“These are my patients – how can you stop me from seeing them?” This is a familiar refrain heard when medical practices break up or physicians leave an ongoing practice. Almost everyone knows that nobody “owns” patients and that patients have absolute freedom of choice as to what doctors they choose to see (excluding health plan participation issues). However, the fact that patients may be free to see the physician of their choice does not necessarily mean that physician will be just as free to see them. This issue is not about patient ownership; it is an issue about restrictive covenants, ownership of medical records, privacy and confidentiality, and ownership of confidential intellectual property or trade secrets.

Restrictive Covenants. The familiar “urban myth” is that restrictive covenants are not enforceable. This misunderstanding is derived from statements in many judicial opinions about the distaste courts have for restrictive covenants. However, in reality, although the law varies from state to state, the general rule in Pennsylvania is that restrictive covenants are enforceable provided they meet a number of conditions:
1.Restrictive covenants are contracts, and contracts must be supported by consideration, i.e., the party enforcing the restrictive covenant (whom we will refer to as the medical practice) must have actually paid valuable consideration, usually money but not necessarily, to create that contract. By way of example, a practice cannot tell an existing physician he must sign a restrictive covenant or be terminated. The restrictive covenant must either be part of the initial employment contract for which the physician is being paid or there must be additional consideration.

2.The restrictive covenant must be reasonable in scope as to both time and geographic area. It cannot be indefinite, but can only be long enough to adequately protect the interest of the medical practice. If a medical practice can reasonably be expected to re-establish its relationship with patients previously being seen by the departing physician over a one or two period, then that is as long as the restrictive covenant should be valid. With respect to geographic area, if all or substantially all of the practice’s patients are within an area of five miles or so of the medical practice offices and a physician with a practice some fifteen or twenty miles away would not be expected to interfere with those patient relationships, then the restrictive covenant probably cannot be a fifteen or twenty mile restrictive covenant. The geographic area obviously varies significantly in urban and rural settings.

3.The medical practice must have a protectable interest. If the medical practice is not going to continue to practice in either a particular specialty or a particular area, then it is doubtful that a court will enforce a restrictive covenant applicable to that specialty or area.

4.The enforcement of the restrictive covenant must not present a risk to the community in general. For example, if the community was underserved in a particular medical specialty and the physician contesting the restrictive covenant could prove that there were patients who would not be treated if the covenant was enforced, and it was therefore also unlikely that the medical practice would suffer any damages, then a court might not enforce that restrictive covenant.

5.Since the restrictive covenant is part of a contract, the medical practice must have substantially performed its responsibilities under the contract. The easiest example is a restrictive covenant for which a medical practice has promised $100,000 in compensation. If the medical practice has not paid the $100,000, then the restrictive covenant is not going to be enforceable. On the other hand, if the breach is immaterial, such as the practice forgetting to reimburse a physician for the cost of some medical journals, then that is probably not going to be a defense to the enforcement of the restrictive covenant.

All cases are different and all cases are decided or based upon the facts and circumstances of those particular cases, but the general rule is that restrictive covenants are enforceable if they meet these conditions.

Ownership of Medical Records. It is important to recognize that there are three parties with a stake in the medical records, i.e., the medical practice entity, the physician and the patients.

The actual medical records, whether they are paper or digital, are owned by the practice. Sometimes this concept is a little bit more difficult to recognize when you are not looking at an actual paper file or folder or x-ray film, but the practice owns the tangible personal property. The actual medical records are really no different than the tables and chairs.

Ownership of the medical records should be covered in the contracts between practices and physicians. Although a provision such as this might be technically unnecessary because the practice owns the records, the additional clarity and mutual understanding is almost always beneficial. Written agreements are even more important if the physician is to own the records because this is contrary to the established rule. The best practice is to have a contract which contains a provision agreeing upon ownership or access, and describing how the medical records will be handled in the event of a dissolution of the practice or the departure of a physician. For example, a typical resolution, when there is no restrictive covenant, is that the practice will send a neutral letter to the patients advising them of the separation of the physicians and requesting that they identify the physician whom they wish to retain their records.

