Starting a new job – especially your FIRST job – can be a very exciting time for any doctor. It is not most people’s first reaction to think about how they will leave that job, but this is exactly the time you should start making those plans. Here’s what you need to know about considering and creating an exit strategy.

Why do I need an exit strategy?

When you are negotiating the terms of your contract with your potential new employer, think through what it will look like when you leave. Just like with starting a new job, leaving a job can be a stressful time when emotions are high – maybe you’re excited about the next opportunity, maybe you’re upset this position didn’t work out as you had hoped, maybe a change in your personal life is necessitating a move.

In any of those circumstances, you want to have a clear plan as to how to move forward with an understanding of any ongoing responsibilities. Here are some tips for creating an exit strategy as a physician, dentist, or veterinarian.

Know your options for termination

First, make sure your contract is clear about your options for termination. According to your contract, when can you terminate the agreement?

Most frequently, when either party terminates, they utilize a provision for a termination without cause. This means that no one has necessarily done anything wrong; one party is just choosing to end the agreement.

For you, this may mean that you’ve been offered a better opportunity at another hospital or practice, you want to move to another location, some aspect of your personal life has changed (such as getting married), or any other in a long list of reasons.

The other option for termination is a termination for cause, which means your employer has done something wrong or not fulfilled their obligations in some way. An example of a termination for cause could be not providing office space for the physician to perform the work (if it was specified to be included in the contract) or the practice losing certification with Medicare or Medicaid. If you feel that a termination for cause is warranted, consider talking to an attorney who can help determine the best way to move forward.

Watch for minimum time requirements

With increasing frequency, contracts for doctors are including a minimum time requirement. These types of clauses require that you stay for some period of time – typically 1-3 years – with no option to terminate without cause.

As it’s difficult to predict the future, be cautious about these types of commitments. Two years may not seem like a long time, but it can be an eternity when you are in a job that you don’t like.

Some contracts also charge financial penalties if a doctor terminates within a certain window. Recruiting, hiring, and onboarding a doctor is an expensive process. Some employers want to recoup that money if doctors leave within the first few months.

Before signing your contract, make sure you know if you will be required to reimburse for licensing, credentialing, and recruiting when you leave. These types of penalties are usually only applicable for a short period of time (potentially up to a year or two) after you start. These penalties or repayments may not keep you at a job longer than you want to be there, but you should certainly be aware of the financial implications of termination.

Take note of your notice period

Most contracts allow for a termination without cause but require a certain notice period before the contract ends. The most common notice period is 90 days, though a general range of 60-120 days is reasonable.

Again, be cautious when you are required to provide more than 3- or 4-months notice. This means that you would let your employer know that you’re leaving and then work for another three months. At times, employers have the option to “accelerate,” meaning they can choose to end your contract at any time within the 90-day window. If your contract has an acceleration clause, make sure the employer is required to provide compensation and benefits throughout the 90-day window.

Consider any incentives

If you received any type of incentive payments – signing/starting bonus, relocation reimbursement, training stipend, etc. – you may be expected to repay all or a portion of those amounts if you terminate the contract.

If you are receiving any recruitment incentives, pay attention to the terms around repayment. There is typically an obligation of time; you will need to stay for a certain number of months or years in order to avoid repayment. Typically, the amount of time increases as the amount of money increases.

If you’re receiving a $10,000 relocation reimbursement, it is reasonable to expect a one-year commitment. However, if you’re given a $100,000 signing bonus, you may be required to repay the entire amount if you don’t stay at the job for 3-5 years.

Review your tail coverage

Another potential cost when leaving a job is that of tail coverage. Tail coverage is malpractice insurance that will cover the work you did for the employer after you leave and through the statute of limitations within your state.

Some employers will pay for the cost of tail coverage when you leave, but this will usually need to be stipulated in your contract when it’s signed. If your employer will not pay for tail coverage, then you will be responsible.

You can also ask your new employer to cover the cost, either by paying it outright or offering a bonus which will cover the amount. This is not typically part of an initial offer but can be negotiated into the agreement.

Depending on your specialty, location, and history, tail coverage can be very expensive. Negotiate this portion of your contract with the end in mind.

Consider non-compete clauses

You also want to consider any post-termination restrictions that your contract may put in place. While the Federal Trade Commission has issued a rule that would ban most non-competes, a federal judge in Texas granted an injunction in early July 2024 to halt enforcement of the new rule. The injunction is temporary, and a final decision is anticipated by the end of August 2024.

In the meantime, the enforcement of non-competes is decided at the state level. Several states don’t allow them at all, while other states limit their enforcement in some circumstances. It is important to know whether the state where you’re practicing allows non-competes.

Even if you don’t have a non-compete, your contract may contain a non-solicitation, which would prohibit you from contacting patients to follow you to your new practice.

Creating your exit strategy

Whether you are about to sign a new contract or considering leaving your current position, it is important that you have an exit strategy and understand the implications your contract could have on when and how you part ways with your employer. Knowing when you can leave, when you should give notice, if you will have to repay incentives, and other factors will help you feel confident as you leave.

Our partner, Panacea Legal, provides contract review and exit strategy services for doctors. These experienced attorneys can help you navigate preparing for a new role or leaving your current one. Learn how a contract attorney can support your career here.

Not ready to commit? Schedule a 15-minute consultation with the Panacea Legal team to see how contract review could help you »

Find articles and webinars that address many frequently asked questions or financial topics that doctors should know in our Resource Library. Click here to browse the entire library or check out one of these articles to get started:

• Compensation Differences Between Primary Care & Specialty Physicians
• Considering A Job Change? Here’s What Doctors Should Know
• Corporate vs. Private Practice: Three Differences in Dentist Salary and Benefits

The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information.