Albert Einstein said, “Intellectuals solve problems, geniuses prevent them.” In short, the Nobel-prize-winning physicist and mathematician observed that intelligence is not just about solving problems, but about preventing them in the first place. This practical approach applies equally to the business of medicine. While physicians spend years developing the clinical expertise necessary to provide exceptional patient care, building and maintaining a successful private practice requires a different set of skills. Sound business practices, thoughtful governance, carefully drafted agreements, and trusted professional advisors can help physicians avoid costly disputes and unnecessary distractions, allowing them to focus on what matters most: caring for patients.
Many legal problems are preventable. The practices that experience the fewest business disruptions are not necessarily the largest or most sophisticated; rather, they are the practices that invest some time on the front end to establish good governance habits, review important agreements before signing them, and seek professional advice on contracts or employee issues early, when they are small and before they become expensive ones. This article discusses some preventative practices.
Start with Good Governance. One of the first decisions a physician starting or joining a practice makes is to select the proper legal structure or enter into a services contract. Under New York law, physicians generally must organize their practices through a Professional Limited Liability Company (PLLC) or Professional Corporation (PC), which is registered with the New York State Department of State after a Certificate of Authority is received from the New York State Education Department, Office of the Professions. The Certificate of Authority confirms that the owners are duly licensed to practice medicine.
Forming the correct entity, however, is only the beginning. Just as important is putting the right governance documents in place. Organizational documents should address ownership interests, management authority, voting rights, admission of new owners, buy-out procedures, succession planning, and dispute resolution. Often, these issues seem remote when everyone is getting along, but they can become critically important after a period when circumstances change. For that reason, consulting with an experienced corporate or health care attorney can help ensure that the practice is properly organized, complies with New York State law, and has governance documents that accurately reflect the owners’ expectations and intentions from day one. Correcting deficiencies years later is almost always more expensive and more disruptive or time-consuming than getting it right at the outset. In short, good governance is an investment in the long-term stability of the practice.
Plan for the Unexpected. As each practice evolves, it will adjust to new technology, improved business processes, and research developments within the field. It is normal for any business to experience change over time. A physician may join the practice or retire, relocate, reduce clinical hours, become disabled, or simply decide to pursue another opportunity. In those situations, the owners should not consider whether change will occur, but whether the practice has planned for it. A thoughtfully drafted partnership agreement, operating agreement, or other control agreement among the physician-owners can reduce uncertainty when a physician leaves the practice. These agreements should establish clear procedures for ownership interests, valuation methods, governance or decision-making processes, management authority, and patient transition issues.
Even highly successful practices can find themselves investing resources, time, and money to resolve disputes that could have been anticipated early on. Internal disagreements are distracting, disruptive, expensive, and emotionally draining. Well-drafted governance documents and good management practice can keep the focus on patient care and the continued success of the practice.
Develop Good Contract Habits. Strong risk management should also involve discipline when the practice enters into a new contractual relationship. Every medical practice depends upon services or supply agreements beyond physician employment contracts. These can include office leases, equipment purchases and leases, software agreements, laboratory services, billing vendors, staffing agencies, contract employees, and pharmacy or specialty pharmacy arrangements.
Establish a process for contracting. It is important and easy to focus on only the business terms such as the monthly payment, purchase price, or length of the agreement, but it is equally important to consider the provisions in the fine print that allocate risk. Review language for automatic renewals, notice requirements, indemnification provisions, limitation of liability clauses, personal guaranties, insurance requirements, exclusivity provisions, termination rights, and conflict resolution procedures. Too often, these are overlooked until a disagreement or dispute arises.
Developing the habit of having significant contracts reviewed before signing is one of the simplest and most effective risk management practices a medical office can adopt. Although a practice may not always have complete control or leverage to negotiate every lease provision with a landlord, equipment supplier, institutional vendor, or specialty pharmacy, it is within any practice’s control to have a dedicated professional review significant agreements and advise on the implications of terms before they are signed, so the practice clearly understands the potential risks and obligations it is accepting.
Many times, counsel can also negotiate better business terms simply by asking for a change or modification. Rent or tenant improvement credits or other tenant-friendly renewal provisions related to flexibility, balanced liability allocations, or shared expenses or similar adjustments may save a practice thousands of dollars each year. Even if the agreement changes very little, simply understanding what the practice has agreed to is valuable.
Review Employment Agreements and Restrictive Covenants. For employers or physician-employees, employment agreements deserve particular attention, especially those containing restrictive covenants. Whether you are hiring a physician or accepting an offer of employment with a practice, the employment agreement establishes the framework for the professional relationship. Compensation naturally receives significant attention, but many of the provisions that create future disputes receive far less scrutiny during negotiations.
Restrictive covenants, noncompetition provisions, patient non-solicitation clauses, confidentiality obligations, repayment provisions, and termination rights can significantly affect future career opportunities and practice operations. Some will restrict the ability to practice within a 5- to 10-mile radius of the employer location for a period of years. Savvy practitioners will fully understand the implications of the contract terms to avoid surprises later on.
To do this, consider obtaining assistance with the contract review. A good advisor will explain what is being promised, identify provisions that create risk, and help you understand exactly what you are agreeing to (or to what you are being asked to agree to). Perhaps most importantly, the best, and only, time to negotiate more favorable contract terms is before the agreement is signed. Once employment begins, leverage shifts, and opportunities to change, improve, or modify the agreement become much more limited.
Putting Prevention into Practice. Successful practices seek professional advice on a regular cadence and typically well before a risk-management issue might develop. Attorneys, accountants, insurance professionals, financial advisors, and special consultants each bring specialized expertise to help a practice grow and thrive. Together, they become an important part of the practice’s risk management team. Waiting until a dispute or litigation has begun is too late. Available options may be limited, and addressing a major risk can carry increased expenses. Seeking advice early and often allows practices to address issues before they become significant problems, while also helping preserve valuable business relationships.
As a practical matter, every practice should develop and maintain strong working relationships with trusted accounting, insurance, and legal professionals. The founding father and advocate for public health and medicine, Benjamin Franklin, famously observed that “An ounce of prevention is worth a pound of cure.” His practical advice is just as applicable to running a medical practice as it is to medicine itself. Regular communication among owners and with trusted advisors can prevent avoidable problems, strengthen the practice, and keep physicians focused on patient care.
Reprinted with permission from the Aug/Sept 2026 issue of The Bulletin from the Monroe County Medical Society and available as a PDF file here.
David M. Tang is Co-Managing Partner at Underberg & Kessler LLP and serves as Chair of the firm’s Health Care and Creditors’ Rights practice groups. He advises health care providers, commercial lenders, nonprofits, and business clients on restructuring, governance, risk management, and complex litigation matters. David can be reached at dtang@underbergkessler.com or 585.258.2845.
