Are you tired of having too much paper work, dealing with electronic medical records, and fighting with payers? Are you ready for something new? If you’ve decided it’s time to move on, proceed carefully. Unfortunately, physicians commonly underestimate the planning and work it takes to close, sell, or retire from a medical practice.
Physicians transition their practices for many reasons and in many ways. These can range from shutting the doors and retiring to selling a practice and becoming an employee. Although every situation is unique, some commonalities do exist.
The purpose of this article is to outline some general considerations that should be taken into account when you depart a practice. Because state law generally governs many of the relevant issues, be sure to review your specific state requirements, confer with an attorney and your malpractice insurance provider, and contact your state’s licensing board and state medical society before making any decisions.
General rules about medical records
As a physician, your duty is to your patients. Therefore, you need to notify them of your decision to leave or close a practice. Although state notification requirements vary, general practice is to provide patients with 3 months’ notice; the minimum amount of notice should not be less than 30 days. However, it is best to give patients as much notice as reasonably possible.
You should also provide your patients with the name of the physician(s) buying the practice (if any), an authorization form for release of their medical records, and information on how they can obtain their medical records and where they will be stored.
During the notice period, it is important to ensure continuity of care to patients to prevent patient abandonment claims. You should notify patients that they may choose their new healthcare provider, obtain or transfer their medical records, obtain details on how to contact you after your departure, or, if necessary, obtain a referral to their health plan or a referral service. Moreover, if patients request their medical records, you are required to provide copies. However, you may charge patients a reasonable fee for the copies.
Retention of patient medical records is a gray area. You have an obligation to retain patient records that may reasonably be of value to patients. When choosing what to keep, an appropriate criterion is whether you would want the information if you were seeing the patient for the first time.
Ideally, medical records should be kept indefinitely. However, you should look to state rules of limitations to determine the length of retention.
Generally, statutory codes or state licensing boards require that patient medical records that may reasonably be of value to patients be retained for 3 to 10 years. The Health Insurance Portability and Accountability Act requires retention of required documentation for 6 years from the date of its creation or the date when it was last in effect, whichever is later. The Centers for Medicare & Medicaid Services requires records of providers submitting cost reports to be retained in their original or legally reproduced form for a period of at least 5 years after the closure of the cost report. Medicare managed care program providers must retain records for 10 years, and immunization records must be kept indefinitely.
The record-keeping period typically begins on the last date of treatment for adult patients and on the date of maturity for minor patients.
Closing a practice
Can you just close the doors, shut off the lights, and move to Boca? Yes—and no. Important things to consider before leaving the practice—for any reason—include the following:
Medical records and patient transition—What will you do with your records? Where will you store them? Are they paper or electronic? Do you want the liability of recommending successors? Can you get such persons to take over your medical records and the responsibility for them? What costs are associated with record retention?
Record retention is the most pressing issue because medical records are burdensome, heavily regulated, and expensive to store and maintain. You will need to check state-specific statutes to determine how long medical records must be stored in your state of practice.
Malpractice coverage—Your malpractice insurance carrier may provide tail coverage at no cost to you when you retire. To obtain coverage, notify your carrier of your end date, confirm the requirements, and move forward. Generally, to qualify for inclusive tail coverage, you must actually retire from practice. You cannot move to your retirement home and open or join a nearby practice.
Receivables—Depending on your billing and collection methodology, you will need to consider the most cost-efficient and viable method to collect outstanding receivables. Perhaps it’s an all-inclusive service or simply maintaining your computer, software, and collection system with part-time services from your former staff. You may also need to consider what to do after your doors are closed and the office staff and space are gone.
Business operations—Closing a practice also means closing a small business. Leases need to be ended, final bills paid, health and welfare benefits transitioned, staff provided with notice, and, of course, final tax and other returns filed. The closing of the business will likely end after all of the receivables are collected.
Retiring from an ongoing practice
If you are planning to retire, begin by reading the agreements you made with the practice to know your rights and obligations. In addition, you must also consider the following:
Medical records and patient transition—Generally, the medical records, including storage and notice, will belong to the ongoing practice. The practice should assist with patient notification and transition. This will ensure that the value the practice has created can be retained and transitioned to other providers.
Malpractice coverage—Most malpractice insurance carriers will provide tail coverage at no cost if you retire. To obtain coverage, notify your carrier of your end date, confirm the requirements, and move forward.
Receivables—Generally, receivables will belong to your retiring practice, and the existing business staff will continue to collect as before. Check your employment agreement, shareholder agreement, or operating agreement to see whether you have any interest in them.
Business operations—The business is continuing so any ongoing operations should not be your responsibility to handle. However, you should know your rights and obligations before you leave. For example, are you a guarantor of a lease or note? Does the practice owe you money? What are your retirement notice requirements? Are you entitled to any post-termination compensation such as a share in receivables? Were you an owner or is there a value to your interest? If so, how is it valued, how will you be paid, and can the practice afford to keep its obligations?
Restrictive covenants—Restrictive covenants are governed by contract and state law and are generally enforceable. Restrictive covenants may limit your ability to change your mind about going back to work or even contacting your old patients and referral sources.
Selling a practice
If you’ve been able to monetize the value you’ve created with your practice, you can also transfer much of the transition work to your successor.
Medical records and patient transition—Your successor should take over the responsibility of your medical records and notices of maintenance. This should be a principle concern in addition to price. If your successor does not want all your medical records, it is your obligation to transition any unwanted records.
Malpractice coverage—Assuming that you retire, your current carrier may provide tail coverage at no cost.
Receivables—Receivables generally are not sold, and this means that you will likely retain any collection cost. Collection costs vary and may be charged on a percentage basis or on a usage (staff and time) basis. If the practice is sold to a hospital, the hospital will generally charge fair market value for any services it provides. Selling to a private practice may ensure more flexibility, but will still involve a cost.
Business operations—Make certain the successor takes responsibility for your space, staff, and any continuing obligations. If you transition more operations, you are responsible for fewer costs.
Restrictive covenants—Generally, you will be subject to a restrictive covenant when you sell your practice. If you want the possibility of going back to work, you will need to consider the impact on malpractice coverage and where you would practice.
Whether you are selling your practice to a third party, winding up your practice with no successor, or retiring from a continuing practice, the important thing is to plan ahead. This will not only help to ensure a smooth and successful transition for your patients, employees, and yourself, but it will also preserve the value of the practice you worked so hard to establish.
How Much Time Do You Have?
The amount of time you have until retirement can affect your preparations. Two courses during the AAOS 2015 Annual Meeting are designed to address retirement planning. “Life After Orthopaedics: Five Years or Less, Then What?” is designed for those closing in on retirement. It addresses issues that must be solved—including psychological and financial issues—in the near future. “Life After Orthopaedics: 10 Years or More, Then What?” is for those who plan to practice for at least another 10 years. No CME credit is available for these courses; spouses are welcome to attend.