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Medical practices must plan for doctor departures

With physician turnover expected to increase even further, it’s important for groups to have contingencies in place if someone leaves.

By Karen Caffarini covered practice management issues during 2008-09 and writes for us occasionally on the topic. Posted July 8, 2013.

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If a doctor in your practice leaves, does your practice have a plan for what to do?

Practice experts say you need a contingency plan to ensure a seamless transition should a doctor retire or leave unexpectedly and with little notice. Without a plan, practices run the risk of overtaxing their remaining physicians, disrupting patient flow, losing profits and possibly watching patients go elsewhere.

Experts say a good plan should include who will take over the doctor’s patients in the short and long term, how much notice the departing doctor will need to give, how to handle the doctor’s payout and outstanding accounts receivables, what to do about legal issues such as noncompete clauses and how to recruit people to keep the practice fully staffed.

They say the plan should be in place when a physician comes on board or is made a partner or shareholder in the practice.

“Don’t wait until you need a contingency plan to make one,” said Judy Bee, a practice management consultant in La Jolla, Calif. “Do it when no one knows who the contingency will apply to, when all physicians are equally at stake.”

According to the latest Physician Retention Survey by the American Medical Group Assn. and Cejka Search, the physician departure rate in 2012 was 6.8%, the highest in the eight years it has been conducting the survey. AMGA represents larger group practices. MGMA-ACMPE, which represents smaller practices than AMGA, has said the turnover rate for its members is about the same, although it doesn’t conduct a similar survey.

Some experts believe the rate will increase further as the economy improves, older physicians who put off retirement during the recession decide to step down, and a shortage of physicians leaves more job openings. Bee said more than half the doctors who come out of their initial training won’t be in the same practice two years later.

It’s a challenging time for group practices, said Manuel Lowenhaupt, MD, a primary care physician who ran a multispecialty group in Boston and now heads the consulting firm Accenture Clinical Services. “The challenge is the employer model gives physicians the flexibility to change employers,” he said.

It’s even more challenging for those in hospitalist practices, where the turnover rate is higher and the need for a full staff of physicians is great, said Abhay Padgaonkar, a practice consultant in Phoenix who previously placed hospitalists.

“Hospitalists work 24/7, 365 days a year,” he said. “You can’t control the incoming workload.”

How to create a contingency plan

Contingencies should include transition arrangements, said Eric Dickerson, a physician recruiter in Dallas.

This includes knowing who would handle the doctor’s clinical and call duties, if there are enough physicians on board to maintain the quality of life-practice balance the physicians want, and determining if the practice wants to hire another physician or a midlevel practitioner, he said.

Dickerson said the plan should be patient-centered. Long wait times and confusion about who a patient’s doctor is could cause patients to switch doctors — and practices.

Donna Knapp, a Reno, Nev.-based independent consultant with MGMA Healthcare Consulting Group, said finding a full-time physician to fill an open slot can take months. In the interim, the void can be filled by having other doctors take on extra work, rescheduling vacations or having an emergency doctor do call. Hiring a midlevel practitioner is another short-term option. But she said you can’t ask other doctors to take on so much extra work that it infringes on their family time.

Hiring a locum tenens is not always an option, because they can be expensive and may take a long time to get on board.

Experts agree that one of the most effective and enforceable ways to ensure a smooth transition is to require physicians to give a reasonable notice of departure. Dickerson said 90 to 100 days is the average notice required of physicians. If the departing physician is also a partner, Bee said she encourages practices to include a clause in the buy-sell agreement stating that for every month short of a 12-month notice of departure, the physician loses one-twelfth of the buyout.

“The money saved can be used to hire a locum tenens or nurse practitioner to fill the void on a temporary basis until another physician can be hired,” Bee said.

Padgaonkar said it’s important to have a recruitment plan at all times, even if you’re fully staffed. “That way you’re not starting from scratch when you need someone.”

Contact a lawyer to determine your state’s rules on noncompete clauses, the departing doctor’s financial obligations for any equipment or leases, and the practice’s obligations to the doctor, such as buying back a partner’s interest in the practice.

Dickerson said buybacks are usually paid off within one to five years, depending on whether there are outstanding accounts receivables. If a departing physician is also a partner who’s leaving to join another practice nearby, there is no need to pay them goodwill, Bee said, “because they took their goodwill with them.”

Dr. Lowenhaupt said patient information belongs to the group, not an individual doctor. Knapp said whether a physician gets access to a patient’s records when leaving is negotiable.

Knapp said liability tail coverage also needs to be included in the plan. “Who pays for the tail coverage? Is the practice covered for a physician’s acts prior to their leaving? Can the group keep money from the physician’s final salary if he or she has liabilities? It can be very expensive.”

Experts say many practices tend to have noncompete clauses in contingency plans in an effort to keep a departing physician from taking patients with them. These clauses are neither legal nor enforceable in some states, like California, and could face stiff legal challenges in other states. They also could prove to be a double-edged sword, hurting efforts to recruit new physicians.

“Every state has a different interpretation of noncompete clauses,” Dr. Lowenhaupt said. “In some states, you need to pass a reasonableness test. You need to prove the public’s need won’t be restricted by your noncompete clause. Most courts rule against the practice.”

Karen Caffarini covered practice management issues during 2008-09 and writes for us occasionally on the topic.

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