Closing a Medical Practice

Issues for Physicians to Consider when Closing or Relocating a Medical Practice
by Cheryl Coon, Healthcare Attorney

There are several scenarios that can lead to the closing of a physician’s practice, including relocation, retirement, or an unexpected event such as a serious illness or disability. There are many issues to be considered when closing a practice, including what to do with patient medical records. If the physician is part of a physician group practice, often the employment agreement, shareholder agreement, or other related agreement will address ownership of medical records and other similar issues. Such agreements, however, rarely address the myriad of other factors that should be addressed. Moreover, compliance with those agreements does not guarantee compliance with laws. 

The following is a short overview of some of the issues that a physician should consider ahead of time to address closing or leaving a practice. In the best of worlds, the physician has planned ahead (some suggest a year in advance for retirement) to address most if not all of the issues noted below, and developed a plan that is known and accessible to other practice and/or family members, including the location of relevant documents and contact information. Note for solo practitioners: terminating an entire practice has more issues to consider than the retirement of one physician in a group practice, such as transfer or sale of equipment, and what to do with any associated real property, whether owned or leased. For the most part, this discussion does not focus on a solo practitioner. 

Before addressing the issues, it is important to note that physicians need to keep accurate and thorough records of the steps taken so that compliance can be verified and the process kept organized. Also, when sending notices, it is important that if the method of communication is not specified in an agreement, notices should be sent via certified mail or using some process that provides a similar evidentiary record. 

Medical Records 
If the physician is part of a practice group, often the practice agreements deal with medical record ownership, transfer, and notification of patients. As noted, however, compliance with the agreements does not equate with compliance with law. In Texas, absent an agreement that states the contrary, employers own the records/work product of employees, and in practice settings, group practice agreements almost always incorporate this concept. 

Texas law also requires that practices provide certain information to physicians who are leaving, to permit the physicians to provide the required notice to patients, discussed below. 

A separate issue related to medical records is record retention requirements under various laws. Physicians need to address the times that various state and federal laws require for retention of patient records in the medical record plan. 

Finally, a note to solo practitioners: having a medical record company serve as custodian is very expensive and should be avoided if possible. It is best to have a plan to transfer records ahead of time. 

As an aside, physicians also should have a plan for preservation of business records that may be necessary in the future, such as for tax preparation.

Notice to Patients 
As noted, practices often have agreements that address notification of patients in the event a physician leaves the practice. Regardless of whether practice-related agreements address notification of patients, the Texas Medical Board (TMB) rules address the issue and have some specific requirements. Under the TMB rules, if a physician relocates, retires, terminates employment, or otherwise leaves a practice, the physician must provide reasonable written notice to patients and provide them with an opportunity to obtain copies of their records or arrange for transfer of their records. Notice (1) can be by either posting notice on the practice website or posting in the local newspaper of greatest circulation in the county, and (2) must also include notice in the practice location, and (3) must include written notice to patients seen in the last two years. 

Also, if the physician wants to recommend another physician to patients in the patient notification or otherwise, the information needs to be included in the retirement/relocation checklist.  The recommendation can be provided to patients in the notice letter discussed above.

Providers also need to review third party payor agreements for notice requirements. 

When providing patient notices, it may be prudent to put a copy of the notice provided in the patient chart, if not for all patients at least for those that are deemed high risk.

Notice to Agencies

Texas Medical Board 
A physician should provide written notice to the TMB of retirement or voluntary relinquishment of a license on the form provided by the TMB. The form must be notarized. If relocating, the TMB must be provided with new contact information. The TMB has an online “change of address” feature and will now accept hard copy notices only in limited circumstances.

Federal Drug Enforcement Administration (DEA) 
When relocating, physicians need to provide written notice to the DEA at least six weeks prior to the move and provide the old and new address for the physician. Notice should be sent to the closest DEA office in the state. Written notice also must be provided for retirement in the same manner. 

Any unused controlled substance prescription forms and other prescription forms must be returned, after being marked “VOID,” to the Texas State Board of Pharmacy within 30 days of (1) when the physician’s DEA license/number is canceled, revoked, suspended or surrendered, or (2) the date the physician died. 

If an entire practice is closing, controlled drugs will need to be inventoried and disposed of in accordance with federal and state laws, with particular care given to the disposal of controlled substances. Laws to be considered include the new Environmental Protection Agency laws on disposal of discarded (or waste) pharmaceuticals. Note that non-controlled drugs may be (1) donated, such as to community medical clinics, under the Texas Prescription Drug Donation Program established by the Texas State Department of Health Services, (2) sold with a practice, or (3) disposed of in accordance with laws.
 

Medicare/Medicaid, Tricare,
other HMOs and PPOs 
Upon retirement, physicians must notify Medicare and Medicaid and submit a voluntary withdrawal form. For Medicaid, physicians leaving a group practice must send a letter or a Provider Information Change Form to the Texas Medicaid & Healthcare Partnership. If the physician is joining a new group, the physician also must complete a new Texas Medicaid Provider Enrollment Application. 

