As the healthcare industry evolves, many doctors form partnerships or merge practice groups into larger ones. Such physician partnership agreements can benefit doctors, who can then share common expenses allowing them to take on more patients and treat more people. Medical groups or partnerships are often-times put together with little or no input from business lawyers. Taking the time and planning at the outset of a partnership can save countless hours and costs later if disputes occur.
Overview
For many physicians, there are several benefits associated with partnering with one or more physicians- You can share administrative costs involving the operation of the practice, have built-in coverage when you are away, and plan for the future, to name a few [1]. Although there are many benefits associated with entering into a partnership with other physicians, before entering into such relationships, physicians must carefully evaluate the arrangement to ensure that the arrangement is appropriate based on the physician’s goals and current situation. If you enter into a partnership arrangement with other physicians (either through ownership in a PC, PLLC, or LLP), you must enter into an agreement outlining the terms of the relationship with the other physician (s). This Agreement is referred to as either a Partnership Agreement, Shareholders’ Agreement, or Operating Agreement (hereinafter “Agreement”) depending on what type of entity the physicians render services through (i.e., LLP, PC, or LLC). The parties must all be on the same page before entering into such a relationship, or it will not work out. We have outlined some key concepts that need to be addressed before physicians enter into partnership arrangements with other physicians.
Legal issues that may arise from a physician partnership agreement
- Doctors sign an employment contract with a partnership that includes an option to become a partner but one or more of the existing partners later refuse to allow the doctor to become a partner
- Personality conflicts cause doctors to separate, but nothing in writing exists for distributing equipment, shared personnel, or shared patients
- The partnership agreement does not address the addition of new equity partners or the effect such reserves have on the shares held by the existing partners
- The partnership agreement fails to detail a method for dissolution of the partnership when one or more doctors want to leave the group
- The partnership agreement lacks a way to remove a partner who has engaged in unethical behavior or is no longer contributing to the practice group
- The practice group wants to merge with another practice group but does not know the requirements on how to do this legally
- There is nothing in place for valuing the practice group if a partner requests to be bought out or to buy another partner’s shares
At some point, one or more of these issues may occur. Awareness of the legal consequences of a physician partnership agreement is important. These disputes can lead to unneeded expenses or anguish, ultimately destroying a practice. Getting a knowledgeable lawyer involved at the beginning of a practice group merger or physician partnership will allow the parties to focus their time and energies on growing the practice.
Elements of a physician partnership agreement
Scope of Employment in a physician partnership agreement
(a) From and after the Employment Date (see subsection 11(b)), the physician shall devote their full time and energy substantially to the practice of medicine on behalf of the group and to practice medicine solely as an employee of the group, except as may be otherwise agreed to by group in writing. Physicians shall represent themselves professionally only under such business or clinic name as shall be approved or designated by the group and shall practice at the office location designated by the group. The physician understands that group has final authority and responsibility for determining the work schedule and fee schedule for professional services rendered by group employees.
(b) Physicians may engage outside of this physician partnership agreement in activities that utilize their professional knowledge but do not involve the direct delivery of patient care services, such as teaching, lecturing, publishing, inventing, consulting in legal matters, and participating in quality assurance or utilization review activities, so long as such activities are engaged in at times when the physician is not scheduled to provide services to group and do not otherwise interfere with their employment obligations under this physician partnership agreement.
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Compensation for services under a physician partnership agreement
(a) Group shall compensate the physician for all services rendered by a physician under this Agreement as follows:
(i) Annual Base Compensation at the rate of $ per annum, prorated and paid in arrears according to the group’s regular employee payroll schedule. In the event of termination of this Agreement for any reason, the physician shall be entitled to Base Compensation for all time worked up to, but not including, the effective date of termination on a prorated basis. A physician shall be entitled to no compensation from the group more than the prorated Base Compensation earned as of the termination date plus any accrued, allowable expenses.
(ii) In addition to Annual Base Compensation, the physician shall be entitled to incentive compensation equal to.
(b) Physician understands and agrees that any monies due to or received by a physician on account of the rendering of patient care services or otherwise in the professional practice of medicine from and after the Effective Date of this Agreement, regardless of the time and place such services are delivered, shall be the exclusive property of the group. The compensation paid to the physician under this Agreement shall constitute total compensation to the physician for services rendered under this Agreement. The physician shall not seek additional compensation from any source for services rendered under this Agreement.
(c) Any honoraria, speaking fees, or royalties paid to the physician as a result of professional speaking, writing, inventions made, or patents issued, whether related to medical matters or otherwise, as a result of any activity permitted under Section 1(b) of this Agreement shall be deemed earned outside of the scope of this physician partnership agreement and shall be the sole property of physician.
