With merger and acquisition activity on the rise among physician practices and hospitals, the big question the medical groups, hospitals, and physicians are asking is:  Does a physician leaving a medical group/hospital have the right to inform his or her patients of that fact?

Departing physicians argue that they have an ethical obligation, based upon patient rights, to inform their former patients of their departure so that those patients can decide whether to remain with the medical group/hospital or follow the treating physician.

Medical groups and hospitals argue that their patient lists are a protectable trade secret, similar to the confidential customer lists of a widget manufacturer, and that they have the right not only to withhold the patient lists, but also to enjoin the departing physician from using the patient lists to solicit business from the patients.

Let the Battle of Patient Rights vs. Business Rights Begin!

The physician-patient relationship is unique and is fundamental to healthcare delivery.  Patients and physicians share an unusually close bond grounded in trust and confidentiality.  To serve their healthcare needs, patients reasonably expect continuity of care with the physicians they have come to depend on.

In recognition of the patients’ interests, the AMA’s Council on Ethical and Judicial Affairs has adopted a standard that governs announcements that physicians should send to their patients when they leave a group practice.  In relevant part, AMA Code of Ethics Opinion 7.03 states:

The patients of a physician who leaves a group practice should be notified that the physician is leaving the group. Patients of the physician should also be informed of the physician’s new address and offered the opportunity to have their medical records forwarded to the departing physician at his or her new practice location. It is unethical to withhold such information upon the request of a patient.

Thus, while physicians are encouraged and ethically required to notify their patients that they have left a practice pursuant to AMA Opinion §7.03, courts around the country have not been able to reconcile the foregoing affirmative obligation with the medical group/hospital’s affirmative right to protect its trade secrets.  In the State of California the foregoing business right is codified under California’s Trade Secrets Act, Civil Code Section 3426.1.

The only guidance provided by California Courts on this issue is an unpublished Appellate Court opinion, Bayside Oncology/Hematology Associates v. Warren H. Fong (2001), Cal. App. 4th Case No. G023822.  The Fong court held that a medical practice’s confidential patient list was indeed a trade secret and that a departing physician’s utilization of the patient list that did more than simply announce the physician’s new practice was an improper solicitation in violation of Civil Code Section 3426.1.

The Fong Court took great pains to distinguish Dr. Fong’s improper solicitation from what would have been a proper announcement.  Specifically, the Fong court found that Dr. Fong’s improper solicitation did more than just announce his new practice; indeed, it “expressed gratitude to his patients, an intention to maintain the same level of quality care, and a willingness to honor insurance agreements and to accept Medicare assignment.”  The Fong Court further stated that had the physician utilized the sample California Medical Association announcement, such an announcement would not have been an improper solicitation.  It therefore follows that, had Dr. Fong not been in possession of the patient lists, the Fong court may have compelled Dr. Fong’s former medical group to either (a) disclose the contact information of Dr. Fong’s former patients to Dr. Fong or (b) require Dr. Fong’s former medical group to serve the CMA announcement themselves.

As a result, if you’re a California physician, medical group, or hospital that is currently confronted with similar issues, such as those arising from contacting a departing physician’s former patients, get qualified legal advice immediately.  Physicians, medical groups, and hospitals should take steps to avoid a costly legal battle between a departing physician and his or her former medical group/hospital.  These steps include ensuring that any physician employment, partnership, or shareholder agreement addresses the following:

  1. Whether the departing physician, the medical group/hospital, or both parties will be responsible for sending to a departing physician’s former patients an announcement that complies with AMA Opinion §7.03;
  2. The exact language of the departing physician’s AMA Opinion §7.03 compliant announcement to his/her former patients;
  3. Whether the departing physician, the medical group/hospital, or both parties will bear the costs associated with sending the AMA Opinion§ 7.03 compliant announcement;
  4. What acts by the departing physician constitute an improper solicitation of the departing physician’s former patients; and,
  5. What information, including contact information, will be provided by the medical group/hospital in response to inquiries from the departing physician’s former patients.