Are hospitals crazy?

I suspect many physicians would answer “yes” to that question without much contemplation. I have always assumed that, although hospitals are profit-driven and therefore likely to have very different priorities than physicians who care about patients, the institutions can be relied upon to have some semblance of reasonableness.

Lately, however, I have been forced to reconsider my position. For decades, I have represented physicians in their various interactions with hospitals. From time to time, I have represented physicians who signed their contract without adequate legal review and now want to leave the institution. Many times, the contract that was presented by the institution (and accepted by the physician without adequate legal representation) did not have a “without cause” termination provision.

The lack of that provision has rarely been an issue. For over 40 years, I have assured physicians that “nobody wants to employ a physician who doesn’t want to be there.” This is simple common sense. Although physicians are obviously consummate professionals, I have always taken it as a given that no employer would want an employee (professional or not) who does not want to work for that employer.

That assumption has been proven wrong in the last few instances where I have represented a physician who wanted to leave and did not have a “without cause” provision in their contract.

In one instance, the physician was brought into the CEO’s office and assured that the physician was greatly respected and obviously had to look out for the needs of the physician’s family. The physician was told that legal counsel would draft a proposal to allow an early termination, even though the employment agreement was silent on that point. The proposal was duly presented, suggesting that the physician pay nearly $400,000 for the privilege of departing early.

I do not dispute the fact that a hospital is entitled to damages if a physician leaves early. If you come in on Friday and announce that you are not going to be in the office on Monday, chaos will ensue. The hospital will likely have to reschedule patients and potentially hire a locum tenens physician to take your place. Although locum tenens physicians are not paid especially well, the agencies that supply these physicians earn a pretty penny—so damages can be substantial.

However, this particular physician intended to leave in slightly more than six months. It is preposterous to assume that the hospital could not replace the physician in that much time. The hospital calculated its “damages” as the cost a locum tenens agency quoted it to supply a full-time physician for six months. No doubt as an oversight, the hospital failed to reduce the expense of the locum tenens agency by the money saved by not paying the physician’s salary and benefits during that period. You may be surprised to learn that we did not instantly jump to accept that proposal.

As insane as that proposal was, I chalked it up to just another instance of greed from your friendly neighborhood “nonprofit.” And then I began representing a physician from another institution who also wanted to leave early.

This physician also had an agreement without a “without cause” provision. This physician wanted to leave in about three months but was persuaded by me to stretch that to five months to make any claim of damages more of a remote possibility. The physician spoke to the department chair, who was disappointed to lose a good physician but understood that greener pastures were beckoning.

I drafted a letter informing the institution of the physician’s resignation and sent it to the hospital’s legal counsel. And then the real craziness began.

I received a response from legal counsel that we would need to resolve the payment of a signing bonus that was contingent upon a certain amount of time served. The contract was clear on that point, so the requested repayment did not constitute a surprise. The physician and I were pleased that the institution was going to be reasonable.

However, later that same day, I received an email from legal counsel stating that the initial email was in error and that the resignation constituted a breach of the agreement (technically true). Normally, these demands then go on to provide terms for an amicable separation. However, this particular email simply stated that my client was in breach.

The lack of a demand was puzzling, but clarity was soon provided. A few days later, I received a FedEx package from the hospital containing copies of two letters. The first letter came from the CFO addressed to my client and reiterated that leaving was a breach of the agreement.

The second letter was a copy of a letter to the chief legal counsel of the institution my client intended to join. That letter informed the prospective employer that my client had a contract with the current employer and threatened a lawsuit against the new institution for tortious interference with contractual relations.

In my decades of representing physicians, I have never seen a hospital assert a claim of tortious interference with contractual relations other than in a non-competition agreement context, where a physician is attempting to find new employment in an area prohibited by the prior employment agreement. The legal counsel at the prospective new employer was unfazed by the letter, but my client will most likely decide to stay at this not-so-beloved institution for almost another year, until the contract expires by its terms.

What can be learned from these interactions? Apparently, the physician shortage is so bad that hospitals are willing to do whatever it takes to retain a physician—even a physician who does not want to be there. As a physician’s attorney who makes a living reviewing physician employment agreements, I am somewhat heartened by this confirmation of how valuable my clients are to the institutions that want to hire them.

I think the second lesson to be learned is that physicians should not sign employment agreements without competent legal counsel reviewing them. There are many reasons why you may want to leave an employer before your contract has expired. It is important that your contract allows you to do that.

Dennis Hursh is a veteran attorney with over 40 years of experience in health law. He is founder, Physician Agreements Health Law, which offers a fixed fee review of physician employment agreements to protect physicians in one of the biggest transactions of their careers. He can also be reached on Facebook and LinkedIn.