| | Forgiveness of Guarantees
Under this clause, the hospital agrees to "forgive" any amount the physician may owe at the end of the guarantee period in exchange for the physician's continued service in the area. The period of "forgiveness" generally ranges from one to three years. In the example above, the hospital may agree to forgive the $20,000 after the physician has practiced in the community for one year past the contracted income guarantee period. In short, if the physician has an income guarantee of $120,000 for each of the two years and owes $20,000 to the hospital after this two-year period, the hospital will "forgive" the $20,000 when the physician has practiced for an additional year in the community. By this mechanism, the physician is ensured that he or she will earn a certain amount over the contract period and will pay no penalty by staying through the forgiveness period. This hospital is assured of retaining the physician for the contract period and perhaps longer if part of the guarantee is "forgiven." However, new physicians must keep in mind that if they wish to leave at the end of the contract period they will need to repay the hospital any outstanding amount on the income guarantee. In effect, the income guarantee is a loan which must be repaid, if not in money than through continued service in the community.
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