Medical Practice Partnership Agreement (Hawaii)

MEDICAL PRACTICE PARTNERSHIP / OPERATING AGREEMENT

(Hawaii Physician Practice)

This Medical Practice Partnership / Operating Agreement (this "Agreement") is entered into on [__/__/____] (the "Effective Date") by and among the physician-owners listed on Schedule A (each a "Partner" and collectively the "Partners") of [PRACTICE LEGAL NAME], a Hawaii [professional corporation under HRS ch. 415A / professional limited liability company under HRS ch. 428] (the "Practice").

ARTICLE I. RECITALS

A. Each Partner is a physician duly licensed by the Hawaii Medical Board under HRS ch. 453.

B. The Partners desire to associate as owners of the Practice for the lawful practice of medicine in the State of Hawai'i, in accordance with HRS ch. 415A (if a professional corporation) or HRS § 428-301 et seq. (if a professional LLC).

C. The Partners intend that all professional medical decisions remain the sole responsibility of duly licensed physicians, consistent with the Hawaii Medical Practice Act and Hawaii's prohibition on the unauthorized corporate practice of medicine and on fee-splitting under HRS § 453-8(a)(10).

ARTICLE II. ENTITY FORM AND GOVERNANCE

2.1 Entity

The Practice is organized as a Hawaii [professional corporation / professional LLC]. Only persons licensed to practice medicine in Hawaii under HRS ch. 453 may hold ownership interests entitled to vote on professional matters or render professional services on behalf of the Practice, except as expressly permitted by HRS ch. 415A or HRS § 428-301 et seq.

2.2 Registered Agent / Principal Office

2.3 Management

☐ Manager-managed by a Managing Partner: [____]
☐ Board-managed by a Board of Directors of [____] members
☐ Member-managed by all Partners voting on a per-capita basis

ARTICLE III. CAPITAL CONTRIBUTIONS AND OWNERSHIP

Additional capital calls require the affirmative vote of [____] of Partners.

ARTICLE IV. CORPORATE PRACTICE OF MEDICINE / PROFESSIONAL JUDGMENT

4.1 Independent Medical Judgment. Each Partner shall exercise independent professional medical judgment in the diagnosis and treatment of patients. No non-physician shall direct, control, or interfere with the professional judgment of any Partner.

4.2 Hawaii CPOM Compliance. Hawaii regulators and the Hawaii Medical Board have applied corporate-practice-of-medicine principles through HRS ch. 453, ch. 415A, and the prohibition on fee-splitting. The Practice shall not enter into any arrangement under which a non-licensed person or entity employs licensed physicians to provide professional services or shares in professional fees in violation of HRS § 453-8(a)(10).

4.3 Management Services Organizations (MSO). Any MSO arrangement shall provide for fixed or fair-market-value fees for non-clinical services and shall not tie compensation to a percentage of professional revenue, the volume or value of referrals, or in a manner that violates HRS § 453-8 or federal Stark/Anti-Kickback laws (42 U.S.C. § 1320a-7b; 42 U.S.C. § 1395nn).

ARTICLE V. SCOPE OF PRACTICE; LICENSING

5.1 Each Partner shall maintain in good standing: (a) Hawaii medical license under HRS ch. 453; (b) DEA registration; (c) board certification if represented to patients; (d) malpractice insurance per Article IX; and (e) hospital staff privileges as applicable.

5.2 Loss, suspension, or material limitation of any Partner's Hawaii medical license is an automatic event of withdrawal under Article XII.

ARTICLE VI. FIDUCIARY DUTIES; LOYALTY

6.1 Each Partner owes the Practice and the other Partners duties of loyalty and care consistent with HRS ch. 425 (general partnerships) or HRS § 428-409 (LLC duties), as applicable.

6.2 No Partner shall engage in any outside medical practice within the Restricted Area defined in Section 10.1 without the unanimous written consent of the other Partners, except for: (a) bona fide academic appointments; (b) volunteer/charitable care; (c) expert-witness engagements; or (d) locum-tenens coverage disclosed in advance.

ARTICLE VII. COMPENSATION AND DISTRIBUTIONS

7.1 Base Compensation. Each Partner receives base compensation as set forth on Schedule B.

7.2 Productivity / Bonus Pool. Bonuses may be allocated based on personally performed professional services (wRVUs), collections from personally performed services, quality metrics, and citizenship factors. Bonuses shall not be calculated based on the volume or value of referrals or other business generated for the Practice in a manner that would violate Stark, AKS, or HRS § 453-8(a)(10).

7.3 Fee-Splitting Prohibition. No portion of professional fees shall be paid, directly or indirectly, to any unlicensed person or entity, except: (a) salary or other compensation to bona fide employees; (b) rent and bona fide service contracts at fair market value; or (c) other arrangements expressly permitted under HRS § 453-8 and federal law.

7.4 Distributions. Distributions of available cash shall be made [monthly / quarterly / annually] in proportion to ownership percentages after reserves.

ARTICLE VIII. PATIENTS, RECORDS, AND HIPAA

8.1 All medical records generated within the Practice are property of the Practice. Departing Partners are entitled to copies of records for patients to whom they personally rendered care, subject to HIPAA (45 C.F.R. Parts 160, 164) and HRS ch. 622-58 (medical records retention).

