Considerations for Selling or Closing a Medical Practice

If you are thinking about discontinuing your medical practice, whether you will move out of the area, take a new position, retire or are disabled, you should be aware of some basic procedural principles and legal concerns. By following these guidelines, you should be able to properly discontinue your professional relationship with your patients while assisting them to obtain continuous care.

Notify Your Patients

To avoid a claim of abandonment by a former patient or the State Office of Professional Medical Conduct, you should notify your active patients of your intention to withdraw from practice.  Active patients are, in most cases, those patients who have been treated within the last year.  Of course, special circumstances may warrant notification of additional patients.

As a general rule, patients should receive written notification that you are discontinuing your practice no less than 30 days prior to closure but we recommend at least 60 days prior to your practice’s termination date.^[1]  Both the letter and the envelope should be marked “personal and confidential.” The letter should be mailed via first class mail to each patient’s last known address. A copy of the letter should be maintained in the patient’s medical record, whether it is paper or electronic.

Although you are under no legal obligation to directly refer your active patients to the care of another physician, you may offer to assist the patient with the transition.  A termination of treatment notice should include the following:

• Advise the patient of the importance of continued care.
• Refer the patient to the appropriate county medical society or local hospital (name and telephone number), to obtain a list of local practitioners or advise the patient that you will be available to continue to provide medical services until the termination date.
• However, you must be aware that if you have given patients a prescription for medications, laboratory tests, or mammograms which go beyond the date the practice is being closed, you must inform the patient in the letter you send about closing your practice that when he/she goes for such testing or mammogram, that the patient must advise the radiologist and/or laboratory to send results only to the patient’s primary care physician. Further, if you are able to anticipate closing your practice well in advance of sending the notice, try to restrict any prescriptions for medications so that the prescription terminates within 30 days from the date the practice officially closes.
• Provide a method which would enable your former patients to contact you or a custodian of your records so a copy of their records can be released to a subsequent treating physician, i.e. address, phone number or form letter. You may also wish to provide this information to your county medical society or a hospital where you have had privileges.
• Also provide the major insurance companies you participate with the name, address and telephone number of the custodian of the records.
• If you are selling your practice, you should inform the patient that the physician who is purchasing your practice will retain and be the custodian of the records unless or until the patient provides written authorization to send a copy of the records to another physician. (See below section on transferring records.)
• However, although recent law permits you to give the patient the original record if you have not arranged for other retention, we strongly recommend against doing so. Not having an original record in the event of a malpractice lawsuit or administrative proceeding after you retire from practice can seriously inhibit your defense. You may not be able to recall and substantiate your recollections for depositions or trials occurring years after a suit or proceeding has been commenced.

Retain Your Medical Records

The importance of a complete, well-documented and unaltered medical record in the defense of an action cannot be overstated. It is extremely important that you retain the original medical records of all your patients, not just the ‘active’ ones, for the statutorily required periods of time, as required by the Education Law.  

Because of the enactment of Lavern’s Law, if a lawsuit is based on the alleged negligent failure to diagnose cancer or a malignant tumor, whether by act or omission, the statute of limitations provides that the lawsuit must be commenced within two and a half (2½) years of the later of: 

• when the patient knows or reasonably should have known of the alleged negligent failure to diagnose and knows or reasonably should have known that such alleged negligent failure has caused injury, BUT the lawsuit must be commenced within seven (7) years of the alleged negligent failure to diagnose; or

• where there is continuous treatment for such condition, the lawsuit must be commenced within two and a half (2½) years from the date of last treatment which could be beyond seven (7) years from the alleged negligent failure to diagnose.

Notify MLMIC

MLMIC’s Underwriting Department has recommended the following:

• Send MLMIC’s Underwriting Department written notification of your intention to discontinue your practice as soon as possible. Tell the underwriter the date you wish to have your policy canceled and the reason. 
• If you have a “claims made” policy, it is strongly recommended that you obtain a Reporting Endorsement or “Tail” to protect yourself for claims that are reported to MLMIC after you cancel your policy. Upon your death, a free tail will be issued to your estate once MLMIC receives notification from the executor/administrator of your estate.

Go the Extra Mile

If your office remains open after you have terminated your practice, you can keep your MLMIC policy in force for an additional 2 or 3 months. This is important due to the risks you incur if a staff member renews a prescription or inadvertently gives advice to patients on the telephone. If you choose to continue your insurance coverage, indemnification should be available for you in the event of a lawsuit as long as the allegations are generally covered and not excluded under your MLMIC policy.

If you are selling or dissolving your practice and transferring your original records to the custody of another physician, you should obtain legal counsel to prepare a written agreement with that physician. You should consult with your attorney regarding current legal requirements, including whether the replacement physician must have a “business associate” agreement under the Health Insurance Portability and Accountability Act (“HIPAA”). The written agreement should also address the following issues:

• Your replacement must either provide patients with a copy of their records upon proof of appropriate patient authorization or must notify you to obtain approval of each patient request, depending upon your desire/intent.
• Your replacement must maintain your original records for the time periods required by State and Federal law AND must maintain patient confidentiality by not looking at those records unless or until the patient chooses to seek treatment with him/her. This physician is not entitled to do anything with the original records beyond storing them for the appropriate time periods.
• Your replacement must maintain your original records in a safe and secure environment, preferably in a waterproof and fireproof area.
• In the event of any civil proceeding, i.e. medical malpractice litigation, or governmental agency investigation or proceeding, you must be given access to and/or a copy of or, if necessary, the original records in order to either comply with such requests or defend yourself.

The information presented above should not be considered as definitive legal advice and does not summarize everything that must be attended to when discontinuing your practice. Obviously, the facts of each situation may differ or other questions may arise. If you intend to sell your practice rather than simply closing your office, there are other technical and legal issues to consider beyond those discussed in this memorandum. 

If the discontinuance of practice is predicated upon a physician’s death, the surviving spouse or the executor/administrator of the estate should be aware of the legal issues involved in order to best manage the assets of the estate. 

Please feel free to contact MLMIC attorneys in Syracuse (315) 428-1380, Latham (518) 786-2880, Long Island (516) 794-7340 or (877) 426-9555.  However, we recommend that you consult your own personal attorney for advice beyond what the MLMIC Legal Department is able to afford you.

^[1] The choice of a termination date that is reasonable for both patient and physician depends on a number of factors, including the nature of the patients’ conditions and the availability of other qualified physicians.