7 legal issues to consider before an independent contractor departs

February 25, 2013

Whether you use an independent contractor in your practice or work as an independent contractor, be sure to consider several points when formalizing the arrangement.

Practice arrangements are changing, and it is becoming increasingly important to know how to handle independent contractor agreements. If you own or work in a practice that contracts with an independent contractor or you are an independent contractor, when it is time to terminate the arrangement, you must know who is responsible for informing patients so that continuity of care occurs and proper time exists to transfer patients to other doctors.

Because physician practice transitions can be contentious, plan ahead and delineate the specific course of action in advance of a doctor’s possible departure. Consider obtaining legal assistance beforehand. Regardless, think about these points:

Liability. An overarching legal matter is the potential liability that a practice has to both patients and the independent contractor. Keep in mind patients can sue the practice for abandonment. (If a patient does not have time to find another doctor and his or her condition deteriorates, the patient can claim abandonment, meaning that the doctor-patient relationship was terminated before treatment was completed.) The independent contractor could sue the practice for things such as breach of a written, verbal, or alleged independent contractor agreement; damage to his or her reputation; and the use of restrictive covenants.

Contract and contract terms. Before agreeing to any arrangement of employment or independent contracting, it’s wise for both parties to have a written contract. Typical language: “This agreement may be terminated: A) Without cause by 30 (or 60 to 90) days’ prior notice; or B) With cause, immediately upon breach of any term of this agreement by either of the parties.” Only point B would be used for an independent contractor.

Look at the contract and follow its terms, especially the terms about termination, to the letter. Finances, reputation, and liability are at stake.

If a written contract does not exist, then follow the verbal contract. Try to remember what both parties said about termination.

If no written or verbal agreement exists, then the best thing to do is to sit down and try to amicably and professionally work out an exit strategy. A smooth transition is to everyone’s benefit, and a longer period of time for transition will allow better organization.

Termination language. Usually, both the written and the verbal contract have fixed terms.

Employment contracts can be terminated “at will” or “for cause,” the former meaning that the contract can be ended at any time by either party. Independent contractor arrangements, however, should not be at will.

The contract’s “for cause” clause could include conditions such as unethical or disrespectful behavior, a crime, loss of license, third-party payer sanctions, or verbal or physical attacks of patients. Also include a provision under which the terminating party must allow a certain period of time for the agreement to be legally ended so that the parties can make other arrangements.

If the independent contractor’s behavior is deemed belligerent or hostile, the practice should be very diplomatic and try to make some ground rules until any notice period has ended.

Transition of work. Determine in advance how the work will be transitioned once the contractor’s upcoming departure is known. Discuss tail coverage, because if a patient lawsuit occurs later, both the practice and the departed doctor will be named, and both will need to be fully covered. If the independent contractor refuses to cooperate, the practice will have to pay tail coverage.

As a courtesy if you practice in a group, consider asking the existing doctors whether they would like more clients and more billable hours. The practice should try to obtain their wishes in writing to be able to proceed with a firm plan. If the other physicians are not interested in additional hours, it will take time to find another doctor, especially factoring in the potential need for staff privileges and third-party payer participation.

“Ownership” of patients. A relevant question is, who “owns” the patients, the practice or the independent contractor? The most determinant issue here is whether the independent doctor brought the patient base with him or her or the clinic assigned the patients. If the physician brought the patients to the practice, then the patients probably belong to the doctor. It would be good policy and good risk management for the independent contractor to write a letter or to participate in the letter via which the medical practice informs patients of the contractor’s upcoming departure.

Patient notification. Speaking of informing patients, agree in advance on how and by whom the written notice to patients will be sent-by the practice or by the contractor using a patient list provided by the practice. Another option is a joint letter.

In most cases, you’ll want to be able to give patients at least 30 days’ notice to enable the independent contractor to look for a position elsewhere, to permit the practice to find a replacement to treat those patients who stay, and to avoid claims of abandonment from patients. Send the termination letter to patients in time for them to arrange for treatment with providers in the appropriate specialties.

Either the practice or on the departing physician may be responsible for providing notice to patients. The independent contractor may wish to inform patients, especially if he or she will continue to practice in the area. (Remember any restrictive-covenant clauses.)

Even if the departing doctor sends a letter, the practice will want to send correspondence, too, offering treatment in the spirit of assuring continuity of care. The letter should clearly state that continuity of care to patients is the practice’s highest priority and that the practice will continue to provide uninterrupted treatment if that is what a patient wishes.

When the practice sends out a letter, it also has the opportunity to convey that it has other talented doctors in the practice whom the patient can see. The letter should inform patients that the practice will try to accommodate patients’ choices of another doctor in the practice and can include information about a new doctor.

Custody of medical records affords a certain amount of control on the disposition of patients. The American Medical Association has addressed the patient’s right to continuity of care in the practice scenario: a physician’s patients should be notified when the physician leaves a group practice, the notice should include the physician’s new address, and patients should be offered the chance to have their medical records transferred to a new practice location.

Attach a Health Information Portability and Accountability Act-compliant form to each letter so that patients can indicate where they would like their medical records to be located.

If the independent contractor commits an egregious act, then the practice may need to dissolve the relationship and escort the doctor out of the building immediately. The practice must call all patients with upcoming appointments and notify them of their options.

Documentation. The practice will need much documentation to protect itself. The practice will want to open a file with the current date and the departing doctor’s name, explaining why the file has been started and why it was started on a particular day. The file should be dated with the current date; pre-dating it would constitute fraud.

Documents in the file should aim to reconstruct the history of the practice/independent contractor relationship as best as possible, including descriptions of all relevant conversations with the independent contractor, all pertinent observations of patient treatment, and copies of all germane documents. After the file has been created, the practice will want to enter any applicable notes or documentation using the current date, and entries should be signed. Entries should be very factual and exact, refraining from placing blame or making irrelevant comments or negative statements. Following this course of action should help insulate the practice from potential future liability.

The independent contractor may wish to undertake similar actions to protect himself or herself.

 

The author is a health law attorney in Mount Kisco, New York, and a Medical Economics editorial consultant. Do you have a health law question you would like to have our experts answer in this column? Send it to medec@advanstar.com.Also engage at: www.twitter.com/MedEconomics and www.facebook.com/MedicalEconomics.