Health Law Pointers - Volume V, No. 2
PHYSICIAN DEPARTURES FROM A GROUP PRACTICE
For many professionals in private practice, there is nothing more painful than being advised that one of your colleagues is leaving the practice unexpectedly, on short notice. Having a well-drafted set of practice documents that anticipates a professional’s withdrawal from the practice will often address the issues that commonly arise during the transition period and allow for an amicable departure.
If however, your practice documents are incomplete, unsigned or vague on the critical questions, the potential for an acrimonious dispute or even a lawsuit is enhanced.
This edition of Health Law Pointers evaluates the business and legal issues arising out of a professional’s departure from a group practice.
RESOLUTION AND DISPUTE
It is no secret that many disputes end up being heard in a courtroom after the filing of a lawsuit. This often involves unwanted legal expenses, intrusions on your professional and personal time, and much effort to resolve. Your practice documents, however, can offer you an opportunity to agree to resolve a dispute in another way. If properly presented, these alternative dispute resolution procedures can reduce the time and expense required to resolve differences and avoid the fractious disputes that often lead to a professional’s unnecessary defection from a group practice. Your options include:
Informal discussions among colleagues.
2. Formal, usually non-binding, mediation conducted by a trained mediator with prior experience in the general area of dispute within a given period of time following the unsuccessful efforts to resolve the differences informally.
3. Binding Arbitration – The American Health Lawyers Association Alternative Dispute Resolution Service offers Rules of Procedures for Arbitrations, using lawyers experienced in health law issues, pursuant to an agreed upon timetable.
GROUP PRACTICE DOCUMENTS
When two or more professionals form a group practice - - whether a general partnership, limited liability partnership, professional service limited liability company or professional service (PC) corporation - - legal counsel should be consulted to work up well-written and easily understandable practice documents. The ultimate goal is to provide the professionals with a “road map” on issues that commonly give rise to disputes, such as:
1. Governance of the entity;
2. Admission of new partners;
3. Voluntary and Involuntary Withdrawals of a partner; and
4. “Buy-Out” price and terms.
The practice documents you should consider will depend on the form of entity you chose to operate your professional practice.
Form of Entity Basic Practice Documents
Partnership Partnership Agreement
Partner Working Agreement
Limited Liability Partnership Certificate of Registration
Partner Working Agreement
Professional Service Limited Liability Company Articles of Organization
Member Working Agreement
Professional Service Corporation (PC) Certificate of Incorporation
If you are presented with a notice of withdrawal from a colleague and anticipate confrontations with the departing professional on a variety of matters, your best bet may be to negotiate a settlement on the disputed items - the so called “withdrawal” or “termination” agreement - even if that means varying from what you had considered to be the existing “understanding” or “agreement”.
The withdrawal agreement should address the following critical issues:
1. Date of Withdrawal
2. Medical practice responsibilities through the date of withdrawal
3. Orderly transfer of patients/patient notices
4. Return of practice property
5. Return of personal property
6. Resignation as officer, director and retirement plan trustee
7. Distribution of the departing professional’s vested interest in the retirement plan
8. Buy-out price and terms
9. Handling of receivables attributable to the departing professional
10. Custody of medical records
11. Handling of personal guarantees on practice debt
12. Non-competition covenants
13. Other post-termination restrictions on practice (non-solicitation of patients and employees)
14. Mutual releases
THE PURPOSE OF A CUSTODIAL AGREEMENT FOR MEDICAL RECORDS
Many group practices take the position that patient medical records have been exclusively entrusted to the practice, and will not allow a departing professional to remove originals or copies of the records, unless directed to by a patient’s request for transfer of the records.
In certain circumstances, though, the departing professional is encouraged or allowed to continue to care for patients for whom he or she has served as the principal treating professional, and the practice will consider a transfer of the original records, provided the parties enter into a “custodial” agreement.
Under this form of agreement, the group practice delivers custody of the medical records to the departing professional, reserving full access to and the right to photocopy the records on request, and is held harmless or “indemnified” from any liability, cost or expense arising out of the departing professional’s failure to maintain the records in accordance with all applicable state and federal laws and regulations.