Multiply these problems by a factor of ten and you have the situation where the terminated physician is a shareholder or partner in the practice, with voting rights under the Bylaws, buy-out rights under the Shareholders’ Agreement and profit share under his Employment Agreement, together with a substantial patient following, name in the community and relationships with referrers.

Especially in a small practice, the net effect of these multiple factors is pure misery for all concerned, until the terminated doctor is finally out the door. And even that may not be the end. In the days, weeks, months or even years after the physician leaves, a process server will often arrive on the practice’s door step to deliver the terminated doctor’s legal complaint. This document will demand hundreds of thousands of dollars of damages for the practice’s alleged failure to provide the terminated physician with full compensation or buy-out, or for "defaming" the physician to patients or referral sources, or for other breach of contract.

What can be done about such a situation? In our experience, the only fully effective mechanism is a physician termination agreement. This is a contract between the practice and the departing physician that addresses and resolves all outstanding issues between the parties, such as exact date of departure, amount and payment dates for bonus, profit share and buy-out monies, return of corporate property (beeper, cell phone, keys, credit cards), purchase of malpractice insurance "tail" coverage, refund of prepaid malpractice premiums, payment for accrued vacation and sick time, handling of future employer reference inquiries, handling of patient charts and patient inquiries, and so on. Thus, a major benefit of a physician termination agreement is that all these issues are dealt with, resolved and not left hanging.

In addition, the agreement can be used to:

• Prevent solicitation of patients and referrers.

• Prevent or limit the departing physician’s competitive activity, such as by requiring him or her to locate his or her new office a good distance away from the practice.

• Prevent the physician from disparaging the practice.

• Get an indemnification from the physician for liabilities associated with his work for the practice.

Finally, the biggest benefit of a termination agreement is that it contains a complete release of the practice from any and all claims, known or unknown, that the departing physician may have against it. This is especially important when the departing physician is a partner or shareholder in the practice, as invariably such a partner is entitled to a share of current profits, or buy-out, in terms of the exact amount owed to him. The release is also invaluable when the departing doctor has other potential legal claims arising out of the termination, such as age, sex, disability or race discrimination.

In sum, the benefits of a termination agreement are threefold:

• It resolves all the details relating to the physician’s departure.

• It helps control the adverse or negative behavior of the departing doctor and thereby limits the damage from the doctor’s departure.

• It provides the practice with a complete release from liability and the assurance that it will not be sued.

These are certainly major advantages for the employer-medical practice, a veritable "no-brainer" from the practice’s perspective. Why then isn’t there a physician termination agreement for each and every practice termination or split up?

Part of the answer is that not everyone knows about this problem-resolving contract. But the more important factor is that the terminated doctor needs a reason to sign the agreement too. It can’t just be all benefits for the practice. The terminating doctor needs to get something out of the deal that he or she wouldn’t have gotten otherwise.

The obvious solution here is severance pay. This is the classic benefit from the terminating doctor’s perspective, and it works. If you choose to offer severance, remember that it needs to be dollars over and above those monies that the terminating doctor would have received anyway, without a termination agreement, such as a buy-out that is specified in the Shareholders’ Agreement, or salary earned from pre-termination services.

Some practices may balk at paying severance money, particularly to a doctor with the avowed objective of competing with his or her former employer. But in some cases the dollars paid out don’t need to be large; it is surprising sometimes how little may be needed to cement the deal. In fact, if the practice has a legitimate basis for claiming damages already incurred as a result of the terminating doctor’s conduct, the severance dollars may consist merely of paying the terminating doctor his full final paycheck, without deducting the damages! (Note: This strategy needs to be approached carefully, with the help of an attorney; state wage payment laws may limit the practice’s use of this tactic.)

Also note that many deals are signed without severance payments. There may be something that the terminating doctor wants more than money—something that only the practice can provide. This can be an agreement by the practice not to disparage the terminating doctor to prospective new employers as he searches for a new job. It could be permission to practice within the covenant area, such as when the non-compete is 10 miles and the terminating doctor wants to practice nine miles away. The key is for the practice to find something that the terminating doctor wants that only the practice can provide.

Negotiating a termination agreement can be hard or easy, depending on the situation. However, in our experience with them, the ultimate savings in time and money dwarf the costs of the negotiation. And once the document is signed, the terminating doctor leaves, and everybody breathes a large sigh of relief. At that moment, and thereafter, the practice can relax knowing that it cannot be sued by the departed doctor.