QUESTION

How should a hospital protect itself in a physician recruitment agreement?

SHORT ANSWER
Using promissory notes to evidence loans, with appropriate security and default provisions, helps protect the hospital.
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A hospital’s primary exposure arises if the physician and/or practice group fails to repay the loan. It is critically important that a hospital make its loan subject to the terms and conditions of a secured promissory note. The note will typically provide that in the event of a default, the hospital may accelerate all or any part of the indebtedness evidenced by the note, which will become immediately due and payable. A secured promissory note should also include a provision providing the hospital with the right to collect all expenses, including reasonable attorney’s fees, incurred in connection with enforcing its rights under the note. Further, a hospital would be wise to consider incorporating appropriate restrictive covenants into the recruitment agreement, including non-solicitation, non-disclosure, and if appropriate, a non-compete provision.

ASG Law can advise you with respect to physician-facility or physician-practice group agreements.