Tricare, HMOs, and PPOs, as well as other third-party payors, will almost certainly have similar provisions. Physicians need to review all these agreements for this issue and other issues noted herein, i.e., provisions relating to patient notice and payment on termination.

Notice to Others 

Hospitals 
If a physician has privileges at a hospital, he or she needs to review the hospital bylaws and other policies carefully to see what obligations exist for retirement or relocation, whether related to notice or otherwise.

Liability Insurance Carrier 
Most liability policies now are “claims made” policies, meaning that the insurance company will pay claims made during term of the insurance contract. Therefore, if a physician leaves a practice, the general liability policy will terminate and a “tail” policy to cover claims made after the termination is crucial. In some instances, the practice will cover this expense, but the physician should verify this and obtain a certificate of insurance showing the coverage. If the practice does not provide a tail policy, one should be obtained.

National, State, and
County Medical Societies 

Physicians can provide notice to the American Medical Association by a call to its 800 number, an email or letter, or on-line. The same is true for most medical societies, including the Texas Medical Association and the Texas Osteopathic Association.

National Provider Identification System 
If the physician has a national provider identifier, the physician needs to provide notice to the National Plan and Provider Enumeration System by phone, mail, or email (again, remember that having a written record is vital).

Employees 
Physicians at some point need to notify employees so they can seek other employment at the appropriate time and so they can assist with issues such as patient notification and other transition issues.

Landlord 
Assuming the termination of a solo practice or of an entire group practice, real estate becomes an issue, particularly if the practice location is leased. The physician and his or her attorney should review the lease carefully to determine notice requirements and terms related to termination of the lease.

Supplies/Vendors 
Physicians should review their supplier and vendor agreements to see if there are provisions relating to termination (and/or relocation) and notification, or other issues that may be relevant. If there are standing orders, these will need to be addressed and possibly the issue of returns and/or credits.
Utilities/Other Accounts 

Notices to utilities and other accounts are relevant in the event a solo practitioner or an entire practice terminates or relocates. Aside from utilities, banks are clearly a significant area for review and planning. This should include making sure that access to accounts is controlled, appointing someone to be responsible who can deal with issues, particularly if physician death is the trigger. 

Review should include any subscriptions that the physician may have for magazines and periodicals from memberships in professional societies or other business-related accounts. 

Additionally, if there is an after-hour call service or something similar, the relevant agreement should be reviewed and the termination coordinated with the service.

Post Office 
Notice should be given to the post office for any change of address and/or mail forwarding.

Review all Professional Agreements 
One of the first steps for a physician should be to carefully review all professional related agreements, particularly any employment agreement or shareholder agreement if the physician is a shareholder in a professional association. Items to look for/consider include the following: 

1. Required notice to the practice of intent to leave or retire 

1. Non-competition and non-solicitation provisions 

1. Medical records ownership
   and transfer 

1. Notice to patients 

1. Insurance, in particular issues related to tail coverage 

1. For shareholders, transfer of shares, both the process and valuation. What notice is required? How will shares be valued? What is the timing of the buyout? 

1. Did the physician sign any guarantees on loans for equipment, operations, real estate, or otherwise?
   

Winding Down anyProfessional Entity 
Physicians should assess if a professional entity, for example, a professional association or “PA,” needs to be shut down, or as the laws refer to the process, wound down and terminated.  If applicable, winding down and termination of a professional entity is a multi-stepped process that involves filing with two different agencies in Texas: the Texas Secretary of State and the Texas Comptroller. Parties will need to address tax issues and more than likely involve an accountant, preferably one who is already familiar with the practice.   In fact, the entity must file a certificate of account status from the Texas Comptroller indicating that all its taxes have been paid and it is in good standing with the Comptroller as part of the package of documents that must be filed with the Texas Secretary of State (SOS).  A certificate of termination must be filed with the SOS.

Additionally, state law requires that an entity that is winding down have a dissolution plan which addresses how claims and assets will be dealt with and distributed, and that dissolution plan must be approved as required by law. 

If there was an assumed name, that name will need to be released by filing a form with the SOS.

Licenses 
If the provider had any x-ray equipment or other equipment that required a license, the relevant licenses will need to be addressed and notice provided to the appropriate licensing agency, the Texas Department of State Health Services. 

Any wall licenses displayed should be stored in a secure location to help prevent fraud. 

Other 
Physicians should consider the tax consequences and financial issues associated with retirement and/or relocation, such as whether there are any outstanding loans (e.g., equipment, real property, other) and whether any real property has liens associated with it. Final tax returns will be required if the entire practice is closing. 

Conclusion 
In summary, there are a myriad of issues that physicians need to consider in advance of any planned retirement or relocation, and the help of other professionals is highly advised, from tax advisors to accountants and attorneys. Particularly when reviewing agreements, having someone versed in the lingo and contract law will reduce confusion and/or frustration and time.