Two recent cases highlight the need for hospitals that employ physicians to consider the collateral consequences of exercising termination rights under employment agreements. In each case, the employer-hospital exercised its contractual right to terminate the employment agreement of a physician. In both cases, the terminated physician sued the employer-hospital for damages arising from the actions by the hospital.
In one case, the physician won; the court found that the physician was entitled to compensation during the notice period prior to the effective date of termination. In the other case, the physician lost; the court found that the hospital had not breached the employment agreement with the physician when it terminated his employment as provided in the agreement. In addition, the court found that the hospital had not breached the physician's constitutional rights since he did not lose clinical privileges at the hospital that was his former employer as a result of the termination of employment.
In the first case, Swapan Chadhuri, M.D. sued Fannin Regional Hospital, Inc. and sought payment for services rendered, including services he would have provided the hospital had the hospital scheduled him to provide on-call services during the sixty day notice period that was required under the physician's employment agreement. The physician's employment agreement allowed for termination without cause on sixty (60) days notice to the employed physician. In accordance with the notice requirement in the employment agreement, in a letter dated September 27, 2007, the hospital terminated Dr. Chadhuri's employment effective November 26, 2007. During this notice period, the hospital refused to schedule the physician for on-call services resulting in the lawsuit by the physician for breach of contract.
In reversing the decision of the trial court, the Georgia Court of Appeals found that Dr. Chadhuri had not breached his employment agreement by working at another hospital while he was on call for Fannin Regional Hospital, his employer. As a result, he had not repudiated his obligations or failed to perform services called for under his employment agreement, which included provision of on-call services as needed by the hospital. As a result, his employer should have scheduled Dr. Chadhuri for on-call time during October and November, 2007. During this sixty day time period, his employment agreement remained in effect and the hospital had a need for oncall services, which it satisfied from another physician. The Court of Appeals found that the hospital should have compensated its former employee for the on-call time it normally would have scheduled during the sixty (60) day notice period.
The second case relates to an action brought by James Tate, M.D., a trauma surgeon, against University Medical Center of Southern Nevada, his former employer, seeking damages for violation of due process rights and for breach of contract by reason of the hospital's termination of the surgeon's on-call duties. In an unpublished opinion, the Ninth Circuit Court of Appeals upheld a Federal District Court decision that dismissed the surgeon's claims. The appellate court concluded that the physician did not have a right to continued employment with the hospital and termination of his on-call duties did not constitute a suspension of his clinical privileges.
These cases illustrate that as an employer-hospital negotiates physician employment agreements, it should carefully consider all aspects of contractual termination rights. Once it decides to exercise its termination rights, the hospital should adhere to the contractual provisions in the agreements for exercise of such termination clauses. More specifically, care should be taken in drafting the physician employment agreement not only to specify the mechanics and timing of any termination notice provisions, but also to address the obligations and rights of the parties to the employment agreement during the notice period if a termination notice is to be given by the employer-hospital. In other words, the physician employment agreement should clearly state what can be done and what is required from both the employer-hospital and the employed physician during the time period after a contractual termination notice is exercised by the employer-hospital, but before the agreement terminates. Based on the Tate case, perhaps the employment agreement should also specify what impact (if any) the termination of the employment agreement will have on an employed physician's clinical privileges at the hospital.
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