Posts Tagged practice

For the First Time, Employed Physicians Outnumber Self-Employed

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For the First Time, Employed Physicians Outnumber Self-Employed

CHICAGO — For the first time in the United States, employed physicians outnumber self-employed physicians, according to a newly updated study on physician practice arrangements by the American Medical Association. This milestone marks the continuation of a long-term trend that has slowly shifted the distribution of physicians away from ownership of private practices.

Employed physicians were 47.4 percent of all patient care physicians in 2018, up 6 percent points since 2012. In contrast, self-employed physicians were 45.9 percent of all patient care physicians in 2018, down 7 percentage points since 2012. Changes of this magnitude are not unprecedented. Older AMA surveys show the share of self-employed physicians fell 14 percentage points during a six-year span between 1988 and 1994.

Given the rate of change in the early 1990s, it appeared a point was imminent when employed physicians would outnumber self-employed physicians, but the shift took much longer than anticipated. The AMA’s research notes this example and suggests “caution should be taken in assuming current trends will continue indefinitely.”

The majority of patient care physicians (54.0 percent) worked in physician-owned practices in 2018 either as an owner, employee, or contractor. Although this share fell from 60.1 percent in 2012, the trend away from physician-owned practice appears to be slowing since more than half of the shift occurred between 2012 and 2014.

Concurrently, there was an increase in the share of physicians working directly for a hospital or in a practice at least partly owned by a hospital. Physicians working directly for a hospital were 8.0 percent of all patient care physicians, an increase from 5.6 percent in 2012. Physicians in hospital-owned practices were 26.7 percent of all patient care physicians, an increase from 23.4 percent in 2012. In the aggregate, 34.7 percent of physicians worked either directly for a hospital or in a practice at least partly owned by a hospital in 2018, up from 29.0 percent in 2012.

Younger physicians and women physicians are more likely to be employed. Nearly 70 percent of physicians under age 40 were employees in 2018, compared to 38.2 percent of physicians age 55 and over. Among female physicians, more were employees than practice owners (57.6 percent vs. 34.3 percent). The reverse is true for male physicians, more were practice owners than employees (52.1 percent vs. 41.9 percent).

“Transformational change continues in the delivery of health care and physicians are responding by reevaluating their practice arrangements,” said AMA President Barbara L. McAneny, M.D. “Physicians must assess many factors and carefully determine for themselves what settings they find professionally rewarding when considering independence or employment. The AMA stands ready to assist with valuable resources that can help physicians navigate their choice of practice options and offers innovative strategies and resources to ensure physicians in all practice sizes and settings can thrive in the changing health environment.”

As in past AMA studies, physicians’ employment status varied widely across medical specialties in 2018. The surgical subspecialties had the highest share of owners (64.5 percent) followed by obstetrics/gynecology (53.8 percent) and internal medicine subspecialties (51.7 percent). Emergency medicine had the lowest share of owners (26.2 percent) and the highest share of independent contractors (27.3 percent). Family practice was the specialty with the highest share of employed physicians (57.4 percent).

Despite challenges posed by a dynamic change in the health care landscape, most physicians still work in small practices. This share has fallen slowly but steadily since 2012. In 2018, 56.5 percent of physicians worked in practices with 10 or fewer physicians compared to 61.4 percent in 2012. This change has been predominantly driven by the shift away from very small practices, especially solo practices, in favor of very large practices of 50 or more physicians.

The new study is the latest addition to the AMA’s Policy Research Perspective series that examines long term changes in practice arrangements and payment methodologies. The new AMA study, as well as previous studies in the Policy Research Perspective series, is available to download from AMA website.

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Do You Understand Due Diligence In Physician Practice Acquisitions?

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Do You Understand Due Diligence In Physician Practice Acquisitions?

Often in the sale of a physician’s practice, the owner of the selling practice (the “Selling Practice”) may desire to structure the transaction as what some refer to as a “handshake deal” – using minimal documentation and providing minimal diligence for review. Although this may be advantageous for the Selling Practice and its owner (depending on the documentation), this is generally quite risky for the purchaser (the “Purchaser”) – as the Purchaser may purchase unwanted liabilities or pay for assets that the Selling Practice cannot transfer.

On the other hand, typically the Purchaser wants to structure the transaction as an asset purchase (an “asset deal”), as opposed to acquiring ownership of the Selling Practice entity (a “stock deal”), so that the Purchaser can pick and choose which assets to purchase and which liabilities to assume (as opposed to taking everything in a stock deal). Regardless of the transaction structure, it is critical for the Purchaser to perform due diligence.

