Health Law Pointers - Volume XIII, No. 1

Physician Departures from a Medical Practice

The unexpected withdrawal of a physician from a close-knit medical practice often is difficult for all involved, but can be traumatic when the departing member is a partner and expectations for the parties on matters relating to the transition are not aligned. This frequently arises if the ground rules are not reduced to writing. A “separation” agreement can establish a binding, enforceable contract that identifies the rights and obligations of the parties and manages their expectations.

Seven Practice Pointers

1. A convenient “withdrawal” date should be jointly established. In agreeing to the date, the medical practice should take into account the time necessary for making various transition arrangements as well as the need for timely patient notices and transfers of medical records.

2. Many practices own their office buildings but choose (for good reason) to hold their real estate in a separate entity. The governing documents for the real estate holding company should require the departing physician to relinquish his or her ownership interest in that entity concurrent with the practice withdrawal.

3. A physician who withdraws from the practice should no longer be considered a member of the medical group, and should no longer be entitled to access to confidential financial and business information, with limited exceptions.

4. Any payments made to the departing physician in connection with his or her withdrawal should be considered a complete satisfaction of all practice obligations to the physician.

5. Patient confidentiality rules under HIPAA and comparable State laws make it imperative for the practice to restrict the physician’s access to premises and records, and require the departing physician to return all practice property. Changes may be needed to various access codes.

6. In some circumstances, an amicable departure is difficult, in which case it is in the interest of all parties to agree not to criticize or disparage the other.

7. Prudence dictates that the parties consider exchanging general releases.

Physician Agreements Concerning the Transfer of Medical Records

New York State law views a medical practice not as owning a patient’s medical record but rather as having custody of it. Patients have the right to select their treating physician and, if they so choose, direct the transfer of their medical records to another (“successor”) physician if, for any reason (or no reason at all), they no longer wish to continue to be seen by the initial treating physician.

Developments in the law concerning the confidentiality of personal health information and the substantial penalties imposed for breaches of patient confidentiality complicate the handling of patient medical records in the event of the departure of a physician from a medical group. Thus, transfers of patient medical records as a favor to a departing colleague, without properly signed authorizations from the patients, may be ill-advised.

The trend in health law is to have the parties enter into a written agreement governing the transfer of patient medical records from the custodial medical practice to a departing physician.

If a transfer agreement is prepared, the custodial responsibilities of the departing physician (the “transferee”) should be made clear in the document. In particular, the physician should be required to segregate the transferred medical records until such time as the individuals become patients of the new practice. The transferee should also indemnify or hold the medical practice harmless from any claims and liabilities, including those relating to damages sustained to the contents of the records while in the transferee’s possession.

Some readers may question why they should agree to a transfer of medical records in the first place, particularly when the governing documents, or physician employment agreement, make it clear that a departing physician is not entitled to the records.

To respond, parties to an agreement are always able to modify that written agreement with the consent of all involved, so that enforcement of existing contract language may be waived. Further, transfers of patient records to a departing physician may be justified where the practice is at or near capacity and the remaining doctors have neither the time nor strength to add to their workload, or the parties wish to avoid a protracted dispute.

New York Wage Theft Prevention Act

Effective April 12, 2011, the Wage Theft Prevention Act (the “Act”) significantly increases an employer’s liability for violations of the wage and hour laws. The Act requires employers to provide written notification to employees identifying the employee’s pay rate, including the regular hourly rate and the overtime rate, how the employee will be paid (e.g., by the hour, per shift, per week, commission or salary), any allowances claimed as part of the minimum wage, and when the regular pay day is scheduled. This written notification must be provided within ten (10) days of hire, with every payment of wages, and annually. The written notice must be signed and dated by the employee, and the employer must retain an accurate record of the employees’ receipt of this notice for six years.

Failure to provide the required notice allows either the employee or the Commissioner of Labor to bring an action against the employer for money damages. If an employee is successful, the employer must pay the employee all back wages due, costs, attorney’s fees and prejudgment interest. The employer may also be liable for liquidated damages equal to the total wages due unless it proves a good faith basis to believe that the underpayment of wages was lawful.

The Act also prevents any person from retaliating against an employee for complaining to anyone that the employer has engaged in conduct which the employee reasonably and in good faith believes to be in violation of the Labor Law. It makes such retaliation a class B criminal misdemeanor.

Please contact Ann Evanko, [email protected], and Jennifer Kelleher, [email protected], with any questions on this new requirement.

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