What to Do When Your Physician Contract Is Not Renewed | Contracts

What should a physician do if their contract doesn’t get renewed? This honestly doesn’t happen that often. We should probably define what is not renewed, or the contract gets terminated. So the vast majority of physician contracts will have some automatic renewal provision. For instance, let’s say you sign a contract. It has an initial two-year term. There’s usually some language that states if it’s not terminated, the contract will automatically renew for another year. Then it would continue perpetually until one of the parties terminates the agreement.

Physician Employment Contract

Any contract will also have a termination provision. So, either party can terminate the agreement for-cause. This means someone breached the agreement, and then either party can terminate it based upon who’s in breach. There’s another provision, and that is without-cause termination. Generally, that states that either party can terminate the agreement at any time, for any reason. That is with a certain amount of notice to the other. Generally, that’s 60 or 90 days, I would say. That probably makes up 90% of all without-cause termination amounts. Suppose either party does not plan to renew the agreement, which should match the amount without-cause termination. There’ll also be some notice requirements. It doesn’t make sense if either party has to give 60 days’ notice to terminate the agreement without-cause that the notice requirement not to renew the contract would be less or more than that. 

Hopefully, that makes sense. It should be the same. Let’s say you have a 60-day notice of intent not to renew the agreement. Well, it would be the same process of terminating the contract without-cause. One party would give written notice if they didn’t want to renew the agreement. And then that would be it. You’d work out the 60 days. Suppose the employer didn’t want the physician to finish the 60 days. The physician would still get paid for those 60 days. They wouldn’t have to work.

Agreement Non-Renewal for Physicians

I’ve had physicians come and say they don’t want to renew the agreement. What should I do? And this might be a stupid answer. It’s to find a new job. They’re like, well, I want to fight for it. And that type of thing. If you’re in a job and the employer doesn’t want you, do not stay there. It makes zero sense on a personal level. It will be very awkward. The employer will find ways to get out of the agreement, or they’ll give the without-cause notice and move on. We also do license board defense when an employee is either disciplined or maybe the employer filed a board complaint. And that person says, well, I don’t want to leave.

I want to stay here, fight whatever they’re doing. The employer will find a way, one way or another, to get rid of that employee. And it will only cause more pain for the employee moving forward. So going back to the original topic of what to do, if it’s not renewed, you find a new job. That’s it. It’s hard. Sometimes it’s hard to say why they wouldn’t want to renew the contract. What did I do wrong? Probably we’re finding out why. Most of the time, it’s just production, either. The physician simply didn’t produce what the employer’s expectations were. Most of the time, the volume issue is not the physician’s fault. It’s a lack of marketing, a lack of referrals. Maybe the staff is poorly trained. It doesn’t do a good job of providing a solid patient care experience.

Practice Employment Concerns

There are several reasons why someone’s volume won’t hit expectations. Still, it’s not, or it’s usually, not just the physician is too slow. He doesn’t want to see the number of patients that are expected. So hopefully, that was helpful as far as what to do. If your contract isn’t renewed, find a new job.

Other Blogs of Interest

• How to Negotiate a Physician Contract | Contract Negotiation Tips for Medical Doctors
• Can you Terminate a Physician Contract Without Notice? | Physician Contracts Termination
• How Do I Write a Notice of Termination of a Contract? | Example

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 an Employer Just Terminate Your Contract? | Contract Termination

Can an employer terminate a contract? It depends on what it says in the contract. In any employment contract, it’s going to list the term in termination. There’ll be a term section, meaning how long the contract lasts and whether it renews automatically or not. And then, there’s also a termination section, which states how either party can terminate the contract. Let’s go through that section first. There are several ways either party can terminate a contract. Let’s say it’s two years long and doesn’t automatically renew if it’s a fixed term. If neither party renegotiates nor signs a new agreement, it ends. The contract terminates. And that’s it.

If they agree to part, if one side says this isn’t working out, the other agrees. You know what, let’s wash our hands off this and walk away. Then that’s fine if it’s through a mutual agreement. The most common way to terminate a contract is through without-cause termination. And in most contracts, there will be a section that states either party can terminate the agreement at any time with a certain amount of notice to the other. Usually, somewhere between 30 to 90 days is standard. Not only can the employee terminate the employment contract, but the employer can also. Why would someone terminate a contract without-cause? If you’re the employee, maybe you found a better job, are moving, are having family concerns, or taking a break.

Two Ways to Terminating the Contracts

All of these things are important. And if let’s say, they did have the two-year term. You wouldn’t want to work for those two years by force if you didn’t want to be there anymore. That’s why the without-cause termination is in an employment contract. And then, from the employer’s perspective, they don’t want to employ an employee that isn’t working out. It’s either a bad cultural fit or personality clashes. Maybe they’re just not productive. For those reasons, the employer wants the ability to get rid of the employee as well. In most employment contracts, there will be a notice period. In those conditions, I gave none of those involved in the breach of contract. That’s the last way to terminate a contract for-cause. 