Provided below are a few examples of due diligence items that should be reviewed by the Purchaser (in the context of an asset deal):

  1. Corporate / Organizational – Even in asset deals, a Selling Practice’s governing documents should be reviewed to confirm which owners must approve (and what actions are needed to approve) the transaction, and who can sign on behalf of the Selling Practice. It is important to confirm that the governing documents do not provide any third parties a prior right to purchase the Selling Practice or its assets.
  2. Liens / Litigation – UCC searches should be conducted to ensure no third party has a security interest, lien, or other encumbrance on the assets. Litigation searches should be conducted to ensure no assets are the subject of any pending litigation.
  3. Contracts – Each contract should be reviewed to determine which, if any, contracts the Purchaser wants to assume, to confirm the federal Stark Law, federal Anti-Kickback Statute, and related state statutes are not violated, and to determine which contracts can be assigned. If the Purchaser wants to assume a contract under which assignment is restricted, consent to assignment will need to be obtained prior to closing. The Selling Practice will be left with any contracts the Purchaser does not assume.
  4. Governmental / Regulatory Matters – It should be confirmed the Selling Practice has all required licenses, provider numbers, permits, registrations and accreditations to conduct its business. Depending on the circumstances and the applicable legal framework, the Purchaser may obtain new licenses, provider numbers, permits and registrations.
  5. Employees / Independent Contractors – All employee and confidentiality agreements, non-compete and non-solicitation provisions, disciplinary actions, immigration status, garnishment actions, paid time off and benefit policies should be reviewed.  The Purchaser will need to analyze which employees it wants to hire and whether it wants to honor any “paid time off” and, if so, how much time will be honored (typically resulting in a corresponding reduction to the purchase price).

The above items are only a few of many examples. Other critical items such as real estate ownership/leases must also be reviewed.

Anthony Romano is a partner with Burr & Forman LLP practicing in the firm’s Health Care Industry Group. Burr & Forman LLP is an official preferred partner with the Medical Association of the State of Alabama.

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Patient Satisfaction: What Is It Really Worth?

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Patient Satisfaction: What Is It Really Worth?

In previous years, patient satisfaction discussions pertained only to patient surveys and results. Some managers believe surveys are utilized by specialties, such as plastic surgery practices that primarily operate on a cash basis. However, consumerism is here to stay! Cost and quality will create a level playing field in health care and increase the importance of patient satisfaction. When working with a practice, I love to sit in the waiting room to see operations from the patient’s point of view. I also search the specialty online to review the competition and the effectiveness of the practice’s website. During my research, I may also see online reviews, which speak directly to the patient experience.

Every business is a function of its people. Choosing the right people, training them continually and providing ongoing communication is essential to creating an exceptional patient experience. A successful practice has an established culture through a mission statement that is expressed each day through the actions of the physicians, managers and staff. Loyalty and profitability follow when an organization makes a promise to a customer and delivers on the promise over, and over again.

As an administrator, I begin with a good job description and then hire the person with the desired behaviors and skills to perform the task or job. A consistent training program is a key to success, it is not simply assigning a new staff to another employee for training. The staff training should occur through various methods with a supervisor or mentor. Once training is complete, the employee’s performance is validated before they are released to perform the task unsupervised.

Patient satisfaction surveys focus on each aspect of the patient’s visit to assure each person is delivering great service and managing their responsibilities to complete the assigned tasks. Medical staff may be highly trained on a specific clinical task, but a customer service attitude is essential when dealing with patients. Defining a plan to act quickly on feedback from a patient survey is essential to mitigate a problem.

You cannot prevent all problems, but the way you handle a problem can salvage a relationship. Establish key behaviors for staff to protect the patient relationship. If you hired people with a genuine heart for service in a medical practice, a problem may arise but the commitment to patient satisfaction should preserve the patient relationship.

Technology is rapidly improving. We have the tools to measure every activity in our practice to ensure the patient experience is exceptional. Phone systems have the capability to measure abandoned calls, length of time on hold, and the number of calls going to voicemail. Our practice management systems include reports and options to monitor first available appointments, percent of patients utilizing the patient portal and patient flow.

There are many tools to promote better patient engagement, including online registration to eliminate paperwork or automated appointment reminders using text, email or call. The patient portal, if promoted and correctly utilized, can reduce phone calls and improve the patient experience. The portal allows for ongoing communication, as opposed to hours waiting by the phone only to miss the call, which increases the call volume. The portal gives the patient access to information to share with other providers.

The development of defined processes and policies is essential to effective training. If the policies are ineffective, or if management does not enforce the policies, then the patient experience is affected. Patients who have an exceptional experience will tell a few people. If they have a poor experience, they may tell the story over and over again.

If your practice relies on referrals from other physician practices, do not underestimate the power of the referring office. The referring provider can send patients elsewhere if the patient is not satisfied with your practice. You should be able to identify the top 20 referring physicians and track the volume of referrals to assure it is consistent. The manager should contact the manager of the referring practice to assure needs are being met and the feedback is good.

It is important to know what makes your practice thrive. It is comprised of multiple factors, including good physicians and loyal employees, which lead to strong referring relationships. A medical practice exists for the patients, so what is patient satisfaction worth? EVERYTHING!