Billing
- Only the group shall be entitled to bill for or otherwise receive payment from the patient or any third party for services provided by the physician under this physician partnership agreement. A physician shall have no right to receive, nor shall the Physician attempt to bill for or collect, payment from the patient or any third party for services provided by the physician under this physician partnership agreement, except as directed by the group, in the name of and for the sole benefit of the group.
- The physician shall cooperate with and assist the group in the preparation and documentation of claims for services rendered by the physician under this physician partnership agreement. Physician agrees to cooperate and comply with the terms of applicable utilization management and similar cost management protocols and to do all things necessary and appropriate to maximize reimbursement to the group for services rendered by a physician under this physician partnership agreement to the extent consistent with law and with the best clinical interests of the patient.
Medicare program regulation under a physician partnership agreement
The physician is responsible for understanding and complying with applicable law about providing services to the beneficiaries of Medicare and other state and federal healthcare programs and billing and collection for such services. Physicians shall provide, document, and request reimbursement for personal and identifiable health care services rendered to patients consistent with applicable legal requirements and in such a manner as to qualify for a refund under practical health benefit programs.
Work facilities
The group shall ensure that the physician has appropriate office space, support staff, supplies, equipment, and other facilities and services as the group deems necessary and proper to their position and to perform the physician’s duties.
Professional relationships
Group and physician each acknowledge and agree that the business relationship between Group and Physician as established by this physician partnership agreement does not, and shall not be construed to alter or in any way affect the legal or ethical. The professional relationship between physician and patients cared for by a physician, nor shall anything in this partnership agreement abrogate any right, privilege, or obligation arising out of or applicable to the physician-patient relationship.
Expenses
Ordinary and necessary business expenses incurred by the physician in performing their duties under this physician partnership agreement, including but not limited to professional dues, subscriptions, licenses, and continuing education expenses, shall be borne by the group, provided that such costs shall not include any fee not deemed an ordinary and necessary business expense under applicable Internal Revenue Service guidelines, and provided further that such charges shall not exceed $2,500 per annum. A physician shall have no authority to enter into any contract binding Group or to create any obligation on behalf of the group unless otherwise expressly approved by the group.
Employee benefits under the physician partnership agreement
A physician shall be entitled to three (3) weeks of paid time off each year, following the group’s leave policies, to be used for vacation, illness, or continuing medical education. A physician shall be entitled to receive or participate in all employee benefits generally available to group employees following the terms of the group’s employee benefit plans in effect from time to time. The governing body of the group may increase, decrease, or discontinue any benefit plan at any time without notice to or the consent of the physician.
Term of the physician partnership agreement
(a) The term of this physician partnership agreement shall begin on the Effective Date stated on the signature page of this Agreement. It shall continue in effect unless and until terminated as hereinafter provided.
(b) This physician partnership agreement shall be final and legally binding on the parties from and after the Effective Date. Still, the physician’s term of employment under this physician partnership agreement shall not begin until the date they are first licensed to practice their profession in the State of Tennessee, or the Commencement Date stated on the signature page of this physician partnership agreement, whichever is later (the “Employment Date”).
A voluntary termination under the physician partnership agreement
Either party may terminate this physician partnership agreement at any time, with or without cause, by giving written notice thereof to the other party at least ninety (90) days before the effective termination date.
Termination for cause
Group may terminate this Agreement immediately upon written notice to the physician on the occurrence of any of the following events:
(a) the failure of the physician to correct any material breach of this physician partnership agreement to the reasonable satisfaction of the group within thirty (30) days following written notice from the group specifying such breach;
(b) any unprofessional or illegal conduct by the physician which is harmful to the good name and reputation of the group or may subject the group to legal liability, including, but not limited to, the physician’s conviction of a felony;
(c) a pattern of inexcusable neglect, or one or more instances of gross negligence or willful neglect of duty by a Physician in the performance of this Agreement;
(d) the inability of the group to obtain or maintain professional liability insurance coverage for the physician from the insurance carrier that provides coverage for the group and its other physician-employees at rates equal to or less than 150% of the highest rate than in effect for any other Group physician-employee in physician’s specialty;
(e) Physician’s violation of any law governing the group as an employer or relating to the rights of Group employees;
(f) Physician’s failure to abide by policies and procedures established by the group that applies to all physician-employees of the group, including but not limited to policies and
procedures relating to substance abuse;
(g) the use of alcohol or an illegal or controlled substance that materially impairs the ability of the physician to effectively perform the physician’s duties and obligations under this physician partnership agreement;
(h) the exclusion of Physicians from participation in Medicare, Medicaid, or any other state or federal health care program; or
(i) in the event Group determines in good faith that the physician is for any reason unable or unwilling to provide patient care services in a manner consistent with professionally recognized standards of medical care or that termination is otherwise necessary to protect the health, safety, or well-being of group’s patients.
