Buying and Selling Healthcare Practices
Whether you are contemplating acquiring a new practice or planning the sale of an existing one, it is important to be aware of the complexities involved in the transfer of a healthcare practice. In order to successfully complete such a transaction, physicians are typically advised to start planning at least a year in advance and to consult an experienced healthcare attorney throughout the process.
During the sale of a practice, there are many issues that must be meticulously considered and decided. Some of these pertain to the physician’s duty to provide proper care to patients. These include assuring continuity of care, advance notice to the patients, and ensuring proper custody and transfer of medical records. Failure to take these steps can be construed as patient abandonment and lead to accusations of professional misconduct and even malpractice.
Typically, patient notification should be made with enough time to allow the patient to have his or her medical records transferred and to find another physician. If the patient is not currently being treated, a letter sent well in advance is usually enough. Providers should be careful when considering whether to include contact information for other physicians for the patient to choose from, as in many cases including this information could result in accusations of improper or negligent referral. For patients who are in active treatment, the physician must use professional judgment to determine what steps are necessary to ensure that quality care continues to be provided.
Arrangements should also be made for the custody and transfer of medical records. Depending on the specific provisions of the sale, copies should be provided to the purchasing physician, to the patient, or to another office upon proper authorization from the patient, and the originals should be maintained in proper custody. Sometimes, the buyer will assume responsibility for maintaining the original records. Whatever your preferred arrangement is, be sure to consult your attorney about relevant issues, including compliance with the Health Insurance Portability and Accountability Act (HIPAA).
Physicians selling their practice also need to think about their responsibility as employers. Have your attorney review employment contracts to ensure that notice provisions are complied with and that all obligations towards employees are met in the course of the sale of the practice, including any notifications concerning the termination of employee benefits.
Another aspect of transferring a practice involves the issue of controlled substances. A provider who does not intend to continue practicing must surrender her or his Drug Enforcement Administration (DEA) registration. Any unused drug samples must also be properly disposed of. For New York physicians, options include returning the drugs to the manufacturer or distributor, surrendering them to the New York State Department of Health (DOH) or to the DEA, or destroying them in an authorized manner. There are specific forms and protocols that must be followed for each of these options.
Throughout years of practice, your office has entered into many contracts of various types – with equipment suppliers, management companies, other providers, and insurance companies. Each of these contracts should be reviewed individually, ideally with the guidance of an experienced attorney, in order to determine what your obligations are in terms of canceling or assigning them.
A major issue that is specific to the sale and purchase of a healthcare practice is making sure that the financial arrangements do not run afoul of the federal anti-kickback statute and other laws and regulations that affect payments to a provider. The anti-kickback statute forbids healthcare providers from receiving any kind of compensation in exchange for referring or arranging healthcare business.
While authorities have also provided several types of safe harbor exceptions to the statute in order to allow transactions like selling a practice, it is important to structure the sale in such a way as to remain within the protection of the safe harbor. Depending on the type of entity buying the practice, various laws and regulations will affect the transaction. It is important to consult a qualified healthcare attorney in order to avoid accidental violations of the statute and their potentially severe consequences.
The method of payment for the medical practice should also be carefully chosen so to comply with the anti-kickback statute and other applicable laws. A preferred method is cash-upon-purchase. Since the selling physician will receive all funds immediately upon transfer of ownership, there will be no further motive to refer business in the future and the anti-kickback statute will not be implicated.
A provider wishing to pursue an installment plan would be wise to work with an attorney in structuring the payment plan so as to avoid problems. As the buyer will continue paying after the sale is final, the seller will still be motivated to refer business in order to be assured of receiving the full amount. Another arrangement to be approached with extreme caution is one where the payment is due after the sale is completed and any part of the payment amount is tied to revenues. It is possible to structure such payment plans without violating the anti-kickback statute, but that is a complex task that should not be attempted without legal counsel.
Buying or selling a healthcare practice is a transaction that is fraught with complexity. If any step is completed incorrectly, the healthcare providers involved may suffer not just monetary loss but also professional and legal consequences. To make your sale or purchase go as smoothly as possible, the best option is to obtain the help of an experienced and knowledgeable healthcare attorney.
The healthcare attorneys with Joseph Potashnik and Associates PC provide quality representation to providers involved with purchasing, selling, or establishing practices in New York and New Jersey. Contact our office today to set up your consultation.