Article contributed by Tammie Lunceford, Healthcare and Dental Consultant, Warren Averett Healthcare Consulting Group. Warren Averett is an official partner with the Medical Association.

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Paying More Money Is Not the Best Way to Retain Great Staff

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Paying More Money Is Not the Best Way to Retain Great Staff

Medical practices are painfully in need of keeping their top employees. The time, costs and dangers of recruiting replacement personnel are just part of the issue. Loss of key team members negatively impacts patient care, practice profitability, and staff morale. All administrators agree the retention of a trained, well-performing and mutually cooperative staff is a key to success in medicine. How do you increase your prospects of keeping your “keepers” so that you lose only the ones who needed to go anyway? There are three secrets to success in this area and none require pay raises or bonuses.

Most important is to show them that you respect them. Make them feel valued by your praise of their efforts and character. Try to “catch” them doing something good. Take an employee to the office of another physician in the group and praise some special thing they did recently. Prompt the physicians about special employee efforts and send them off to find and praise the staff member. Write key staff notes of thanks for their sacrificial efforts. Set aside time each week to praise one to three members of your team. Conduct “stay interviews” with select team members. Also, the physicians and practice leadership should be aware of the circumstances in their life. Do they have a child excelling at academics or athletics, are they planning a special vacation, are they approaching empty nest status, are they caregivers to parents or other family members, do they have a special hobby they enjoy discussing, are they saving for a major purchase like a vehicle, boat, or home?

Caring about the lives of your team affirms their value to you. Giving them a $500 bonus deposited into their joint checking account is a currency over which they may have limited control and when it is spent, it is forgotten. Giving them a handwritten note or sincere verbal praise is a “currency” they can keep for their very own and use again and again as they replay the message in their minds. The praise costs your practice a little of your time and a modicum of empathy.

After a culture of merited praise is established, it is easier to correct or discipline them when necessary. Ignoring mistakes or poor conduct is a sign of not caring about the person. Think of the influential family members, teachers and coaches in your life. Weren’t they candid with you about times when your efforts were not your best? If the staff rest in the certainty of your gratefulness for them, they can handle the truth about poor performance from you better. Always praise their character and criticize their actions. In other words, speak to the actions, but don’t attack their character. Avoid a “compliment sandwich” where you say something nice, slip in the problem, and then end with another positive. Be brief, be clear, be firm, but be nice.

New employees need some corrective discussion as early in their employment as possible. Not only is there usually an area for enhancement, but it establishes that you will exercise the right to address them when you deem necessary. For the millennials in your office, this discipline may come as a great shock. They were raised in an era when every child received a participation trophy just for showing up, and as children, they were assured they could be anything they wanted to be. If there were problems at school, their parents went to the school and took care of it for them. Now you are telling them they are special but not in a good way, and their only trophy may be dismissal if the behavior continues. This might be a difficult message to absorb, but you owe it to the great staff to communicate it in a timely manner.

At a recent practice management roundtable, we discussed the fact that some medical staff members underperform until the leadership assigns part of their duties to the better performing staff, so that things get done. Permitting this transfer of work, is unfair to all staff and must be remedied.

With a balance of praise and discipline in place, have some fun at work! Every holiday is a good time to have fun. At Christmas, let them have a contest to decorate a door. For Thanksgiving let them write something about each member of their work area for which they are thankful. Compile the results and share with the staff in a lunch meeting. Halloween, the start of football season, Groundhog Day and anything else is a reason to celebrate. Have each bring a baby photo of themselves, and let the team guess which baby is the staff member, let them send in photos of what they did this summer and have a collage review in the fall of the pictures with narrative by each staff to share the joy, take them bowling, have a new baby “pool” where all can guess the delivery details of an expectant mother on the team, and select secret pals among the staff with a low limit on any expenditures. The point is to permit them to have fun at work. You do not have to entertain them, just give them permission to entertain themselves.

It is essential medical practices provide a fair salary and benefit structure to their staff. Underpaying your people is not compensated by the provision of a good work environment. However, remember people accept a job for the initial pay and benefits, but they remain in a position because they feel appreciated, know their best efforts are expected, and they are encouraged to have fun at their work. Make your practice a place where these three things are true, and you will have a stable, patient-caring and happy staff. It will make everything else you have to do so much more enjoyable.

Article contributed by Sae Evans, Maddox Casey and Jim Stroud, Members, Warren Averett Healthcare Consulting Group. Warren Averett is an official Gold Partner with the Medical Association.

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You Need to Know When to Hold ’em and Know When to Merge ’em

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You Need to Know When to Hold ’em and Know When to Merge ’em

With uncertainty in the health care markets and the growing demands on medical practice infrastructure, many physicians are thinking that merging their practice with another might be a worthwhile idea. A merger might be advisable under some circumstances, problematic in other cases, and potentially illegal in certain instances. We will leave the legal issues to the attorneys, but if you are talking with the only other practice of your specialty in your city, I recommend getting some legal advice.

