Is Bankruptcy Worth Your Medical License?

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By Matt Gracey

According to statistics, millions of Americans file for bankruptcy every year.  For most people, the process is relatively simple and absolves them of the cost of most unsecured debts.  For physicians, it may not be quite that simple.  In addition to a seven year blemish on your credit history, bankruptcy may be the shortcut that could cost a physician his/her medical license.


In Florida, Statute 458.320 requires that as a condition of licensure and maintaining an active license, with certain delineated exceptions, an applicant must demonstrate to the satisfaction of the Board of Medicine and the Department of Health financial responsibility to pay claims and ancillary costs arising out of the rendering of, or the failure to render, medical care or services.


Unless the physician demonstrates that he/she is otherwise in compliance with these requirements, the Department must suspend the license of the physician.  Furthermore, any deceptive, untrue, or fraudulent representation by the licensee with respect to any provision of these requirements will result in permanent disqualification from any exemption to mandated financial responsibility and constitutes grounds for disciplinary action.


What does that mean?  While a Florida physician against whom medical malpractice claims are pending has the same right to file a bankruptcy petition as any other individual, he/she should be aware of the possible added complications of doing so.  Mainly, if a physician files for bankruptcy and cannot satisfy a judgment, the Board of Medicine must suspend the physician’s license. Why?  The Florida legislature specifically authorizes the Board of Medicine to adopt rules and implement provisions regarding the practice of medicine. 


Put simply, Florida Statute § 458.320 requires a physician to demonstrate financial responsibility to the appropriate state licensing authorities through certain means.  Essentially, the statute requires a physician to either obtain and maintain the required professional liability coverage or establish by escrow or acceptable letter of credit that he/she is able to, and will, satisfy any adverse medical malpractice judgments or settlements, or make a promise to pay up to $250,000 of a claims judgment in a court or binding arbitration.  If an adverse judgment/settlement remains unpaid for a period of sixty days, the Board of Medicine can, and likely will, discipline and even revoke the physician’s medical license.


So, while a physician might be able to avoid payment of an adverse medical malpractice judgment against him by filing for bankruptcy, the implications of doing so are significant:  it is likely that his/her license will be suspended for failure to comply with the financial responsibility statute as a result of the bankruptcy.  Is bankruptcy worth your medical license?