By Vasilios J. Kalogredis, J.D.
Over the past decade or so, it was not uncommon for physicians who had previously been in private practice to become employed by a larger entity (such as a hospital, managed care organization, management company, teaching institution, and the like).
In most of those instances, the doctors involved negotiated and executed lengthy and complex Agreements with the employer. In some instances, the doctor sold his prior practice to the new employer before being engaged by it. That often involved Practice Sale Documents, Noncompete Agreements, in addition to the Employment Agreement.
Some physicians have been quite satisfied with their arrangements and have continued to work for the larger employer after the initial employment term ended.
Other physicians determined that they would only continue on through the end of the initial term of the Employment Agreement and then move on to other opportunities.
The options available to such a physician are a function of several things. First of all, what type of work does the doctor want to do going forward? Does he or she want to continue clinical practice work only or primarily, or does he or she want to do different things?
Furthermore, some doctors have decided that they much prefer a smaller, private practice setting and desire that route.
Others determined that they would prefer another larger employer after their present Agreement ends.
Others have determined that they want to move onto another nonclincial aspect of health care (for example, teaching, pharmaceuticals or management).
It is clear that one important aspect of determining what options to pursue is what the doctor’s desires are.
However, another important aspect relates to what the documentation executed by the physician allows the doctor to do post-employment termination. For example, many Employment Agreements have covenants not to compete. They generally would limit the ability of a departing doctor to practice medicine (or a specific sub-specialty of medicine) for a period of time (perhaps two years) after leaving the employment, within a specified geographic area. Without getting into all of the legalities of the enforceability of a restrictive covenant (which would be an article in and of itself) suffice it to say that if a physician has executed an Agreement with such a provision, that doctor must be wary of taking any steps that might cause him or her to violate such a provision, unless he or she wants to take a chance as to what might happen in a court of law.
The important thing here is to clearly understand (ideally with the assistance of experienced legal counsel) what it is that the doctor has agreed not to do from a restrictive covenant standpoint. The doctor would then have to evaluate what his options are and what his tolerance for risk is with all of the cards on the table.
Another important aspect of this would relate to provisions that are sometimes called “non-solicitation” clauses. Such a provision might preclude a physician from recruiting or attempting to recruit present or former employees or independent contractors of the employing institution. This may be a serious problem, depending upon what the language says, when a group of doctors express an interest in “leaving” together and doing something jointly upon such departure. There may be a problem with the doctors banding together, per se. There may be problems if staff are solicited to depart with the doctors as well.
Furthermore, some of these provisions keep a doctor from soliciting any of the patients, referral sources, contractual arrangements, etc. of the predecessor employer. These provisions can be problematic since they are not always clearly defined. The vagueness can actually work to the detriment to the departee unless he/she is willing to take a chance.
For example, I was recently involved with an arrangement whereby a group or doctors were moving from Institution A to Institution B. Although the second institution was outside of the geographic area defined within the noncompete language of the first Employment Agreement, the Hospitals still considered themselves to be competitors of each other and were very sensitive to the potential of patients moving from Institution A to Institution B if and when these doctors moved on from Institution A to Institution B.
Unfortunately, the initial Employment Agreement (which I did not negotiate) was vague and had a general statement indicating that the Physician agreed not to solicit directly or indirectly any of the patients of Institution A for a period of 24 months after leaving Institution A. In negotiating the departure of my clients from Institution A, I attempted to negotiate a clarification of the non-solicitation language to not include things such as general mailings (not using any institutional mailing list), listings in managed care provider networks, and oral communications when seeing people in a social setting which was not “planned” to be a marketing program to get patients to move to Institution B. A perfect example would be if a doctor were to see some friends at church and they were to ask him where he was going to open his new office. We did not want his telling them of his new location to be deemed to be solicitation by him in violation of his Employment Agreement with Institution A.
To make a long story short, since Institution A was so concerned about what would happen to its patient base by the moving to Institution B, they decided not to clarify the provision and tell the departing doctors that they would be at risk if they were to “solicit” in any way. As I often will tell my clients in situations such as this, I can certainly give them my professional opinion as to whether or not they would lose such a possible suit. However, that does not mean that an “angry/emotional” prior employer won’t file suit anyway. The hassles and costs involved often will cause the departing doctor to decide if is best to not even come close to violating such a provision. Therefore, other options are pursued. Other physicians have the conviction and the pocketbook to fight the behemoth and let the chips fall where they may. This is not an easy decision. But it should be made in a fully informed fashion, with full knowledge of all of the options and ramifications of selecting each of them.
In any event, those types of provisions certainly will dictate what a departing doctor will decide to do depending upon his/her specific contractual arrangements and his/her tolerance for risk and potential aggravation.
Some Employment Agreements very clearly state that if a doctor leaving their employ wishes to continue to practice within the proscribed geographic area, that the doctor would agree to pay a certain specified amount of money to the institution for this .”
Other institutions may decide that so long as the departing doctor complied with his obligations during the initial employment term that he/she should be able to leave and practice within the geographic area after that initial term obligation was satisfied. In many circumstances, allowing the doctor to stay in that marketplace is good for the doctor and good for the hospital. If a good relationship is maintained, the potential is there for the departing doctor to continue to want to service his patients at that particular institution.
Other Employment Agreements make clear that, if the Employer does not renew or offer to renew the employment relationship past the then relevant term at a compensation arrangement the same as or comparable (perhaps defined as a specified percentage of the initial compensation arrangement) pay level, the doctor is then free to move on and do whatever he/she wants to do. This is a protective provision for the physician. Without it, an institution could say that they were willing to renew the existing Employment Agreement, but at a greatly reduced compensation. If the doctor was then faced with the alternatives of accepting that lower pay or having to leave but being subject to a restrictive covenant, non-solicitation provisions, etc., his/her choices would certainly not be ideal.
Of course, it is not at all uncommon for both sides to be very happy with how things went and to then negotiate a new contractual arrangement into the future.
In closing, it is clear that the options facing a doctor in such circumstances are varied. Making the best choice involves being honest with oneself as to what is the best fit for that individual and protecting oneself from hassles and legal difficulties.
Vasilios J. Kalogredis, J.D., is Founder and President of Kalogredis, Sansweet, Dearden and Burke, Ltd., a boutique health care law firm in Wayne, Pa.