When physicians initiate merger discussions, they often begin with an assumption that they can share the overhead of one group and all enjoy a dramatic increase in personal income. Based on the enthusiasm generated by this monetary issue, a plan to pursue merger begins. However, there are other matters which should come before the optimistic expectation of financial gain.

Do Your Homework

The most basic consideration is whether the physicians in both groups are clinically compatible. Medical training and various academies afford latitude in clinical decision making, a medical choice at one end of that range of latitude can be questionable in the mind of an M.D. on the opposite end. Making certain your groups are clinically compatible is the first step in a successful merger. Compatibility also includes practice patterns, treatment protocols and utilization issues.

If you are a good fit clinically, look next at cultural issues. This includes the manner in which the physicians relate to their patients, the staff and to one another. Many groups will not tolerate a physician who is rude to patients, hostile to staff and abrasive with other doctors in the group or in the medical community. This behavior may have been accepted in one group, but it will be toxic in the merged practice. In my experience working to help keep practices together, cultural differences are the most common areas of disagreement and are also the most difficult problems to solve.

Devising a Plan

If the groups are deemed to be clinically and culturally compatible, the hard part is complete. Now you are ready to address any differences in work ethic. I place this third because if there are differences, they can be mitigated with a well-designed physician compensation formula. There are times when one physician’s pursuit of appropriate work-life balance might result in choices which appear to another M.D. as neglect of the practice, but those are part of the cultural difference resolution. Differences in work ethic must be accommodated in the practice of medicine, and bonus differentials are designed to do exactly that.

Finally, it is time to assess the monetary matters. Overhead can be shared and, perhaps, reduced. The practice management, billing and EMR systems needed for one practice might be able to handle two groups with little increase in costs. Ancillary activities may be more profitable with additional physicians referring to them. The best practice behaviors of each group can be shared to improve patient scheduling, procedure mix, payer mix and revenue cycle processes.

Bet or Fold

The process of determining clinical, behavioral, work ethic and financial compatibility needs an outside facilitator to keep it on track and to ensure the difficult parts of the dialogue are addressed and moving forward, rather than stalling out. A merger may be in the cards for your group, but keep in mind that one done poorly can cause many years of pain which could have been avoided.

 

Article contributed by Sae Evans, Maddox Casey and Jim Stroud, Members, Warren Averett Healthcare Consulting Group. Warren Averett is an official Gold Partner with the Medical Association.

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Alabama Legislature Considers State Law on Cybersecurity

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Alabama Legislature Considers State Law on Cybersecurity

At the time of the writing of this article, Alabama is one step closer to having a law on the books related to cybersecurity. As one of only two states without a state data breach law, Alabama is considering legislation that requires certain entities, “covered entities,” to report to state agencies and affected individuals when there has been an unauthorized acquisition of “electronic, sensitive personally identifying information.”

On March 1, 2018, the Alabama Senate passed SB318, and if passed by the House and signed by the Governor, it would require “covered entities” to notify Alabama’s Attorney General, Alabama residents whose information has been compromised, and consumer credit-reporting agencies of a data breach. For health care providers covered by the Health Insurance Portability and Accountability Act (“HIPAA”), federal law already requires notification when they experience unauthorized disclosures of protected health information. In addition to HIPAA’s breach notification requirements, the new Alabama law would require reporting at the state level for healthcare providers who experience a data breach. It is important to note that the term “covered entities” in the proposed legislation is much broader and applies to persons or business entities that acquire or use personally identifiable information.

Investigation and Reporting

Under SB318, a covered entity is required to investigate any data breach and in some instances report the breach. The investigation must include:

  1.  an assessment of the nature and scope of the breach,
  2.  identification of any sensitive personally identifying information involved and the individuals involved,
  3.  a determination as to whether the information was acquired by an unauthorized individual and could result in substantial harm, and
  4.  identify and implement measures to restore security and confidentiality of the system involved in the breach.

It is the second factor that determines whether the breach is reportable:  Is the sensitive information reasonably believed to have been acquired by an unauthorized person? And is the unauthorized acquisition reasonably likely to cause substantial harm to the individuals?

The law sets forth four factors to consider when evaluating whether the information is “reasonably believed” to have been acquired by an unauthorized individual. In making this determination, the covered entity must evaluate “indications that the information is in the physical possession and control of a person without valid authorization, such as a lost or stolen computer or other device containing information; indications that the information has been downloaded or copied; indications that the information was used by an unauthorized person, such as fraudulent accounts opened or instances of identity theft reported; and whether the information has been made public.” Unfortunately, the law does not provide guidance on whether the breach is reasonably likely to cause substantial harm to the affected individual.

Even if a breach is not a reportable event, the covered entity must maintain relevant records for at least five years. For instance, if the covered entity determines the breach is not reasonably likely to cause substantial harm then no notification is required, but the entity should keep all records related to the breach and their determination that notification was not necessary for five years following the incident.