And in that case, if one of the parties is breaching the contract. The other party lets them know they’re in breach and generally have what’s called a cure period. The cure period allows either party to fix whatever the breach is, somewhere between 15 to 30 days. Suppose that breach gets fixed within that cure period. Then the other party cannot terminate it with-cause. Let’s say you are an employee and you’re not getting paid an agreed-upon bonus. You would say, employer, you’re in breach of contract. You need to pay me whatever I’m owed. If you don’t pay me, then I have the option of terminating the contract immediately. It’s rare for a contract to be terminated for-cause. 

Now, in some professions, it’s obvious for-cause termination. Let’s say you’re a doctor and you lose your license or any license profession, accountant, doctor, dentist, veterinarian.

Absence of Without-Cause Termination as a Red Flag to an Employer

The contract will terminate if you lose your license and can’t practice. And some professions, if you’re uninsurable, you lose your DEA registration or privileges or staff membership. Someone can be fired for those things immediately, simply because they can’t perform their job. So, can an employer terminate an employee at any time? Sure, if a certain amount of notice is followed, the opposite can be true. The employee can terminate the contract at any point if a certain amount of notice is given. 

It is a huge red flag if you’ll sign a contract for a fixed term without any ability to terminate the agreement early. Many situations seem great from the outside, and then you get into the actual job, which stinks for whatever reason. And in that scenario, you want the ability to move on.

And so, without a without-cause contract termination, it’s an enormous red flag. I would implore anyone considering signing an employment contract without one of those to rethink. I promise you; it is a bad idea. And once again, you have promises from the employer of how great it will be, but things can change when it starts and when you’re into the practice.

How to Get Out of a Physician Contract | Physicians Contract

How to get out of a physician contract? Now, how to get out of it, I guess, could have different meanings. We’ll go through the standard ways to get out of a contract or how it would end. First, you have the end contract term, and neither party would renew the agreement. If you have a two-year term that doesn’t automatically renew, if no one wants to renegotiate or extend the term, the contract ends, and that’s it. Second, you can mutually agree with the employer to terminate the agreement. At that point, the contract would end. The third would be without-cause termination, meaning you would give notice. 

Most contracts are somewhere between 60 to 90 days’ notice. You give them notice and finish out the 60 days. Then you can leave. Then the last way to terminate an agreement is with-cause. This is probably what most people think of if they get out of a contract. In any contract, at least it should state the main reasons why an agreement terminates with-cause or for-cause. Now, you’ll find that most of these sections list 20 things that the employer can terminate the physician for, and many times it’s completely silent as to how the physician can end the agreement with-cause. 

If Someone Is Breaching the Physician Contract

Suppose someone is breaching the contract, meaning not following through on one of the terms of the agreement. If they’re in breach of contract, a physician could theoretically terminate for-cause. Most of the time, there would be a cure period. In most cases, it’s somewhere between 15 to 30 days. How that would work would be if the physician thinks the employer is breaching the contract. They will send them a written notice saying, here are the things you’re doing that breach the contract. 

Then you have a certain amount of time to fix the breach. And if the breach isn’t settled then the physician can immediately terminate the contract. Most physician contracts are generally silent about how the physician can end the agreement for-cause, especially if you’re with a maybe a smaller physician-owned group. Many of those contracts are highly slanted towards the employer, which would be one thing that would favor the employer. At least one suggestion is if you’re given a new employment contract, make sure that there is some language that states the employee. 

The physician can terminate the agreement for-cause if the employer doesn’t fix the breach within a certain period. If that’s not in the contract, it needs to be. That would be the way to get out of the agreement. So, you have the usual ways contract ends, mutual agreement, termination without-cause. But the only way to get out, like the employer did something wrong and you want to leave, is to give them notice of what they’re doing wrong. If they don’t fix it at that time, you can terminate/get out of the contract. 

When Does a Notice Become Tricky?

These are tricky issues. I get calls all the time from physicians who say, my employer is doing this and doing that or not doing this. They’re not supporting me, I don’t have the proper staff. I feel unsafe due to the volume of patients they expect me to see. And my first question is: did you let them know about it? Have you given them the notice? They are making this job unsafe or not following through on the contract. And most of the time, they say no, or I’ve talked to them verbally about it.

Physician Contracts Notice Section

You need to, in writing, in the notice section of your contract. This means it will state that if there are notices to be given, you need to give them to this address, to this person, and to follow that. It would help if you put it in writing, these are the things you’re doing that are in breach of contract, or these are the things you’re doing that are making it unsafe to practice.

And that’s the start. If you haven’t done that, it’s hard to go anywhere from there. Suppose you’ve been sucking up a terrible working environment for six months. You’re finally fed up and want to get out immediately. In that case, you must let the employer know about it. You got to give notice.