When Physicians Want Out: Legal Options After a PE Acquisition
After a practice is purchased by private equity, everything can feel different. You may be dealing with new productivity demands or other hurdles you never before faced. It could even impact the way you are compensated. In New York, Corporate Practice of Medicine (CPOM) rules are designed to protect patients and physicians from many of the problematic practices seen elsewhere. Even so, the structure may no longer align with your goals, and you may be considering your options for moving forward.
The medical transaction attorneys at Daniels, Porco & Lusardi, LLP can help you weigh your legal options for getting out after a private equity acquisition. Let us help you navigate this complex process and move forward with your career.
Reviewing the Employment Agreement: The First and Most Important Step
After a PE acquisition, most physicians become employees of the professional entity (P.C. or PLLC) that remains physician-owned under New York’s CPOM rules. The employment agreement governs nearly every aspect of the physician’s rights and obligations, including:
- Term length and renewal provisions
- Termination rights (with or without cause)
- Notice requirements
- Compensation formulas
- Call obligations and productivity expectations
- Restrictive covenants, including non-competes and non-solicitation clauses
Physicians often sign these agreements quickly during the acquisition process, assuming the terms are standard. But when a physician wants to leave, the employment agreement becomes the roadmap. Many agreements allow termination without cause with 60–180 days’ notice. Others lock physicians in for multi-year terms unless they can prove “cause,” which is narrowly defined.
Evaluating Restrictive Covenants Under New York Law
New York does not ban non-compete agreements for physicians, but courts scrutinize them closely. A restrictive covenant must be:
- Reasonable in geographic scope
- Reasonable in duration
- Necessary to protect legitimate business interests
- Not harmful to the public
In healthcare, courts are particularly sensitive to patient access issues. If the non-compete agreement would keep the local community from having good medical coverage, it will likely be struck down. There may be other pathways to strike down that non-compete, so speaking with an attorney is a must.
Using “Constructive Termination” Arguments When Conditions Change
Many doctors will feel trapped, because the employment agreement won’t allow for early termination. However, New York recognizes the constructive termination. This means that the employer has made work so intolerable or so different from what was promised that the doctor has to resign.
Many physicians feel trapped because their employment agreement does not allow early termination without cause. But New York law recognizes the concept of constructive termination—when an employer makes working conditions so intolerable or materially different from what was promised that the employee is effectively forced to resign.
Examples may include:
- Dramatic increases in patient volume or productivity quotas
- Compensation restructuring that significantly reduces earnings
- Loss of clinical autonomy due to MSO or PE interference
- Unilateral changes to call schedules or work locations
- Ethical conflicts created by new operational policies
Challenging Unlawful Interference Under New York’s CPOM Rules
The CPOM rules in New York prohibit non-physicians from controlling clinical decision making. This includes private equity firms or MSOs. It is against New York law for a private equity firm or MSO to have unlawful influence over:
- Clinical protocols
- Staffing decisions
- Patient scheduling that affects clinical judgment
- Medical record access
- Quality-of-care decisions
CPOM violations can also trigger regulatory scrutiny, giving physicians additional leverage in negotiations.
Negotiating a Buyout or Mutual Separation
In many cases, the cleanest solution is a negotiated exit. PE-backed groups often prefer to avoid litigation, regulatory complaints, or public disputes. Physicians may be able to negotiate:
- Release from restrictive covenants
- A shortened notice period
- A buyout of remaining contract obligations
- A transition plan that protects patient continuity
Find the Way Out After a PE Acquisition
When you’re ready to get out, you have options. Act early to know what your options are and the best way to pursue them. A private equity acquisition doesn’t have to impact you long-term if it isn’t the right fit.
The attorneys at Daniels, Porco & Lusardi, LLP are ready to help. Contact us today for a consultation.