What to Consider as Your Hospital Employment Contract Comes to an End

April 30, 2014

Whether a physician wants to walk away from hospital employment or stay employed, adequate preparation before the contract comes to a close is critical.

Hospitals and health systems continue to buy up physician practices throughout the country, as they have been doing for the past few years.  However, many physicians who were early sellers may find themselves nearing the end of the contract in which they entered when their practice was sold or desiring to end the relationship after being employed for several years.

For some physicians, there may be no question that they desire to continue working with their current employer and a new contract or renewal will be executed.  For others, the end of the contract is a welcome relief and there are new directions they intend to pursue.  In both cases, physicians need to review their contracts carefully before making any decisions.

For those physicians staying with an employer, here are some provisions to consider:

1. Is it time for an increase in compensation or the addition (or modification) of a bonus formula?
2. Are there other benefits that should be demanded at this time, such as more time off?
3. Have you taken on a leadership role that should be properly recognized and compensated, such as director, department head, or other position?
4. Are there provisions of the contract that can be renegotiated:  restrictive covenant terms, work or call schedule, notice provisions, etc.? 

For physicians looking to leave a hospital employer, there are some special considerations:

1. If the agreement requires notice of termination or non-renewal, be sure that adequate notice is provided.  Keep in mind that the type of notice or contract termination can impact other provisions of the contract, such as covenant and tail obligations.  Additionally, if a contract terminates at any time other than the end of the full employment year or contract term, a physician can face a loss of all or part of an annualized bonus. Finally, make sure you understand whether your employer can accept your notice but elect to not pay compensation or benefits during the notice period.
2. Be familiar with the restrictive covenant provisions not only in your employment agreement but in any agreement that was signed when you sold the assets of your prior practice.  Consider whether your employer might be willing reduce or waive your covenant provisions if you are leaving on good terms and intend to keep practicing locally.  Also, determine if resignation of staff privileges is required under your contract. 
3. Make sure you understand what you are entitled to as final payment in terms of compensation, bonus, and benefits upon termination.  Don’t leave money on the table.
4. Consider whether there is a role within the institution that you may have an interest in pursuing. Many physicians tired of private practice can find a place to share their skills and knowledge, even if not in clinical practice.
5. Remember the promises made in your employment agreement, whether it’s not to disparage your employer, to keep information confidential, to not solicit employees/patients/referral sources, or to cooperate in completion of medical records.  Review your document for post-termination agreements and remember that a hospital/health system has deep pockets, and will typically choose to enforce its contractual rights.
6. Be aware that use of electronic devices, access to medical records, and other benefits to which you have become accustomed may be coming to an end.  Make sure you are familiar with your obligations under HIPAA and other privacy laws.
7. Review your malpractice insurance requirements and be sure to secure appropriate coverage to meet your contractual obligations.  Even if a tail appears to be required under your contract, talk with the carrier and employer to see whether continuation of coverage may be possible (or other alternatives exist) if you will be staying in practice.

There are many issues a physician needs to confront as a relationship with an institutional provider changes or ends.  Many of the answers (and many more questions) can be found by reviewing the documents that started the physician-hospital employment relationship.  Make sure you understand your rights and obligations well before any big decisions are made.