Physicians typically close their medical practice due to retirement, but the business may close due to death, disability, leaving solo practice and joining a group or an institution, or leaving medicine altogether. In any of these situations, it’s important to know the major issues to consider when closing your practice.
Before discussing the issues, know how important the planning can be. The more time physicians take to plan a practice closing, the smoother it should be. However, each practice is unique, and each will generate its own timeline and criteria for the closing process.
According to the Alabama Board of Medical Examiners Newsletter, physicians are responsible to notify active patients of their intent to close their practice, and to offer an opportunity to transfer patient records if requested. Your practice’s healthcare attorney can assist in preparing the proper communication to your patients. “Records which may be of value to a patient and which are not forwarded to a new physician should be retained, either by the treating physician, another physician, or such other person lawfully permitted to act as a custodian of the records.” The need to transfer patient records may require office staff for a period of time after the practice closes its doors to patient care. Some practices make arrangements with another medical group to act as custodian of the records.
Don’t forget about Personnel and benefit issues. If the practice has the opportunity, sufficient notice of the closure timetable should be communicated to the employees. Position phase-outs should be determined. Severance benefit packages are sometimes provided to key personnel to entice them to remain at the practice until all necessary functions are complete. Issues relating to benefits, including health insurance and retirement plans must be resolved. Working with the staff to obtain new employment and timing of the new employment start date is invaluable to an orderly shut-down of your practice.
Where possible, coordinate your practice closing date with your lease. Be sure that you provide proper notices required under the lease, and allow time to handle the collection of accounts receivable, the sale of practice equipment and the patient records.
With appropriate lead time, you may be able to find a practice or an institution interested in acquiring all of your office and medical equipment. If you desire, have the equipment appraised to determine its value. At the right price, selling to only one party is an ideal situation. If you are not able to find one buyer for all of it, there are equipment brokers who acquire for resale, or you could sell it yourself in smaller lots.
Financial, accounting and billing issues create challenges. Someone knowledgeable with your accounts receivable system should be retained to bill and collect the remaining accounts. Communication with insurance companies and slow paying patients may require several months’ effort before you decide to send the remaining amounts to a collection agency. It’s these collections that will provide the funds to pay any remaining practice bills, outstanding bank debt and provide some funds to you. In addition, you will have to file necessary papers with appropriate agencies regarding practice closure. You may have to file legal liquidation papers, final tax returns and address profit sharing or pension plan distributions to terminating staff.
Notify Medicare, if you are Medicare eligible, and notify Social Security if you plan to begin receiving Social Security Benefits. Again, be sure you have a plan for continuing your health insurance if you are not Medicare eligible.
Communicate with your professional liability insurance carrier to ascertain the options available to you regarding post-work liability insurance coverage. Review your policy to determine your options, and work with your representative to be sure continuing coverage is in place in advance of your retirement.
It is not possible to cover all of the items one should consider when closing a practice, as each practice is unique. Notify any hospitals in which you have privileges, any medical societies to which you belong, agencies that issue business or professional licenses, membership organizations, and accreditation services of your impending retirement. Remember to discontinue services, such as subscriptions, telephone, answering and beeper services. Think about your practice and determine what additional items you need to include in your list.
Closing a medical practice takes effort and planning. Developing a checklist of items and delegating a responsibility to complete each task will allow for a smooth practice transition. Plan ahead when you have the ability to do so.
Gerard J. Kassouf, CPA/PFS CFP © is a director in the Birmingham, Alabama accounting and consulting firm of L. Paul Kassouf & Co., P. C. His email address is [email protected]