Hi, I’m attorney Renee Osipov with Chelle Law in Scottsdale, Arizona. We draft employment agreements, policies, and patient letters for physicians within their medical practice. If you’re watching this video, you are likely a multi-physician practice. One of those physicians has decided to retire or depart from the geographical area.
Patient Notification Requirements
The best way to communicate this information is via an official letter to your patients. You should send this out at least 30 days before the physician leaves, and not sooner. That is to give plenty of time to patients to consider continuing care at your facility or seeking care elsewhere. The letter should include notification of the change and reassure them that they will remain to have quality healthcare within your medical practice. You can also include their medical practice records that you can request, or you can even include a medical practice release form.
And then, depending on this situation, you can also include the physician’s contact information that’s leaving. But that’s optional, especially considering why they’re leaving your practice. And then, finally, you’ll want to include just a brief apology and reassurance again that they will receive quality care. We know that every situation is unique. If you’d like more information, check out our website, Chelle Law, C H E L L E law.com. We have more information on there as well as our contact information. We’d be happy to set up a consultation with you and address all of your unique needs for your medical practice in a similar situation. Thank you.
Other Blogs of Interest
- Can I Quit my Job if I Signed a Contract? | Career & Contract Termination
- Can You Write an Email to Terminate a Contract? | Contract Termination Letter
- Can a Physician Negotiate After Signing a Letter of Intent? | Medical Physician Negotiation Tips
Can You Break a Physician Contract? | Physician Contracts
So, can you break a physician’s 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, one reasonably frequent question is whether you can break a physician’s contract. I think defining break is probably the essential part of that. So, can you break a physician’s 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 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 in practice, and lost revenue from you. You are 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 this video, If we’re going to say, can I break a physician contract? I think the best way of handling that would be, can I terminate the contract? And indeed, yeah, 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.
There are usually three ways: First, by mutual agreement. If you and the employer agree, the check gets terminated. 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. 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 typically 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 a physician contract review to identify the areas that can improve and assist you in negotiating the best contract possible.
Considerations to Make When Breaking a Contract
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 from practice 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 typically states that the other party can terminate the agreement with a certain amount of notice. 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 adequate notice. So you’d write them a letter and then go through the notice section properly, usually certified mail, hand delivery, and not very often, email.
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. Now, there are some considerations. However, if you break the agreement, terminate the agreement. In this case, if you’re a new physician in practice and received a signing bonus or relocation, there’d usually be some forgiveness in the first couple of years. If you leave before the initial term, you must pay back some of the signing bonus and relocation assistance. The second consideration is, will you have to pay for medical tail insurance? Most contracts, at least for the smaller physician-to-own groups, will have some clause. That states that if the physician in practice terminates the agreement without-cause, they’ll be responsible for paying for medical tail insurance.
Details that Physician Needs to Know After Termination
If you don’t know what medical tail insurance is, I have some other videos that you can look at. The last consideration is 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 notes. 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, how it’s written in the termination section. And then once you decide to terminate, you got to think about all the kinds of 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 paid what was collected, but the contract stated that they would only get paid through the end of the termination date. With a standard 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 some collection period after the contract terminates, so they don’t lose out on all that money. I mean, it’s sled towards the employer.
Physician Practice Contract Review
It’s not fair, but many physicians don’t think about that when the contract gets terminated. Hopefully, this is helpful. If you’re a physician and have a question about your current contract or a new employment agreement, I’m happy to look at it. Take care.
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 letters 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 letters are 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 letters, 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’s 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 normal amount. The physician in the termination letters 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 physicians need to make certain that the termination letters follow what would be called a notices section. So, in any physician’s contract, there should be a section called either notice or notice. That states how the physician can give effective notice, meaning who and how you properly send some notice. And in that section, it will note 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 letters through the post office. Almost all of them accept hand delivery in some way. Then, they will list where and to whom the termination letters need to be sent.
To Whom Should I Write the Termination Letters?
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, 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 the criteria. 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’ll 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.
Can Physicians Terminate a Contract Without Notice?
Can a physician terminate an agreement without notice? In my mind, that 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 got 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. You received a $30,000 signing bonus, and your initial term was three years. Then the employer may say that one-third of that $30,000 gets 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 gets 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’s contract without-cause is if you have a productivity bonus in the physician’s contract, either net-collections or RVU. Many will state that you will not get it if you’re not employed when the compensation gets released. 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 medical tail insurance? If the physician is responsible for medical 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’s contract, as I said before, there will be a clause that says you can terminate the physician’s 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 a physician’s employment contract? 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 incur 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 the physician’s 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. 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 consideration. 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.
