Physician practices break up in one form or another as often as physician marriages breakup and the breakup of a physician practice can be as costly, tumultuous and painful as the breakup of a marriage. The best advice is to plan ahead and develop a “pre-nuptial” type arrangement or exit plan, when the practice is set up and when new providers are brought into the practice. Unfortunately, many physician practices have no exit plan for practice departures or breakups and suffer unnecessarily as a result.
Even those practices with an exit plan, often encounter rough waters as they work through issues. The biggest disputes seem to be over competition and post termination compensation. The practice may or may not have a non-compete provision in its physician contracts, if there is a contractual non-compete, it may or may not be enforceable. Even with an enforceable non-compete, the departing provider may choose to ignore the non-compete and poach patients and referral sources.
With respect to post-termination compensation, practices may need to hold back some money to account for payer audits, recoupments, fines, penalties, practice debt, contractual obligations, limited liquidity and other miscellaneous costs. It is important to protect the remaining providers and make sure they are not saddled with the departing provider’s expenses and debt.
In addition to the big picture issues, there are a myriad of other issues associated with practice breakups. Patient notification can be a sticky issue. For instance, an academic medical center practice was forced to pay a penalty for violating HIPAA, when the medical center provided protected health information to a departing provider without first obtaining authorization from patients. Conversely, practices have also been penalized for not notifying patients about departing providers.
With respect to practice departures and breakups, the best defense is a good offense. Plan ahead working with experienced health care counsel.