The patients always have a right to access their medical records, unless restricted by some special circumstance, and in many states, such as Pennsylvania, are entitled to copies upon request and payment for the copies. Pennsylvania Code Chapter 49 § 16.61 (a) (18) requires physicians to “make available” the medical record, or a copy thereof, to the patient or another designated healthcare practitioner upon the patient’s written request. The physician may charge a reasonable charge for such records but may not require prior payment of professional fees as a condition of making the records available.

The physicians actually have no independent right of ownership or access to the medical records; their rights are solely derivative of the patient relationship. Patients have a common law expectation of privacy, supported by the regulations, and codified by HIPAA. HIPAA prohibits disclosure of protected health information to anybody except disclosures that are necessary as part of the “treatment, payment and operations” of the medical practice (TPO) or as authorized by law or by the patient. A treating physician leaving the practice might be surprised to learn that, not only do the patients want their medical records to stay at the practice that their family has been using for years, but that the physician’s copying or retention of those medical records could actually be objectionable to the patient and a violation of patient confidentiality and HIPAA. If a physician is not continuing to treat a specific patient, then the physician would have no reason to have access to those medical records. A departing physician may have some subsequent legitimate need for access to the records, such as to explain the medical necessity of a certain procedure or to defend a malpractice case and access in those cases would be granted, but those exceptions would arise under TPO and, in the case of litigation, would probably be proceeded by subpoenas, court orders, patient consent or some other independent right of access. That is why it is of paramount importance for a physician who wishes to retain the medical records to have patient consent. This process could be built into the original patient intake forms, but that would be an unusual case.

Remember that it is somebody’s responsibility under Pennsylvania Code Chapter 49 §16.95 to retain medical records for a period of seven years or until one (1) year after a minor reaches the age of maturity, whichever is longer. Absent any agreement to the contrary, this would be the responsibility of the owner of the medical records, i.e., the practice.

Abandonment. Physicians often say that the severance of a patient relationship could lead to charges of abandonment. This is not typically the case. Abandonment is defined in Pennsylvania Code Chapter 49 §16.61 (a) (17) as the withdrawal of service without sufficient notice for the patient to obtain necessary care. Therefore, cessation of service during an ongoing treatment is always a critical issue. The appropriateness of the notice is usually a function of the patient’s medical condition and need for timely treatment. Although the regulation specifically includes a physician’s departure from a practice, abandonment is not usually an issue when there are other physicians in a practice who remain ready, willing and able to treat the patients, even if those patients have not expressed any desire or willingness to be treated by those physicians.

Trade Secrets: Ownership of a Patient List. Another medical record issue is the “patient list,” regardless of whether the practice actually maintains a list or can simply generate one via the practice information software system. Ownership of the patient list would be easy to resolve if there is only one tangible patient list, and only one person could own that. However, since patient lists can be generated by photocopying, access to electronic medical records, computers, etc., the issue isn’t the ownership of the list itself, but the ownership of the intangible information. The owner of the patient list is the same entity or person that owns the medical records, unless if there is some agreement to the contrary. Patient lists could even be treated as uniform trade secrets under the Uniform Trade Secret Act and a physician covertly copying or generating an additional patient list could not only be violating the patient’s expectation of confidentiality but it could also be violating Pennsylvania law. Pennsylvania adopted the Uniform Trade Secret Act in February of 2004, which specifically includes “customer lists” within the definition of trade secrets. Individuals who misappropriate trade secrets could be liable for actual civil damages, exemplary damages equal to twice the actual damages for willful or malicious conduct, attorneys’ fees and perhaps criminal prosecution.

Conclusion. As with most business situations, a written agreement is advisable. A “writing” does not make a written agreement more enforceable than an oral agreement, but it does make it much easier to prove the terms of the agreement. Furthermore, with many aspects of these issues already defined by law, such as the ownership of the medical records and patient lists, a written agreement of some kind will be almost essential to satisfactorily prove a contrary intent.