Automatic suspension and termination
Physician’s employment under this physician partnership agreement shall be suspended automatically and immediately upon the occurrence of any of the
following events:
- The revocation, termination, restriction, suspension, or lapse of the physician’s license to practice medicine in the State of Tennessee or of the Physician’s DEA permit;
- the revocation, termination, restriction, or suspension of physician’s hospital admitting privileges at any hospital within a thirty (30) mile radius of any Group clinical office site (but only if such action gives rise to fair hearing rights under such hospital’s medical staff bylaws); or
- the revocation, termination, restriction, suspension, or lapse of the physician’s professional liability insurance coverage other than as a result of nonpayment of premium or other default on the part of the group.
The effect of automatic suspension under the provisions of this Section 14 shall be that physician shall immediately cease any patient-care activity, shall immediately notify the group of the event causing such suspension, and provide such documentation of the event as may be reasonably requested by the group, and shall for the term of the rest be entitled to no compensation except as may otherwise be determined by the group in its sole discretion. All other provisions of this physician partnership agreement shall remain in full force and effect during the term of any such suspension unless and until this partnership agreement is terminated as provided herein. Any rest under this Section 14 shall continue unless and until a written notice of reinstatement is provided to the Physician by Group, in the group’s sole discretion. Any suspension under this Section that continues for an uninterrupted thirty (30) day period shall be deemed permanent, and this physician partnership agreement shall be terminated.
Relationship between the parties
The parties recognize that the governing body of the group shall own the assets and manage the business affairs of the practice. Nothing contained in this physician partnership agreement shall be construed to give the physician any interest in the physical assets or the accounts receivable of the group, whether used in or produced by the physician in providing patient-care services or otherwise, nor shall anything in this physician partnership agreement be construed to give the group any right to control the professional judgment of the physician in providing patient care services. A physician shall not engage in direct purchasing or otherwise contract with any person on any subject on behalf of the group.
Further, if approached by any person seeking to contract with the group, the physician shall expressly state that the physician has no authority to either negotiate or enter into any obligations on behalf of the group, and the physician shall refer such person to the President of the Group.
Limitation on physician’s activities upon termination
- Non-competition and non-solicitation
In consideration of the employment or continued employment of the physician under this physician partnership agreement, the physician agrees that in the event their engagement with the group is terminated for any reason, voluntarily or involuntarily, with or without cause, or in the event Physician voluntarily leaves the work of group during the term of this physician partnership agreement or any extension.
- Physician will not engage in the practice of medicine, either directly or indirectly, actively or passively, under contract or otherwise, as an employee, owner, partner, agent, stockholder, director, or otherwise, for a period of one (1) year within either a ten (10) mile radius from the primary practice site of physician while employed by group, or within Shelby County, Tennessee; and
- in addition to, and separate from, the foregoing Agreement not to compete, physician agrees that he or she will not, at any time within one (1) year after any termination of his or her employment hereunder: (1) treat, or solicit for treatment by himself or herself or any person or entity other than group, any person who has received medical treatment from Physician while Physician was an employee of group, regardless of whether such person was treated by physician prior to the Effective Date of this Agreement; or (2) offer employment to, solicit, engage by contract, or enter into any business relationship whatsoever with any person who is now or at any time during the term of this Agreement becomes an employee or service contractor of group.
- Remedies
The physician understands and agrees that any breach of the covenants contained under
Section 16 will cause irreparable injury and damages to the group for which there is no adequate remedy at law and as to which monetary damages cannot be readily ascertained. Accordingly, the physician consents in such event to the granting of injunctive relief. A physician shall be liable to the group for all costs reasonably incurred by the group in pursuing enforcement of the provisions of this Section, including but not limited to reasonable attorney fees and court costs.
- Buy-Out
As an alternative to the remedies otherwise afforded by this Section 16, the physician may elect to buy out their obligations under this Section 16 at any time after the end
of the twelfth (12th) month following the Employment Date by completing each of the following steps: (i) providing proper written notice to Group of Physician’s termination of this Agreement; (ii) including in such written notice a statement that physician is exercising their election under this Section 16, subsection (c); and (iii) paying to group a dollar amount equal to their actual collections net of contractual adjustments during the six (6) highest months of the most recent twelve (12) months before the termination of this physician partnership agreement. Payment of the buy-out amount hereunder shall give the physician the right to contact the patients he or she has personally treated and obtain copies of charts concerning those patients upon payment of $5.00 per chart to cover the cost of reproduction.
