Health Law Pointers - Volume X, No. 2

What Makes a Successful Partnership Agreement
(Part Two of Two)

            In the last issue of Health Law Pointers, we reviewed key principles that help in establishing a successful business partnership. In this edition of the newsletter, we discuss certain approaches that may result in the preparation of a better functioning partnership agreement.

1.       Understand all preconditions to the transaction and allow time for:
·     Preparation and review of the business plan.
Regulatory hurdles.
·     Agreement on financial contributions.
·     Real estate closing(s).

2.       Recognize that not all Partners are created equal!
Founders, financiers and service partners have different interests.
·     Short and long-term goals may vary based on personal characteristics.

3.       Make sure your document operates like a road map.
Check to see if there is a logical flow.
·     Include finding devices.
·     Promote clarity by using recitation and background provisions.

4.       Use plain English.
Avoid unnecessary legal mumbo-jumbo.
·     Don’t accept anything you don’t understand.
·     Test the document for relevancy and consistency.

5.       Offer examples or illustrations.
They may limit misunderstandings.
Particularly useful in describing formulas or computations.

6.       Life with your Partnership Agreement.
“Literature” is time consuming and costly.
·     Focus on completeness and accuracy of language.
·     Understand when an imperfect document will have to do!

            No document is perfect. Intense time pressure and cost constraints may contribute to compromises among parties in the preparation of a partnership agreement. Learn to live with an imperfect document. Recognize that disagreement in business is to be expected and that not all disputes involve material concerns, or should imperil the partnership.

Specialty Practice Organizations and Board Certification

Many practice entities are unfamiliar with the need to advise the State Department of Education of changes in their ownership structure. Should the medical practice admit a new shareholder, for example, a letter should be timely mailed to the Education Department, Division of Professional Licensing, notifying the State of the change in ownership. This simple act may have unwanted consequences. As part of the review, the Department of Professional Licensing is known to require board certification from each of the physician owners of a professional service corporation (PC) as a condition to continued use of the practice name where the practice makes reference to a specialty in its name.

If a physician owner of the specialty practice is not board certified, the practice may be required to redeem (temporarily) the physician’s ownership interest pending confirmation of board certification, resulting in a possible disruption of the compensation model and practice governance.

Notification Letters from Plaintiffs who are Patients of Your Practice

Your professional practice should anticipate letters from plaintiffs in accident cases in increasing numbers over the next few years, perhaps along the following lines:

“I am a patient of your office. I am also the Plaintiff in an action to recover damages for injuries I sustained in an automobile accident. I understand that I must provide defense counsel with authorizations allowing them to review copies of my medical records and interview you concerning the care and treatment I received from you.

You should know that I would prefer that you not talk to defense counsel about me if they contact you. You should also know that you are under no obligation to speak with them. If you choose to disregard my request, please let me know the date and time of the conference with defense counsel so that I may attend the interview.”

What Should You Do?

A person who sues for personal injuries waives the privilege of physician confidentiality for the particular medical condition at issue in the lawsuit. A recent New York State Court of Appeals decision now requires plaintiffs to provide defense counsel with an authorization allowing treating physicians to speak to defense counsel. This may be done during the discovery phase of the litigation, not just on the eve of the trial, as was the prior practice. The plaintiff may not condition the authorization by requiring the defense attorney to provide plaintiff’s counsel with copies of written statements or notes of the conversation or audio of video recordings, etc. Treating physicians are entirely free to decide whether or not to speak to defense counsel.

In consultations with your attorneys, your professional practice should establish a policy for dealing with such requests, and determine where these types of letters should be stored. That policy should consider the following 4 questions:

  1. Is the request a “confidential communication” under New York State law?

  2. Should the request be incorporated as part of the patient medical record?

  3. Should the practice authorize its physicians to speak with defense counsel?

  4. Does the plaintiff have the right to participate in any interview with defense counsel?

Please contact Lawrence M. Ross or Paul J. Suozzi if you should like our advice on the development of a policy for handling these requests.

Hospitalist Employment Agreements

There is a trend in our community, and elsewhere, for hospitals to engage hospital-based physicians (hospitalists) to assume care for primary care physician patients and unassigned patients from the emergency department. Many of these hospitalists are directly employed by the hospital. Supporters say that these physicians are a resource for patients, a comfort for overworked primary care doctors and provide a competitive edge by reducing costs and length of stay.

Physicians interested in such positions should be wary of any employment agreement that conditions medical staff privileges on the duration of the contract or requires the hospitalist to forego his or her due process rights and waive access to medical staff fair hearings. If termination is for “cause,” it is possible that the revocation of medical staff privileges may trigger a reporting requirement to the State Department of Health, generating licensure and credentialing problems for many years to come.

A second concern stems from the increasing leadership positions hospitalists are assuming. Should you be asked to take a more prominent role and assume significant administrative duties, separate and distinct from serving on hospital committees, these responsibilities should be separately compensated, and appropriate insurance coverage provided, by the hospital.

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