8.2 The Practice shall maintain HIPAA Privacy/Security policies and a Notice of Privacy Practices.

ARTICLE IX. INSURANCE

ARTICLE X. RESTRICTIVE COVENANTS

10.1 Non-Competition (Physician). During the term of each Partner's affiliation and for [12 / 18 / 24] months following termination, the departing Partner shall not, within a [____]-mile radius of any Practice office in [ISLAND/COUNTY], directly or indirectly: (a) practice [SPECIALTY] medicine; (b) solicit Practice patients seen by the Partner within the prior [12/18] months; or (c) solicit Practice employees or contractors.

10.2 Hawaii Enforceability Standard. The Partners acknowledge that Hawaii courts evaluate restrictive covenants under HRS § 480-4 and Prudential Locations, LLC v. Gagnon, 151 Haw. 136 (2022), which require: (a) a legitimate purpose ancillary to a protectable interest (not merely preventing competition); (b) reasonable scope, duration, and geography; and (c) no undue hardship on the restricted person or the public. Hawaii's 2015 statutory ban on non-competes for "technology business" employees under HRS § 480-4(d) does not apply to physicians; physician non-competes remain governed by the common-law reasonableness standard.

10.3 Blue-Pencil / Reformation. If any restriction is held unreasonable, the Partners authorize the court to reform the covenant to the maximum extent enforceable under Hawaii law.

10.4 Confidentiality. Each Partner shall protect Practice confidential information indefinitely, subject to lawful disclosure obligations.

ARTICLE XI. DISPUTE RESOLUTION

11.1 Negotiation, then Mediation. Disputes shall first be addressed by good-faith negotiation among the Partners, then by mediation in Honolulu, Hawaii.

11.2 Arbitration. If unresolved, disputes shall be resolved by binding arbitration administered by Dispute Prevention & Resolution, Inc. (DPR Hawaii) under its commercial rules, before a single arbitrator in [Honolulu / Hilo / Wailuku / Lihu'e]. Judgment may be entered in any Hawaii court of competent jurisdiction. Equitable relief to enforce Article X may be sought directly in court.

11.3 Governing Law. This Agreement is governed by Hawaii law without regard to conflicts principles.

ARTICLE XII. WITHDRAWAL, EXPULSION, AND BUY-SELL

12.1 Triggering Events

• ☐ Voluntary withdrawal on [____] days' notice
• ☐ Death or permanent disability (>[____] consecutive days)
• ☐ Loss, suspension, or material limitation of Hawaii medical license
• ☐ Felony conviction or Medicare/Medicaid program exclusion
• ☐ Material breach not cured within [30] days
• ☐ Retirement at age [____] or later

12.2 Valuation

Goodwill: ☐ Included ☐ Excluded (per Hawaii custom and HRS ch. 415A constraints)

12.3 Payment Terms

Buy-out paid over [____] months at [____]% interest, secured by [____].

12.4 Tail Coverage

Departing Partner (or estate) shall obtain malpractice tail coverage; cost allocated as set forth in Schedule B.

ARTICLE XIII. REGULATORY COMPLIANCE

13.1 Stark / Anti-Kickback. All financial relationships among the Partners, the Practice, and any referral source shall comply with 42 U.S.C. § 1395nn (Stark) and 42 U.S.C. § 1320a-7b (AKS), including the in-office ancillary services and bona-fide employment safe harbors as applicable.

13.2 Hawaii Fee-Splitting. No arrangement shall violate HRS § 453-8(a)(10).

13.3 Cross-Referral Restriction. Neither the Practice nor any Partner shall establish a pattern of consistent referrals in violation of HRS § 431:10C-308.7 (motor-vehicle insurance context).

13.4 Certificate of Need. Where the Practice contemplates services subject to HRS ch. 323D, the Partners shall obtain a CON before commencement.

ARTICLE XIV. GENERAL PROVISIONS

14.1 Amendment. Amendments require written consent of [Partners holding ____% of ownership / unanimous Partners].

14.2 Severability. If any provision is held unenforceable, the remainder continues in effect.

14.3 Entire Agreement. This Agreement, together with its Schedules, constitutes the entire agreement among the Partners regarding its subject matter.

14.4 Notices. Notices to addresses set forth on Schedule A, by personal delivery, certified mail, or nationally recognized overnight courier.

14.5 Counterparts; Electronic Signatures. Permitted under HRS ch. 489E (Hawaii Uniform Electronic Transactions Act).

EXECUTION

The undersigned Partners adopt this Agreement as of the Effective Date.

SCHEDULE A — PARTNERS, ADDRESSES, AND OWNERSHIP

[____]

SCHEDULE B — COMPENSATION FORMULA

[____]

SCHEDULE C — APPROVED OUTSIDE ACTIVITIES

[____]

SOURCES AND REFERENCES

• HRS ch. 415A — Hawaii Professional Corporation Act
• HRS ch. 428, § 428-301 — Hawaii LLC Act (professional services)
• HRS ch. 453 — Medicine and Surgery
• HRS § 453-8 — Disciplinary grounds (fee-splitting at (a)(10))
• HRS § 480-4 — Restraints of trade; § 480-4(d) technology-worker non-compete ban
• HRS ch. 327E — Uniform Health-Care Decisions Act
• Prudential Locations, LLC v. Gagnon, 151 Haw. 136, 510 P.3d 622 (2022)
• 42 U.S.C. § 1395nn (Stark); 42 U.S.C. § 1320a-7b (AKS)