The Basics of Physician Separations

Posted By Mike Meyer, Wednesday, March 24, 2021

frustrated person

By Bradford E. Adatto, Partner, ByrdAdatto

The breakup of a medical practice (or "doctor divorce") is a common occurrence. Whether the breakup or departure of the physicians is voluntary or involuntary, the result is the same—economic impact on the practice.

If the practice did not address the separation process in its employment agreements or governing documents, then what was already going to be a difficult task will be substantially more difficult, time consuming and expensive. The repercussions can be devastating to a closely held practice and affect all the employees of the practice. Owners and employers must address the issues during the formation process or initial employment of the physician(s)—otherwise, they are left with case law and state statutes to remedy their arrangements.

The goal of every separation plan (via employment agreements or governing documents) must articulate several basic fundamental terms and conditions:

  • Triggers: When can a physician be terminated, voluntarily or involuntarily?
  • Reimbursement of services: How, when and for how much can a physician be compensated for the services already preformed on behalf of the practice?
  • Professional liability: Who pays for the liability after termination?
  • Sale and purchase of the practice: How do you value the ownership, and when does the practice pay for the ownership?
  • Protective covenants: Do you have non-competes or non-solicitations to protect the practice?
  • Ancillary ownership: Do you address the ownership of other medical ventures that trigger the buyouts based on the termination from the practice?
  • Bank debt and leases: How do you remove a partner from personal obligations?
  • Notifications to patients: When and how do you notify your patients of the departure?
  • Transfer of medical records: What is the process, timeframe and compliance in place to securely transfer medical records?
  • Indemnification: When and how will the parties indemnify each other?

Clearly, the above elements are not an exhaustive check list. The goal of any separation plan should be to remove the emotional issues, which often are intertwined in a practice breakup or departure, and concentrate on the fundamental business elements to assist a smooth transition.

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Bradford E. Adatto is a partner at ByrdAdatto, a national business and health care boutique law firm with offices in Dallas and Chicago. His background is in regulatory, transactional and securities law. Having worked in health care law his entire career, he has an in-depth knowledge of the "dos and don'ts" of this heavily regulated industry. Brad has worked with physicians, physician groups, and other medical service providers in developing ambulatory surgical centers, in-office and freestanding ancillary service facilities, and other medical joint ventures. He regularly counsels clients with respect to federal and state health care regulations that impact investments, transactions and contract terms, including Medicare fraud and abuse, antitrust, anti-kickback, anti-referral, and private securities laws.

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