- Survival of terms under a physician partnership agreement
The parties acknowledge and agree that the provisions of this Section 16 have been specifically bargained for and are reasonably necessary to protect the legitimate business
interests of the group, and shall survive termination of this physician partnership agreement for any reason.
- Notices
Except as otherwise provided elsewhere in this physician partnership agreement, all notices required to be given under this physician partnership agreement shall be sufficient if given in writing and sent by United States Certified Mail, postage prepaid, return receipt requested, to the appropriate party at the address given following the signature lines at the end of this physician partnership agreement, or to the group at its registered office address and physician at their most current home address as shown in the personnel records of the group. Notice given by mail shall be adequate as of the mailing date. Information provided by any other means shall be effective upon delivery.
- Entire Agreement
This physician partnership agreement contains the entire Agreement between the parties relating to the subject matter addressed herein. Any prior or contemporaneous physician partnership agreement, promise, or representation, whether oral or written, relating to the subject matter of this physician partnership agreement and not expressly set forth or referenced in this Agreement or a proper amendment hereto shall be of no force or effect.
- Amendment of a physician partnership agreement
This physician partnership agreement may be amended only by the parties’ mutual written consent, and no oral modification or amendment shall be permitted.
- Assignment of a physician partnership agreement
This physician partnership agreement and physician’s rights and obligations hereunder may not be assigned or transferred by a physician. The group may assign this physician partnership agreement, and its rights and obligations hereunder, to any person that controls, is controlled by, or is under common control with the group, or which is merged with or into the group, or that purchases all or substantially all of the assets of the group.
- Blinding effect under the physician partnership agreement
This physician partnership agreement shall be binding upon and inure to the benefit of the respective parties, their successors, and permitted assigns.
- Waiver
Any of the terms or conditions of this physician partnership agreement may be waived in writing at any time by any party hereto entitled to the benefit thereof. Waiver of a breach of any provision of this physician partnership agreement shall not be deemed a waiver of any other breach of the same or a different provision.
- Remedies under the physician partnership agreement
Nothing in this physician partnership agreement shall be construed to limit the lawful remedies available to either party in case of breach of any Agreement provision. The provisions of this physician partnership agreement and the performance of each party hereunder may be enforced by any right or remedy available at law or in equity.
Suppose any provision of this physician partnership agreement is rendered invalid or unenforceable. In that case, such provision shall be severed from this Agreement. The remaining provisions of this physician partnership agreement shall continue in full force and effect, provided, however, that if the impact of the severance of such unenforceable provision is to substantially deprive the group of the benefit of the services of a physician or the revenues derived therefrom or to deprive significantly physician of the use of compensation for services rendered, this physician partnership agreement may be terminated by the party so denied immediately upon written notice to the other party.
- Headings or captions
The headings or captions provided throughout this physician partnership agreement are for reference purposes only, shall not be considered in construing the terms and conditions of this Agreement, and shall not affect the meaning or interpretation of this partnership agreement.
- Governing law
This physician partnership agreement shall be governed by and construed following the law of the State of Tennessee.
- Counterparts
This physician partnership agreement may be executed in any number of counterparts, each of which shall be deemed original.
- Buy-in
- Third year
In the event Physician remains employed by the group as of the first (1st) day of the thirty-seventh (37th) month following the Employment Date stated in Section
11(b) of this physician partnership agreement, they shall have the opportunity to purchase shares (or other equity interest then pertaining) in the group. The number of shares held by each stockholder, and the number of shares available for purchase by the physician, shall be determined on an objective basis, commensurate with the number of years of continuous employment of the physician and the productivity of the physician in terms of average annual net receipts generated. The purchase price shall be determined by dividing the fair market value of the assets of the group (not including goodwill) by the number of shares that will be outstanding following the issuance of physician’s shares and multiplying the quotient by the number of shares issued to a physician.
- Earlier sale of the practice
In the event of any physician partnership agreement to sell or transfer all or substantially all of the assets or stock of the group at any time following the end of the twelfth (12th) month and before the beginning of the thirty-seventh (37th) month of physician’s employment under this physician partnership agreement, the buy-in described in subsection (a) of this Section shall be accelerated and concluded as a condition precedent to such sale or transfer.
References
https://www.medicaleconomics.com
https://assets-global.website-files.com
https://www.physiciaspractice.com
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