Deselection of physicians from managed care plans and provider alliances is a significant problem. When a physician member of a medical group is deselected from one or more plans or alliances, he or she can no longer work with patients covered by these contracts unless they pay full fees personally. If the physicians' compensation formula does not allocate income according to individual productivity, the deselected physician's partners will become dissatisfied with the arrangement. Worse, the deselection may prevent the physician from seeing enough of the remaining practice patients to justify a full-time work load and income entitlement. What should the group do?
Modification of the compensation arrangement is one solution. This often leads to bickering, but it must be done. The larger issue, however, is to deal with the long-term implications of the deselection. Is the physician a troublemaker who resists conforming to the managed care plan's protocols? Is this an isolated incident or part of a pattern?
In many cases, deselection may be grounds for a medical group's termination of a physician. Most employment contracts allow the group to terminate a physician's employment if he or she loses staff privileges or medical licensure. But deselection is not a license loss or privileges loss. It is therefore crucial that the co-owners' employment arrangement make clear when a group may terminate a physician who loses his or her ability to continue seeing the practice's patients. Each group must decide for itself when this termination right shall apply. You will probably want to build some discretion into the contract so that deselection doesn't automatically result in termination. But be careful with too much discretion, as it can open the door for the terminated physician to argue bias or bad faith in the termination decision.
I have negotiated many contracts where a hospital, independent practice association, physician-hospital organization or health plan sought the right to terminate a medical practice if any of its members lost his or her license, was convicted of certain crimes, got in trouble with Medicare or violated a noncompete contract. Usually I can negotiate a modification to this provision so that the group can avoid termination if it promptly gets rid of the offending physician. (Sometimes it is enough to make sure the offender has no more involvement with the contract.)
But many groups can't get rid of a problem physician easily. For this reason I recommend the "global termination" clause. Built into the employment contract or corresponding documents, this clause should provide that the physician employee must abide by the terms of all contracts or other arrangements entered into by the medical group, and that willful or reckless failure to do so will give the group the right to terminate the physician.