This Practice Now Closed

February 1, 2004

What to take care of when closing a practice

The decision to close one's practice is never an easy one. Age, family or personal issues, health problems, burgeoning malpractice premiums, or the death of a physician partner can compel you to shutter your practice. But whatever the reason, careful planning is essential to a smooth transition for you, your patients, and your staff.

If the decision to close your practice is voluntary, then there's little excuse to not carefully plan for it. If you hope to sell your practice and get a fair price for it, don't be surprised if the sale process -- finding a buyer, negotiating a price, and closing the sale -- takes two to three years.

Even if you close your practice without selling it, expect to spend several months wrapping up all of the legal and operational details before you see your last patient.

Start with the paperwork

Begin the process by locating all contracts that affect you and your practice. These include office leases, equipment leases, automobile leases, third-party payer contracts, maintenance and service contracts, Internet, telephone and cellular phone contracts, and any agreements for employed or contracted staff.

Next, turn to agreements for your services. These may include medical directorships and nursing home and hospital agreements (including hospital staff bylaws). It may be an impressive pile of paper, but you must go through each document to determine your legal responsibilities in terminating these agreements. Keep an eye out for any items that might trigger penalties for failing to comply with those agreements.

It might help to create a spreadsheet that lists the name of each agreement, pertinent information about each obligation, requisite notice and termination provisions, and the addresses for notification.
You should also review your current malpractice insurance policy to determine if post-termination insurance, commonly called tail insurance, is needed. If so, arrange to have it in place before your last day of service.

Your next step in closing your practice is to contact your state's licensing board, state medical society, and malpractice carrier. These entities may be able to provide you with guidance regarding practice closure details and legal requirements. Keep them updated with your current address in case a former patient's physician wants to contact you. Don't forget to notify your other insurers. You don't want property or casualty insurance policies to lapse before you stop seeing patients; on the other hand, you don't want to pass up possible rebates.

Keep patients in the loop

As a practicing physician your patients are your primary concern, and they must remain your number one concern as you close your practice. Since your decision will affect them greatly, give patients as much advance notice as possible so they can arrange for the smooth transition of their medical care to a new provider.

Otherwise, you could face a charge of patient abandonment. Check your state's laws regarding the amount of mandatory notice you must provide to a patient. If your state does not require a specific length of time, plan on no less than 30 days --  60 to 90 days notice is even better.

The AMA's policy statement E-7.03 (Records of Physicians Upon Retirement or Departure From a Group) states that patients should be notified and urged to find a new physician. Prepare a letter that states your decision to leave practice (see sample Letter to Your Patients, page 65). If it isn't practical to send this letter to every patient for whom you've created a record --  it could be tens of thousands --  then at least send the letter to all patients you've seen in the past three years. Going back even further than three years is highly recommended. 

Next, identify high-risk patients still receiving ongoing treatments from you and for whom it is imperative to coordinate a seamless transfer to a new physician. For these special patients, consider sending the general letter about your practice's closing via regular mail, and an additional copy via certified mail to avoid claims of patient abandonment. Place a copy of the letter in the patient's chart. If the letter was sent by certified mail, then save the receipt from the letter in the patient's file as well. Track these expenses as you would any other business expenses.

You should also plan on placing one or more notices of your practice's closing in local general circulation newspapers. The ads should include the date of your last day of practice, where patient records will be stored, and how patients can arrange to transfer their records to new physicians. Save a copy of the newspaper in which the printed advertisements appear along with information about where and when it was published.

Record keeping and sharing


Decide well in advance where you will store patient records. Your state may dictate the length or manner of storage. Your malpractice carrier may also be able to pinpoint the minimum length of time that you must store patient records.

Ideally, you will store the records indefinitely, although that may not be practical. If you practice in a state with no retention period mandate, plan on keeping the records for at least seven years or the length of the applicable statute of limitations, whichever is longer. Thus, if you are a pediatric practice and the statute of limitations does not expire for several years after your patients reach the legal age of majority in your state, plan on retaining the medical records for many years to come.

When preparing your records for storage or transfer, resist the temptation to perform a little housekeeping and throw away parts of patient charts. What appears irrelevant information now may be critical later on. The patient chart is your first line of defense in a malpractice action. Without the original chart, you have no way to prove that you met the appropriate standard of care. Under no circumstances should you give a patient the original chart. When patients request their records --  either before or after your practice closes --  give them copies. Likewise, if a patient's new physician requests the chart, transfer a copy, never the original.

It's OK to charge patients the reasonable copy fee allowed by your state when they request copies of their records. However, consider waiving this fee for requests that come in during the window of time after your closure announcement but before the practice closes for good. It's reasonable to charge patients nominal copying fees for requests received after your practice closes.

You may decide to transfer your patient records to a local physician. If so, consult with an experienced healthcare attorney to make sure you comply with all applicable confidentiality laws, including HIPAA. Your attorney should assist you in preparing an agreement that specifies how long the local physician will store your patient medical records. This agreement should clearly state that you will have indefinite access to these records, that you will receive copies or the original records at your request, and will be notified if the physician retires or plans to dispose of the records.

Patient charts aren't the only records you should be concerned about. Hang on to business records in case you have to deal later with tax matters, billing investigations, employment actions, or other legal actions. You should strongly consider saving business records for a minimum of three to seven years.

Remember your employees

Saying goodbye to trusted employees won't be easy. But parting will be more difficult if you overlook your obligations as an employer. Check local and state laws to see if a minimum period of notice to employees is required. Also check your personnel manual and any of the practice's employment contracts to see if a minimum length of notice was promised. Plan on giving your staff at least 30 days notice. Certainly, you should give this notice by the time you mail your letters to patients.

Don't expect the entire staff to hang in there until the last day. Many will start looking for new jobs soon after you announce the practice is closing. Since it is possible that some staff will find other employment quickly or may decide to leave before your last day, line up several temporary staffing agencies in case you need to fill in gaps.

One way to slow the exodus of key staff is to offer retention bonuses to key employees who stay with the practice until the closing date. Regardless of when your employees leave, be sure to follow all applicable laws regarding payment of accrued vacation time and other accrued benefits.

Tend to details

As you wind down the day-to-day matters of the practice, arrange for the collection of your accounts receivable after your practice closes. Don't close your practice's bank accounts until all of your accounts receivable have either been collected or written off. Make sure that all of the practice's bills from various vendors are paid.

Notify your call coverage group as early as possible so they can take you off the schedule and arrange for a replacement for your scheduled call. Determine what you will do with the practice's hard assets. Will they be sold to another practice, transferred to an equipment reseller, or sold at auction? Inventory and dispose of all pharmaceutical samples, drugs on hand, and medical supplies in accordance with applicable law.  Don't forget to also notify third-party payers and the DEA.

Notify the post office of your change of address. Cancel all magazine subscriptions, professional society memberships, and practice-maintained insurance policies as of your last day of practice. Arrange for the transfer of health and life insurance policies to you, if needed. Consult with your retirement plan adviser about how to terminate your practice's retirement plan. Also, make the necessary arrangements with your practice's attorney to dissolve your practice's legal entity.

Closing a medical practice does not happen overnight. Winding down the legal and administrative responsibilities of your life's hard work is a complex, emotionally charged process. Give yourself plenty of time to make the necessary arrangements, so you can minimize inconvenience to patients, reduce business and tax headaches, and protect yourself from potential claims of patient abandonment.

Joan M. Roediger can be reached at editor@physicianspractice.com.

This article originally appeared in the February 2004 issue of Physicians Practice.