What Are 4 Reasons for Termination of a Medical Contract? | Contracts Termination
What are four reasons that a medical practice employment contract gets terminated? Let’s discuss the differences between why an agreement gets terminated and how a contract terminates. The “why” doesn’t matter. What matters is the language in the contract that tells the provider how the contract gets terminated. There are four common ways for an agreement to be terminated.
Fixed Term Contract
First, in a contract, it’s going to list the terms of the agreement. The term just means how long does the agreement last. Some contracts have a language that automatically renews after the initial term, usually for one year. Let’s say it’s an initial two-year term. It’ll continuously renew for additional one-year terms unless terminated in one of the three ways. After this, we’ll talk about that next. Some contracts have no fixed term at all. It states that the contract continues forever unless terminated as soon as it is signed. The first way to terminate the medical practice contract is for the initial term to end. There’s no renewal language, neither party wants to renew the contract, and that’s it.
Mutual Agreement Termination
Next would be by mutual agreement. A medical practice contract may terminate by mutual agreement of both parties. Let’s say the provider starts, just not the right fit. The employer says you know what? This isn’t the right fit. We’re not going to require you to give us notice. We’re not going to need you to work anymore. Let’s wash our hands of the situation. And you both can leave. A mutual agreement is the second way to terminate a medical practice contract.
With Cause Termination in Medical Contracts
The third way is for-cause or with-cause termination. This means if a provider or the employer is in breach of contract. There will usually be language that states one party has to give the other written notice. That contains they are in breach of contract and the reasons why. And then, typically, there would be a cure period.
A cure period means how much time a party must fix or cure the breach. Let’s say a provider had productivity bonuses that should get paid monthly in their contract. The employer is not paying it either on time or at all. In that situation, the provider would then send a written notice to the employer stating you’re in breach of contract.
You’re supposed to pay me a monthly bonus, and you’re not. Suppose you don’t fix this within whatever the allotment is, let’s say 15 days. In that case, the provider can terminate the contract immediately for-cause. The third way of terminating the medical practice agreement is for-cause or with-cause termination. It doesn’t happen very often that a contract gets terminated with-cause.
Usually, the parties would work out the differences in advance of that. But it does provide some leverage, I guess, to both sides if one of the parties isn’t holding up their end of the bargain. From the employer’s side, let’s say the contract states that the provider must take one in four calls and then refuses to take calls. Well, then they’re in breach of contract. The employer will then basically state that you’re not taking calls. You’re in breach. It would help if you started taking calls, or we will terminate the agreement immediately. So, it goes both ways.
Without Cause Termination – A Physician Would Want This in a Contract
And then the last and the most common way to terminate a medical practice contract is through what’s called without-cause termination. Nearly any employment agreement is an At-will contract. And that means either party can terminate the agreement at any time. Still, it’s a certain amount of notice for a medical practice provider. Typically, 60 to 90 days is the industry standard for terminating an employment agreement without-cause in the healthcare industry. Now, why do you have to give this much notice? Let’s say you’re a provider, unhappy, want to leave, and have a better opportunity. The contract states that you have 60 days without-cause notice. Then you’d send them in writing saying, I’m terminating the agreement per the without-cause termination section. Then you’d work out your 60 days, and then you’re free to move on.
Reasons Why Without-Cause Termination Is Important
This is important and why it needs to be in the contract if a provider starts with somebody and the practice makes it out to be much better. The volume is much better, and your productivity incentives will be great. The hours are going to be reasonable, and it’s not. The contract has no language where the provider can terminate it without-cause. They may get stuck in that contract until the initial term ends.
So, you always want to have without-cause termination. And as I said before, typically 60 to 90 days. If you have 180 days, you want to negotiate that down to a reasonable amount. Now, the reason why there are between 60 to 90 days in most contracts is for continuity of care purposes. Maybe if you’re in sales, you don’t need 90 days lead time to leave.
But suppose you’re a medical practice provider and have a patient base. In that case, there needs to be some time to transition them to a new provider, refer them to different providers, or provide bridge prescriptions. So, they don’t just go cold turkey until they find a new provider. That’s why there are 60 to 90 days. To allow enough lead time to make a smooth transition and provide continuity of care for the patients. So, those are the four reasons you can terminate a contract. Either the term ends, mutual agreement, for-cause termination, or without-cause termination.
Physician Contract Questions?
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