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Thinking of leaving your practice? Plan ahead to avoid problems with malpractice insurance, non-compete clauses, and other issues.
After a decade as an internist, Jay Want was looking for the exits.
He enjoyed his patients, but grew increasingly frustrated at some of the practice management issues he wasn’t able to change.
He left patient care entirely in 1999 to join Physician Health Partners LLC, a Denver-based consulting firm that helps practices implement quality improvement programs.
The transition went smoothly and Want, now the company’s CEO, says he’s where he belongs.
He took two months to gradually notify all his patients of his departure, many of them in person. And he hung on to thank-you letters from grateful patients as a reminder to himself about the importance of the human elements of practicing.
But there was a bitter pill he couldn’t get around, one that’s increasingly common for departing doctors today: a bill for his medical malpractice insurance to cover him for any cases filed after his departure that were related to his practice tenure.
So-called “tail insurance” typically costs 1.5 times to 3.5 times the annual malpractice premiums, sometimes even more. It was painful for Want, but not a deal breaker. For high-risk specialties, though, the figure can be enough to thwart dreams of moving on to a new practice or a different career.
“It’s become typical for hiring practices to require associates to buy their own tail coverage when they leave,” says Daniel Bernick, an attorney and principal with The Health Care Group in Plymouth Meeting, Pa.
Being a stickler about getting provisions for tail coverage written into employment agreements is one of the most important exit strategies physicians can use, experts say.
Cover your tail
But with fewer practices offering to pay for tail insurance coverage, there are some alternative strategies:
Buy a nose. One alternative to consider is “nose” coverage, which is part of a new policy for your next job that covers malpractice claims that arise from your previous position, says Lawrence Smarr, president of the Physician Insurers Association of America.
Write in a waiver. If you’re thinking ahead about a smooth exit when first joining a practice, Smarr says, you should also be sure your malpractice policy carries a waiver for retirement, death, or disability. Many carriers offer these waivers, he says, which provide automatic tail coverage if one of those events occurs.
Self-insure. Another strategy is to effectively self-insure against a future tail coverage bill, Smarr says. The first few years of most claims-made policies offer significant discounts on premiums until the full annual rate is reached.
During those years, he says, save and invest the difference between the full premium and your discounted rate, earmarking the money in case you need it to pay for tail coverage down the road.
Scrutinize. Another potential mine field to watch out for, says Bernick, are contracts that simply guarantee an incoming physician will be covered according to current practice policy. Language like this doesn’t hold anyone to anything, despite what you’re told in interviews, says Bernick.
Another thing to ask upfront is whether your carrier will allow you to pay the tail charge over time without interest, which is common provided your personal credit rating is fairly high, he says.
Beyond tail coverage, don’t forget other must-dos to cover your exit:
Review the non-compete. Always review the non-compete language in your contract, as experts say this is a major area of confusion and disagreement when doctors leave.
If your practice has multiple locations, make sure you understand the geographic area of the non-compete. Even if you typically only work in one location, the agreement may prohibit competitive work within a given radius of any of the practice’s locations.
Build bridges. Like with any job change, remember the softer side of making your exit, too. Even when the circumstances aren’t ideal - and even if you’ve had some difficult conversations about tail coverage or some other detail of your departure - it pays to try to smooth things over personally before you go.
Want still keeps those old patient letters, and maintaining contacts in the practice world helped him make the smooth transition to running his new company.
Above all, he says, be sure you’re heading toward something, rather than focusing solely on leaving a practice behind. “You have to want to do this as much as you originally wanted to be a doctor,” he says of his own move to a new venture. “There’s no other reason to go through so much transformational pain.”
Janet Kidd Stewart is a freelance writer based in Marshfield, Wis. As a contributing columnist for the Chicago Tribune, she writes a weekly, syndicated retirement column called “The Journey” that appears in Tribune newspapers across the United States. She can be reached via email@example.com.
This article originally appeared in the April 2010 issue of Physicians Practice.