contract. And same goes for relocation assistance. They gave you some money upfront. Usually, it’s forgiven over time. Then you’d have to pay back whatever the outstanding amount is. 

What if Your Physician Employment Contract Includes a Productivity Bonus?

Another thing to think about if you terminate a physician contract without-cause is if you have a productivity bonus in the physician contract, either net-collections or RVU. Many will state that if you’re not employed when the compensation is given out, you will not get it. Or maybe if it’s like an annual bonus, they won’t prorate it either. The timing of when you give that notice is essential, so you’re not losing out on whatever productivity bonus you earned. 

What Will Happen if Your Medical Contract Contains a Claims-Made Policy?

And then kind of the last thing that can usually follow is if you have a claims-made policy, who’s going to pay for tail insurance? If the physician is responsible for tail insurance, they must pay that amount before the contract ends. And that can usually be somewhere between ten and a hundred thousand for OB-GYN or maybe a high-level surgeon.

Is It a Good Idea to Terminate a Physician Contract Without Notice to the Employer?

What happens if you don’t provide notice to the employer? In the physician contract, as I said before, there will be a clause that says you can terminate the physician contract without-cause with this amount of notice. So, what happens if you don’t give any notice? You walk in on a Monday and say this job sucks. I’m out of here. You walk out, and that’s it. Well, you’re in breach of the physician’s contract. What are some things that can happen when you breach physician employment contracts? Well, the employer could assert damages. 

Meaning lost revenue for the patients that you would’ve seen that they don’t have coverage for recruitment fees for replacing the physician. Also, expenses are incurred when there’s no physician to be there with staffing or vendors. And so, how that would work is that the employer would sue the physician for breach of physician contract. Then they would claim those damages, then fight it out in court, or if there’s an arbitration clause, they will arbitrate. It’s a terrible idea to walk out on an employer if there’s a without-cause termination clause. 

Physicians, Remember Continuity of Care for Patients

Another consideration is continuity of medical care for your patients. What would happen to your patients if you were to leave a job without providing any notice? Although employed, they may be your patients. They are the employer’s patients. So, the physician couldn’t just up and take all the patients to a new practice for several reasons. There’s probably a non-compete and non-solicit that would prohibit that in some legal way.

Now, patients can choose who their provider is, and I’m not going to get into that right now. But the continuity of care aspect is something that needs to be considered. Are there bridge scripts written if they’re maybe psych patients absolutely in need of medication? Has there been any opportunity to refer the patients out to someone else? Is there someone in-house who can take over the patients? Not only could you get sued for damages, but if you just up and leave all the patients in the lurch, you’re also asking for a board complaint, and nobody wants to deal with their state board. 

I promise you I’ve represented hundreds of professionals before the licensing boards, and it’s not a fun process for a provider. So, can you terminate a physician’s employment contract without any notice? Yes, but it’s a terrible idea that could open the physician to many problems.