Closing A Medical Practice Upon Retirement
Physicians who plan to retire and sell their medical practice are advised to retain an attorney who specializes in business and/or healthcare law for advice on signing sales contracts, determining appropriate compensation, selling office equipment, etc. Among other things, the attorney will advise that while physicians may sell the tangible and intangible assets of the practice, including “good will,” they may not “sell” or otherwise transfer patients to another physician without the patients’ consent. Patients must be given the option of choosing another doctor and having a copy of their records sent to the new physician.
Others who would benefit from consultation with legal counsel before retirement include physicians who intend to close their practice without selling any of its assets, those who are retiring from a group practice or a medical corporation or partnership, and executors of the estates of deceased physicians.
This MIEC Advisory offers general information about closing a practice, but it is not intended as legal advice. Additional assistance about closing a medical practice may be available from county, state and national medical associations.
There are several ways to notify patients about an impending retirement. The most direct way is to send a letter to patients you have seen in the past three years or so. The letter tells patients when the practice will close and asks them if they want a copy of their medical records forwarded to another physician. (Sample letters on page 3 can be adapted to individual needs and be photocopied.) Include an authorization for the release of a copy of the records to another doctor. State laws permit patients to request that a copy of their medical chart be sent to them. You may charge the patient for a copy of the records, or you may choose to waive the fee. Allowable copying charges vary by state.
If the patient authorizes you to send the chart to another physician, MIEC suggests that you provide the copy to that physician without charge. Post signs in your reception and treatment rooms several months in advance of your retirement date. Have record release authorization forms available for those who request them.
In the event that you need to reach large numbers of patients, consider taking out an advertisement in a local newspaper as an alternative to sending out personal letters to all active patients. While this is not required, it may serve as an effective communication tool for larger patient populations.
Custody and Transfer of Medical Records
If you sell your practice, and the buyer agrees, you may designate the purchaser of your practice as the new custodian of your records. You may not sell patient records or “transfer” patients automatically to another physician’s care. You may recommend to your patients that they continue treatment with the new provider, but be careful to advise patients that they are free to select any physician they wish.
When transferring custody of records as part of a sale, it is prudent to specify in the purchase contract that the buyer:
- (a) agrees to be custodian of your medical and billing records, and will maintain them in a safe and secure place;
- (b) will make the records available to your former patients and to any physician to whom a patient requests a copy be sent;
- (c) will make the records available to you in the event you require them for any reason, including the defense of a claim; and,
- (d) will preserve the records for at least ten years following transfer of custody, and that the records may not be destroyed without your consent.
Please see MIEC’s Managing Your Practice Advisory Number 1, “How long do we have to keep medical records,” for information about state-specific requirements for retention of medical records.
If you do not sell your practice, you may still designate a physician to be custodian of your records if they agree to do so. This person must keep the records for the required period of time; make them available to you, the courts, and to patients, upon presentation of an appropriate authorization or subpoena. Whether or not a fee is paid to the custodian of records, MIEC recommends that you and the custodian sign a written agreement delineating the terms of the custodianship.
Lastly, you may store the records yourself and continue to act as the custodian of records. In any case, provide your patients with specific information regarding how they can request a copy of their medical records after your retirement.
Physicians who are closing their practice completely upon retirement might want to retain an answering service for 3-6 months. If another physician purchases your practice, ask his or her staff to take your calls and inform patients of your retirement. Include this provision in the sale contract. Alternatively, if you terminate telephone service immediately upon closure of your practice, arrange for your office number to be forwarded to your home telephone for several months. If necessary, it would be appropriate to have an answering machine or recorded greeting to advise callers that you have retired from practice.
Notifying Contracted Insurers
If you have providers contracts with health insurers, notify them of your retirement plans well in advance of your retirement date. Depending on the terms of your agreement, plans may reassign your patients to another physician. If so, you can modify your patient notification letter to inform patients of the contact information for their new physician, how their plan will handle reassignment, and/or who to call for further information about reassignment of providers.
Before your retirement date, notify MIEC’s Underwriting Department and arrange for “tail coverage” (also called a reporting endorsement), which is an extension of your professional liability policy to provide ongoing coverage after you retire. This coverage insures you for malpractice claims reported after your retirement, but which involve treatment that occurred while your regular liability policy was in effect. Importantly, MIEC offers tail coverage at no charge to retiring physicians.
If you plan to close your medical practice, but plan to continue practicing on a limited basis, you may qualify for part-time coverage depending on how many hours per month you plan to work. For further information, ask your MIEC Underwriter.