Required Security Measures

The proposed legislation also requires covered entities to implement “reasonable security measures” to protect an individual’s data.  Similar to HIPAA, the bill requires the covered entity to designate an employee to coordinate security measures (i.e. HIPAA Security Officer) and to identify risks of data breaches. In recognizing that not all covered entities face the same risks or have the same resources, the required “reasonable” security measures should take into account the size of the covered entity, the amount of data maintained and stored by the covered entity and the cost to implement security measures. Good news for healthcare providers, if a healthcare provider has performed the necessary security and risk assessments required under HIPAA, it should easily meet the standards required in SB318.

Information that Triggers Notification

Not all information qualifies as “sensitive personally identifiable information.” To meet this definition, the accessed information must consist of the individual’s first name or initial and last name in combination with any one of these data elements:

  • A non-truncated (or shortened) Social Security or tax identification number;
  • Non-truncated driver’s license, state-issued identification card number, passport number, military identification number or any unique, government-issued number used to verify identity;
  • A financial account, credit or debit card number along with a required security code, expiration date, PIN, access code or password necessary to access a financial account or conduct a transaction;
  • Individual medical or mental history or treatment information;
  • A health insurance policy or identification number; and
  • A username or email address along with a password or security question and answer that gives access to an online account that is likely to contain sensitive personal information.

Elements and Method of Notification

If the investigation concludes that notification must be made, the covered entity must provide notification as “expeditiously as possible but no more than 45 days after the determination of the breach. The notification may be made by mail or email and must include the following elements: 

  • The date, estimated date, or estimated date range of the breach;
  • A description of the sensitive personally identifying information that was acquired by an unauthorized person as part of the breach;
  • A general description of the actions taken by a covered entity to restore the security and confidentiality of the personal information involved in the breach;
  • A general description of steps a consumer can take to protect himself or herself from identity theft; and
  • Information that the individual can use to contact the covered entity to inquire about the breach.

Penalties

The legislation also includes penalties for failing to provide the required notifications, including a potential violation of the Alabama Deceptive Trade Practices Act (“ADTPA”). The Deceptive Trade Practice Act penalties would apply for willful or reckless disregard of the notification requirements. Civil money penalties are capped at $5,000 per day for each consecutive day the covered entity fails to comply with the notice provisions and there is a $500,000 cap for violations under the ADTPA. A violation does not constitute a criminal offense and does not provide for a private right of action.  In other words, a patient/consumer cannot sue the covered entity for the breach.

The bill is currently pending before the Alabama House of Representatives, bill number HB410.

Article contributed by Burr & Forman, LLP. Burr & Forman, LLP, is a partner with the Medical Association. Please read other articles from Burr & Forman, LLP, here.

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How is Tax Reform Impacting Physician Practices?

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How is Tax Reform Impacting Physician Practices?

The biggest U.S. tax reform since 1986 consists of major tax law changes that will affect everyone. The most significant change for corporations is a move from the graduated corporate tax rate structure to a flat rate. Although President Trump was originally fighting for the corporate rate to be reduced to 15 percent, lawmakers settled by reducing the rate from 35 percent to 21 percent. Other aspects of the tax law are more complex, and many businesses are wondering how this new law will affect their particular industries.

Let’s dive a little deeper into how tax reform is affecting physician practices.

A significant amount of attention has been focused on the 20 percent pass-through income deduction (also known as the qualified business income “QBI” deduction). Unfortunately, physician practices are specifically excluded from QBI deduction eligibility. However, an exception is made for physicians with taxable income under $415,000 for joint filers and $207,500 for single filers. Physicians with taxable income below these thresholds may be eligible for the 20 percent QBI deduction. The QBI deduction calculation is complex and should be considered in conjunction with physician group compensation models and reasonable compensation guidelines.

Entertainment expenses need to be evaluated and minimized. Under the new law, deductions for business-related entertainment expenses are disallowed. Meal expenses incurred while traveling on business will remain 50 percent deductible. The 50 percent disallowance will now also apply to meals provided at an on-premises cafeteria or otherwise on the employer’s premises for the convenience of the employer. After 2025, the cost of meals provided through an on-premises cafeteria or otherwise on the employer’s premises will be nondeductible.

Physicians should also take into account the tax reform changes for individuals by evaluating their personal mortgage interest structure to maximize the interest deduction. This can be achieved by turning a home equity line of credit (HELOC) into a traditional mortgage, if applicable. The home mortgage interest deduction has been modified to reduce the limit on acquisition indebtedness to $750,000 for married filing jointly (MFJ), down from $1,000,000 under previous law. However, if the acquisition indebtedness occurred before Dec. 15, 2017, the limit remains $1,000,000.

