Contract Termination Provisions – Physician Contract Basics
August 15, 2018
Never have I witnessed delight or a light-hearted attitude when the time comes to bounce a partner. Quite the contrary, there is often significant consternation when making the final decision. The practice has invested time and effort in recruitment, financial guarantees, marketing support, staff – the list goes on. So, physician termination is not a topic to be taken lightly. And, our hope is that it never gets to that point.
If a group’s governance agreement is solid, if it has an effective physician rights and responsibilities document, behavior guidelines and expectations have been spelled out. On that foundation, we advise that the partners, and the administrator when appropriate, conduct several on-record conversations with the physician who is failing to meet group standards or follow established rules. Involve a healthcare attorney and document the meetings for the physician’s file, as you would with an employee being disciplined.
If the agreed-upon corrective action is not taken, or the physician continues to underperform, well, that is when I hope your group’s employment agreement includes an effective termination clause; one that enables a professional and graceful exit for both parties. Our colleague Pat Hofstra offers guidance about this provision in this issue of the KZA Blog.
Continuing the theme of blogging about physician employment contracts, this blog is about contract termination provisions.
This is just a brief overview of employment contract termination provisions.
Contract termination provisions are complicated and should be carefully negotiated, preferably with the advice and counsel of experienced health care attorneys.
Almost all physician employment contracts are heavily weighted in favor of the employer when it comes to termination provisions. For example, it is not uncommon to see contract termination language calling for immediate termination of the physician in the event that the physician, in the employer’s judgment, engages in conduct which could negatively impact the employer’s reputation. That pretty much means if your employer doesn’t like you, you can be terminated immediately. It is hard to negotiate such immediate termination language out of contracts, but you can almost always negotiate for notice of proposed termination and an opportunity to cure the event(s) leading up to termination. Adding a notice and opportunity to cure provision to an employment contract buys time and forces the employer to be specific about the conduct leading to the proposed termination.
Other contract termination language to negotiate includes: patient notification procedures; post-termination compensation; tail coverage; and non-compete and no solicitation provisions. For patient notification procedures, I recommend specifying in the contract that the parties will comply with the American Medical Association’s guidelines on patient notification upon termination of employment. This is part of policy H.225.950 which you can find here. Post-termination compensation contract language will vary depending on how compensation and bonuses are structured in the contract. For compensation based on collections, a specified run-off period for collections and the ability to audit accounts receivable is critical. Some of the non-negotiable reasons for termination include loss of clinical privileges, loss of DEA and Medicare ban.
Non-competes, breach of contract remedies, indemnification language, and exit plans will be the subjects of future blogs.
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