Closing your practice: What to do and when to do it
■ A column answering your questions about the business side of your practice
By Karen S. Schechter amednews correspondent— Posted Feb. 18, 2008.
Question: I have been in solo practice for 40 years and am now thinking about retiring at the end of the year. What steps do I need to take, and when should I begin the process?
Answer: Closing the doors of a long-standing private medical practice should be handled with as much care and attention to details as the opening of a new practice.
To start the closing process, the physician should first notify staff. When doing so, it is appropriate to present a timeline, along with a plan as to how you will staff the office during and immediately after the closing, and what support you will provide to the staff with respect to finding new positions.
It is appropriate to give your employees at least 90 days notice. The next group to notify is patients and their legal representatives. This must be done in writing. It is recommended that registered mail with return receipt requested be used in the case of high-risk patients, those undergoing aggressive treatment or those on your follow-up schedule.
The letter should clearly state that the practice is closing and that the patient will have to seek medical care from a different physician. The letter should also include a medical record release authorization form that indicates the number of years the records will be retained, and a permanent mailing address or post office box number for future record requests. Offer patients the opportunity to contact the office for possible referrals.
A copy of this written notice should be placed in each patient's medical record. This should occur 60 days prior to closing the practice.
Other written notifications need to be sent to the health plans in which the physician participates, hospitals, professional liability insurance and other insurance carriers, and appropriate licensing agencies and professional associations.
After notification, a physician closing a practice should make arrangements for preserving and maintaining medical records. Each state has its own set of record retention guidelines. Typically, adult records must be maintained for a minimum of seven years after the last visit, even if the patient is deceased. Records of minors should be maintained for a corresponding period of time past majority (age 21 in most states).
Records that must continue to be retained may be scanned or stored in a secure location that is moisture- and fire-resistant. Those that have surpassed the state retention period may be destroyed, with shredding being the preferred method.
The physician might also consider using a document management company to store or destroy medical records. However, the cost associated with using this service needs to be weighed heavily.
Most state laws allow physicians to charge a patient a fee for duplicating and transferring records to another practice. But generally speaking, retiring physicians provide this service at no cost to the patients. Record copies must be accompanied by a signed authorization from the patient or the patient's legal representative. Do not send the original medical record.
A retired physician will continue to be exposed to the risk of a malpractice allegation. The period of time depends on the state's statute of limitations for the filing of professional liability lawsuits. The physician may and should cancel his or her professional liability insurance policy, effective with the date of retirement, and subject to applicable law.
Under an occurrence policy, no action needs to be taken other than notifying the carrier in writing and requesting a refund of unearned premium. With a claims-made policy, it will be necessary to secure tail coverage to provide continuing protection if the physician is sued in future years for a service that was rendered while the policy was in force.
In the last 90 days, a physician also needs to tie up loose operational ends in the practice. At a minimum, these include paying bills, maintaining billing and collection activities, and keeping an optimum level of staff -- all while still seeing patients.
Obviously, no new patients should be seen at the practice once the retirement announcement is made. At 60 days prior to closing, it is recommended that the physician start referring patients that require continual follow-up and start restricting nonemergent appointments as much as possible. How this is handled is the individual physician's decision.
Once the staff learns that the practice is closing, it might be difficult to retain them through (and sometimes beyond) the closing date. Consider offering incentives, including severance packages or help in locating a new position. Be gracious to those who choose not to stay to the end, and be prepared to supplement the loss of staff through the use of temporary staffing agencies. While this is an additional expense, it might be worth it to minimize the stress on the remaining staff.
Bill payment and billing and collection activities will typically continue months after the practice closes. The physician may choose to take over the bill payment and other administrative tasks.
However, the billing and collection function is a different story. While the practice is still running, there should be a huge effort made to bill and collect as quickly as possible and to resolve any outstanding reimbursement issues with insurance companies and patients.
If the practice uses an outside billing service, then it is a matter of following the terms of the agreement and deciding when it is appropriate to cease the activities. If billing is done internally, there are several alternatives, including but not limited to: leasing a small office (on a month-to-month basis) so that the necessary staff may continue to work on accounts; having the biller work from home or from the physician's home; engaging a billing service to work the accounts and take a percentage; or finding a company that would purchase the receivables.
Also, the physician needs to take inventory of supplies and get an appraisal of the office furniture and equipment, then decide what to sell and what to donate. An accountant might help make those decisions by explaining the tax implications of any decision.
If the equipment is leased, it is important to review the leasing contract and contact the vendor to negotiate the terms for the remaining period.
Notify supply vendors so that recurring orders are adjusted and assigned a termination date. Office supplies with the practice's name or other identifying information should be destroyed -- particularly prescription pads. Follow the federal guidelines for disposing of prescription drugs and medications. Contact drug representatives to determine what to do with the unused samples.
This is just an overview of the activities that must be considered when retiring from a practice. Even when a physician knows he or she is ready to take this step, it is still an emotional and stressful time.
Karen S. Schechter amednews correspondent—