Finally, tax reform limits the Federal tax deduction for state and local taxes to $10,000, beginning in 2018. Many physicians will far exceed the $10,000 state and local tax deduction cap. The limitation on state and local tax deduction encompasses both income taxes, sales tax and property taxes. Physicians can potentially minimize tax liabilities by strategically planning the payment of their individual state taxes and utilizing any state scholarship granting organizations, such as an Alabama Scholarship Granting Organization (SGO) or Georgia Student Scholarship Organization (SSO). These programs allow taxpayers to receive a state tax credit in return for an eligible contribution. This contribution qualifies as a charitable contribution on a federal return. This turns a state tax payment into a charitable deduction for federal purposes, increasing itemized deductions.

 

Article contributed by Warren Averett CPAs and Advisors. Warren Averett CPAs and Advisors is an official Gold Partner with the Medical Association.

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Three Common Mistakes in Transferring Ownership of a Medical Practice

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Three Common Mistakes in Transferring Ownership of a Medical Practice

Physicians spend their careers building top-quality practices, but many devote too little attention to the architecture and terms by which the practices will be transferred at their retirement, death or disability. In our experience, there are three areas, which if neglected, will lead to problems at the crucial point when the ownership of this valuable asset changes hands.

Determining Value

Our clients are most concerned with the value of their practice. While some practitioners underestimate the value of their practice, many overestimate the amount which can be captured in the sale of the practice interest they own. A common mistake is to use a value that was read or heard about from a transaction elsewhere. That transaction price might have been determined by a purchaser who was limited in the amount they could pay, such as a hospital. The transaction might have occurred in a state with a higher managed care payer mix than your practice, or in a state with different non-compete laws regarding health care professionals. Practice valuations vary widely and for many reasons. Two practices in the same city and same specialty could have much different values. The terms of the transaction are another powerful force on sales prices and are rarely publicized. Even if you get the value accurately determined, there are still ways to create problems in the monetization of your practice value.

Clear Conversations

The documents relative to the transfer of a group practice ownership percentage should reflect the plan to sell at a future date, and the design of the manner by which the price will be determined. Even for valuable practice interests absent a clear design, potential buyers may feel tricked by a plan to transfer your share of the practice if it is developed late in your career. The time for this understanding is when younger doctors are brought in to the ownership. Buy-sell agreements and cross-purchase agreements serve to clarify expectations at the time of their drafting but should be reviewed every few years for relevance to the current situation, and any needed changes made. The greater the price desired for a practice, the more the need for clear design, pricing and terms. With a good legal architecture and a fairly determined price, your practice liquidation is almost ready for your time to sell, except for one additional issue.

The Fine Print

The legal obligation to pay the fairly determined price is often accomplished by the purchase of life and/or disability insurance on the selling practitioner. That can become a problem if the policies are never obtained, or the premiums payments are halted. In this situation, the buyer has a responsibility to pay a price agreed but with no funds to pay it. No one will be pleased with the outcome of this situation. Compound this problem with the common mistake of letting the practice price be set by the amount of life insurance proceeds, which could be afforded when the transfer architecture was designed, and you have a purchaser obligated to pay too much and with nothing but after-tax dollars from their future earnings. The CEO, chief emotional officer, at home will not respond well to this deal.

If you have a valuable practice, and you negotiate a fair price and terms for its sale, this can be a valuable way to exit your professional career and move to your next endeavor of success. It takes a little planning and periodic monitoring to gain top value.

Article contributed by Warren Averett CPAs and Advisors, official Gold Partner with the Medical Association.

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Before You Lock the Door and Turn Out the Lights . . .

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Before You Lock the Door and Turn Out the Lights . . .

Necessary Steps When Closing a Physician Practice

The Gilberto Sanchez Story [1]

Shortly after a group of DEA agents and other law enforcement personnel sporting tactical gear arrived in the parking lot with search and arrest warrants on a Tuesday early in August, Dr. Gilberto Sanchez was hauled away from his medical practice in the 4100 block of Atlanta Highway in Montgomery, Ala. Dr. Sanchez had been indicted for operating a medical clinic that dispensed controlled substances inappropriately, unlawfully, and for non-medical reasons. Since his arrest, Sanchez has pled not guilty and been released on bond.

The unfortunate saga of Dr. Sanchez highlights a difficult issue for both physicians and patients — who takes care of a physician’s patients when his or her practice closes shop, whether voluntarily or otherwise? Montgomery news sources reported on a patient of Dr. Sanchez who encountered this exact struggle. After Sanchez was arrested, the patient and his wife (also a patient of Sanchez) began the arduous search for another physician. They also encountered trouble getting their medical records from Sanchez’s office, reporting that they received no answers beyond a voicemail box too full to receive additional messages.

Dr. Sanchez’s story is unique in many regards, but it highlights the need for an effective transition plan upon the closing of a physician practice. Doctors sell practices, retire, die, seek the protection of the United States bankruptcy laws, and generally quit practicing medicine all the time. Whether you’re packing up to hit the links or being packed up and hauled to jail like Dr. Sanchez (let’s hope it’s not the latter), here are a few things to think about in order to wind up your practice’s affairs in accordance with applicable legal and ethical considerations.

A Few Things Before You Leave

A number of factors come into play when you decide to close your practice. Below we consider legal and ethical requirements regarding continuity of patient care and access to records from the Alabama Board of Medical Examiners (“BME”) and the American Medical Association (“AMA”), notification requirements for various government and third-party payors, and miscellaneous corporate formalities that must be undertaken when dissolving a business.

Board of Medical Examiners Requirements and AMA Ethical Considerations

Perhaps the most important part of closing down your practice (maybe for you, but certainly for your patients) is making sure that your patients have adequate notice and opportunity to find a new doctor, as well as access to their medical records. These notice and access considerations are addressed on the state level by the BME in accordance with ethical opinions issued by the AMA.

Consider the following items when closing your practice. Take note of whether each is a suggested best practice or a mandatory requirement.[2]

  1. Notify the BME. You need to advise the BME of any change in your status (closing practice, retiring, etc.) and of your new address, if applicable, and you are required to notify the Medical Licensure Commission within 15 days of a change in your address.[3] You may also submit a request for the removal and disposal of unused medications, especially controlled substances.
  2. Notify Your Patients. To ensure continuity of care for your patients, they have to receive a reasonable notification that your practice is closing and an opportunity to arrange for the transfer of their medical records.[4] The BME recommends that (i) each active patient of the practice receive a direct mail notification of the practice’s closing at their last known address and that (ii) the practice issue a public advertisement (e.g. in the local newspaper) about the closing of the practice to notify the public more generally. All notices (public or direct notice to active patients) should indicate the expected date the practice will close, and the direct notice to active patients should specifically identify instructions for how patients can access or transfer their medical records, and, if the medical practice is being assumed by another physician or practice, the name, address, and telephone number of that physician or practice.[5]
  3. Notify the Drug Enforcement Administration (“DEA”). Notify the DEA of the closing of your practice. This notification can be especially important as you plan for the appropriate disposition of unused medications, including controlled substances.
  4. Post a Written Notice at the Practice. After you actually close your practice, you should consider posting a written notice of its closing on the door or other visible areas of the office/building where your practice is located. The notice should contain instructions for patients to transfer or obtain copies of their medical records, as well as the current location of such records. These instructions must be made available to leasing agents, new tenants, or new owners of the building where the practice is located.
  5. Records Management. As mentioned briefly in the description of notices above, you have to maintain and provide access to patient medical records for a period of time after you close your practice. The BME generally recommends maintaining such records for a period of 10 years after your practice closes. However, some types of medical records (e.g., pediatric records and immunization records) may have different retention requirements, and records associated with anticipated litigation should be kept until the litigation is resolved, even if such resolution does not occur until after the regular record retention period. In addition, BME regulations and AMA ethics opinions require that you make records available to a patient’s succeeding physician, to third parties as requested by your patients or their authorized representatives, and as otherwise required by law.[6]

These record maintenance practices serve multiple purposes: (i) you can satisfy your ethical obligation to provide access to medical records for your patients so they can obtain copies or transfer copies of their medical records to their new physician; and (ii) you fulfill applicable recordkeeping requirements for government and other third party payors in the event of an audit.

  1. Provide Access to Patient Records.  Your patients have a right to access their medical records, or at least a copy of them. This right extends to any person who has a properly executed authorization from the patient to access such records.[7] According to state law and regulations, when providing copies of patient records, you may charge up to $1.00 per page for the first 25 pages, up to $.50 for each page after that, and up to $5.00 as a search fee.[8] The costs of mailing the medical records to the requestor or their designee may also be included in the copying charges. However, state regulations (and in some cases HIPAA) require physicians to consider the needs of their patients and waive the fees where appropriate.[9]

Notify Government and Third Party Payors

There are several parties in addition to your patients who want to know if you close your practice. Medicare, Medicaid, and private insurers will want to know when you close your practice in order to terminate your provider agreement. There are likely requirements in your provider agreement with each payor regarding what you should do when closing your practice. However, generally you need to take the following steps for each payor below:

  1. Medicare. File a form 855B within 30 days of a change of ownership or practice location and within 90 days of other changes in enrollment, as required by 42 CFR § 424.516.
  2. Medicaid. There are no general requirements for closing a physician practice in the Medicaid Administrative Code or the Medicaid Provider Billing Manual. However, providers should notify HPE/DXC (Medicaid’s fiscal agent) on the provider disenrollment form.[10]
  3. Private Insurers. Frequently, insurance payors require notices prior to termination. For private insurers, such as Blue Cross Blue Shield of Alabama, check your provider agreement for the applicable notice requirements, if any.

The “Business” Side of Things

As if the steps listed above were not enough, you still have to think about what you want to do with the business entity from which you operated your practice. Unless you sold your practice, your name is probably still in a partnership, limited liability company, or professional corporation somewhere. To fully dissolve the business entity that formed your practice, you have to file articles of dissolution (or their comparable form for other types of business entities).[11] Be sure to file a copy of the articles of dissolution (or their comparable form) with the BME within 30 days of the effective date of dissolution.[12] In addition, you may be required to file notices with applicable federal and state taxing authorities, local governmental entities, and other agencies, as well as known creditors.

In addition to the above, there are several other nuances that must be explored when dissolving your practice. These nuances can be different based on the type of entity you chose to form your practice and may very well be different between two practices formed of the same type of entity. Consult counsel to look at the relevant provisions in the applicable statutes and the governing documents for your practice.

Lights Out, Lock the Door

As you can see, closing a physician practice is not as simple as turning off the lights and locking the door when you leave. There are a number of legal, ethical, and practical considerations you have to be aware of as you close or transition away from your practice. It may seem like a daunting task at first, but it has to be done in order to provide continuity of care for your patients and to provide for the orderly winding down of your practice’s affairs. To accomplish these objectives, be sure to plan ahead, consult counsel in the planning and implementation process, and don’t leave any stone unturned. It could be the one that trips you up unexpectedly.

For additional inquiries regarding this article or the steps to close a medical practice, please contact Christopher Richard or Gregg Everett at:

Christopher Richard, Esquire
Gilpin Givhan, PC
P.O. Drawer 4540 (36103-4540)
2660 EastChase Lane, Suite 300
Montgomery, Alabama  36117
Telephone: (334) 244-1111
Direct Dial: (334) 409-2233
Fax: (334) 244-1969
E-mail: crichard@GilpinGivhan.com

 

Gregg B. Everett, Esquire
Gilpin Givhan, PC
Lakeview Center, Suite 300
2660 EastChase Lane
Montgomery, Alabama  36117
Telephone: (334) 244-1111
Direct Dial: (334) 409-2228
Fax: (334) 244-1969
E-mail: geverett@GilpinGivhan.com

Article contributed by Christopher Richard, an attorney at Gilpin Givhan. Gilpin Givan is a Bronze Partner with the Medical Association.

 

REFERENCES

[1] Jennifer Horton, Alleged AL pill mill doc’s patients lined walls, sat on floor, U.S. attorney says, WSFA12 News (August 1, 2017), http://www.wsfa.com/story/36021670/alleged-al-pill-mill-docs-patients-lined-walls-sat-on-floor-us-attorney-says; Samantha Day, Patient of alleged Montgomery pill mill doctor speaks out, WSFA12 News (August 4, 2017), http://www.wsfa.com/story/36066718/patient-of-alleged-pill-mill-doctor-speaks-out.

[2] These action items come from a publication by the Alabama State Board of Medical Examiners, available on the BME website. Recommended Procedure in Closing/Discontinuing a Medical Practice, Alabama State Board of Medical Examiners, available at http://www.albme.org/closeprac.html (last visited September 5, 2017).

[3] Ala. Code § 32-24-338 (1975).

[4] Ala. Admin. Code r. 540-X-9-.10(3). See also AMA Code of Medical Ethics, Opinion 1.1.3: Patient Rights (stating the patient’s right to continuity of care, as well as sufficient notice and reasonable assistance in making alternative arrangements for care prior to a physician discontinuing care); AMA Code of Medical Ethics, Opinion 1.1.5: Terminating a Patient-Physician Relationship (requiring physicians to notify the patient or an authorized decision maker sufficiently in advance to permit the patient to secure another physician and to facilitate transfer of care where appropriate).

[5] Ala. Admin. Code r. 540-X-9-.10(3); AMA Code of Medical Ethics, Opinion 3.3.1: Management of Medical Records.

[6] Id. With regard to disclosure as required by law, check the record management requirements in your provider agreements with Medicare, Medicaid, and private third party payors, as applicable, to confirm the minimum length of time you should preserve records and make them available for inspection. However, in most cases, the 10 years recommended by the BME should suffice.

[7] See Ala. Admin. Code r. 540-X-9-.10(2); Ala. Admin. Code r. 545-X-4-.06 (including in the definition of “unprofessional conduct” any refusal to comply, within a reasonable time, with a request from another physician for medical records or information when such request is accompanied by a properly executed authorization from the patient).

[8] Ala. Code § 12-21-6.1 (1975); Ala. Admin. Code r. 540-X-9-.10(2).

[9] Ala. Admin. Code r. 540-X-9-.10(2); AMA Code of Medical Ethics, Opinion 3.3.1: Management of Medical Records(d)-(e).

[10] http://medicaid.alabama.gov/content/9.0_Resources/9.4_Forms_Library/9.4.16_Provider_Enrollment_Forms.aspx. The form contains additional instructions regarding the disenrollment process.

[11] As a practical matter, your business will be “dissolved” once the articles of dissolution are approved, but the entity will continue to exist for a period of time for purposes of winding down its affairs by paying off creditors and distributing remaining assets to the owners, among other things.

[12] Ala. Admin. Code r. 540-X-9-.01(5).

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